Item 1. Financial Statements

Baxter International Inc.

Condensed Consolidated Balance Sheets (unaudited)

(in millions, except share information)

			March 31, 2025			December 31, 2024
Current assets:
Cash and cash equivalents			$	2,294		1,764
Accounts receivable, net of allowances of $66 in 2025 and $71 in 2024			1,646			1,679
Inventories			2,170			2,046
Prepaid expenses and other current assets			925			753
Current assets of discontinued operations			—			2,611
Total current assets			7,035			8,853
Property, plant and equipment, net			2,717			2,870
Goodwill			5,338			5,275
Other intangible assets, net			5,081			5,223
Operating lease right-of-use assets			301			306
Other non-current assets			832			755
Non-current assets of discontinued operations			—			2,500
Total assets			$	21,304		$	25,782
Current liabilities:
Short-term debt			$	11		$	2,126
Current maturities of long-term debt and finance lease obligations			651			626
Accounts payable			963			968
Accrued expenses and other current liabilities			1,856			1,861
Current liabilities of discontinued operations			—			930
Total current liabilities			3,481			6,511
Long-term debt and finance lease obligations, less current portion			9,412			10,374
Operating lease liabilities			235			243
Other non-current liabilities			1,122			1,076
Non-current liabilities of discontinued operations			—			554
Total liabilities			14,250			18,758
Commitments and contingencies
Equity:
Common stock, $1 par value, authorized 2,000,000,000 shares, issued 683,494,944 shares in 2025 and 2024			683			683
Common stock in treasury, at cost, 170,414,885 shares in 2025 and 172,567,636 shares in 2024			(10,937)			(11,059)
Additional contributed capital			6,309			6,421
Retained earnings			14,968			14,929
Accumulated other comprehensive loss			(3,942)			(4,010)
Total Baxter stockholders’ equity			7,081			6,964
Noncontrolling interests			(27)			60
Total equity			7,054			7,024
Total liabilities and equity			$	21,304		$	25,782

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

Baxter International Inc.

Condensed Consolidated Statements of Income (Loss) (unaudited)

(in millions, except per share data)

			Three months ended March 31,
			2025			2024
Net sales			$	2,625		$	2,490
Cost of sales			1,764			1,529
Gross margin			861			961
Selling, general and administrative expenses			703			729
Research and development expenses			140			120
Other operating income, net			(40)			(3)
Operating income			58			115
Interest expense, net			64			78
Other (income) expense, net			(3)			(9)
Income (loss) from continuing operations before income taxes			(3)			46
Income tax expense (benefit)			(67)			40
Income (loss) from continuing operations			64			6
Income (loss) from discontinued operations, net of tax			62			33
Net income (loss)			126			39
Net income attributable to noncontrolling interests included in continuing operations			—			—
Net income attributable to noncontrolling interests included in discontinued operations			—			2
Net income attributable to noncontrolling interests			—			2
Net income (loss) attributable to Baxter stockholders			$	126		$	37
Income (loss) from continuing operations per common share
Basic			$	0.13		$	0.01
Diluted			$	0.13		$	0.01
Income (loss) from discontinued operations per common share
Basic			$	0.12		$	0.06
Diluted			$	0.12		$	0.06
Income (loss) per common share
Basic			$	0.25		$	0.07
Diluted			$	0.25		$	0.07
Weighted-average number of shares outstanding
Basic			512			508
Diluted			514			510

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

Baxter International Inc.

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

(in millions)

			Three months ended March 31,
			2025			2024
Income (loss) from continuing operations			$	64		$	6
Other comprehensive income (loss) from continuing operations, net of tax:
Currency translation adjustments, net of tax expense (benefit) of $6 and $13 for the three months ended March 31, 2025 and 2024, respectively.			(68)			(119)
Pension and other postretirement benefits, net of tax expense (benefit) of ($4) and $3 for the three months ended March 31, 2025 and 2024, respectively.			12			4
Hedging activities, net of tax expense (benefit) of ($1) and $2 for the three months ended March 31, 2025 and 2024, respectively.			(2)			8
Total other comprehensive income (loss) from continuing operations, net of tax			(58)			(107)
Comprehensive income (loss) from continuing operations			6			(101)
Income (loss) from discontinued operations, net of tax			62			33
Other comprehensive income (loss) from discontinued operations
Currency translation adjustments, net of tax expense (benefit) of zero and $(2) for the three months ended March 31, 2025 and 2024, respectively.			137			(65)
Pension and other postretirement benefits, net of tax expense (benefit) of $(3) and zero for the three months ended March 31, 2025 and 2024, respectively.			(11)			—
Total other comprehensive income (loss) from discontinued operations			126			(65)
Comprehensive income (loss) from discontinued operations			188			(32)
Comprehensive income (loss)			194			(133)
Less: Comprehensive income attributable to noncontrolling interests			—			2
Less: Other comprehensive loss attributable to noncontrolling interests			—			(4)
Comprehensive income (loss) attributable to Baxter stockholders			$	194		$	(131)

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

Baxter International Inc.

Condensed Consolidated Statements of Changes in Equity (unaudited)

(in millions)

			For the three months ended March 31, 2025
			Baxter International Inc. stockholders' equity
			Common stock shares			Common stock			Common stock shares in treasury			Common stock in treasury			Additional contributed capital			Retained earnings			Accumulated other comprehensive loss			Total Baxter stockholders' equity			Noncontrolling interests			Total equity
Balance as of January 1, 2025			683			$	683		173			$	(11,059)		$	6,421		$	14,929		$	(4,010)		$	6,964		$	60		$	7,024
Net income			—			—			—			—			—			126			—			126			—			126
Other comprehensive income (loss)			—			—			—			—			—			—			(47)			(47)			—			(47)
Reclassification of other comprehensive income (loss) disposed in the Kidney Care separation			—			—			—			—			—			—			115			115			—			115
Stock issued under employee benefit plans and other			—			—			(3)			122			(112)			—			—			10			—			10
Dividends declared on common stock			—			—			—			—			—			(87)			—			(87)			—			(87)
Disposition of noncontrolling interest associated with the Kidney Care separation			—			—			—			—			—			—			—			—			(87)			(87)
Balance as of March 31, 2025			683			$	683		170			$	(10,937)		$	6,309		$	14,968		$	(3,942)		$	7,081		$	(27)		$	7,054

			For the three months ended March 31, 2024
			Baxter International Inc. stockholders' equity
			Common stock shares			Common stock			Common stock shares in treasury			Common stock in treasury			Additional contributed capital			Retained earnings			Accumulated other comprehensive loss			Total Baxter stockholders' equity			Noncontrolling interests			Total equity
Balance as of January 1, 2024			683			$	683		176			$	(11,230)		$	6,389		$	16,114		$	(3,554)		$	8,402		$	66		$	8,468
Net income			—			—			—			—			—			37			—			37			2			39
Other comprehensive income (loss)			—			—			—			—			—			—			(168)			(168)			(4)			(172)
Stock issued under employee benefit plans and other			—			—			(2)			100			(50)			—			—			50			—			50
Dividends declared on common stock			—			—			—			—			—			(148)			—			(148)			—			(148)
Change in noncontrolling interests			—			—			—			—			—			—			—			—			(2)			(2)
Balance as of March 31, 2024			683			$	683		174			$	(11,130)		$	6,339		$	16,003		$	(3,722)		$	8,173		$	62		$	8,235

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

Baxter International Inc.

Condensed Consolidated Statements of Cash Flows (unaudited)

(in millions)

			Three Months Ended March 31,
			2025			2024
Cash flows from operations
Net income (loss)			$	126		$	39
Less: Income (loss) from discontinued operations, net of tax			62			33
Income (loss) from continuing operations			64			6
Adjustments to reconcile net loss to cash flows from operations:
Depreciation and amortization			247			271
Deferred income taxes			(142)			(58)
Stock compensation			10			17
Net periodic pension and other postretirement costs			(8)			(7)
Other long-lived asset impairments			22			—
Other			6			5
Changes in balance sheet items:
Accounts receivable, net			26			125
Inventories			(122)			(145)
Prepaid expenses and other current assets			(24)			(4)
Accounts payable			16			119
Accrued expenses and other current liabilities			(143)			(240)
Other			(51)			(22)
Cash flows from operations - continuing operations			(99)			67
Cash flows from operations - discontinued operations			(94)			96
Cash flows from operations			(193)			163
Cash flows from investing activities
Capital expenditures			(122)			(110)
Other investing activities, net			(2)			10
Cash flows from investing activities - continuing operations			(124)			(100)
Cash flows from investing activities - discontinued operations			3,389			(66)
Cash flows from investing activities			3,265			(166)
Cash flows from financing activities
Repayments of debt			(2,825)			(15)
Net decreases in debt with original maturities of three months or less			(300)			—
Cash dividends on common stock			(87)			(147)
Proceeds from stock issued under employee benefit plans			10			40
Other financing activities, net			(24)			(18)
Cash flows from financing activities			(3,226)			(140)
Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash - continuing operations			36			(25)
Increase (decrease) in cash, cash equivalents and restricted cash			(118)			(168)
Cash, cash equivalents and restricted cash at beginning of period (1)			2,414			3,198
Cash, cash equivalents and restricted cash at end of period (1)			2,296			3,030
Less cash and cash equivalents of discontinued operations			—			200
Cash, cash equivalents and restricted cash of continuing operations			$	2,296		$	2,830

(1) The following table provides a reconciliation of cash, cash equivalents and restricted cash shown above to the amounts reported within the condensed consolidated balance sheet as of March 31, 2025, December 31, 2024, and March 31, 2024 (in millions):

			March 31, 2025			December 31, 2024			March 31, 2024
Cash and cash equivalents			$	2,294		$	1,764		$	2,826
Restricted cash included in other non-current assets			2			2			4
Cash and cash equivalents of discontinued operations			—			648			200
Cash, cash equivalents and restricted cash			$	2,296		$	2,414		$	3,030

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

Baxter International Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

1. BASIS OF PRESENTATION

The unaudited interim condensed consolidated financial statements of Baxter International Inc. and its subsidiaries (we, our or Baxter) have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (SEC) for interim financial reporting. Accordingly, certain information and note disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP) in the United States have been condensed or omitted. These unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in our Annual Report on Form 10-K for the year ended December 31, 2024 (2024 Annual Report).

In the opinion of management, the unaudited interim condensed consolidated financial statements reflect all adjustments necessary for a fair statement of the financial position, results of operations and cash flows for the periods presented. All such adjustments, unless otherwise noted herein, are of a normal, recurring nature. The disclosures presented in our notes to the consolidated financial statements are presented on a continuing operations basis. The results of operations for the current interim period are not necessarily indicative of the results of operations to be expected for the full year.

On August 12, 2024, we entered into an Equity Purchase Agreement (EPA) with certain affiliates of Carlyle Group Inc. (Carlyle) to sell our Kidney Care business. That business, which is now known as Vantive Health LLC (Vantive) is comprised of our former Kidney Care segment and provides chronic and acute dialysis therapies and services, including peritoneal dialysis, hemodialysis, continuous renal replacement therapies, and other organ support therapies. On January 31, 2025, we completed the sale of our Kidney Care business to Carlyle for an aggregate purchase price of $3.80 billion in cash, subject to certain closing cash, working capital and debt adjustments. After giving effect to certain adjustments, we received approximately $3.71 billion pre-tax cash proceeds at closing of the transaction with the net after tax proceeds of approximately $3.3 billion, subject to certain post-closing adjustments. The financial position, results of operations and cash flows of our Kidney Care business, including the gain on sale of that business and the related cash proceeds received, are reported as discontinued operations in the accompanying condensed consolidated financial statements, and our prior period results have been adjusted to reflect discontinued operations. See Note 2 for additional information.

Hurricane Helene

In September 2024, Hurricane Helene, which brought significant rain and extensive flooding to Western North Carolina, caused damage to certain of our assets at our North Cove facility in Marion, North Carolina and disrupted operations at that facility. Since then, we have actively worked with customers, regulators and other stakeholders to manage inventory and minimize disruption to patient care as we worked towards resuming our North Cove manufacturing operations. While we continue to increase allocation levels across key impacted product groups, the facility was fully operational by the end of the first quarter of 2025. In the first quarter of 2025, we recorded $98 million of pre-tax net charges related to remediation, air freight and other costs as a result of the damages caused by Hurricane Helene. These amounts were recorded as a component of cost of sales in the condensed consolidated statements of income for the three month period ended March 31, 2025.

Risks and Uncertainties

Supply Constraints, Tariffs and Global Economic Conditions

We have experienced significant challenges to our global supply chain, including production delays and interruptions, increased costs and shortages of raw materials and component parts (including resins and electromechanical devices), higher transportation costs, adverse impacts from significant weather events (including Hurricane Helene, which caused the flooding of our North Cove facility), elevated inflation levels and interest rates, disruptions to certain ports of call and access to shipping ports around the world, the war in Ukraine, the conflict in the Middle East and other geopolitical events. While we have seen improvements in the availability of component parts and improved pricing in raw materials and on transportation costs, some of these challenges are expected to have a negative impact on our results of operations in the future. In addition, recent announcements regarding changes in U.S. trade policies and practices, including the implementation of global tariffs and proposed further tariffs (including potential pharmaceutical tariffs), and responses from other jurisdictions, have significantly affected financial markets and economic conditions. While we are in the process of implementing select offsets for 2025 and working to identify

additional mitigation opportunities in 2025 and beyond, we currently expect that our results will be adversely affected (including as a result of a failure to achieve the anticipated offsets or an inability to identify additional mitigating actions). Additionally, continued global macroeconomic uncertainty, including in trade policies and practices, elevated tariffs and in operational and policy changes in the governments of the U.S. and other countries, could contribute to further market volatility, deteriorating or prolonged weakened economic conditions and decreased hospital capital spending levels, all of which could adversely affect our business, results of operations or financial condition. Sole source supplier relationships may limit our ability to respond to these tariffs with alternative of lower cost raw material or component parts.

We expect that these challenges, among other factors, may continue to have an adverse effect on our business.

2. DISCONTINUED OPERATIONS

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

Discontinued Operations - Kidney Care

On January 31, 2025, we completed the sale of our Kidney Care business to Carlyle for an aggregate purchase price of $3.80 billion in cash, subject to certain closing cash, working capital and debt adjustments. After giving effect to certain adjustments, we received approximately $3.71 billion pre-tax cash proceeds at closing of the transaction. We recognized a pre-tax gain on the sale of $191 million ($111 million net of tax).

We concluded that our Kidney Care business met the criteria to be classified as held-for-sale in August 2024. We analyzed the quantitative and qualitative factors relevant to the sale of our Kidney Care business, including its significance to our overall net income (loss), earnings (loss) per share, and net assets, and determined that those conditions for discontinued operations presentation had been met. As such, the financial position, results of operations and cash flows of that business are reported as discontinued operations in the accompanying condensed consolidated financial statements. Prior period amounts have been adjusted to reflect discontinued operations presentation.

Upon closing of the sale of the Kidney Care business, pursuant to the Equity Purchase Agreement (EPA), Baxter and Vantive entered into several agreements, including a Manufacturing and Supply Agreement (Kidney Care MSA), a Transition Services Agreement (Kidney Care TSA), a Long Term Master Services Agreement, a Distribution Agreement and certain other arrangements providing for short-term supply of saline products, and an Intellectual Property Agreement. Pursuant to the Kidney Care MSA, Baxter and the Kidney Care divested entities provide each other with certain dialysis-related products, other products, product components and fulfillment services for up to 10 years post-closing (with certain extension rights and early exit rights as provided therein). Pursuant to the Kidney Care MSA, our sales to Vantive are recognized in net sales in the condensed consolidated statements of income (loss). Pursuant to the Kidney Care TSA, Baxter and the entities that were divested in connection with the Kidney Care sale (the Kidney Care divested entities) provide each other, on an interim basis, certain transitional services for up to 30 months post-closing (with certain extension rights and early exit rights as provided therein) to help ensure business continuity and help minimize disruptions to the operations of both parties post-closing. Services provided under the Kidney Care TSA include information technology applications and support, supply chain and certain other corporate and administrative services. Billings by us under the Kidney Care TSA are recorded in other operating income, net in the condensed consolidated statements of income. The costs to provide each respective service is recorded in the applicable expense category in the condensed consolidated statements of income (loss).

In accordance with the EPA, we have agreed to indemnify Vantive for certain items, including taxes imposed on or with respect to the Kidney Care divested entities, for pre-closing tax periods. The net indemnification liability as of March 31, 2025 was $37 million. Further, in accordance with the EPA, Baxter recorded a contingent liability for payments to reimburse Vantive for qualifying capital expenditures over a period of three years post sale. The contingent liability as of March 31, 2025 was $133 million. Certain of the business guarantees originally entered by us on behalf of the Kidney Care business were not released prior to the completion of the sale and remain outstanding. These legacy guarantees primarily relate to leases, performance contracts and ones to support regulatory requirements of the Kidney Care business. As of March 31, 2025, the total amount of Kidney Care business guarantees retained by us is approximately $300 million. Under terms of the EPA, Carlyle has agreed to indemnify us for any cost or expense, or payments made in the future under these arrangements.

Results of Discontinued Operations and Assets and Liabilities of Discontinued Operations

The following tables summarize the major classes of line items included in income (loss) from discontinued operations, net of tax, for the three months ended March 31, 2025 and 2024:

			Three Months Ended March 31,
(in millions)			2025			2024
Net sales			$	352		$	1,102
Cost of sales			206			676
Gross margin			146			426
Selling, general and administrative expenses			116			298
Research and development expenses			16			56
Operating income (loss)			14			72
Interest expense, net			13			—
Other (income) expense, net			7			2
Income (loss) from discontinued operations before gain on disposition and income taxes			(6)			70
Gain on disposition			191			—
Income tax expense (benefit)			123			37
Income from discontinued operations, net of tax			62			33
Less: Net income attributable to noncontrolling interest included in discontinued operations			—			2
Net income attributable to Baxter stockholders included in discontinued operations			$	62		$	31

For the three months ended March 31, 2025 and 2024, selling, general and administrative expenses (SG&A) includes $37 million and $88 million, respectively, of separation-related costs incurred in connection with the sale of our Kidney Care business.

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

(in millions)						December 31, 2024
Cash and cash equivalents						$	648
Accounts receivable, net of allowances						942
Inventories						821
Prepaid expenses and other current assets						200
Current assets of discontinued operations						2,611
Property, plant and equipment, net						1,516
Goodwill						265
Other intangible assets, net						148
Operating lease right-of-use assets						204
Other non-current assets						367
Non-current assets of discontinued operations						2,500
Assets of discontinued operations						$	5,111
Current maturities of finance lease obligations						$	1
Accounts payable						344
Accrued expenses and other current liabilities						585
Current liabilities of discontinued operations						930
Long-term finance lease obligations, less current portion						37
Operating lease liabilities						173
Other non-current liabilities						344
Non-current liabilities of discontinued operations						554
Liabilities of discontinued operations						$	1,484

3. SUPPLEMENTAL FINANCIAL INFORMATION

Allowance for Doubtful Accounts

The following table is a summary of the changes in our allowance for doubtful accounts for the three months ended March 31, 2025 and 2024.

			Three Months Ended March 31,
(in millions)			2025			2024
Balance at beginning of period			$	71		$	62
Charged to costs and expenses			(4)			(1)
Write-offs			(2)			(3)
Currency translation adjustments			1			(2)
Balance at end of period			$	66		$	56

Inventories

(in millions)			March 31, 2025			December 31, 2024
Raw materials			$	550		$	510
Work in process			310			266
Finished goods			1,310			1,270
Inventories			$	2,170		$	2,046

Property, Plant and Equipment, Net

(in millions)			March 31, 2025			December 31, 2024
Property, plant and equipment, at cost			$	7,431		$	7,648
Accumulated depreciation			(4,714)			(4,778)
Property, plant and equipment, net			$	2,717		$	2,870

Other Current Assets and Liabilities

In connection with the sale of our Kidney Care business and pursuant to the EPA, the Kidney Care assets and liabilities in certain countries are to be transferred at a later date for operational, regulatory or other reasons. Accordingly, the related assets, primarily consisting of accounts receivable, of $95 million and liabilities, consisting of accounts payable, of $7 million of these deferred markets and are presented within prepaid and other current assets and accrued expenses and other current liabilities in the accompanying condensed consolidated balance sheet as of March 31, 2025.

In the first quarter of 2025, we signed a purchase agreement with a buyer to sell our manufacturing facility in Opelika, Alabama for $25 million, subject to the satisfaction of various closing conditions. The related assets are classified as held-for-sale and are presented within prepaid and other current assets in the accompanying condensed consolidated balance sheet as of March 31, 2025. While the closing remains subject to the satisfaction of various closing conditions, we currently expect the transaction to close in 2025 and the net book value of the assets as of March 31, 2025 approximates the transaction price net of estimated selling costs.

Interest Expense, Net

			Three Months Ended March 31,
(in millions)			2025			2024
Interest expense, net of capitalized interest			$	81		$	103
Interest income			(17)			(25)
Interest expense, net			$	64		$	78

Other (Income) Expense, Net

			Three Months Ended March 31,
(in millions)			2025			2024
Foreign exchange losses, net			$	—		$	14
Pension and other postretirement benefit plans			(11)			(13)
Change in fair value of marketable equity securities			1			(3)
Equity method investment impairment			9			—
Other, net			(2)			(7)
Other (income) expense, net			$	(3)		$	(9)

Non-Cash Operating and Investing Activities

Right-of-use operating lease assets obtained in exchange for lease obligations for the three months ended March 31, 2025 and 2024 were $5 million and $16 million, respectively.

Purchases of property, plant and equipment included in accounts payable as of March 31, 2025 and 2024 were $39 million and $35 million, respectively.

4. GOODWILL AND OTHER INTANGIBLE ASSETS, NET

Goodwill

The following is a reconciliation of goodwill by segment.

(in millions)			Medical Products & Therapies			Healthcare Systems & Technologies			Pharmaceuticals						Total
Balance as of December 31, 2024			$	1,185		$	3,550		$	540					$	5,275
Currency translation			38			8			17						63
Balance as of March 31, 2025			$	1,223		$	3,558		$	557					$	5,338

Other intangible assets, net

The following is a summary of our other intangible assets.

															Indefinite-lived intangible assets
(in millions)			Customer relationships			Developed technology, including patents			Trade names			Other amortized intangible assets			Trade names			In process Research and Development			Total
December 31, 2024
Gross other intangible assets			$	3,387		$	3,131		$	958		$	86		$	680		$	107		$	8,349
Accumulated amortization			(878)			(2,075)			(107)			(66)			—			—			(3,126)
Other intangible assets, net			$	2,509		1,056			851			20			680			107			5,223
March 31, 2025
Gross other intangible assets			$	3,389		$	3,154		$	953		$	88		$	680		$	107		$	8,371
Accumulated amortization			(932)			(2,170)			(119)			(69)			—			—			(3,290)
Other intangible assets, net			$	2,457		$	984		$	834		$	19		$	680		$	107		$	5,081

Intangible asset amortization expense was $155 million and $158 million for the three months ended March 31, 2025 and 2024, respectively.

5. FINANCING ARRANGEMENTS

Significant Debt Activity

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

Credit Facilities

On July 17, 2024, we entered into a credit agreement pursuant to which a group of banks provided us senior unsecured term loans in an aggregate principal amount of up to $2.05 billion ("the bridge facility"). Borrowings under the bridge facility were available in up to three drawings to fund (a) the refinancing of our 1.322% Senior Notes due November 29, 2024, our Floating Rate Notes due November 29, 2024, and certain borrowings under our existing term loan facility and (b) payment of certain U.S. tax liabilities arising from internal reorganization transactions related to the sale of our Kidney Care business. Borrowings under the bridge facility bore interest at a rate based on our long-term debt ratings in effect from time to time and the interest rate on any borrowings outstanding beyond December 31, 2024 would increase by 0.25%. We also incurred a ticking fee on undrawn commitments at a rate based on our long-term debt ratings in effect from time to time. The banks’ funding commitments under the bridge facility terminated on December 31, 2024. Outstanding borrowings under the bridge facility were scheduled to mature on the earlier of 364 days from the first funding date and November 24, 2025. Additionally, we were required to use the net cash proceeds from certain transactions (including from the sale of our Kidney Care business) to repay any outstanding borrowings under the bridge facility. The bridge facility contained financial and other covenants, including a net leverage

covenant, and provided for customary events of default. There was $1.83 billion outstanding under this bridge facility as of December 31, 2024. In January 2025, we used a portion of the approximately $3.3 billion of net after-tax cash proceeds from the sale of our Kidney Care business to repay the $1.83 billion outstanding under the bridge facility, at which time it was terminated.

As of March 2025, we had a U.S. Dollar-denominated term loan credit facility, which had one tranche of term loans outstanding, a U.S Dollar-denominated revolving credit facility and a Euro-denominated revolving credit facility. Our U.S. Dollar-denominated revolving credit facility has a current capacity of $2.00 billion and our Euro-denominated revolving credit facility has a capacity of €200 million. Each of the facilities is scheduled to mature in 2026. There were no borrowings outstanding under these credit facilities as of March 31, 2025 or December 31, 2024. Our commercial paper borrowing arrangements require us to maintain undrawn borrowing capacity under our revolving credit facilities for an amount at least equal to our outstanding commercial paper borrowings. Based on our covenant calculations as of March 31, 2025 we have capacity to draw $2.04 billion under our credit facilities.

Commercial Paper

There was no commercial paper outstanding as of March 31, 2025. As of December 31, 2024, we had $300 million of commercial paper outstanding with a weighted-average interest rate of 4.78% and an original term of 45 days. In the first quarter of 2025, we repaid the $300 million balance outstanding as of December 31, 2024.

6. COMMITMENTS AND CONTINGENCIES

We are involved in product liability, patent, commercial, employment and other legal matters that arise in the normal course of our business. We record a liability when a loss is considered probable and the amount can be reasonably estimated. If the reasonable estimate of a probable loss is a range, and no amount within the range is a better estimate than any other amount, the minimum amount in the range is accrued. If a loss is not probable or a probable loss cannot be reasonably estimated, no liability is recorded. As of March 31, 2025 and December 31, 2024, our total recorded reserves with respect to legal and environmental matters were $46 million and $40 million, respectively.

We have established reserves for certain of the matters discussed below. We are not able to estimate the amount or range of any loss for certain contingencies for which there is no reserve or additional loss for matters already reserved. While our liability in connection with these claims cannot be estimated and the resolution thereof in any reporting period could have a significant impact on our results of operations and cash flows for that period, the outcome of these legal proceedings is not expected to have a material adverse effect on our consolidated financial position. While we believe that we have valid defenses in the matters set forth below, litigation is inherently uncertain, excessive verdicts do occur, and we may incur material judgments or enter into material settlements of claims.

In addition to the matters described below, we remain subject to the risk of future administrative and legal actions. With respect to governmental and regulatory matters, these actions may lead to product recalls, injunctions, and other restrictions on our operations (including our ability to launch new products) and monetary sanctions, including significant civil or criminal penalties. With respect to intellectual property, we may be exposed to significant litigation concerning the scope of our and others’ rights. Such litigation could result in a loss of patent protection or the ability to market products, which could lead to a significant loss of sales, or otherwise materially affect future results of operations.

Environmental

We are involved as a potentially responsible party (PRP) for environmental clean-up costs at six Superfund sites. Additionally, we are a defendant in a separate matter regarding a seventh Superfund site. Under the U.S. Superfund statute and many state laws, generators of hazardous waste sent to a disposal or recycling site are liable for site cleanup if contaminants from that property later leak into the environment. The laws generally provide that a PRP may be held jointly and severally liable for the costs of investigating and remediating the site. Separate from these Superfund cases noted above, we are involved in ongoing environmental remediations associated with historic operations at certain of our facilities. As of March 31, 2025 and December 31, 2024, our environmental reserves, which are measured on an undiscounted basis, were $28 million and $29 million, respectively. After considering these reserves, the outcome of these matters is not expected to have a material adverse effect on our financial position or results of operations.

General Litigation

In March 2020, two lawsuits were filed against us in the Northern District of Illinois by plaintiffs alleging injuries as a result of exposure to ethylene oxide used in our manufacturing facility in Mountain Home, Arkansas to sterilize certain of our products. The plaintiffs sought damages, including compensatory and punitive damages in an unspecified amount, and unspecified injunctive and declaratory relief. The parties reached an agreement to settle these lawsuits in the third quarter of 2021 for amounts that were not material to our financial results, which were paid in the fourth quarter of 2021. We have since resolved, without litigation, additional claims of injuries from exposure to ethylene oxide at Mountain Home for amounts within accruals previously established as of December 31, 2021. On October 20, 2022, a lawsuit was filed against us in the Western District of Arkansas alleging injury as a result of exposure to ethylene oxide at Mountain Home. On December 16, 2022, we filed a motion to dismiss and for a more definite statement. In response, Plaintiffs filed a First Amended Complaint on January 6, 2023. We answered the First Amended Complaint on January 27, 2023. The parties reached an agreement to settle this lawsuit in the third quarter of 2023 for an amount that was not material to our financial results, which was paid in the fourth quarter of 2023. The case was dismissed on October 17, 2023. Since December 2023, 41 lawsuits (after giving effect to the September 2024 amendment referenced below) have been filed against us in the Circuit Court of Cook County, Illinois by plaintiffs alleging injuries as a result of exposure to ethylene oxide used by several companies, including historic use by us for sterilization at our facility in Round Lake, Illinois. The plaintiffs seek damages in an unspecified amount. On July 16, 2024, Plaintiffs' counsel filed an omnibus motion seeking leave to add certain defendants to hundreds of previously-filed lawsuits, including Baxter with respect to 40 cases. The motion was denied on July 25, 2024, without prejudice to refiling multiple motions each addressing smaller groupings of cases and defendants. On September 11, 2024, the court granted leave to amend one previously-filed complaint to add Baxter as a defendant. In the second quarter of 2025, plaintiffs filed a motion to voluntarily dismiss Baxter from 29 of the filed cases, which was granted by the Court. The parties have reached an agreement in principle to resolve the remaining filed cases, along with certain additional matters, for an amount not material to Baxter.

We acquired Hill-Rom Holdings, Inc. (Hillrom) on December 13, 2021. In July 2021, Hill-Rom, Inc., a wholly-owned subsidiary of Hillrom, received a subpoena from the United States Office of Inspector General for the Department of Health and Human Services (the DHHS) requesting documents and information related to compliance with the False Claims Act and the Anti-Kickback Statute. The subpoena was related to a lawsuit brought under the qui tam provisions of the False Claims Act. The allegations included in the unsealed complaint relate to conduct prior to our acquisition of Hillrom, and the division involved is no longer operational. Hillrom voluntarily began a related internal review, and Hillrom and Baxter cooperated fully with the DHHS and the Department of Justice (DOJ) with respect to this matter. In January 2024, the parties reached an agreement to settle the allegations. We paid the settlement amounts, which were not material to our financial results, in January 2024 and the matter was dismissed in February 2024. In October 2022, the DOJ issued a separate Civil Investigative Demand (CID) addressed to Hillrom, requesting documents and information related to compliance with the False Claims Act and the Anti-Kickback Statute. In October 2024, the DOJ issued a subpoena (the 2024 Subpoena), pursuant to 18 U.S.C. 3846, to Hillrom. The 2024 Subpoena substantially overlaps with the CID and requests additional documents relating to Hillrom's respiratory health business. Baxter is cooperating fully with the DOJ in responding to the CID and the 2024 Subpoena. The DHHS and DOJ often issue these types of requests when investigating alleged violations of the federal health care laws.

On December 28, 2021, Linet Americas, Inc. (Linet) filed a complaint against Hill-Rom Holdings, Inc., Hill-Rom Company, Inc., and Hill-Rom Services, Inc. in the United States District Court for the Northern District of Illinois, captioned Linet Americas, Inc. v. Hill-Rom Holdings, Inc.; Hill-Rom Company, Inc.; Hill-Rom Services, Inc. Linet alleges that Hillrom violated Sections 1 and 2 of The Sherman Antitrust Act of 1890, Section 3 of the Clayton Act, and the Illinois Antitrust Act by allegedly engaging in anti-competitive conduct in alleged markets for standard, ICU and birthing beds. Hillrom filed an answer to the complaint on January 28, 2022 and filed a motion challenging certain aspects of plaintiff's case on May 27, 2022, which was denied on January 17, 2024, subject to further discovery. Fact discovery is ongoing.

On June 20, 2024, Reading Hospital filed a putative class action complaint against Hill-Rom Holdings, Inc., Hill-Rom Company, Inc., and Hill-Rom Services, Inc. in the United States District Court for the Eastern District of Pennsylvania. The complaint alleges that Hillrom violated Sections 1 and 2 of The Sherman Antitrust Act and Section 3 of the Clayton Act by allegedly engaging in anti-competitive conduct in alleged markets for standard, ICU and birthing beds. The plaintiff filed the action on behalf of itself and all "direct purchasers of Standard Hospital Beds, ICU Beds, and/or Birthing Beds from Hill-Rom during a period beginning at least as early as June 20, 2020” and continuing past the date of filing. On September 30, 2024, the plaintiff filed a First Amended Complaint. On November 8, 2024, Hillrom

filed a Motion to Dismiss Plaintiff's Amended Complaint. Briefing was completed in January 2025, and the court held a hearing on the motion on March 25, 2025. The motion is pending before the court.

7. STOCKHOLDERS’ EQUITY

Cash Dividends

Cash dividends declared per share for the three months ended March 31, 2025 and 2024 were $0.17 and $0.29, respectively.

Stock Repurchase Programs

In July 2012, our Board of Directors authorized a share repurchase program and the related authorization amount was subsequently increased a number of times. During the first three months of 2025 and 2024 we did not repurchase any shares under this authority. We had $1.30 billion remaining available under the authorization as of March 31, 2025.

8. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

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

The following table is a net-of-tax summary of the changes in accumulated other comprehensive income (loss) (AOCI) by component for the three months ended March 31, 2025 and 2024.

			Gains (losses)
(in millions)			CTA			Pension and OPEB plans			Hedging activities			Available-for-sale debt securities			Total
Balance as of December 31, 2024			$	(3,430)		$	(475)		$	(108)		$	3		$	(4,010)
Other comprehensive income (loss) before reclassifications			(57)			14			—			—			(43)
Amounts reclassified from AOCI (a)			126			(13)			(2)			—			111
Net other comprehensive income (loss)			69			1			(2)			—			68
Balance as of March 31, 2025			$	(3,361)		$	(474)		$	(110)		$	3		$	(3,942)

			Gains (losses)
(in millions)			CTA			Pension and OPEB plans			Hedging activities			Available-for-sale debt securities			Total
Balance as of December 31, 2023			$	(2,985)		$	(452)		$	(120)		$	3		$	(3,554)
Other comprehensive income (loss) before reclassifications			(180)			5			6			—			(169)
Amounts reclassified from AOCI (a)			—			(1)			2			—			1
Net other comprehensive income (loss)			(180)			4			8			—			(168)
Balance as of March 31, 2024			$	(3,165)		$	(448)		$	(112)		$	3		$	(3,722)

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

The following is a summary of the amounts reclassified from AOCI to net income (loss) during the three months ended March 31, 2025 and 2024.

			Amounts reclassified from AOCI (a)
(in millions)			Three Months Ended March 31, 2025			Three Months Ended March 31, 2024			Location of impact in income statement
CTA
Reclassification of cumulative translation loss to earnings from Kidney Care separation			$	(126)		$	—		Income from discontinued operations, net of tax
Less: Tax effect			—			—			Income from discontinued operations, net of tax
			$	(126)		$	—		Net of tax
Pension and OPEB items
Amortization of net losses and prior service costs or credits			$	3		$	2		Other (income) expense, net
Pension settlement from Kidney Care separation			14			—			Income from discontinued operations, net of tax
			17			2			Total before tax
Less: Tax effect			(1)			(1)			Income tax expense
Less: Tax effect on pension settlement from Kidney Care separation			(3)			—			Income from discontinued operations, net of tax
			$	13		$	1		Net of tax
Gains (losses) on hedging activities
Foreign exchange contracts			$	(1)		$	2		Cost of sales
Interest rate contracts			4			(1)			Interest expense, net
Fair value hedges			—			(3)			Other (income) expense, net
			3			(2)			Total before tax
Less: Tax effect			(1)			—			Income tax expense
			$	2		$	(2)		Net of tax
Total reclassifications for the period			$	(111)		$	(1)		Total net of tax

(a) Amounts in parentheses indicate reductions to net income

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

9. REVENUES

Revenue is measured as the amount of consideration we expect to receive in exchange for transferring goods or providing services. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account in the contract. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. Some of our contracts have multiple performance obligations. For contracts with multiple performance obligations, we allocate the contract’s transaction price to each performance obligation using our best estimate of the standalone selling price of each distinct good or service in the contract. Our global payment terms are typically between 30 to 90 days.

Our primary customers are hospitals, healthcare distribution companies, and government agencies that purchase healthcare products on behalf of providers. Most of our performance obligations are satisfied at a point in time. This includes sales of our broad portfolio of essential healthcare products across our business segments. We earn revenues from sterile IV solutions; infusion systems and devices; parenteral nutrition therapies; inhaled anesthetics; generic injectable pharmaceuticals; surgical hemostat and sealant products; smart bed systems; patient monitoring and diagnostic technologies; respiratory health devices; and advanced equipment for the surgical space. For most of those offerings, our performance obligation is satisfied upon delivery to the customer. Shipping and handling activities are considered to be fulfillment activities and are not considered to be a separate performance obligation.

To a lesser extent, we enter into arrangements for which revenue may be recognized over time. For example, we lease medical equipment to customers under operating lease arrangements and recognize the related revenues on a monthly basis over the lease term. Our Healthcare Systems & Technologies segment includes connected care solutions and collaboration tools that are implemented over time. We recognize revenue for these arrangements over time or at a point in time depending on our evaluation of when the customer obtains control of the promised goods or services. We also earn revenue from contract manufacturing activities, which is recognized over time as the services are performed. Revenue is recognized over time when we are creating or enhancing an asset that the customer controls as the asset is created or enhanced or our performance does not create an asset with an alternative use and we have an enforceable right to payment for performance completed.

As of March 31, 2025, we had $10.19 billion of transaction price allocated to remaining performance obligations related to executed contracts with an original duration of more than one year, which are primarily included in the Medical Products & Therapies segment. Some contracts in the United States included in this amount contain index-dependent price increases, which are not known at this time. We expect to recognize approximately 15% of this amount as revenue over the remainder of 2025, 20% in 2026, 15% in each of 2027 and 2028 and 35% thereafter.

Significant Judgments

Revenues from product sales are recorded at the net sales price, which include estimates of variable consideration primarily related to rebates and distributor chargebacks. These reserves are based on estimates of the amounts earned or to be claimed on the related sales and are included in accrued expenses and other current liabilities and as reductions of accounts receivable, net on the condensed consolidated balance sheets. Management's estimates take into consideration historical experience, current contractual and statutory requirements, specific known market events and trends, industry data, and forecasted customer buying and payment patterns. Overall, these reserves reflect our best estimates of the amount of consideration to which we are entitled based on the terms of the contract using the expected value method. The amount of variable consideration included in the net sales price is limited to the amount for which it is probable that a significant reversal in revenue will not occur when the related uncertainty is resolved. Revenue recognized during the three months ended March 31, 2025 and 2024 related to performance obligations satisfied in prior periods was not material. Additionally, our contracts with customers often include promises to transfer multiple products and services to a customer. 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 judgement.

Contract Balances

The timing of revenue recognition, billings and cash collections results in the recognition of trade accounts receivable, unbilled receivables, contract assets and customer advances, and deposits (contract liabilities) on our condensed consolidated balance sheets. Net trade accounts receivable was $1.49 billion and $1.54 billion as of March 31, 2025 and December 31, 2024, respectively.

For contract manufacturing arrangements, revenue is primarily recognized throughout the production cycle, which typically lasts up to 90 days, resulting in the recognition of contract assets until the related services are completed and the customers are billed. Additionally, for certain arrangements containing a performance obligation to deliver software that can be used with medical devices, we recognize revenue upon delivery of the software, which results in the recognition of contract assets when customers are billed over time, generally over one to five years. For bundled contracts involving equipment delivered up-front and consumable medical products to be delivered over time, total contract revenue is allocated between the equipment and consumable medical products. In certain of those arrangements, a contract asset is created for the difference between the amount of equipment revenue recognized upon delivery and the amount of consideration initially receivable from the customer. In those arrangements, the contract asset becomes a trade account receivable as consumable medical products are delivered and billed, generally over one to seven years.

The following table summarizes our contract assets:

(in millions)			March 31, 2025			December 31, 2024
Contract manufacturing services			$	4		$	2
Software sales			39			44
Bundled equipment and consumable medical products contracts			89			87
Contract assets			$	132		$	133

Contract liabilities represent deferred revenues that arise as a result of cash received from customers or where the timing of billing for services precedes satisfaction of our performance obligations. Such remaining performance obligations represent the portion of the contract price for which work has not been performed and are primarily related to our installation and service contracts. We expect to satisfy the majority of the remaining performance obligations and recognize revenue related to installation and service contracts within the next 12 months with most of the non-current performance obligations satisfied within 24 months.

The following table summarizes contract liability activity for the three months ended March 31, 2025 and 2024. The contract liability balance represents the transaction price allocated to the remaining performance obligations.

			Three Months Ended March 31,
(in millions)			2025			2024
Balance at beginning of period			$	171		$	169
New revenue deferrals			128			93
Revenue recognized upon satisfaction of performance obligations			(124)			(91)
Currency translation			—			(2)
Balance at end of period			$	175		$	169

For the three months ended March 31, 2025 and 2024, $34 million and $43 million of revenue was recognized that was included in contract liabilities as of December 31, 2024 and 2023, respectively.

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

(in millions)			March 31, 2025			December 31, 2024
Prepaid expenses and other current assets			$	54		$	51
Other non-current assets			78			82
Contract assets			$	132		$	133
Accrued expenses and other current liabilities			$	135		$	131
Other non-current liabilities			40			40
Contract liabilities			$	175		$	171

Disaggregation of Net Sales

Refer to Note 16 for additional information on our net sales including the disaggregation of net sales within each of our segments and net sales by geographic location.

Lease Revenue

We lease medical equipment, such as smart beds and infusion pumps, to customers, often in conjunction with arrangements to provide consumable medical products such as IV fluids and inhaled anesthetics. Certain of our equipment leases are classified as sales-type leases and the remainder are operating leases. The terms of the related contracts, including the proportion of fixed versus variable payments and any options to shorten or extend the lease term, vary by customer. We allocate revenue between equipment leases and medical products based on their standalone selling prices.

The components of lease revenue for the three months ended March 31, 2025 and 2024 were:

			Three Months Ended March 31,
(in millions)			2025			2024
Sales-type lease revenue			$	8		$	2
Operating lease revenue			91			104
Variable lease revenue			7			8
Total lease revenue			$	106		$	114

Our net investment in sales-type leases was $47 million as of March 31, 2025, of which $13 million originated in 2021 and prior, $6 million in 2022, $7 million in 2023, $10 million in 2024, and $11 million in 2025.

10. BUSINESS OPTIMIZATION CHARGES

In recent years, we have undertaken actions to transform our cost structure and enhance operational efficiency. These efforts include restructuring the organization into verticalized segments, optimizing the manufacturing footprint, R&D operations and supply chain network, employing disciplined cost management, and centralizing and streamlining certain support functions. We currently expect to incur additional pre-tax costs, primarily related to the implementation of business optimization programs, of approximately $4 million through the completion of initiatives that are currently underway. We continue to pursue cost savings initiatives, including those intended to mitigate a portion of the dis-synergies that arose as a result of the sale of our Kidney Care business, and to the extent further cost savings opportunities are identified, we would incur additional restructuring charges and costs to implement business optimization programs in future periods. For segment reporting, business optimization charges are unallocated expenses.

During the three months ended March 31, 2025 and 2024, we recorded the following charges related to business optimization programs.

			Three Months Ended March 31,
(in millions)			2025			2024
Restructuring charges			$	44		$	17
Costs to implement business optimization programs			1			5
Total business optimization charges			$	45		$	22

Costs to implement business optimization programs for the three months ended March 31, 2025 and 2024, respectively, consisted primarily of external consulting and transition costs, including employee compensation and related costs. These costs were primarily included within cost of sales and SG&A expense.

During the three months ended March 31, 2025 and 2024, we recorded the following restructuring charges.

			Three months ended March 31, 2025
(in millions)			COGS			SG&A			R&D			Total
Employee termination costs			$	12		$	13		$	1		$	26
Asset write offs			1			17			—			18
Total restructuring charges			$	13		$	30		$	1		$	44

			Three months ended March 31, 2024
(in millions)			COGS			SG&A						Total
Employee termination costs			$	3		$	11					$	14
Contract termination and other costs			—			3						3
Total restructuring charges			$	3		$	14					$	17

For the three months ended March 31, 2025, $25 million of the restructuring charges reflected in the table above, consisting of employee termination costs, were related to initiatives to reduce our cost structure following the sale of our Kidney Care segment.

For the three months ended March 31, 2024, $6 million of the restructuring charges reflected in the table above, consisting of employee termination costs, were related to the implementation of our operating model intended to streamline our operations.

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

(in millions)
Liability balance as of December 31, 2024			$	122
Charges			26
Payments			(36)
Currency translation			2
Liability balance as of March 31, 2025			$	114

Substantially all of our restructuring liabilities as of March 31, 2025 relate to employee termination costs, with the remaining liabilities attributable to contract termination costs. Substantially all of the cash payments for those liabilities are expected to be disbursed by the end of 2025.

11. PENSION AND OTHER POSTRETIREMENT BENEFIT PROGRAMS

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

			Three Months Ended March 31,
(in millions)			2025			2024
Pension benefits
Service cost			$	3		$	6
Interest cost			34			45
Expected return on plan assets			(44)			(59)
Amortization of net losses and prior service costs			1			4
Net periodic pension cost			$	(6)		$	(4)
OPEB
Interest cost			$	2		$	2
Amortization of net loss and prior service credit			(4)			(5)
Net periodic OPEB cost (income)			$	(2)		$	(3)

12. INCOME TAXES

For the three months ended March 31, 2025 and 2024, our effective income tax rate differs significantly from the 21% U.S. federal statutory rate due to a number of factors, including foreign rate differences, tax incentives, non-deductible expenses, non-taxable income, increases or decreases in valuation allowances, increases or decreases in liabilities for uncertain tax positions, and excess tax benefits or shortfalls on stock compensation awards.

For the three months ended March 31, 2025, the difference between our effective income tax rate and the U.S. federal statutory rate was primarily driven by our near break-even pre-tax income and a tax benefit driven by an entity classification election that we made for U.S. tax purposes, which resulted in a capital loss.

For the three months ended March 31, 2024, the difference between our effective income tax rate and the U.S. federal statutory rate was primarily driven by income tax expense resulting from internal reorganization transactions related to the sale of our Kidney Care segment, an increase in a valuation allowance in a foreign jurisdiction resulting from changes in future projected income, and an increase in our liabilities for various uncertain tax positions.

13. EARNINGS PER SHARE

The numerator for both basic and diluted earnings per share (EPS) is net income (loss) attributable to Baxter stockholders. The denominator for basic EPS is the weighted-average number of shares outstanding during the period. The dilutive effect of outstanding stock options, RSUs and PSUs is reflected in the denominator for diluted EPS using the treasury stock method.

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

			Three Months Ended March 31,
(in millions)			2025			2024
Income (loss) from continuing operations			$	64		$	6
Less: Net income attributable to noncontrolling interests included in continuing operations			—			—
Income (loss) from continuing operations attributable to Baxter stockholders			64			6
Income (loss) from discontinued operations			62			33
Less: Net income attributable to noncontrolling interests included in discontinued operations			—			2
Income (loss) from discontinued operations attributable to Baxter stockholders			62			31
Net income (loss) attributable to Baxter stockholders			$	126		$	37

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

			Three Months Ended March 31,
(in millions)			2025			2024
Basic shares			512			508
Effect of dilutive securities			2			2
Diluted shares			514			510

The effect of dilutive securities includes unexercised stock options, unvested RSUs and contingently issuable shares related to granted PSUs. The computation of diluted EPS excludes 20 million and 16 million shares issuable under equity awards for the three months ended March 31, 2025 and 2024, respectively, because their inclusion would have had an anti-dilutive effect on diluted EPS.

14. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

We operate on a global basis and are exposed to the risk that our earnings, cash flows and equity could be adversely impacted by fluctuations in foreign exchange and interest rates. Our hedging policy attempts to manage these risks to an acceptable level based on our judgment of the appropriate trade-off between risk, opportunity and costs.

We are primarily exposed to foreign exchange risk with respect to recognized assets and liabilities, forecasted transactions and net assets denominated in the Euro, British Pound, Canadian Dollar, Australian Dollar, Indian Rupee, Turkish Lira, Japanese Yen, Mexican Peso, Korean Wan and Swiss Franc. We manage our foreign currency exposures on a consolidated basis, which allows us to net exposures and take advantage of any natural offsets. In addition, we use derivative and nonderivative instruments to further reduce our net exposure to foreign exchange risk. Gains and losses on the hedging instruments offset losses and gains on the hedged transactions and reduce the earnings and equity volatility resulting from changes in foreign exchange rates. Financial market and currency volatility may limit our ability to cost-effectively hedge these exposures.

We are also exposed to the risk that our earnings and cash flows could be adversely impacted by fluctuations in interest rates. Our policy is to manage interest costs using the mix of fixed- and floating-rate debt that we believe is appropriate at that time. To manage this mix in a cost-efficient manner, we periodically enter into interest rate swaps in which we agree to exchange, at specified intervals, the difference between fixed and floating interest amounts calculated by reference to an agreed-upon notional amount.

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

Derivative instruments are recognized as either assets or liabilities at fair value in the condensed consolidated balance sheets and are classified as short-term or long-term based on the scheduled maturity of the instrument. We designate certain of our derivatives and foreign-currency denominated debt as hedging instruments in cash flow, fair value or net investment hedges.

Cash Flow Hedges

We may use options, including collars and purchased options, forwards and cross-currency swaps to hedge the foreign exchange risk to earnings relating to forecasted transactions and recognized assets and liabilities. We periodically use treasury rate locks to hedge the risk to earnings associated with movements in interest rates relating to anticipated issuances of debt.

For each derivative instrument that is designated and effective as a cash flow hedge, the gain or loss on the derivative is recorded in AOCI and then recognized in earnings consistent with the underlying hedged transaction. Cash flow hedges are classified in cost of sales and interest expense, net, and are primarily related to forecasted intra-company sales denominated in foreign currencies and forecasted interest payments on anticipated issuances of debt, respectively.

The notional amounts of foreign exchange contracts designated as cash flow hedges were $49 million and $99 million as of March 31, 2025 and December 31, 2024, respectively. The maximum term over which we have cash flow hedge contracts in place related to forecasted transactions at March 31, 2025 is eight months for foreign exchange contracts. There were no outstanding interest rate contracts designated as cash flow hedges as of March 31, 2025 and December 31, 2024.

Fair Value Hedges

We periodically use interest rate swaps to convert a portion of our fixed-rate debt into variable-rate debt. These instruments hedge our earnings from changes in the fair value of debt due to fluctuations in the designated benchmark interest rate. For each derivative instrument that is designated and effective as a fair value hedge, the gain or loss on the derivative is recognized immediately to earnings, and offsets changes in fair value attributable to a particular risk, such as changes in interest rates, of the hedged item, which are also recognized in earnings. Changes in the fair value of hedge instruments designated as fair value hedges are classified in interest expense, net, as they hedge the interest rate risk associated with certain of our fixed-rate debt.

There were no outstanding interest rate contracts designated as fair value hedges as of March 31, 2025 and December 31, 2024.

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

Net Investment Hedges

In May 2017, we issued €600 million of 1.3% senior notes due May 2025. We had designated these debt obligations as hedges of our net investment in our European operations and, as a result, mark to spot rate adjustments of the outstanding debt balances were previously recorded as a component of AOCI. In March 2025, we dedesignated this previously designated net investment hedge and concurrently entered into forward contracts to manage foreign exchange risk in earnings relating to these outstanding debt balances.

In May 2019, we issued €750 million of 1.3% senior notes due May 2029. We have designated these debt obligations as hedges of our net investment in our European operations and, as a result, mark to spot rate adjustments on the outstanding debt balances are recorded as a component of AOCI.

In May 2019, we issued €750 million of 0.40% senior notes due May 2024. We had designated these debt obligations as hedges of our investment in our European operations and, as a result, mark to spot rate adjustments of the outstanding debt balances were previously recorded as a component of AOCI. In October 2023, we dedesignated this previously designated net investment hedge and concurrently entered into a fair value hedging relationship as discussed in the "Fair Value Hedges" section above.

As of March 31, 2025, we had an accumulated pre-tax unrealized translation gain in AOCI of $63 million related to the Euro-denominated senior notes.

Dedesignations

If it is determined that a derivative or nonderivative hedging instrument is no longer highly effective as a hedge, we discontinue hedge accounting prospectively. Gains or losses relating to terminations of effective cash flow hedges generally continue to be deferred and are recognized consistent with the loss or income recognition of the underlying hedged transactions. However, if it is probable that the hedged forecasted transactions will not occur, any gains or losses would be immediately reclassified from AOCI to earnings.

There were no cash flow hedge dedesignations in the first three months of 2025 or 2024 resulting from changes in our assessment of the probability that the hedged forecasted transactions would occur.

If we terminate a fair value hedge, an amount equal to the cumulative fair value adjustment to the hedged item at the date of termination is amortized to earnings over the remaining term of the hedged item. There were no fair value hedges terminated during the first three months of 2025 or 2024.

If we remove a net investment hedge designation, any gain or loss recognized in AOCI is not reclassified to earnings until we sell, liquidate, or deconsolidate the foreign investments that were being hedged. In March 2025, we dedesignated one of our net investment hedges as discussed in the "Net Investment Hedges" section above. There were no net investment hedges terminated during the first three months of 2024.

Undesignated Derivative Instruments

We use forward contracts to hedge earnings from the effects of foreign exchange relating to certain of our intra-company and third-party receivables and payables denominated in a foreign currency. These derivative instruments are generally not formally designated as hedges and the terms of these instruments generally do not exceed one month.

In March 2025, as discussed in the "Net Investment Hedges" section above, we entered into forward contracts with a notional amount of $655 million to hedge the repayment of our Euro-denominated senior notes due May 2025. The total notional amount of undesignated derivative instruments was $955 million as of March 31, 2025 and $389 million as of December 31, 2024.

Gains and Losses on Hedging Instruments and Undesignated Derivative Instruments

The following tables summarize the gains and losses on our hedging instruments and the classification of those gains and losses within our condensed consolidated financial statements for the three months ended March 31, 2025 and

			Gain (loss) recognized in OCI												Location of gain (loss) in income statement			Gain (loss) reclassified from AOCI into income
(in millions)			2025						2024						2025						2024
Cash flow hedges
Interest rate contracts			$	—					$	—					Interest expense, net			$	(1)					$	(1)
Foreign exchange contracts			—						10						Cost of sales			4						2
Fair value hedges
Foreign exchange contracts			—						(2)						Other (income) expense, net			—						(3)
Net investment hedges			61						38						Other (income) expense, net			—						—
Total			$	61					$	46								$	3					$	(2)

			Location of gain (loss) in income statement			Gain (loss) recognized in income
(in millions)			2025						2024
Fair value hedges
Foreign exchange contracts			Other (income) expense, net			$	—					$	(23)
Undesignated derivative instruments
Foreign exchange contracts			Other (income) expense, net			(2)						(5)
Total						$	(2)					$	(28)

As of March 31, 2025, $2 million of deferred, net after-tax losses on derivative instruments included in AOCI are expected to be recognized in earnings during the next 12 months, coinciding with when the hedged items are expected to impact earnings.

Derivative Assets and Liabilities

The following table summarizes the classification and fair values of derivative instruments reported in the condensed consolidated balance sheet as of March 31, 2025.

			Derivatives in asset positions									Derivatives in liability positions
(in millions)			Balance sheet location			Fair value						Balance sheet location			Fair value
Derivative instruments designated as hedges
Foreign exchange contracts			Prepaid expenses and other current assets			$	3					Accrued expenses and other current liabilities			$	—
Net investment hedges												Long-term debt and finance lease obligations, less current portion			761
Undesignated derivative instruments
Foreign exchange contracts			Prepaid expenses and other current assets			—						Accrued expenses and other current liabilities			4
Net investment hedges												Current maturities of long-term debt and finance lease obligations			648
Total derivative instruments						$	3								$	1,413

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

			Derivatives in asset positions									Derivatives in liability positions
(in millions)			Balance sheet location			Fair value						Balance sheet location			Fair value
Derivative instruments designated as hedges
Foreign exchange contracts			Prepaid expenses and other current assets			$	6					Accrued expenses and other current liabilities			$	—
Net investment hedges												Current maturities of long-term debt and finance lease obligations			618
Net investment hedges												Long-term debt and finance lease obligations, less current portion			727
Undesignated derivative instruments
Foreign exchange contracts			Prepaid expenses and other current assets			1						Accrued expenses and other current liabilities			2
Total derivative instruments						$	7								$	1,347

While some of our derivatives are subject to master netting arrangements, we present our assets and liabilities related to derivative instruments on a gross basis within the condensed consolidated balance sheets. Additionally, we are not required to post collateral for any of our outstanding derivatives.

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

			March 31, 2025									December 31, 2024
(in millions)			Asset			Liability						Asset			Liability
Gross amounts recognized in the condensed consolidated balance sheets			$	3		$	4					$	7		$	2
Gross amount subject to offset in master netting arrangements not offset in the condensed consolidated balance sheet			(2)			(2)						(1)			(1)
Total			$	1		$	2					$	6		$	1

The following table presents the amounts recorded on the condensed consolidated balance sheet related to fair value hedges:

			Carrying amount of hedged item									Cumulative amount of fair value hedging adjustment included in the carrying amount of the hedged item (a)
(in millions)			Balance as of March 31, 2025			Balance as of December 31, 2024						Balance as of March 31, 2025			Balance as of December 31, 2024
Long-term debt			$	99		$	99					$	2		$	2

(a) These fair value hedges were terminated in 2018 and earlier periods.

15. FAIR VALUE MEASUREMENTS

The following tables summarize our assets and liabilities that are measured at fair value on a recurring basis.

						Basis of fair value measurement
(in millions)			Balance as of March 31, 2025			Quoted prices in active markets for identical assets (Level 1)			Significant other observable inputs (Level 2)			Significant unobservable inputs (Level 3)
Assets
Foreign exchange contracts			$	3		$	—		$	3		$	—
Available-for-sale debt securities			1			—			—			1
Marketable equity securities			12			12			—			—
Total			$	16		$	12		$	3		$	1
Liabilities
Foreign exchange contracts			$	4		$	—		$	4		$	—
Contingent payments related to acquisitions			12			—			—			12
Indemnifications related to Kidney Care separation1			37			—			—			37
Total			$	53		$	—		$	4		$	49

1 Recorded in connection with the sale of our Kidney Care business and was measured as of January 31, 2025. See Note 2 for additional information.

						Basis of fair value measurement
(in millions)			Balance as of December 31, 2024			Quoted prices in active markets for identical assets (Level 1)			Significant other observable inputs (Level 2)			Significant unobservable inputs (Level 3)
Assets
Foreign exchange contracts			$	7		$	—		$	7		$	—
Available-for-sale debt securities			1			—			—			1
Marketable equity securities			13			13			—			—
Total			$	21		$	13		$	7		$	1
Liabilities
Foreign exchange contracts			$	2		$	—		$	2		$	—
Contingent payments related to acquisitions			12			—			—			12
Total			$	14		$	—		$	2		$	12

As of March 31, 2025 and December 31, 2024, cash and cash equivalents of $2.29 billion and $1.76 billion, respectively, included money market fund and other short-term funds of approximately $1.21 billion and $583 million, respectively, that are considered Level 2 in the fair value hierarchy.

For assets that are measured using quoted prices in active markets, the fair value is the published market price per unit multiplied by the number of units held, without consideration of transaction costs. A majority of the derivatives entered into by us are valued using internal valuation techniques as no quoted market prices exist for such instruments. The principal techniques used to value these instruments are discounted cash flow and Black-Scholes models. The key inputs, which are considered observable and vary depending on the type of derivative, include contractual terms, interest rate yield curves, foreign exchange rates and volatility.

Available-for-sale debt securities, which consist of convertible debt and convertible redeemable preferred shares issued by nonpublic entities, are measured using discounted cash flow and option pricing models. Those available-for-sale debt securities are classified as Level 3 fair value measurements when there are no observable transactions near the balance sheet date due to the lack of observable data over certain fair value inputs such as equity volatility. The fair values of available-for-sale debt securities increase when interest rates decrease, equity volatility increases, or the fair values of the equity shares underlying the conversion options increase.

Contingent payments related to acquisitions, which consist of milestone payments and sales-based payments, are valued using discounted cash flow techniques incorporating management's expectations of future outcomes. The fair value of milestone payments increases as the estimated probability of payment increases or the expected timing of payments is accelerated. The fair value of sales-based payments is based upon probability-weighted future revenue estimates, and increases as revenue estimates increase, probability weighting of higher revenue scenarios increases or the expected timing of payment is accelerated.

In addition, we have contingent payments related related to the Kidney Care separation, which consist of reimbursements to Vantive for certain indemnifications contemplated in the EPA. For additional information on these items see Note 2.

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

			Three Months Ended March 31,
			2025												2024
(in millions)			Indemnifications related to Kidney Care separation			Contingent payments related to acquisitions			Available-for-sale debt securities						Contingent payments related to acquisitions			Available-for-sale debt securities
Fair value at beginning of period			$	—		$	12		$	1					$	14		$	1
Additions			37			—			—						—			—
Fair value at end of period			$	37		$	12		$	1					$	14		$	1

Financial Instruments Not Measured at Fair Value

In addition to the financial instruments that we are required to recognize at fair value in the condensed consolidated balance sheets, we have certain financial instruments that are recognized at amortized cost or some basis other than fair value. For these financial instruments, the following table provides the values recognized in the condensed consolidated balance sheets and the estimated fair values as of March 31, 2025 and December 31, 2024.

			Book values									Fair values(a)
(in millions)			2025			2024						2025			2024
Liabilities
Short-term debt			$	11		$	2,126					$	11		$	2,126
Current maturities of long-term debt and finance lease obligations			651			626						650			619
Long-term debt and finance lease obligations			9,412			10,374						8,398			9,295

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

The estimated fair values of current and long-term debt were computed by multiplying price by the notional amount of the respective debt instruments. Price is calculated using the stated terms of the respective debt instrument and yield curves commensurate with our credit risk. The carrying values of other financial instruments not presented in the above table, such as accounts receivable and accounts payable, approximate their fair values due to the short-term maturities of most of those assets and liabilities.

Investments Without Readily Determinable Fair Values

The carrying values of equity investments without readily determinable fair values that we measure at cost, less impairment were $37 million as of March 31, 2025 and December 31, 2024. When applicable, we also adjust the measurement of such equity investments for observable prices in orderly transactions for an identical or similar investment of the same issuer. These investments are included in Other non-current assets on our condensed consolidated balance sheets.

16. SEGMENT INFORMATION

Our business is comprised of three segments: Medical Products & Therapies, Healthcare Systems & Technologies, and Pharmaceuticals. The Medical Products & Therapies segment includes sales of our sterile IV solutions, infusion systems, administration sets, parenteral nutrition therapies and surgical hemostat, sealant, and adhesion prevention products. The Healthcare Systems & Technologies segment includes sales of our connected care solutions and collaboration tools, including smart bed systems, patient monitoring systems and diagnostic technologies, respiratory health devices, and advanced equipment for the surgical space, including operating room integration technologies, precision positioning devices, and other accessories. The Pharmaceuticals segment includes sales of specialty injectable pharmaceuticals, inhaled anesthesia, and drug compounding. Other sales not allocated to a segment

primarily includes sales to Vantive, pursuant to the Kidney Care MSA, and sales of products and services provided directly through certain of our manufacturing facilities.

Disaggregation of Net Sales

The following tables present our U.S. and International disaggregated net sales.

			Three Months Ended March 31,
			2025												2024
(in millions)			U.S.			International			Total						U.S.			International			Total
Infusion Therapies and Technologies			$	584		$	410		$	994					$	526		$	440		$	966
Advanced Surgery			145			123			268						147			116			263
Medical Products & Therapies			729			533			1,262						673			556			1,229
Care and Connectivity Solutions			316			111			427						278			124			402
Front Line Care			202			75			277						195			70			265
Healthcare Systems & Technologies			518			186			704						473			194			667
Injectables and Anesthesia			195			140			335						191			137			328
Drug Compounding			—			246			246						—			250			250
Pharmaceuticals			195			386			581						191			387			578
Other			48			30			78						11			5			16
Total Baxter			$	1,490		$	1,135		$	2,625					$	1,348		$	1,142		$	2,490

Geographic Sales Information

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

			Three Months Ended March 31,
(in millions)			2025			2024
United States			$	1,490		$	1,348
Emerging markets1			297			307
Rest of world2			838			835
Total Baxter			$	2,625		$	2,490

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

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

Segment Operating Income

In the first quarter of 2025, in conjunction with the change in our Chief Executive Officer, we determined that our chief operating decision maker (CODM) comprises of our Chair and Interim Chief Executive Officer, and the Executive Vice President, Chief Operating Officer and Interim Group President, Medical Products & Therapies, who review the financial information presented for purposes of evaluating the performance of our segments and to make resource allocation decisions. The change in CODM during the first quarter of 2025 did not result in a change in our segments.

Segment operating income is the measure of segment profitability and represents income before income taxes, interest and other non-operating income or expense, unallocated corporate costs, intangible asset amortization, and other special items. Special items, which are presented below in our reconciliations of reportable segment operating income to income (loss) from continuing operations before income taxes, are excluded from segment operating income because they are highly variable, difficult to predict and of a size that may substantially impact our reported results of operations for the period.

Corporate costs, inclusive of global functional support costs, overhead costs and other shared costs that benefit our segments are allocated to those segments. Corporate costs that are not allocated to our segments, as well as any differences between actual corporate costs and the amounts allocated to our segments, are presented as unallocated corporate costs.

Segment results include net sales, cost of sales, selling, general and administrative expenses, research and development expenses, corporate costs that had previously been allocated to our former Kidney Care segment which did not convey in the related sale, and other segment items which are directly allocated to each segment. Beginning in 2024 annual reporting, we adopted ASU 2023-07 retrospectively. The following table presents our segment information of net sales, significant expense and operating income during the periods presented.

			Three Months Ended March 31, 2025												Three Months Ended March 31, 2024
(in millions)			Medical Products & Therapies			Healthcare Systems & Technologies			Pharmaceuticals						Medical Products & Therapies			Healthcare Systems & Technologies			Pharmaceuticals
Net sales			$	1,262		$	704		$	581					$	1,229		$	667		$	578
Cost of sales			694			356			396						668			346			382
Selling, general and administrative expenses			286			217			103						284			207			96
Research and development expenses			59			45			26						52			47			22
Other segment items			(21)			(7)			(7)						(2)			—			—
Segment operating income			$	244		$	93		$	63					$	227		$	67		$	78

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

			Three Months Ended March 31,
(in millions)			2025			2024
Medical Products & Therapies			$	244		$	227
Healthcare Systems & Technologies			93			67
Pharmaceuticals			63			78
Total reportable segment operating income			400			372
Other			9			4
Unallocated corporate costs			(17)			(69)
Intangible asset amortization expense			(155)			(158)
Legal matters			(11)			—
Business optimization items			(45)			(22)
Acquisition and integration items			(1)			(5)
Separation-related costs			(13)			—
European Medical Devices Regulation			(5)			(7)
Hurricane Helene costs			(98)			—
Product-related items			(6)			—
Total operating income			58			115
Interest expense, net			64			78
Other (income) expense, net			(3)			(9)
Income from continuing operations before income taxes			$	(3)		$	46

Additional financial information for our segments is as follows:

			Three Months Ended March 31,
(in millions)			2025			2024
Depreciation Expense1
Medical Products & Therapies			$	49		$	58
Healthcare Systems & Technologies			27			30
Pharmaceuticals			16			25
Total depreciation expense			$	92		$	113

1Depreciation expense related to Corporate property, plant and equipment has been fully allocated to our segments and those segment allocations are reflected in the depreciation amounts presented herein.

Our CODM does not receive asset or capital expenditure information by reportable segment and, accordingly, we do not report that information for our segments.