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SUPPLEMENTAL FINANCIAL INFORMATION | 12 Months Ended
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Dec. 31, 2023
Organization, Consolidation and Presentation of Financial Statements [Abstract] |
SUPPLEMENTAL FINANCIAL INFORMATION |
SUPPLEMENTAL FINANCIAL INFORMATION
Allowance for Doubtful Accounts The following table is a summary of changes in our allowance for doubtful accounts for the years ended December 31, 2023 and 2022.
years ended December 31 (in millions) | 2023 | 2022 | 2021
Balance at beginning of period | $ | 114 |  | $ | 122 |  | $ | 125 |
Acquisition | — |  | — |  | 13 |
Charged to costs and expenses | 16 |  | 7 |  | (2) |
Write-offs | (9) |  | (7) |  | (5) |
Currency translation adjustments | 8 |  | (8) |  | (9) |
Balance at end of period | $ | 129 |  | $ | 114 |  | $ | 122 |
Inventories
as of December 31 (in millions) | 2023 | 2022
Raw materials | $ | 731 |  | $ | 698 |
Work in process | 285 |  | 294 |
Finished goods | 1,808 |  | 1,687 |
Inventories | $ | 2,824 |  | $ | 2,679 |
Prepaid Expenses and Other Current Assets
as of December 31 (in millions) | 2023 | 2022
Prepaid value added taxes | $ | 190 |  | $ | 188 |
Prepaid income taxes | 211 |  | 185 |
Contract assets | 53 |  | 52 |
Assets held for sale | — |  | 50 |
Derivative assets | 51 |  | 14 |
Other | 387 |  | 368 |
Prepaid expenses and other current assets | $ | 892 |  | $ | 857 |
In September 2022, we entered into a purchase agreement with a buyer to sell our corporate headquarters in Deerfield, Illinois for $52 million, which approximated its net book value. The related assets were classified as held for sale at that time and were presented within prepaid expenses and other current assets in the accompanying consolidated balance sheet as of December 31, 2022. During 2023, the purchase agreement was terminated and the property was taken off the market. We currently intend to continue using the property as our corporate headquarters for the foreseeable future and the related assets, which became classified as assets held for use upon termination of the purchase agreement, are presented within property, plant and equipment, net in the accompanying consolidated balance sheet as of December 31, 2023. Property, Plant and Equipment, Net
as of December 31 (in millions) | 2023 | 2022
Land and land improvements | $ | 149 |  | $ | 137 |
Buildings and leasehold improvements | 1,791 |  | 1,757 |
Machinery and equipment | 6,693 |  | 6,364 |
Equipment on lease with customers | 1,640 |  | 1,613 |
Construction in progress | 950 |  | 909 |
Total property, plant and equipment, at cost | 11,223 |  | 10,780 |
Accumulated depreciation | (6,790) |  | (6,085) |
Property, plant and equipment, net | $ | 4,433 |  | $ | 4,695 |
Depreciation expense was $611 million in 2023, $627 million in 2022 and $592 million in 2021. Impairments of Property, Plant and Equipment and Certain Other Long-Lived Assets We review the carrying amounts of long-lived assets used in operations for potential impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In evaluating recoverability of long-lived assets other than goodwill and intangible assets not subject to amortization, we group assets and liabilities at the lowest level such that the identified cash flows relating to the group are largely independent of the cash flows of other assets and liabilities. If the carrying amount of an asset group is greater than the related estimated undiscounted future cash flows, the carrying value is not considered recoverable. In that case, an impairment charge is recorded if, and to the extent that, the amount by which the asset group's carrying amount exceeds its fair value. However, the portion of an impairment loss allocated to an individual long-lived asset within an asset group cannot reduce the carrying amount of that asset below its fair value if its fair value is determinable without undue cost and effort. Impairment of Opelika, Alabama Manufacturing Facility Our manufacturing facility in Opelika, Alabama was one of three Baxter manufacturing facilities that produced dialyzers used in hemodialysis (HD) treatments. The competitive environment has increased the global supply of those products and, in connection with our initiatives to streamline our manufacturing footprint and improve our profitability, we made the decision in the second quarter of 2023 to cease production of dialyzers at the Opelika facility near the end of 2023. As a result of our decision to cease dialyzer production at this manufacturing facility, we performed a trigger-based recoverability assessment of its long-lived assets, which consist of a building and manufacturing equipment, including specialized equipment used in the production of dialyzers. The carrying amount of that asset group exceeded the estimated undiscounted cash flows expected to be generated, and we recognized an impairment charge of $243 million, classified within cost of sales in the accompanying consolidated statements of income (loss), during the second quarter of 2023 to reduce the carrying amounts to their estimated fair values. The fair values of the building and manufacturing equipment tested for impairment during the second quarter of 2023 were determined based on transaction prices of comparable assets. Significant assumptions used in the determination of the fair values included the identification of representative comparable assets. Our long-lived asset fair value measurements are classified as Level 3 in the fair value hierarchy because they involve significant unobservable inputs. Other Impairments of Long-Lived Assets Related to HD Business In the third quarter of 2023, we completed the implementation of a new operating model intended to simplify and streamline our operations and better align our manufacturing and supply chain to our commercial activities. Our segments were changed during the third quarter of 2023 to align with our new operating model. See further discussion in Note 18, Segment Information. In connection with that segment change, we identified new reporting units for impairment testing purposes and performed fair value measurements of our reporting units to reallocate goodwill to the new reporting units based on their relative fair values and to assess those reporting units for impairment. We identified our HD business within our Kidney Care segment as one of the new reporting units at that time. Based on the estimated fair value of our HD business, we allocated no goodwill to it, and we determined that a triggering event was present to review the carrying amounts of long-lived assets within the HD business, which include four manufacturing facilities that primarily manufacture HD products, HD equipment leased to customers under operating leases and developed technology intangible assets, for potential impairment. In connection with that evaluation, we determined that the carrying amount of the asset group represented by our HD business, which is the lowest level for which identifiable cash flows are largely independent of other assets and liabilities, exceeded its forecasted undiscounted cash flows. We then measured the excess of the carrying amount of that asset group over its fair value and allocated the resulting impairment to its long-lived assets, limiting the impairments of individual assets within the group to amounts that would not result in their carrying amounts being written down below their fair values. As a result, we recognized $267 million of long-lived asset impairment charges, comprised of (i) a $190 million impairment charge related to certain manufacturing equipment, operating lease right-of-use assets and HD equipment leased to customers and (ii) a $77 million impairment charge related to developed technology intangible assets. The impairments are classified within cost of sales in the accompanying consolidated statement of income (loss) for the year ended December 31, 2023. The fair value of the HD asset group was based on a discounted cash flow model (an income approach). Significant assumptions used in the determination of its fair value include forecasted cash flows, discount rates and terminal growth rates. The discounted cash flow model used to determine the fair value of the HD asset group during the third quarter 2023 reflected our most recent cash flow projections, a discount rate of 8% and a terminal growth rate of 1.5%. We also measured the fair values of individual assets within that asset group to ensure that the allocation of the asset group’s impairment to the long-lived assets within that group would not reduce the carrying amount of any individual asset below its fair value. The fair values of the buildings within that asset group were determined based on a cost approach. Significant assumptions used in the determination of those fair values included replacement costs of assets with a similar age and condition. The fair values of manufacturing equipment and HD equipment leased to customers within that group were determined based on transaction prices of comparable assets. Significant assumptions used in the determination of those fair values included the identification of representative comparable assets. The fair value of the right-of-use asset within that group was determined based on market rents and discount rates. Our long-lived asset fair value measurements are classified as Level 3 in the fair value hierarchy because they involve significant unobservable inputs. Other Non-Current Assets
as of December 31 (in millions) | 2023 | 2022
Deferred tax assets | $ | 384 |  | $ | 280 |
Non-current receivables, net | 67 |  | 89 |
Contract assets | 113 |  | 122 |
Capitalized implementation costs in hosting arrangements | 121 |  | 119 |
Pension and other postretirement benefits | 129 |  | 123 |
Investments | 194 |  | 247 |
Other | 118 |  | 129 |
Other non-current assets | $ | 1,126 |  | $ | 1,109 |
Accrued Expenses and Other Current Liabilities
as of December 31 (in millions) | 2023 | 2022
Common stock dividends payable | $ | 147 |  | $ | 146 |
Employee compensation and withholdings | 636 |  | 409 |
Property, payroll and certain other taxes | 147 |  | 161 |
Contract liabilities | 148 |  | 154 |
Restructuring liabilities | 110 |  | 100 |
Accrued rebates | 263 |  | 257 |
Operating lease liabilities | 128 |  | 120 |
Income taxes payable | 268 |  | 91 |
Pension and other postretirement benefits | 49 |  | 48 |
Contingent payments related to acquisitions | 3 |  | 34 |
Other | 695 |  | 650 |
Accrued expenses and other current liabilities | $ | 2,594 |  | $ | 2,170 |
Other Non-Current Liabilities
as of December 31 (in millions) | 2023 | 2022
Pension and other postretirement benefits | $ | 919 |  | $ | 846 |
Deferred tax liabilities | 447 |  | 661 |
Long-term tax liabilities | 125 |  | 64 |
Contingent payments related to acquisitions | 11 |  | 50 |
Contract liabilities | 46 |  | 40 |
Litigation and environmental reserves | 22 |  | 20 |
Restructuring liabilities | 18 |  | 7 |
Other | 149 |  | 160 |
Other non-current liabilities | $ | 1,737 |  | $ | 1,848 |
Interest Expense, net
years ended December 31 (in millions) | 2023 | 2022 | 2021
Interest costs | $ | 527 |  | $ | 426 |  | $ | 217 |
Interest costs capitalized | (15) |  | (11) |  | (10) |
Interest expense | 512 |  | 415 |  | 207 |
Interest income | (70) |  | (20) |  | (14) |
Interest expense, net | $ | 442 |  | $ | 395 |  | $ | 193 |
Other (Income) Expense, net
years ended December 31 (in millions) | 2023 | 2022 | 2021
Foreign exchange (gains) losses, net | $ | 52 |  | $ | 1 |  | $ | 17 |
Change in fair value of marketable equity securities | (7) |  | (8) |  | 7 |
Loss on debt extinguishment | — |  | — |  | 5 |
Pension settlement and curtailment (gains) losses | 1 |  | (12) |  | 2 |
Pension and other postretirement benefit (gains) losses | (42) |  | (26) |  | 8 |
Reclassification of cumulative translation loss to earnings | — |  | 65 |  | — |
Non-marketable investment impairments | 52 |  | — |  | — |
Other, net | (5) |  | (8) |  | 2 |
Other (income) expense, net | $ | 51 |  | $ | 12 |  | $ | 41 |
Following the wind down of our operations in Argentina, we determined that the net assets of the related entities were substantially liquidated during the third quarter of 2022. As a result of that determination, we reclassified their $65 million cumulative translation loss from accumulated other comprehensive income (loss) to other (income) expense, net. Supplemental Cash Flow Information Non-Cash Investing Activities Purchases of property, plant and equipment included in accounts payable and accrued liabilities as of December 31, 2023, 2022 and 2021 was $80 million, $91 million and $79 million, respectively. Other Supplemental Information
year ended December 31 (in millions) | 2023 | 2022 | 2021
Interest paid, net of portion capitalized | $ | 484 |  | $ | 355 |  | $ | 145 |
Income taxes paid | $ | 262 |  | $ | 273 |  | $ | 182 |

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