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DISCONTINUED OPERATIONS
 9 Months Ended
Sep. 30, 2024
Discontinued Operations and Disposal Groups [Abstract]  
DISCONTINUED OPERATIONS 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 for two strategic actions, as described below.
Discontinued Operations - Kidney Care
On August 12, 2024, we entered into an EPA to sell our Kidney Care business, subject to receipt of customary regulatory approvals and satisfaction of other closing conditions. That business, which is comprised of our Kidney Care segment, provides chronic and acute dialysis therapies and services, including peritoneal dialysis, hemodialysis, continuous renal replacement therapies, and other organ support therapies. Pursuant to the EPA, we expect to sell the Kidney Care business to Carlyle for an aggregate purchase price of $3.80 billion. After giving effect to certain adjustments, we currently expect to receive approximately $3.50 billion of net pre-tax cash proceeds (approximately $3.15 billion to $3.25 billion after tax). The transaction is currently expected to close in late 2024 or early 2025, subject to receipt of customary regulatory approvals and satisfaction of other closing conditions. We intend to use the net after-tax proceeds from this transaction to repay certain of our debt obligations, consistent with our stated capital allocation priorities.
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 pending 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 pending sale of the Kidney Care business, Baxter and Vantive will enter into several agreements, including a Manufacturing and Supply Agreement (Kidney Care MSA), a long-term Master Services Agreement, a Distribution Agreement, a Transition Services Agreement (Kidney Care TSA), and an Intellectual Property Agreement. Pursuant to the Kidney Care MSA, Baxter and the Kidney Care divested entities will provide each other with certain dialysis-related products, other products, product components and fulfillment services for a period up to 10 years post-closing (with certain extension rights as provided therein). Pursuant to the Kidney Care TSA, Baxter and the entities that will be divested in connection with the pending Kidney Care sale (the Kidney Care divested entities) will provide each other, on an interim basis, certain transitional services for up to 30 months post-closing (with certain extension rights as provided therein) to help ensure business continuity and help minimize disruptions to the entities' operations post-closing. Services to be provided under the TSA include IT, supply chain and certain other corporate and administrative services. Pursuant to the EPA, Baxter will retain (i) the manufacture and sale of saline solutions and (ii) the plastics operations of Baxter and its subsidiaries at its Mountain Home, Arkansas facility, which is not part of the Kidney Care segment.
Discontinued Operations - BioPharma Solutions
On September 29, 2023, we sold our BioPharma Solutions (BPS) business to Advent International and Warburg Pincus (collectively, the BPS buyers).
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 BPS divested entities).
We concluded that our BPS business met the criteria to be classified as held-for-sale in May 2023. We analyzed the quantitative and qualitative factors relevant to the divestiture of our BPS business, including its significance to our overall net income and earnings 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 are reported as discontinued operations in the accompanying condensed consolidated financial statements. Prior period amounts have been adjusted to reflect discontinued operations presentation.
At closing of the transaction, Baxter entered into a Transition Services Agreement (BPS TSA) and a Master Commercial Manufacturing and Supply Agreement (BPS MSA) with the divested entities. Pursuant to the BPS TSA, Baxter and the BPS divested entities 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 provided under the BPS TSA include finance, information technology, human resources, integrated supply chain, and certain other administrative services. Pursuant to the BPS MSA, the BPS divested entities 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 tables summarize the major classes of line items included in income (loss) from discontinued operations, net of tax, for the three and nine months ended September 30, 2024 and 2023:
Kidney CareBioPharma SolutionsTotal
Three Months Ended September 30,Three Months Ended September 30,Three Months Ended September 30,
(in millions)202420232024202320242023
Net sales$1,155 $1,109 $— $191 $1,155 $1,300 
Cost of sales731 1,048 — 81 731 1,129 
Gross margin424 61 — 110 424 171 
Selling, general and administrative expenses278 258 — 15 278 273 
Research and development expenses41 33 — 1 41 34 
Other operating income, net(1)— — — (1)— 
Operating income (loss)106 (230)— 94 106 (136)
Interest expense, net1 1 — — 1 1 
Other (income) expense, net(8)5 — 2 (8)7 
Income (loss) from discontinued operations before gain on disposition and income taxes113 (236)— 92 113 (144)
Gain on disposition— — — 2,890 — 2,890 
Income tax expense (benefit)30 (250)— 522 30 272 
Income from discontinued operations, net of tax83 14 — 2,460 83 2,474 
Less: Net income attributable to noncontrolling interest included in discontinued operations4 3 — — 4 3 
Net income attributable to Baxter stockholders included in discontinued operations$79 $11 $— $2,460 $79 $2,471 
Kidney CareBioPharma SolutionsTotal
Nine Months Ended September 30,Nine Months Ended September 30,Nine Months Ended September 30,
202420232024202320242023
Net sales$3,375 $3,294 $— $469 $3,375 $3,763 
Cost of sales2,125 2,841 — 216 2,125 3,057 
Gross margin1,250 453 — 253 1,250 706 
Selling, general and administrative expenses874 691 — 44 874 735 
Research and development expenses140 104 — 2 140 106 
Goodwill impairment430 — — — 430 — 
Other operating income, net(1)— — — (1)— 
Operating income (loss)(193)(342)— 207 (193)(135)
Interest expense, net— 2 — — — 2 
Other (income) expense, net(2)18 — 2 (2)20 
Income (loss) from discontinued operations before income taxes(191)(362)— 205 (191)(157)
Gain on disposition— — — 2,890 — 2,890 
Income tax expense (benefit)99 (258)— 536 99 278 
Income (loss) from discontinued operations, net of tax(290)(104)— 2,559 (290)2,455 
Less: Net income attributable to noncontrolling interests included in discontinued operations9 6 — — 9 6 
Net income (loss) attributable to Baxter stockholders included in discontinued operations$(299)$(110)$— $2,559 $(299)$2,449 
For the three and nine months ended September 30, 2024, selling, general and administrative expenses (SG&A) includes $69 million and $236 million, respectively, of separation-related costs incurred in connection with the pending sale of our Kidney Care business. For the three months ended September 30, 2023, SG&A includes separation-related costs of $67 million and $8 million, incurred in connection with the pending sale of our Kidney Care business and the sale of BPS, respectively. For the nine months ended September 30, 2023, SG&A includes separation-related costs of $108 million and $15 million, incurred in connection with the pending sale of our Kidney Care business and the sale of BPS, respectively.
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 September 30, 2024 and December 31, 2023:
(in millions)September 30, 2024December 31, 2023
Cash and cash equivalents$658 $116 
Accounts receivable, net of allowances1,045 971 
Inventories960 906 
Prepaid expenses and other current assets229 186 
Current assets of discontinued operations2,892 2,179 
Property, plant and equipment, net1,542 1,562 
Goodwill276 721 
Other intangible assets, net147 161 
Operating lease right-of-use assets209 188 
Other non-current assets360 317 
Non-current assets of discontinued operations2,534 2,949 
Assets of discontinued operations$5,426 $5,128 
Current maturities of finance lease obligations$— $1 
Accounts payable396 360 
Accrued expenses and other current liabilities693 679 
Current liabilities of discontinued operations1,089 1,040 
Long-term finance lease obligations, less current portion40 41 
Operating lease liabilities186 173 
Other non-current liabilities349 337 
Non-current liabilities of discontinued operations575 551 
Liabilities of discontinued operations$1,664 $1,591