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DISCONTINUED OPERATIONS | 12 Months Ended
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Dec. 31, 2023
Discontinued Operations and Disposal Groups [Abstract] |
DISCONTINUED OPERATIONS | DISCONTINUED OPERATIONS On September 29, 2023, we sold our BPS business to Advent International and Warburg Pincus (collectively, the buyers). Under the terms of the related Equity Purchase agreement entered into with the buyers in May 2023, we were entitled to aggregate consideration of $4.25 billion, subject to adjustment for specified items. After giving effect to those adjustments, we received cash proceeds of $3.96 billion. We recognized a pre-tax gain on the sale of $2.88 billion ($2.59 billion net of tax), which represents the excess of (a) the $3.91 billion in net consideration received, consisting of (i) $3.96 billion in cash proceeds from the buyers, less (ii) $47 million in transaction costs, over (b) the sum of (i) the $840 million net book value of the BPS business upon the closing of the transaction and (ii) BPS's $181 million other comprehensive loss, which was reclassified to earnings. The BPS business, which was historically reported within our former Americas segment, provided contract manufacturing and development services, which include sterile fill-finish manufacturing and support services across clinical and commercial applications, primarily serving customers in the pharmaceutical industry. BPS was historically operated through our former, wholly-owned subsidiaries Baxter Pharmaceutical Solutions LLC, a Delaware limited liability company, and Baxter Oncology GmbH, a German limited liability company (collectively, the divested entities). We concluded that our BPS business met the criteria to be classified as held-for-sale in May 2023. 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. We analyzed the quantitative and qualitative factors relevant to the divestiture of our BPS business, including its significance to our overall net income (loss) and earnings (loss) per share, 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, including our gain from the sale of that business and the related cash proceeds received, are reported as discontinued operations in the accompanying consolidated financial statements. Prior period amounts have been adjusted to reflect discontinued operations presentation. At closing of the transaction, Baxter Pharmaceutical Solutions LLC included a BPS manufacturing facility in Bloomington Indiana and Baxter Oncology GmbH included a manufacturing facility in Halle Germany. Previously, Baxter Oncology GmbH included an additional manufacturing site in Bielefeld Germany that was not part of the BPS business and was transferred to another Baxter entity prior to closing of the divestiture. Accordingly, amounts related to the Bielefeld site continue to be presented as continuing operations in the accompanying consolidated financial statements. At closing of the transaction, Baxter entered into a Transition Services Agreement (TSA) and a Master Commercial Manufacturing and Supply Agreement (MSA) with the divested entities. Pursuant to the TSA, Baxter and the divested entities will provide to each other, on an interim basis, specific transition services for up to 24 months post-closing to help ensure business continuity and minimize disruptions. Services to be provided under the TSA include finance, information technology, human resources, integrated supply chain and certain other administrative services. Pursuant to the MSA, the divested entities will provide development, manufacturing, regulatory and other related services for certain Baxter pharmaceutical products for up to 5 years post-closing (with certain extension rights as provided therein). Results of Discontinued Operations and Assets and Liabilities of Discontinued Operations The following table summarizes the major classes of line items included in income from discontinued operations, net of tax, for the years ended December 31, 2023, 2022 and 2021:
(in millions) | 2023 | 2022 | 2021
Net sales | $ | 469 |  | $ | 607 |  | $ | 638 |
Cost of sales | 216 |  | 276 |  | 253 |
Gross margin | 253 |  | 331 |  | 385 |
Selling, general and administrative expenses | 45 |  | 28 |  | 22 |
Research and development expenses | 1 |  | 3 |  | 3 |
Interest expense, net | (1) |  | — |  | (1) |
Other (income) expense, net | 1 |  | 3 |  | — |
Income from discontinued operations before gain on disposition and income taxes | 207 |  | 297 |  | 361 |
Gain on disposition | 2,882 |  | — |  | — |
Income tax expense | 357 |  | 64 |  | 99 |
Income from discontinued operations, net of tax | $ | 2,732 |  | $ | 233 |  | $ | 262 |
For the years ended December 31, 2023 and 2022, SG&A expenses include $17 million and $5 million, respectively, of separation-related costs incurred in connection with the sale of BPS. The following table summarizes the carrying amounts of the major classes of assets and liabilities classified as discontinued operations in the consolidated balance sheets as of December 31, 2022:
as of December 31 (in millions) | 2022
Accounts receivable, net of allowances | $ | 88 |
Inventories | 39 |
Prepaid expenses and other current assets | 59 |
Property, plant and equipment, net | 284 |
Goodwill | 391 |
Operating lease right-of-use assets | 9 |
Other non-current assets | 2 |
Assets of discontinued operations | $ | 872 |
Accounts payable | $ | 29 |
Accrued expenses and other current liabilities | 32 |
Operating lease liabilities | 9 |
Other non-current liabilities | 111 |
Liabilities of discontinued operations | $ | 181 |

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- Definition The entire disclosure related to a disposal group. Includes, but is not limited to, a discontinued operation, disposal classified as held-for-sale or disposed of by means other than sale or disposal of an individually significant component. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 205 -SubTopic 20 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//205-20/tableOfContent Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 360 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//360/tableOfContent + Details
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