Baxter International BAX · USD

SEGMENT AND GEOGRAPHIC INFORMATIONOur business is comprised of three reportable segments: Medical Products & Therapies, Healthcare Systems & Technologies, and Pharmaceuticals. The Medical Products & Therapies segment includes sales of our sterile IV solutions, infusion systems, administration sets, parenteral nutrition therapies and surgical hemostat, sealant and adhesion prevention products. The Healthcare Systems & Technologies segment includes sales of our connected care solutions and collaboration tools, including smart bed systems, patient monitoring systems and diagnostic technologies, respiratory health devices and advanced equipment for the surgical space, including operating room integration technologies, precision positioning devices, and other accessories. The Pharmaceuticals segment includes sales of specialty injectable pharmaceuticals, inhaled anesthetics and drug compounding. Other sales not allocated to a segment primarily include 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 SalesThe following tables present our U.S. and International disaggregated net sales.for the years ended December 31202520242023(in millions)U.S.InternationalTotalU.S.InternationalTotalU.S.InternationalTotalInfusion Therapies & Technologies$2,236 $1,865 $4,101 $2,279 $1,824 $4,103 $2,227 $1,733 $3,960 Advanced Surgery648 550 1,198 603 501 1,104 582 469 1,051 Medical Products & Therapies2,884 2,415 5,299 2,882 2,325 5,207 2,809 2,202 5,011 Care & Connectivity Solutions1,372 539 1,911 1,311 503 1,814 1,263 537 1,800 Front Line Care871 289 1,160 843 294 1,137 905 308 1,213 Healthcare Systems & Technologies2,243 828 3,071 2,154 797 2,951 2,168 845 3,013 Injectables & Anesthesia749 603 1,352 780 593 1,373 759 588 1,347 Drug Compounding— 1,141 1,141 — 1,038 1,038 — 902 902 Pharmaceuticals749 1,744 2,493 780 1,631 2,411 759 1,490 2,249 Other246 135 381 34 33 67 66 21 87 Total Baxter$6,122 $5,122 $11,244 $5,850 $4,786 $10,636 $5,802 $4,558 $10,360 Geographic InformationOur net sales are attributed to the following geographic regions based on the location of the customer.

REVENUESContract BalancesThe timing of revenue recognition, billings and cash collections results in the recognition of trade accounts receivable, unbilled receivables, contract assets, and customer advances and deposits (contract liabilities) on our consolidated balance sheets. Net trade accounts receivable was $1.70 billion and 1.54 billion as of December 31, 2025 and 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 provided and billed, generally over one to seven years. The following table summarizes our contract assets:as of December 31 (in millions)20252024Contract manufacturing services$3 $2 Software sales34 44 Bundled equipment and consumable medical products contracts110 87 Contract assets$147 $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.

COMMITMENTS AND CONTINGENCIESRefer to Note 2 for information regarding contingent payments related to Vantive, recorded in accordance with the EPA.IndemnificationsDuring the normal course of business, we make indemnities, commitments and guarantees pursuant to which we may be required to make payments related to specific transactions. Indemnifications include: (i) intellectual property indemnities to customers in connection with the use, sales or license of products and services; (ii) indemnities to customers in connection with losses incurred while performing services on their premises; (iii) indemnities to vendors and service providers pertaining to claims based on negligence or willful misconduct; (iv) indemnities involving the representations and warranties in certain contracts; and (v) contractual indemnities for our directors and our executive and corporate officers for services provided to or at the request of us. In addition, under our Amended and Restated Certificate of Incorporation, and consistent with Delaware General Corporation Law, we have agreed to indemnify our directors and officers for certain losses and expenses upon the occurrence of certain prescribed events. The majority of these indemnities, commitments and guarantees do not provide for any limitation on the maximum potential for future payments that we could be obligated to make. To help address some of these risks, we maintain various insurance coverages. Based on historical experience and evaluation of the agreements, we do not believe that any payments related to our indemnities will have a material impact on our financial condition or results of operations. In accordance with the EPA, we have agreed to indemnify Vantive for certain items. Refer to Note 2 for additional information regarding these indemnifications. Legal ContingenciesWe 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. We regularly review legal contingencies to determine whether our accruals and related disclosures are adequate.

DEBT AND CREDIT FACILITIESDebt OutstandingAt December 31, 2025 and 2024, we had the following debt outstanding: as of December 31 (in millions)Effective interest rate as of December 31,2025¹2025120241Commercial paper— %$— $300 1.3% notes due 2025— %— 625 Delayed draw term loan due 2025— %— 1,826 2.6% notes due 2026— %— 749 Term loan maturing 2027— %— 1,643 7.65% debentures due 20277.7 %5 5 1.915% notes due 20273.4 %834 1,446 6.625% debentures due 20285.8 %94 94 2.272% notes due 20282.4 %1,246 1,245 1.3% notes due 20291.4 %876 776 4.45% notes due 20294.2 %298 — 3.95% notes due 20304.1 %497 497 4.9% notes due 20304.6 %695 — 1.73% notes due 20312.7 %647 646 2.539% notes due 20322.6 %1,542 1,541 5.65% notes due 20355.2 %991 — 6.25% notes due 20376.3 %266 266 3.65% notes due 20423.9 %6 6 4.5% notes due 20434.6 %256 256 3.5% notes due 20463.7 %442 441 3.132% notes due 20513.2 %743 743 Finance leases and other4.8 %38 21 Total debt and finance lease obligations9,476 13,126 Short-term debt (1)(2,126)Current maturities of long-term debt and finance lease obligations(2)(626)Long-term debt and finance lease obligations$9,473 $10,374 1Book values include any discounts, premiums and adjustments related to hedging instruments and effective interest rates reflect amortization of those items.Significant Debt ActivityIn February 2025, we repaid $1.00 billion under our $1.64 billion five-year term loan facility maturing in 2026. In June 2025, we amended and restated this term loan facility in its entirety (as further described under "Credit Facilities" below). In November 2025 we commenced cash tender offers for (i) any and all of our 2.6% senior unsecured notes due 2026 (the 2026 Notes) and (ii) a portion of our 1.915% senior unsecured notes due 2027 (the 2027 Notes) in an aggregate purchase price up to $600 million. The cash tender offers were settled in December 2025. In December 2025, we issued $300 million of 4.45% senior notes due in 2029 (the 2029 Notes), $700 million of 4.9% senior notes due in 2030 (the 2030 Notes) and $1.00 billion of 5.65% senior notes due 2035 (the 2035 Notes and together with the 2029 Notes and the 2030 Notes, the Notes). The interest rate payable on each series of the Notes will be subject to adjustment from time to time if (1) Moody’s Investors Service, Inc.

INCOME TAXESIncome (Loss) Before Income Tax Expense (Benefit) by Categoryyears ended December 31 (in millions)202520242023United States$(1,345)$(1,499)$(1,057)Foreign840 1,210 1,299 Income (loss) from continuing operations before income taxes$(505)$(289)$242 Income Tax Expense (Benefit) years ended December 31 (in millions)202520242023CurrentUnited StatesFederal$118 $19 $1 State and local29 21 9 Foreign171 259 307 Current income tax expense (benefit)318 299 317 DeferredUnited StatesFederal(34)(197)(123)State and local37 (21)(25)Foreign74 (44)(108)Deferred income tax expense (benefit)77 (262)(256)Income tax expense (benefit)$395 $37 $61 On July 4, 2025, the United States enacted the One Big Beautiful Bill Act (OBBBA), which includes significant tax provisions, including extensions of key provisions from the 2017 Tax Cuts and Jobs Act and modifications to the U.S. international tax framework. The legislation has multiple effective dates, with certain provisions effective in 2025 and others to be implemented through 2027. The impact of the OBBBA legislation on our income tax expense for the year ending December 31, 2025 was not material. We will continue to monitor regulatory guidance and interpretations as they are issued.Deferred Tax Assets and Liabilitiesas of December 31 (in millions)20252024Deferred tax assetsAccrued liabilities and other$403 $310 Pension and other postretirement benefits124 131 Tax credit and net operating loss carryforwards433 750 Swiss tax reform net asset basis step-up103 92 Operating lease liabilities66 139 Valuation allowances(543)(536)Total deferred tax assets586 886 Deferred tax liabilitiesUnremitted earnings of subsidiaries33 21 Long-lived assets and other536 632 Operating lease right-of-use assets62 132 Total deferred tax liabilities631 785 Net deferred tax asset (liability)$(45)$101 At December 31, 2025, we had U.S. state operating loss carryforwards totaling $70 million, U.S. federal operating loss carryforwards totaling $9 million and tax credit carryforwards totaling $277 million, which includes a U.S. foreign tax credit carryforward of $235 million. The U.S. federal and state operating loss and tax credit carryforwards expire between 2026 and 2045, with $13 million of the operating loss carryforwards having no expiration date. At December 31, 2025, with respect to our operations outside the U.S., we had operating loss carryforwards totaling $69 million and tax credit carryforwards totaling $16 million. The non-U.S.

LEASESLessee ActivityWe have entered into operating and finance leases primarily for office, manufacturing, warehouse and R&D facilities, vehicles and equipment. Our leases have remaining terms from one to 37 years and some of those leases include options that provide us with the ability to extend the lease term for periods ranging from one to 10 years. Such options are included in the lease term when it is reasonably certain that the option will be exercised.Certain of our leases include provisions for variable lease payments which are based on, but not limited to, maintenance, insurance, taxes, index escalations and usage-based amounts. For all asset classes, we have elected to apply a practical expedient to account for other services within lease contracts as components of the lease. We also have elected to apply a practical expedient for short-term leases whereby we do not recognize a lease liability and right-of-use asset for leases with a term of less than 12 months.We classify our leases as operating or finance at the lease commencement date. Finance leases are generally those leases for which we will pay substantially all of the underlying asset’s fair value or will use the asset for all or a major part of its economic life, including circumstances in which we will ultimately own the asset. All other leases are operating leases. For finance leases, we recognize interest expense using the effective interest method and we recognize amortization expense on the right-of-use asset over the shorter of the lease term or the useful life of the asset. For operating leases, we recognize lease cost on a straight-line basis over the term of the lease.Lease liabilities and right-of-use assets are recognized at the lease commencement date based on the present value of minimum lease payments over the lease term. We determine the present value of payments under a lease based on our incremental borrowing rate as of the lease commencement date. The incremental borrowing rate is equal to the rate of interest that we would have to pay to borrow on a collateralized basis over a similar term in an amount equal to the lease payments in a similar economic environment.

The Cybersecurity Program and the CISO's organization maintain a cybersecurity governance and oversight framework that seeks to drive accountability for all levels of employees, including senior management and executive officers. Cybersecurity matters are generally managed by a combination of working groups, the cybersecurity compliance committee and ultimately the cybersecurity executive oversight committee, as appropriate. Our cross functional cybersecurity compliance committee is led by the CISO, is composed of members of senior management, including the CIO, and reviews matters such as cybersecurity escalations, critical remediations, and disclosure recommendations. The output from the cybersecurity compliance committee meetings is discussed at meetings of Baxter’s cybersecurity executive oversight committee, which is also led by the CISO's organization and includes the CEO, other members of the CEO's executive management including the CIO, Chief Financial Officer and General Counsel. The Board oversees information technology functions generally, including product related cybersecurity matters as well as our use of artificial intelligence (whether internally or in our products and services). The Audit Committee of the Board is responsible for the oversight of certain significant cybersecurity incidents, including ones related to our products and services, and, in the event of a significant cybersecurity incident, receives related updates from management on those incidents. Consistent with this oversight responsibility, the Audit Committee is responsible for reviewing proposed disclosures in connection with any material cybersecurity incident consistent with our disclosure obligations under Item 1.05 of Form 8-K. The full Board receives periodic updates on information technology and cybersecurity matters from management (including the CIO and CISO) and external advisors from time to time, and the Audit Committee receives periodic updates (including as part of continuing director education) on the evolving cybersecurity and artificial intelligence landscapes and regulatory reporting requirements. We maintain and annually update a Cybersecurity Incident Response Plan, which is a guide for our Cyber Security Incident Response Team and business to respond to cybersecurity incidents in a coordinated manner.

STOCKHOLDERS' EQUITYStock-Based CompensationOur stock-based compensation generally includes stock options, restricted stock units (RSUs), performance share units (PSUs) and purchases under our employee stock purchase plan. Shares issued relating to our stock-based plans are generally issued out of treasury stock.As of December 31, 2025, approximately 40 million authorized shares are available for future awards under our stock-based compensation plans.Stock Compensation ExpenseStock compensation expense was $117 million, $114 million and $115 million in 2025, 2024 and 2023, respectively. The related tax benefit recognized was $13 million in 2025, $8 million in 2024 and $10 million in 2023. Included in the benefit in 2025, 2024 and 2023 was tax expense for stock-based compensation shortfalls of $10 million, $9 million and $11 million, respectively.Approximately 75% of stock compensation expense is classified in SG&A expenses, with the remainder classified in cost of sales and R&D expenses. Costs capitalized in the consolidated balance sheets at December 31, 2025 and 2024 were not material.Stock compensation expense is based on awards expected to vest and therefore has been reduced by estimated forfeitures.Stock OptionsStock options are granted to employees with exercise prices equal to 100% of the market value on the date of grant. Stock options granted to employees generally vest in one-third increments over a three-year period. Stock options granted to non-employee directors prior to 2023 generally vested immediately on the grant date and are issued with a six-month claw-back provision. Stock options typically have a contractual term of 10 years. The grant-date fair value, adjusted for estimated forfeitures, is recognized as expense on a straight-line basis over the substantive vesting period.The fair value of stock options is determined using the Black-Scholes model. The weighted-average assumptions used in estimating the fair value of stock options granted during each year, along with the weighted-average grant-date fair values, were as follows:years ended December 3120252023Expected volatility30 %27 %Expected life (in years)6.56.0Risk-free interest rate4.1 %4.2 %Dividend yield2.3 %3.0 %Fair value per stock option$9 $9 The expected volatility assumption required in the Black-Scholes model was calculated principally based on our historical volatility, and to a lesser extent, on implied volatility from options trading on our stock.