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Item 1A. Risk Factors.

In addition to the other information in this Annual Report on Form 10-K (Annual Report), stockholders or prospective investors should carefully consider the following risk factors. If any of the events described below occurs, our business, financial condition, results of operations, future growth prospects and stock price could suffer.

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Risks Relating to the COVID-19 Pandemic

The effects of the COVID-19 pandemic have had, and we expect will continue to have, a material adverse effect on our business. The nature and extent of future impacts are uncertain and unpredictable.

Our global operations expose us to risks associated with public health crises, including epidemics and pandemics, such as the COVID-19 pandemic. COVID-19 has had, and we expect will continue to have, an adverse impact on our operations, supply chains and distribution systems and has increased and will continue to increase our expenses, including due to preventive and precautionary measures that we, other businesses and governments have taken and may continue to take. These measures have led to unprecedented restrictions on, disruptions in, and other related impacts on businesses and personal activities. We expect that evolving restrictions and precautions, as well as the corresponding need to adapt to new methods of conducting business remotely, will continue to have an adverse effect on our business. Risks associated with COVID-19 include, but are not limited to, the following:

•We have experienced, and expect to continue to experience, significant and unpredictable reductions or increases in demand for certain of our products as healthcare customers re-prioritize the treatment of patients. Some of our products are particularly sensitive to reductions in elective medical procedures. For example, due to the recent spread of the Omicron variant, many elective procedures have been suspended or postponed in our principal markets as hospital systems prioritize treatment of COVID-19 patients again or otherwise comply with changing government guidelines. It is not possible to predict the timing of a broad resumption of elective medical procedures or whether, once resumed, further delays or cancellations may occur in the future in connection with the spread of new variants. If patients and hospital systems continue to de-prioritize, delay or cancel elective procedures, our business, financial condition and results of operations would continue to be negatively affected.

•A significant number of our suppliers, manufacturers, distributors and vendors have been adversely affected by the COVID-19 pandemic, including with respect to increased absenteeism among their employees and other obstacles relating to their ability to maintain the continuity of their on-site operations. These impacts have caused interruptions and delays in our supply chain, and may continue to do so, resulting in more expensive alternative sources of labor and materials and heightened supply chain costs. Any delay or shortage in the supply of components or materials or other operational or logistical challenges impacts our ability to satisfy consumer demand for our products in a timely manner or at all, which could harm our reputation, future sales and profitability. For example, we have experienced and expect to continue to experience supply constraints for amino acid raw materials used in our parenteral nutrition products, as such materials are being used to produce COVID-19 vaccines. These constraints have resulted in certain product backorders and may do so in the future.

•We could experience a loss of sales and profitability due to delayed payments, reduced demand or insolvency of healthcare professionals, hospitals and other customers, and suppliers and vendors facing liquidity or other financial issues. These liquidity or other financial issues could be exacerbated if prolonged high levels of unemployment or loss of insurance coverage impact patients’ ability to access treatments that use our products and services.

•COVID-19 has adversely impacted the continued service and availability of skilled personnel necessary to run our operations. For example, we have faced increased absenteeism in connection with the rise of recent COVID-19 variants. Although we have sought to mitigate these staffing challenges through overtime and enlisting contingent labor, staffing shortages have strained our operations and increased our expenses. In addition, we may be unable to retain employees who object to governmental vaccine mandates or heightened safety protocols.Vaccination is currently required for employees who are customer-facing and/or directly engaged with hospitals and medical care providers covered by the Centers for Medicare and Medicaid Services (CMS). To the extent our management or other personnel are impacted in significant numbers by COVID-19 and are not available to perform their professional duties, we could experience further disruptions in our manufacturing operations or disruptions in other activities and other functions.

•We face increased operational challenges as we continue to take measures to support and protect employee health and safety, including through office closures, vaccine mandates and work from home policies. For example, remote working arrangements heighten our risks associated with information technology systems and networks, including cyber-attacks, computer viruses, malicious software, security breaches, and telecommunication failures, both for systems and networks we control directly and for those

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that employees and third-party developers rely on to work remotely. Any failure to prevent or mitigate security breaches or cyber risks or detect, or respond adequately to, a security breach or cyber risk, or any other disruptions to our information technology systems and networks (as a result of remote working arrangements or otherwise), can have adverse effects on our business and cause reputational and financial harm. These risks are particularly heightened due to COVID‐19 as cybercriminals attempt to profit from COVID-related disruptions.

Any of these and other impacts of the pandemic could have a material adverse effect on our business, financial condition and results of operations. Finally, to the extent COVID-19 adversely affects our operations and global economic conditions more generally, many of the other risks described in this “Risk Factors” section may be heightened.

Risks Related to Our Ability to Grow Our Business

If we are unable to successfully introduce new products or fail to keep pace with changing consumer preferences and needs and advances in technology, our business, financial condition and results of operations could be adversely affected.

We need to successfully introduce new products to achieve our strategic business objectives. We can provide no assurances that our new products will achieve commercial acceptance in the marketplace. In addition, difficulties in manufacturing or in obtaining regulatory approvals, including as a result of the COVID-19 pandemic, might delay or prohibit introduction of new products into the marketplace. We may not be able to obtain patent protection on our new products or be able to defend our intellectual property rights globally. Warranty claims and service costs relating to our new products might be greater than anticipated, and we might be required to devote significant resources to address any quality issues associated with our new products, which could reduce the resources available for further new product development and other matters. In addition, the introduction of new products might also cause customers to defer purchases of existing products. Our future financial performance will also depend in part on our ability to influence, anticipate, identify and respond to changing consumer preferences and needs, including those impacted by the COVID-19 pandemic. We might not correctly anticipate or identify trends in customer preferences or needs or might identify them later than competitors do.

Failure to successfully introduce new products in a cost-effective manner, or delays in customer purchasing decisions related to the evaluation of new products, could cause us to lose market share and could materially adversely affect our business. Furthermore, product development requires substantial investment and there is inherent risk in the R&D process. A successful product development process further depends on many other factors, including our ability to adapt to new technologies, demonstrate satisfactory clinical results and differentiate our products from those of our competitors. If we cannot successfully introduce new products or adapt to changing technologies, our products may become obsolete and our revenue and profitability could suffer.

Issues with product supply or quality could have an adverse effect on our business or cause a loss of customer confidence in us or our products, among other negative consequences.

Our success depends upon the availability and quality of our products and the underlying raw materials and component parts. The medical products and pharmaceutical industries are competitive and subject to complex market dynamics and varying demand levels. These levels vary in response to economic conditions, regulatory requirements, seasonality, natural disasters, pandemics, epidemics and other matters. For example, for many of our suppliers, the COVID-19 pandemic has created increased employee absenteeism rates and other obstacles relating to their ability to maintain the continuity of their on-site operations. These increased rates and other obstacles have increased the cost of certain raw materials and component parts and caused us to incur increased freight costs. They may, in the future, prevent suppliers from providing good and services to us on reasonable terms or at all.

Additionally, the development of new or enhanced products involves a lengthy regulatory process and is capital intensive. As a result, our ability to match our production levels and capacity to market demand is imprecise and may result in a failure to meet market demand or satisfy customer requirements for our products or, alternatively, an oversupply of inventory. Increased costs relating to freight, raw materials or component parts and difficulties hiring and retaining staff have had and may continue to have a negative impact on product supply. Failure to meet market demand may result in customers transitioning to available competitive products, loss of market share, negative publicity, reputational damage, loss of customer confidence or other negative consequences (including a decline in stock price).

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Our success also depends on our ability to maintain and routinely improve product quality and our quality management program. Quality management plays an essential role in meeting customer requirements, preventing defects, improving our products and services and assuring the safety and efficacy of our products. While we have a quality system that covers the lifecycle of our products, quality and safety issues have and may in the future occur with respect to our products. New or unintended uses of our products (for example, in response to COVID-19 or changing clinical practice) may also raise quality or safety issues. A quality or safety issue may result in adverse inspection reports, voluntary or official action indicated, warning letters, import bans, product recalls (either voluntary or required by FDA or similar governmental authorities in other countries) or seizures, monetary sanctions, injunctions to halt manufacture and distribution of products, civil or criminal sanctions (which may include corporate integrity agreements), costly litigation, refusal of a government to grant approvals and licenses, restrictions on operations or withdrawal of existing approvals and licenses. See “—Risks Related to Legal and Regulatory Matters.” An inability to address a quality or safety issue in an effective and timely manner may also cause negative publicity, a loss of customer confidence in us or our current or future products, which may result in the loss of sales and difficulty in successfully launching new products. Additionally, we have made and continue to make significant investments in assets, including inventory and property, plant and equipment, which relate to potential new products or modifications to existing products. Product quality or safety issues may restrict us from being able to realize the expected returns from these investments, potentially resulting in asset impairments in the future.

Unaffiliated third-party suppliers provide a number of goods and services to our R&D, clinical and manufacturing organizations, many of whom do so on a spot basis and not pursuant to a contractual arrangement. Our ability to receive goods or services at all or on reasonable financial terms from these third parties will be impacted if they are unable or refuse to supply or service us. Moreover, we may have limited or no recourse if the goods or services are not subject to contractual terms. If we are unable to identify an alternative provider on reasonable terms, our ability to meet our obligations to our customers could be negatively impacted, which could adversely affect our financial results and our reputation. Additionally, third party suppliers are required to comply with our quality standards. Failure of a third-party supplier to provide compliant raw materials, component parts or supplies could result in delays, service interruptions or other quality related issues that may negatively impact our business results.

There is substantial competition in the product markets in which we operate and the risk of declining demand and pricing pressures could adversely affect our operating results.

Although no single company competes with us in all of our businesses, we face substantial competition in all of our markets from international and domestic healthcare medical products and pharmaceutical companies and providers of all sizes, and these competitors often differ across our businesses. Competition is primarily focused on cost-effectiveness, price, service, product performance, and technological innovation.

Competition may increase further as additional companies begin to enter our markets or modify their existing products to compete directly with ours. If our competitors respond more quickly to new or emerging technologies and changes in customer requirements or we do not introduce new versions or upgrades to our product portfolio in response to those requirements, our products may be rendered obsolete or non-competitive. If our competitors develop more effective or affordable products or achieve earlier patent protection or product commercialization than we do, our business, financial condition and operations will likely be negatively affected. If we are forced to reduce our prices due to increased competition, our business could become less profitable.

In addition, many healthcare industry companies, including healthcare systems, distributors, manufacturers, providers, and insurers, are consolidating or have formed strategic alliances. As the healthcare industry consolidates, competition to provide goods and services to industry participants will become more intense. Further, this consolidation creates larger enterprises with greater negotiating power, which they can use to negotiate price concessions. If we face an increase in costs or must reduce our prices because of industry consolidation, or if we lose customers as a result of consolidation, our business, financial condition and results of operations could be adversely affected.

Demand for our products and services depends in large part on overall demand in the healthcare market. With the healthcare market’s increased focus on hospital asset and resource efficiency as well as reimbursement constraints, spending for some of our products could decline over time. Further, the competitive pressures in our industry could cause us to lose market share unless we increase our commercial investments or reduce our prices, which could adversely impact our operating results. These factors, along with possible legislative developments and others, might result in significant shifts in market share among the industry’s major participants, which includes us. Accordingly, if we are unable to effectively differentiate ourselves from our competitors in terms of new products and

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diversification of our product portfolio through business acquisitions, then our market share, sales and profitability could be adversely impacted through lower volume or decreased prices.

We may fail to realize the anticipated benefits of the Hillrom acquisition.

During 2021, we completed the acquisition of Hillrom. The success of this acquisition depends on, among other things, our ability to integrate Hillrom in a manner that facilitates growth opportunities, realizes anticipated cost and revenue synergies (some of which are still being identified) and achieves certain previously communicated net leverage targets without adversely affecting current revenues and investments in future growth. If we are not able to successfully achieve these objectives, the anticipated benefits of the Hillrom acquisition may not be realized fully or at all or may take longer to realize than expected.

There is a significant degree of difficulty and management distraction inherent in the process of integrating an acquisition. These difficulties include challenges consolidating certain operations and functions (including regulatory and other corporate functions), integrating technologies (including differing IT systems and processes), organizations, procedures, policies and operations, addressing differences in the business cultures of the two companies and retaining key personnel. The integration may be complex and time consuming and involve delays or additional and unforeseen expenses. The integration process and other disruptions resulting from the Hillrom acquisition may also disrupt our ongoing businesses or cause inconsistencies in standards, controls, procedures and policies that adversely affect our relationships with market participants, employees, regulators and others with whom we and Hillrom have business or other dealings. Any failure to successfully or cost-effectively integrate Hillrom could have a material adverse effect on our business and cause reputational harm.

If our business development activities are unsuccessful, we may not realize the intended benefits.

We expect to continue to engage in business development activities, including evaluating acquisitions, joint development opportunities, technology licensing arrangements and other opportunities. These activities may result in substantial investment of our resources. Our success developing products or expanding into new markets from such activities will depend on a number of factors, including our ability to find suitable opportunities for acquisition, investment or alliance; competition from other companies in the industries in which we operate that are seeking similar opportunities; whether we are able to complete an acquisition, investment or alliance on terms that are satisfactory to us; the strength of the other company’s underlying technology, products and ability to execute its business strategies; any intellectual property and litigation related to the other company’s products or technology; and our ability to successfully integrate the acquired company, business, product, technology or research into our existing operations, including the ability to adequately fund acquired in-process R&D projects and to maintain adequate controls over the combined operations. Certain of these activities are subject to antitrust and competition laws, which laws could impact our ability to pursue strategic transactions and could result in mandated divestitures in the context of proposed acquisitions. If we are unsuccessful in our business development activities, we may not realize the intended benefits of such activities, including that acquisition and integration costs may be greater than expected or the possibility that expected return on investment, synergies and accretion will not be realized or will not be realized within the expected timeframes. For more information, see Note 2 in Item 8 of this Annual Report.

If we fail to attract and retain key employees our business may suffer.

Our ability to compete effectively depends on our ability to attract and retain key employees, including people in senior management, sales, marketing, information technology and R&D positions and from the recently acquired Hillrom business. Competition for top talent in the healthcare industry can be intense. Our ability to recruit and retain such talent will depend on a number of factors, including hiring practices of our competitors, compensation and benefits, work location, work environment (including our competitors’ policies regarding remote work arrangements and COVID-19 protocols) and industry economic conditions. If we cannot effectively recruit and retain qualified employees, our business could suffer.

Risks Related to Our Business Operations

Segments of our business are significantlydependent on major contracts with GPOs, IDNs, and certain other distributors and purchasers.

A portion of our U.S. hospital sales and rentals are made pursuant to contracts with hospital GPOs. At any given time, we are typically at various stages of responding to bids, negotiating and renewing expiring GPO agreements. Failure to be included in certain of these agreements could have a material adverse effect on our business,

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including product sales and service and rental revenue. In addition, we have faced and continue to face challenges related to increasing costs associated with these agreements (associated with ongoing supply chain challenges), which negatively impact our revenues.

Our participation in such programs often requires increased discounting or restrictions on our ability to raise prices, and failure to participate or to be selected for participation in such programs might result in a reduction of sales to the member hospitals. In addition, the industry is showing an increased focus on contracting directly with health systems or IDNs (which typically represent influential members and owners of GPOs). IDNs and health systems often make key purchasing decisions and have influence over the GPO’s contract decisions, and often request additional discounts or other enhancements. Further, certain other distributors and purchasers have similar processes to the GPOs and IDNs and failure to be included in agreements with these other purchasers could have a material adverse effect on our business.

We may not be successful in achieving expected operating efficiencies and sustaining or improving operating expense reductions, and might experience business disruptions and adverse tax consequences associated with restructuring, realignment and cost reduction activities.

Portions of our business have been, and following the Hillrom acquisition may be, the subject of restructuring, realignment and cost reduction initiatives. While we initiate these actions with the goal of realizing efficiencies, we may not be successful in achieving the full efficiencies and cost reduction benefits we expect. Further, such benefits might be realized later than expected, and the ongoing costs of implementing these measures might be greater than anticipated. If these measures are not successful or sustainable, we might undertake additional realignment and cost reduction efforts, which could result in future charges. Moreover, our ability to achieve our other strategic goals and business plans might be adversely affected, and we could experience business disruptions, if our restructuring and realignment efforts and our cost reduction activities prove ineffective. These actions, the resulting costs, and potential delays or potential lower than anticipated benefits might also impact our foreign tax positions and might require us to record tax reserves against certain deferred tax assets in our international business.

We have incurred a substantial amount of debt in connection with the Hillrom acquisition, which could adversely affect our business, financial condition or results of operations.

We have incurred acquisition-related debt financing of approximately $11.8 billion to fund the cash consideration for the Hillrom acquisition, refinance certain indebtedness of Hillrom and pay related fees and expenses. Our substantially increased indebtedness and higher debt-to-equity ratio following the acquisition has the effect, among other things, of reducing our flexibility to respond to changing business and economic conditions and has increased our borrowing costs (including as a result of the downgrade in our senior debt credit ratings). The increased levels of indebtedness could also reduce funds available for investments in product development, capital expenditures, dividend payments, acquisitions, share repurchases and other activities and may create competitive disadvantages for us relative to other companies with lower debt levels. In addition, until we achieve our commitment to reduce our indebtedness following the Hillrom acquisition, our capital allocation activities and operational flexibility may be limited. There can be no assurance that we will be successful in doing so on a timely basis or at all.

If we are unable to obtain sufficient components or raw materials on a timely basis or for a cost-effective price or if we experience other manufacturing, sterilization, supply or distribution difficulties, our business and results of operations may be adversely affected.

The manufacture of our products requires, among other things, the timely supply or delivery of sufficient amounts of quality components and materials. We manufacture our products in approximately 50 manufacturing facilities around the world. We acquire our components, materials and other requirements for manufacturing from many suppliers and vendors in various countries, including sometimes from ourselves for self-supplied requirements. We endeavor, either alone or working closely with our suppliers, to ensure the continuity of our inputs and supplies but we cannot guarantee these efforts will always be successful. Further, while efforts are made to diversify certain of our sources of components and materials, in certain instances there is only a sole source or supplier with no alternatives yet identified. Additionally, we obtain certain components and materials on a spot basis from third party suppliers with whom we do not have a contractual arrangement. For most of our components and materials for which a single source or supplier is used, alternative sources or suppliers may exist, but we have made a strategic determination to use the single source or supplier. Although we do carry strategic inventory and maintain insurance to help mitigate the potential risk related to any supply disruption, such measures may not be sufficient or effective. A reduction, interruption or suspension in supply, other supply chain issues, including those due to the revocation of distribution facilities’ licenses, and our inability to quickly develop acceptable alternative sources for such supply

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could adversely affect our ability to manufacture, distribute and sell our products in a timely or cost-effective manner. We have faced difficulties obtaining supplies of key materials such as electromechanical components, active ingredients for pharmaceuticals and resins due to the COVID-19 pandemic and related supply chain disruptions. Moreover, changes in regulation, world trade policies, international taxes and government-to-government relations and issues with export and import activities could negatively impact our ability to distribute products within a country and across countries. See “—Risks Related to Legal and Regulatory Matters.”

Additionally, volatility in our costs of energy, transportation/freight, components, raw materials and other supply, manufacturing and distribution costs have had and could in the future adversely affect our results of operations. These prices might continue to fluctuate based on many factors beyond our control, including, but not limited to, changes in general economic conditions, labor costs, delivery costs, competition and currency exchange rates.

Significant increases in the cost of raw materials, sub-assemblies or materials used in the production of our products that cannot be recovered through increased prices of our products (or the unavailability of those raw materials, sub-assemblies or production materials) could adversely affect our results of operations. There can be no assurance that the marketplace will support higher prices or that such prices and productivity gains will fully offset any commodity cost increases in the future. We may from time to time engage in hedging transactions with respect to raw material purchases but do enter into fixed price supply contracts at times. Future decisions not to engage in hedging transactions or ineffective hedging transactions might result in increased cost volatility, potentially adversely impacting our profitability.

Many of our products are difficult to manufacture. This is due to the complex nature of manufacturing devices and pharmaceuticals, including biologics, as well as the strict regulatory regime governing our manufacturing operations. Variations in the manufacturing process may result in production failures which could lead to launch delays, product shortage, unanticipated costs, lost revenues and damage to our reputation. A failure to identify and address manufacturing problems prior to the release of products to our customers may also result in a quality or safety issue of the type discussed above.

Some of our products are manufactured at a single manufacturing facility or stored at a single storage site. Additionally, some of our manufacturing facilities are located in the same geographic area. Loss or damage to, or closure of, a manufacturing facility or storage site due to a natural disaster, such as we experienced as a result of Hurricane Maria, a pandemic, such as COVID-19, or otherwise could adversely affect our ability to manufacture sufficient quantities of key products or deliver products to meet customer demand or contractual requirements, which may result in a loss of revenue and other adverse business consequences (including those identified in the paragraphs above). We might be unable to transfer manufacturing of the relevant products to another facility or location in a cost-effective or timely manner, if at all. This potential inability to transfer production could occur for several reasons, including but not limited to a lack of necessary relevant manufacturing capability at another facility, or the regulatoryrequirements of the FDA or other governmental regulatory bodies. Such an event could materially negatively impact our financial condition, results of operations and cash flows.

In addition, several of our manufacturing facilities are leased and we may not be able to renew leases on favorable terms or at all. Because of the time required to approve and license a manufacturing facility, a third-party manufacturer may not be available on a timely basis (if at all) to replace production capacity in the event we lose manufacturing capacity or products are otherwise unavailable. Any of the foregoing could adversely affect our business, financial condition and results of operations.

Some of our products require sterilization prior to sale or distribution, and we utilize both Baxter-owned and third-party facilities for this process. If an event occurs that results in damage to or closure, whether temporarily or permanent, of one or more of these facilities, we may be unable to manufacture or sterilize the relevant products at prior levels or at all, and a third party may not be available on a timely basis (if at all) to replace sterilization capacity.

For example, in May 2021, our facility in Mountain Home, Arkansas, entered into a Consent Administrative Order with the Arkansas Division of Environmental Quality relating to certain air emission control technology used to reduce ethylene oxide-emissions from sterilization equipment. Although the events giving rise to the Consent Administrative Order only caused a temporary pause in operations, these events or other disruptions of manufacturing or sterilization processes that we or third parties may experience, whether due to lack of capacity, environmental, regulatory or compliance issues or otherwise, could result in product shortage, unanticipated costs, loss of revenues, litigation and damage to our reputation, all of which could have a material adverse effect on our business, financial condition and results of operations.

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Climate change, or legal, regulatory or market measures to address climate change, could adversely affect our business, results of operations and financial condition.

The long-term effects of climate change are difficult to predict and may be widespread. The impacts of climate change may include physical risks (e.g., rising sea levels or frequency and severity of extreme weather conditions, including natural disasters), social and human effects (e.g., population dislocations or harm to health and well-being), compliance costs and transition risks (e.g., regulatory or technology changes), shifts in market trends (e.g., customers increasingly prioritize purchasing products that are sustainably made) and other adverse effects. Such impacts may disrupt our supply chain and operations by adversely affecting our ability to procure goods or services required for the operation of our business at the quantities and levels we require, due to impairment of the availability and cost of certain products, materials, commodities and energy. For example, material or sustained increases in the price of oil could have an adverse impact on the cost of many of the plastic materials or resins we use to make and package our products, as well as our transportation/freight costs. These outcomes may in turn result in customers transitioning to available competitive products, loss of market share, negative publicity, reputational damage, loss of customer confidence or other negative consequences (including a decline in stock price).

In addition, the increasing concern over climate change has resulted and may continue to result in more regional, federal, and/or global legal and regulatory requirements relating to climate change, including regulating greenhouse gas emissions (and the establishment of enhanced internal processes or systems to track them), alternative energy policies and sustainability initiatives. If legislation or regulations are enacted or promulgated in the United States or in any other jurisdictions in which we do business that impose more stringent restrictions and requirements than our current legal or regulatory obligations, we may experience disruptions in, or increases in the costs associated with, sourcing, manufacturing and distributing our products, which could have a material adverse effect on our business, financial condition or result of operations. Any such regulatory changes could have a significant effect on our operating and financial decisions, including those involving capital expenditures to reduce emissions and comply with other regulatory requirements.

Breaches and breakdowns affecting our information technology systems or protected data, including from cyber security breaches and data leakage, could have a material adverse effect on our business, results of operations, financial condition, cash flows, reputation and competitive position.

We rely upon information technology systems and infrastructure, including support provided by our partners and third parties, to support our business, products and customers. For example, we routinely rely on technology systems and infrastructure in the collection, use, storage and transfer, disclosure and other processing of voluminous amounts of data including confidential, business, financial, personal and other sensitive information (collectively, Confidential Information). We also rely on systems for manufacturing, customer orders, shipping, regulatory compliance and various other matters. Certain of our products and systems collect data regarding patients and their therapy and some are internet enabled or connect to our systems for maintenance and other purposes. Some of our products, even though not internet enabled nor connected to our systems, connect to hospital networks, electronic medical records or electronic health records. The continuing evolution of technology we use, including cloud-based computing, and reliance on third parties creates additional opportunities for the unintentional, intentional and/or unauthorized exposure, dissemination and/or destruction of Confidential Information stored in our devices, systems, servers, infrastructure and products (collectively, Technology). Security threats, including cyber and other attacks, are becoming increasingly sophisticated, frequent and adaptive.

Our Technology is vulnerable to breakdown, interruption, cyber and other security attacks, system malfunction, unauthorized access, inadvertent exposure or disclosure of information, theft and other events. Third-party systems that we rely upon could also become vulnerable to the same risks and may contain defects in design or manufacture or other problems that could result in system disruption or compromise the information security of our own systems. Any such vulnerability could compromise our Technology and could expose Confidential Information to unauthorized third parties and/or cause permanent loss of such data. In addition to loss of Confidential Information, unauthorized access to or interference with our Technology may cause product functionality issues that may result in risk to patient safety, field actions and/or product recalls. We have, like other large multi-national companies, experienced cyber incidents in the past and may experience them in the future, which have exposed and may continue to expose vulnerabilities in our information technology systems. Although the prior incidents have not had a material effect on our business and we have invested and continue to invest in the protection of data and Technology, there can be no assurance that our efforts have prevented or will prevent breakdowns, attacks, breaches in our Technology, cyber incidents or other incidents or ensure compliance with all applicable security and

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privacy laws, regulations and standards, including with respect to third-party service providers that host or process Confidential Information on our behalf. Such incidents could result in unauthorized access to patient data and other Confidential Information and could pose a risk to patient safety. Any failure to protect against such incidents can lead to substantial and material regulatory fines and penalties, business disruption, reputational harm, financial loss, litigation as well as other damages. Misappropriation or other loss of our intellectual property from any of the foregoing may have an adverse effect on our competitive position and may cause us to incur substantial litigation costs. See “—Risks Related to Legal and Regulatory Matters.” As the FDA, other regulators and our customers become more sensitive to risks related to cybersecurity, our ability to meet certain information technology safety standards could affect our products’ marketability and competitiveness. We could also suffer strained relationships with customers, business partners, physicians and other healthcare professionals, increased costs (for security measures, remediation or otherwise), litigation (including class actions and stockholder derivative actions) or other negative consequences (including a decline in stock price) from breaches, cyber and other security attacks, industrial espionage, ransomware, email or phishing scams, malware or other cyber incidents, which may compromise our system infrastructure or lead to data leakage, either internally or at our third-party providers or other business partners.

In addition, significant implementation issues may arise as we continue to consolidate and outsource certain computer operations and application support activities. Further, a greater number of our employees are working remotely in response to the COVID-19 pandemic and the emergence of related variants, which (among other things) could expose us to greater risks related to cybersecurity and our information technology systems. We also face all of the same risks listed above and other heightened risks when acquiring a company, in particular if we need to transition or implement certain processes or controls with the acquired company. For example, as we integrate Hillrom into our business, we may identify vulnerabilities or other issues as we transition its information technology systems and processes to our processes and controls, including with respect to cybersecurity and privacy. Any such vulnerabilities if unidentified or unremediated could have a material adverse effect on our business, results of operations or financial condition.

We are subject to risks associated with doing business globally.

Our operations are subject to risks inherent in conducting business globally and under the laws, regulations and customs of various jurisdictions and geographies. These risks include changes in exchange controls and other governmental actions, loss of business in government and public tenders that are held annually in many cases, increasingly complex labor environments, availability of raw materials and component parts, changes in taxation, tariffs, export control restrictions, changes in or violations of U.S. or local laws, dependence on a few government entities as customers, pricing restrictions, economic and political instability, monetary or currency volatility or instability (including as it relates to the U.S. dollar, the Euro, the Yuan and currencies in emerging market countries (including the Turkish Lira)), disputes between countries, trade relationships and conflicts, diminished or insufficient protection of intellectual property, and disruption or destruction of operations in a significant geographic region regardless of cause, including natural disaster, pandemic, power loss, cyber-attack, data breach, war, terrorism, riot, labor disruption, civil insurrection or social unrest. Failure to comply with, or material changes to, the laws and regulations that affect our global operations could have an adverse effect on our business, financial condition or results of operations.

The escalating global economic competition and trade tensions between the U.S., China and Russia could have an adverse effect on our business, financial condition or results of operations. Although we have been able to mitigate some of the impact from increased duties imposed by these countries (through petitioning the governments for tariff exclusions and other mitigations), the risk remains of additional tariffs and other kinds of restrictions. Tariff exclusions awarded to us by the U.S. Government require annual renewal, and policies for granting exclusions could shift. The U.S., China and Russia could impose other types of restrictions such as limitations on government procurement or technology export restrictions, which could affect our access to the markets.

More generally, several governments have raised the possibility of policies to induce “re-shoring” of supply chains, less reliance on imported supplies, and greater national production. For example, the Chinese government has issued a series of policies in the past several years to promote local medical devices or suggest government procurement budget for local products. Another example would be the stronger “Buy American” requirements in the U.S. (pursuant to a U.S. executive order by the new Administration on January 25, 2021) or U.S. withdrawal from the World Trade Organization Agreement on Government Procurement (GPA). If such steps triggered retaliation in other markets, such as by restricting access to foreign products in purchases by their government-owned healthcare systems, the outcomes could have an adverse effect on our business, financial condition or results of operations.

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A portion of our workforce is unionized, and we could face labordisruptions that would interfere with our operations.

Some of our employees both in and outside of the United States (including contingent workers) work under collective bargaining agreements and/or national trade union agreements. Although we have not recently experienced any significant work stoppages as a result of labor disagreements, we cannot ensure that such a stoppage will not occur in the future. Two collective bargaining agreements for one of our U.S. manufacturing facilities are scheduled to expire in February 2022 and January 2024, respectively. On February 23, 2022, union members are scheduled to vote on whether to enter into a new collective bargaining agreement (in place of the one scheduled to expire in February 2022) or to authorize a potential strike. Our inability to negotiate satisfactory new agreements or a labor disturbance at any of our manufacturing facilities (including at the facility with a collective bargaining agreement scheduled to expire in February 2022) could have a material adverse effect on our operations.

Risks Related to Legal and Regulatory Matters

We are subject to a number of laws and regulations, non-compliance with which could adversely affect our business, financial condition and results of operations, and we are susceptible to a changing regulatory environment.

As a participant in the healthcare industry, our operations and products, and those of our customers, are regulated by numerous government agencies, both inside and outside the United States.

Laws and regulations include the Patient Protection and Affordable Health Care Act (H.R. 3590) and the Health Care and Education Reconciliation Act (H.R. 4872) (collectively, the Healthcare Reform Act) which aim to decrease costs through comparative effectiveness research and pilot programs to evaluate alternative payment methodologies. Compliance with these and similar regulations could result in pricing pressure or negatively impact the demand for our products. In a number of situations, even though specific laws and regulations may not directly apply to us, our products must be capable of being used by our customers in a manner that complies with those laws and regulations.

The manufacture, distribution, marketing and use of our products are subject to extensive regulation and scrutiny by FDA and other regulatory authorities globally. Any new product must undergo lengthy and rigorous testing and other extensive, costly and time-consuming procedures mandated by FDA and foreign regulatory authorities. The same testing and procedures sometimes apply to current products that are up for authorization or renewal or are subject to changes in laws or regulations. For example, certain of our medical devices have to comply with the new European Union Medical Device Regulation that entered into force in May 2021. These regulations require companies that wish to manufacture and distribute medical devices in EU member states to meet certain quality system and safety requirements and ongoing product monitoring responsibilities, and obtain a “CE” marking (i.e., a mandatory conformity marking for certain products sold within the European Economic Area) for their products. Various penalties exist for non-compliance with the laws implementing the European Medical Device Regulations which if incurred, could have a material adverse impact on portions of our business, results of operations and cash flows. Changes to current products may be subject to vigorous review, including additional 510(k) and other regulatory submissions, and approvals or the time needed to secure approvals are not certain. Our facilities must be approved and licensed prior to production and remain subject to inspection from time to time thereafter. Failure to comply with the requirements of FDA or other regulatory authorities, including a failed inspection or a failure in our adverse event reporting system, could result in adverse inspection reports, voluntary or official action indicated, warning letters, import bans, product recalls or seizures, monetary sanctions, reputational damage, injunctions to halt the manufacture and distribution of products, civil or criminal sanctions, refusal of a government to grant approvals or licenses, restrictions on operations or withdrawal of existing approvals and licenses. In addition, our efforts to comply with FDA regulations have been challenged by the ongoing COVID-19 pandemic. For example, our attempts to rectify an outstanding warning letter for our facility in Ahmedabad have been thwarted as the FDA inspectors cannot travel to the site to evaluate our remediation efforts. The failure of our suppliers to comply with regulations could also adversely affect segments of our business as regulatory actions taken by the FDA against those manufacturers can result in product shortages, recalls or modifications. Any of these actions could cause a loss of customer confidence in us and our products, which could adversely affect our sales.

Our business is also subject to risks associated with U.S. and foreign legislation, regulations and trade agreements relating to the materials we import, including quotas, duties, tariffs or taxes, other charges or restrictions on imports and the nature of materials that can be used in our products, which could adversely affect our operations and our

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ability to import materials used in our products at current or increased levels. We cannot predict whether additional U.S. and foreign customs quotas, duties (including antidumping or countervailing duties), tariffs, taxes or other charges or restrictions, requirements as to where raw materials and component parts must be purchased, additional workplace regulations or other restrictions on our imports will be imposed in the future or adversely modified, or what effect such actions would have on our costs of operations. Future quotas, duties or tariffs may have a material adverse effect on our business, financial condition, results of operations or cash flows. Future trade agreements could also provide our competitors with an advantage over us, or increase our costs, either of which could have a material adverse effect on our business, financial condition, results of operations or cash flows.

The sales, marketing and pricing of products and relationships that medical device and pharmaceutical companies have with healthcare providers are under increased scrutiny by federal, state and foreign government agencies. Compliance with the Anti-Kickback Statute, False Claims Act, Food, Drug and Cosmetic Act (including as these laws relate to off-label promotion of products) and other healthcare related laws, as well as competition, data and patient privacy and export and import laws, is under increased focus by the agencies charged with overseeing such activities. The DOJ and the SEC have also increased their focus on the enforcement of the U.S. Foreign Corrupt Practices Act (FCPA), particularly as it relates to the conduct of medical product and pharmaceutical companies. The FCPA and similar anti-bribery laws generally prohibit companies and their employees, contractors or agents from making improper payments to government officials for the purpose of obtaining or retaining business. Healthcare professionals in many countries are employed by the government and consequently may be considered government officials. Foreign governments have also increased their scrutiny of medical product and pharmaceutical companies’ sales and marketing activities and relationships with healthcare providers and competitive practices generally. The laws and standards governing the promotion, pricing, sale and reimbursement of our products and those governing our relationships with healthcare providers and governments, including the Physician Payments Sunshine Act, can be complicated, are subject to frequent change and may be violated unknowingly.

We are also subject to environmental laws, which are becoming more stringent throughout the world. For example, the EPA regulates the use of ethylene oxide for sterilization of medical devices, as is increasingly focused on reducing emissions from the ethylene oxide sterilization process, which has increased our costs of operations and necessitated changes to our manufacturing plants and processes. Other environmental laws may have similar consequences to us or our suppliers, or result in liability to us.

Additionally, the U.S. Department of the Treasury’s Office of Foreign Control and the Bureau of Industry and Security at the U.S. Department of Commerce administer laws and regulations that restrict U.S. persons and, in some instances, non-U.S. persons, in conducting activities, transacting business or making investments in certain countries, or with governments, entities and individuals subject to U.S. economic sanctions. From time to time, certain of our subsidiaries have limited business dealings with countries subject to these sanctions, including Iran, Sudan, Syria, Russia and Cuba. These dealings represent an insignificant amount of our consolidated revenues and income but expose us to an increased risk of operating in these countries, including foreign exchange risks or restrictions or limitations on our ability to access funds generated in these jurisdictions, or the risk of violating applicable sanctions or regulations, which are complex and subject to frequent change.

We have compliance programs in place, including policies, training and various forms of monitoring, designed to address the risks discussed above. Nonetheless, these programs and policies may not always protect us from conduct by individual employees that violate these laws. Violations or allegations of violations of these laws may result in large civil and criminal penalties, debarment or exclusion from participating in government programs, diversion of management time, attention and resources and may otherwise have an adverse effect on our business, financial condition and results of operations.

The laws and regulations discussed above are broad in scope and subject to evolving interpretations and changes, which may be violated unknowingly, could require us to incur substantial costs regarding compliance or to alter our sales and marketing practices and may subject us to enforcement actions or litigation which could adversely affect our business, financial condition and results of operations. We cannot predict with certainty what laws, regulations and healthcare initiatives, if any, will be implemented, or what the ultimate effect of healthcare reform or any future legislation or regulation will have on us. For more information related to ongoing government investigations, see Note 7 in Item 8 of this Annual Report. For more information on regulatory matters currently affecting us, including quality-related matters, see “Certain Regulatory Matters” in Item 7 of this Annual Report.

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Increasing regulatory focus on privacy and security issues and expanding laws could impact our business and expose us to increased liability.

As a global company, we are subject to global data privacy and security laws, regulations and codes of conduct that apply to our businesses. We are required to comply with increasingly complex and changing legal and regulatory requirements that govern the collection, use, storage, security, transfer, disclosure and other processing of personal data in the United States and in other countries, including, but not limited to, The Health Insurance Portability and Accountability Act, as amended (HIPAA), The Health Information Technology for Economic and Clinical Health Act, the California Consumer Privacy Act (CCPA), and the European Union’s General Data Protection Regulation (GDPR). The GDPR imposes stringent European Union data protection requirements and provides for significant penalties for noncompliance. HIPAA also imposes stringent data privacy and security requirements and the regulatory authority has imposed significant fines and penalties on organizations found to be out of compliance. CCPA provides consumers with a private right of action against companies who have a security breach due to lack of appropriate security measures. We or our third-party providers and business partners may also be subjected to audits or investigations by one or more domestic or foreign government agencies relating to compliance with information security and privacy laws and regulations, and noncompliance with the laws and regulations could result in substantial and material fines or class action litigation.

If reimbursement or other payment for our current or future products is reduced or modified in the United States or in foreign countries, including through the implementation or repeal of government-sponsored healthcare reform or other similar actions, cost containment measures, or changes to policies with respect to pricing, taxation or rebates, our business could suffer.

Sales of our products depend, in part, on the extent to which the costs of our products are paid by both public and private payers. These payers include Medicare, Medicaid, and private healthcare insurers in the United States and foreign governments and third-party payers outside the United States. Our work with government payers carries various risks inherent in working with government entities and agencies, including government reporting and auditing, additional regulatory oversight, mandated contractual terms, failure of government appropriations or other complex procedural requirements.

Public and private payers are increasingly challenging the prices charged for medical products and services. We may continue to experience downward pricing pressures from any or all of these payers which could result in an adverse effect on our business, financial condition and operational results.

Global efforts toward healthcare cost containment continue to exert pressure on product pricing. Governments around the world use various mechanisms to control healthcare expenditures, such as price controls, the formation of public contracting authorities, product formularies, which are lists of recommended or approved products, and competitive tenders which require the submission of a bid to sell products. Sales of our products are dependent, in part, on the availability of reimbursement by government agencies and healthcare programs, as well as insurance companies and other private payers. In much of Europe, Latin America, Asia and Australia, the government provides healthcare at low cost to patients, and controls its expenditures by purchasing products through public tenders, collective purchasing, regulating prices, setting reference prices in public tenders or limiting reimbursement or patient access to certain products. For example, China has been implementing volume-based procurement policies, a series of centralized reforms being instituted in China on both a national and regional basis that has resulted in significant price cuts for pharmaceuticals and medical consumables. Additionally, austerity measures or other reforms by foreign governments may limit, reduce or eliminate payments for our products and adversely affect both pricing flexibility and demand for our products. In addition, our recent acquisition of Hillrom has increased our exposure to risks related to reimbursement (as certain portions of that business directly bill various government agencies).

The Healthcare Reform Act includes several provisions which impact our businesses in the United States, including increased Medicaid rebates and an expansion of the 340B Drug Pricing Program which provides certain qualified entities with discounts on the purchase of drugs for outpatient use and an excise tax on the sale of certain drugs. The Healthcare Reform Act reduces Medicare and Medicaid payments to hospitals and other providers, which may cause us to experience downward pricing pressure. Certain portions of the Healthcare Reform Act could negatively impact the demand for our products, and therefore our results of operations and financial position.

In 2019, the U.S. Department of Health and Human Services launched a new kidney health initiative. The CMS published the final end stage renal disease Treatment Choices mandatory payment model (ETC) in 2020. The ETC launched in 30% of dialysis clinics across the country on January 1, 2021 and creates payment incentives for the

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greater use of home dialysis and kidney transplants for those new to and already on dialysis. CMS also announced the implementation of four voluntary payment models with the stated goal of helping healthcare providers reduce the cost and improve the quality of care for patients with late-stage chronic kidney disease and ESRD. CMS has stated these payment models are aimed to prevent or delay the need for dialysis and encourage kidney transplantation. CMS launched the program on January 1, 2022, at which time 85 entities (or potential customers) were enrolled as participants. These proposed regulatory changes in kidney health policy and reimbursement may substantially change the U.S. end stage renal disease market and could increase demand for our peritoneal dialysis products, necessitating significant multi-year capital expenditures in order to meet that demand. However, the impact of such changes and related expenses are difficult to estimate in advance.

In addition, a substantial portion of our revenues is dependent on federal healthcare program reimbursement, and any disruptions in federal government operations, including a federal government shutdown or failure of the U.S. government to enact annual appropriations, could have a material adverse effect on our business, financial condition and results of operations. Additionally, disruptions in federal government operations may negatively impact regulatory approvals and guidance that are important to our operations, and create uncertainty about the pace of upcoming healthcare regulatory developments or approvals.

As a result of these and other measures, including future measures or reforms that cannot be predicted, reimbursement may not be available or sufficient to allow us to sell our products on a competitive basis. Legislation and regulations affecting reimbursement for our products may change at any time and in ways that may be adverse to us. We cannot predict the impact of these pressures and initiatives, or any negative effects of any additional regulations that may affect our business.

We could be subject to fines or damages and possible exclusion from participation in federal or state healthcare programs if we fail to comply with the laws and regulations applicable to our business.

Portions of our business are subject to stringent laws and regulations at the federal or state levels governing the participation of durable medical equipment suppliers and independent diagnostic testing facilities in federal and state healthcare programs. From time to time, the government seeks additional information related to our claims submissions, and in some instances government contractors perform audits of payments made to us under Medicare, Medicaid, and other federal healthcare programs. On occasion, these reviews identify overpayments for which we submit refunds. At other times, our own internal audits identify the need to refund payments. We believe the frequency and intensity of government audits and review processes has grown and we expect this will continue in the future, due to increased resources allocated to these activities at both the federal and state Medicaid level, and greater sophistication in data review techniques.

In addition, our business contracts with foreign and U.S. federal, state and local government entities and is subject to specific rules, regulations and approvals applicable to government contractors. Our failure to comply with these could result in contract terminations, suspension or debarment from contracting with these entities, civil fines and damages, criminal prosecution and possible exclusion from participation in federal healthcare programs such as Medicare and Medicaid, as well as possible recoupment of any overpayments related to such violations. While we believe that our practices materially comply with applicable state and federal requirements, the requirements might be interpreted in a manner inconsistent with our interpretation. Failure to comply with applicable laws and regulations, even if inadvertent, could have a material adverse impact on our business.

If we are unable to protect our patents or other proprietary rights, or if we infringe the patents or other proprietary rights of others, our competitiveness and business prospects may be materially damaged.

Patent and other proprietary rights are essential to our business. Our success depends to a significant degree on our ability to obtain and enforce patents and licenses to patent rights, both in the United States and in other countries. We cannot guarantee that pending patent applications will result in issued patents, that patents issued or licensed will not be challenged or circumvented by competitors, that our patents will not be found to be invalid or that the intellectual property rights of others will not prevent us from selling certain products or including key features in our products.

The patent position of a healthcare company is often uncertain and involves complex legal and factual questions. Significant litigation concerning patents and products is pervasive in our industry. Patent claims include challenges to the coverage and validity of our patents on products or processes as well as allegations that our products infringe patents held by competitors or other third parties. An unfavorable litigation outcome in any of these types of cases could result in a loss of patent protection or the ability to market products, which could lead to a significant loss of

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sales, or otherwise materially affect future results of operations. We also rely on trademarks, copyrights, trade secrets and know-how to develop, maintain and strengthen our competitive positions. Third parties may know, discover or independently develop equivalent proprietary information or techniques, or they may gain access to our trade secrets or disclose our trade secrets to the public.

Although our employees, consultants, parties to collaboration agreements and other business partners are generally subject to confidentiality or similar agreements to protect our confidential and proprietary information, these agreements may be breached, and we may not have adequate remedies for any breach. To the extent that our employees, consultants, parties to collaboration agreements and other business partners use intellectual property owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions.

Furthermore, our intellectual property, proprietary technology and sensitive company data is potentially vulnerable to loss, damage or misappropriation from system malfunction, computer viruses and unauthorized access to our data or misappropriation or misuse thereof by those with permitted access and other events. While we have invested to protect our intellectual property, confidential information and other data, and continue to work diligently in this area, there can be no assurance that our precautionary measures will prevent breakdowns, breaches, cyber incidents or other events. Such events could have a material adverse effect on our reputation, business, financial condition or results of operations.

Changes in tax laws or exposure to additional income tax liabilities may have a negative impact on our operating results.

Changes to the tax laws in the United States or other countries in which we operate could have an adverse effect on our operating results. For example, the Build Back Better framework, if enacted as proposed by President Biden, could adversely affect our financial condition and results of operations. Similarly, the outcome of various initiatives currently being undertaken by the Organization of Economic Cooperation and Development could significantly impact how we allocate profits across multiple jurisdictions, which could adversely impact our global tax obligations.

Taxing authorities audit us from time to time and may disagree with certain positions we have taken in respect of our tax liabilities. Our tax liabilities are affected by many factors, including the amounts we charge in intra-company transactions for inventory, services, licenses, funding and other items, which are subject to the use of assumptions and judgment. Because we operate in multiple income tax jurisdictions both inside and outside the United States, cross border transactions among our affiliates are a significant part of the manner in which we operate. Although we believe that we transact intra-company business in accordance with arm's-length principles, tax authorities may disagree with our intra-company charges, cross-jurisdictional transfer pricing or other matters, and may assess additional taxes as a result, including in connection with their review of the restated financial statements we have filed as part of our 2019 Annual Report on Form 10-K.

We regularly assess the likely outcomes of these audits in order to determine the appropriateness of our tax provision. However, we may not accurately predict the outcome of these audits and, as a result, the actual outcome of these audits may have an adverse impact on our financial results. For more information on ongoing audits, see Note 12 in Item 8 of this Annual Report.

We are party to a number of pending lawsuits and other disputes which may have an adverse impact on our business, operations or financial condition.

We are party to a number of pending lawsuits, settlement discussions, mediations, arbitrations and other disputes, including for example, the Superfund cases, opioid litigation, ethylene oxide litigation, Linet antitrust litigation and a stockholder request for inspection of our books and records related to the restatement of certain of our financial statements, as set forth in Note 7 in Item 8 of this Annual Report. In addition, in the future we may be party to additional lawsuits, disputes or other matters, including patent, product liability or other lawsuits. These current and future matters may result in a loss of patent protection, reduced revenue, incurrence of significant liabilities and diversion of our management’s time, attention and resources. Given the uncertain nature of litigation and other disputes generally, we are not able in all cases to estimate the amount or range of loss that could result from an unfavorable outcome in our current matters. In view of these uncertainties, the outcome of these current matters may result in charges in excess of any established reserves, and, to the extent available, liability insurance. We also continue to be self-insured with respect to product liability claims. The absence of third-party insurance coverage for current or future claims increases our potential exposure to unanticipated claims and adverse decisions. Protracted litigation and other disputes, including any adverse outcomes, may have an adverse impact on our business,

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operations or financial condition. Even claims without merit could subject us to adverse publicity and require us to incur significant legal fees.

Risks Related to the Economy and Our Financial Performance

Current or worsening economic conditions may adversely affect our business and financial condition.

Our ability to generate cash flows from operations could be affected if there is a material decline in the demand for our products, in the solvency of our customers or suppliers, or deterioration in our key financial ratios or credit ratings. Current or worsening economic conditions may adversely affect the ability of our customers (including governments) to pay for our products and services, and the amount spent on healthcare generally, which could result in decreased demand for our products and services, declining cash flows, longer sales cycles, slower adoption of new technologies and increased price competition. These conditions may also adversely affect certain of our suppliers, which could disrupt our ability to produce products. We continue to do business with foreign governments in certain countries, including Greece and Italy, which have experienced deterioration in credit and economic conditions. While global economic conditions have not significantly impacted our ability to collect receivables, liquidity issues in certain countries have resulted, and may continue to result, in delays in the collection of receivables and credit losses, and may also impact the stability of the U.S. dollar, Euro or Yuan.

Changes in foreign currency exchange rates and interest rates could have a material adverse effect on our operating results and liquidity.

We generate the majority of our revenue and profit outside the United States. As a result, our financial results have been and may in the future be adversely affected by fluctuations in foreign currency exchange rates. We cannot predict with any certainty changes in foreign currency exchange rates or our ability to mitigate these risks. We may experience additional volatility as a result of inflationary pressures and other macroeconomic factors, including in emerging market countries. We are also exposed to changes in interest rates, and our ability to access the money markets and capital markets could be impeded if market conditions are not favorable. For more information see “Financial Instrument Market Risk” in Item 7 of this Annual Report.

Our operating results and financial condition may fluctuate.

Our operating results and financial condition may fluctuate from quarter to quarter and year to year for a number of reasons. Events, such as a delay in product development, changes to our expectations or strategy or even a relatively small revenue shortfall or increase in supply chain or other costs may cause financial results for a period to be below our expectations or projections. As a result, we believe that period-to-period comparisons of our results of operations are not necessarily meaningful, nor should they be relied upon as an indication of future performance. Our operating results and financial condition are also subject to fluctuation from all of the risks described throughout this section. These fluctuations may adversely affect our results of operations and financial condition and our stock price.

We may not achieve our financial goals.

We continue to evaluate and refine both our short-term and long-term financial objectives, including our stated commitment to achieve certain net leverage targets after completion of the Hillrom acquisition. Our ability to achieve these targets depends, in part, on our ability to realize the anticipated benefits of the acquisition (and related cost and revenue synergy targets) while continuing to strengthen our portfolio and extend our impact through transformative innovation. We may fail to achieve our targeted financial results if we are unsuccessful in implementing our strategies, our estimates or assumptions change or for any other reason. Our failure to achieve our financial goals could have a material adverse effect on our business, financial condition and results of operations.

Future material impairments in the value of our long-lived assets, including goodwill, could negatively affect our operating results.

We regularly review our long-lived assets, including identifiable intangible assets, goodwill (which results from our acquisition activity) and property, plant and equipment, for impairment. Goodwill and acquired indefinite life intangible assets are subject to impairment review on an annual basis and whenever potential impairment indicators are present. Other long-lived assets are reviewed when there is an indication that impairment may have occurred. Changes in market conditions or other changes in the future outlook of value may lead to impairment charges in the

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future. In addition, we may from time to time sell assets that we determine are not critical to our strategy, including in connection with strategic exits. Future events or decisions may lead to asset impairments and/or related charges. Certain non-cash impairments may result from a change in our strategic goals, business direction or other factors relating to the overall business environment. Material impairment charges could negatively affect our results of operations. For more information on the valuation and impairment of long-lived assets, see “Critical Accounting Policies” in Item 7 of this Annual Report.

Item 1B. Unresolved Staff Comments.

None.

Item 2. Properties.

Our corporate offices are owned and located at One Baxter Parkway, Deerfield, Illinois 60015.

We manage our global operations based on four segments, consisting of the following geographic segments related to our legacy Baxter business: Americas, EMEA and APAC, and a new global segment for our recently acquired Hillrom business. We own or have long-term leases on all of our manufacturing facilities and the location of the principal manufacturing facilities of each of our segments are listed below:

Segments Location Owned/Leased

Americas

Aibonito, Puerto Rico Leased

Alliston, Canada Owned

Cali, Colombia Owned

Cartago, Costa Rica Owned

Cuernavaca, Mexico Owned

Guayama, Puerto Rico Owned

Haina, Dominican Republic Leased

Hayward, California Leased

Round Lake, Illinois Owned

Bloomington, Indiana Owned/Leased(1)

Cleveland, Mississippi Leased

Medina, New York Leased

Jayuya, Puerto Rico Leased

Opelika, Alabama Owned

Pesa, Mexico Leased

Sao Paulo, Brazil Owned

Tijuana, Mexico Owned

Mountain Home, Arkansas Owned/Leased(1)

North Cove, North Carolina Owned

St. Paul, Minnesota Leased

Irvine, California Owned

Mountain View, California Leased

APAC

Ahmedabad, India Owned

Guangzhou, China Owned

Shanghai, China Owned

Suzhou, China Owned

Toongabbie, Australia Owned

Woodlands, Singapore Owned/Leased(2)

Canlubang, Philippines Leased

Amata, Thailand Owned

Tianjin, China Owned

Miyazaki, Japan Owned

EMEA

Castlebar, Ireland Owned

Grosotto, Italy Owned

Halle, Germany Owned

Hechingen, Germany Leased

Lessines, Belgium Owned

Liverpool, United Kingdom Leased

Lund, Sweden Leased

Marsa, Malta Owned

Medolla, Italy Owned

Meyzieu, France Owned

Rostock, Germany Leased

Sabinanigo, Spain Owned

San Vittore, Switzerland Owned

Sondalo, Italy Owned

Swinford, Ireland Owned

Thetford, United Kingdom Owned

Tel Aviv, Israel Leased

Elstree, United Kingdom Leased

Tunis, Tunisia Owned

Dammam, Saudi Arabia Owned

Hillrom

Acton, Massachusetts Leased

Batesville, Indiana Owned

Bellevue, Washington Leased

Cary, North Carolina Leased

Charleston, South Carolina Leased

Chicago, Illinois Leased

Milwaukee, Wisconsin Owned

Sarasota, Florida Leased

St. Paul, Minnesota Leased

Skaneateles Falls, New York Owned

Suzhou, China Leased

Taicang, China Leased

Pluvigner, France Owned

Puchheim, Germany Leased

Saalfeld, Germany Owned

Navan, County Meath, Ireland Owned

Bologna, Italy Leased

Tijuana, Mexico Owned

Monterrey, Mexico Owned

Amsterdam, Netherlands Leased

Singapore Leased

Luleå, Sweden Owned

__________________________________________________________________

(1)Includes both owned and leased facilities.

(2)We own the facility located at Woodlands, Singapore and lease the property upon which it rests.

We also own or operate shared distribution facilities throughout the world. In the United States and Puerto Rico, there are six shared distribution facilities with the principal facilities located in Memphis, Tennessee; Cataño, Puerto Rico; North Cove, North Carolina; and Round Lake, Illinois. Internationally, we have more than 100 shared distribution facilities located in Argentina, Australia, Austria, Belgium, Brazil, Canada, Chile, China, Colombia, Costa Rica, the Czech Republic, Ecuador, France, Germany, Greece, Guatemala, Hong Kong, India, Ireland, Italy, Japan, Korea, Mexico, New Zealand, Panama, the Philippines, Poland, Portugal, Russia, Singapore, Spain, Sweden, Switzerland, Thailand, Turkey, the United Arab Emirates, and the United Kingdom.

We continually evaluate our plants and production lines and believe that our current facilities plus any planned expansions are generally sufficient to meet our expected needs and expected near-term growth. Expansion projects and facility closings will be undertaken as necessary in response to market needs.

Item 3. Legal Proceedings.

Incorporated by reference to Note 7 in Item 8 of this Annual Report on Form 10-K.

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Item 4. Mine Safety Disclosures.

Not Applicable.

Executive Officers of the Registrant

As of February 23, 2022, the following serve as Baxter’s executive officers:

José E. Almeida, age 59, is Chairman, President and Chief Executive Officer, having served in that capacity since January 2016. He began serving as an executive officer of Baxter in October 2015. He served as Senior Advisor with The Carlyle Group from May 2015 until October 2015. Previously, he served as the Chairman, President and Chief Executive Officer of Covidien plc (Covidien), a global health care products company, from March 2012 to January 2015, prior to the acquisition of Covidien by Medtronic plc (Medtronic), and President and Chief Executive Officer of Covidien from July 2011 to March 2012. Mr. Almeida served in other executive roles with Covidien (formerly Tyco Healthcare (Tyco)) between April 2004 and June 2011. Mr. Almeida previously served as a member of the Board of Directors of Walgreens Boots Alliance, Inc., and the board of trustees of Partners in Health.He also previously served as director and chairman of the Board for the Advanced Medical Technology Association (AdvaMed).

Giuseppe Accogli, age 51, was appointed in 2021 to a newly created role of Executive Vice President and Chief Operating Officer with responsibility of Baxter’s eight global business units and the Americas. Prior to his current role, Mr. Accogli served as Senior Vice President and President, Americas and Global Business Units. In 2020, his role was expanded to include President of Baxter’s Global Businesses, a position he held from 2017 to 2019. He also served as Corporate Vice President and President, Renal from 2016 to 2017 and as Head of the U.S. region for Baxter’s Renal business from 2015 to 2016. Mr. Accogli joined Baxter in 2007 as Renal business unit Director in Italy, and assumed positions of increasing responsibility with the Renal business in Europe, including Head of the Europe, Middle East and Africa (“EMEA”) region for Baxter’s Renal business from 2013 to 2015. Prior to joining Baxter, Mr. Accogli worked as a Business Unit Manager and Sales and Marketing Manager for Medtronic plc in Italy, and in several sales, product and marketing roles for Tyco and then Covidien in Italy and EMEA.Mr. Accogli serves as a director to AdvaMed, an American medical device trade association, which he has done since September 25, 2019.

James Borzi, age 59, is Senior Vice President, Chief Supply Chain Officer. He joined Baxter in August 2020 from GE Healthcare, where he served as Vice President, Chief Supply Chain Officer from 2019 to 2020. Prior to joining GE Healthcare, he spent five years with Becton Dickinson (BD) in various manufacturing operations leadership roles; his last role with BD was Executive Vice President of Global Operations and Chief Supply Chain Officer. Earlier in his career, he was Senior Vice President of Operations & Technology at Hydro Aluminum and Executive Vice President of Worldwide Operations at Lennox International. Prior to that, he was the Chief Operating Officer at AEES and Senior Vice President of Americas Operations at Alcoa.

Cristiano Franzi, age 59, is Senior Vice President and President, EMEA. Mr. Franzi joined Baxter in September 2017 from Medtronic, where he served as Vice President and President, Minimally Invasive Therapies Group EMEA from 2015 to August 2017. He served as President EMEA at Covidien prior to Medtronic’s acquisition of Covidien. He joined Covidien in 2009 and held roles of increasing responsibility during his tenure. He held a number of commercial and functional roles across Europe, the Middle East and Africa at ev3 Endovascular, Inc., Boston Scientific Corporation and Becton, Dickinson & Co. earlier in his career. He served as a member of the board of Eucomed Medical Technology from 2013 to 2015 and again from 2018 to 2019.

Andrew Frye, age 56, is Senior Vice President and President, APAC. Mr. Frye joined Baxter in 2017 from DKSH Holdings Ltd., where he served as Global Head of Healthcare from 2015 to 2017. In that role, he oversaw a portfolio of pharmaceuticals, over-the-counter and device products across 13 countries. Previously, he served as Vice President of Business Development from 2011 to 2014 for DKSH Healthcare. Earlier in his career, he held a number of commercial roles with increasing responsibility at Abbott Laboratories’ Pharmaceutical and Nutrition divisions.

Jacqueline Kunzler, Ph.D., age 56, is Senior Vice President and Chief Quality Officer. Ms. Kunzler joined Baxter in 1993 and has served in roles of increasing responsibility across Baxter’s research & development, international marketing, and quality organizations, most recently as Senior Vice President, Chief Quality Officer.

Sean Martin, age 59, is Senior Vice President and General Counsel. Mr. Martin joined Baxter in 2017 from Apollo Education Group, Inc., where he served as Senior Vice President, General Counsel and Secretary from 2010 to 2017. Previously, he served as Assistant Secretary (2010), Vice President of Corporate Law (2009 to 2010) and Vice President of Commercial Law (2005 to 2009) for Amgen Inc. He also served as Vice President and Deputy

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General Counsel at Fresenius Medical Care North America from 2000 to 2005. Mr. Martin was a Partner at the law firm Foley & Lardner LLP from 1998 to 2000 and served eight years as Assistant U.S. Attorney for the Northern District of Illinois.

Jeanne K. Mason, Ph.D., age 66, is Senior Vice President, Human Resources. Ms. Mason joined Baxter in 2006 from GE Insurance Solutions, a primary insurance and reinsurance business, where she was responsible for global human resource functions. Ms. Mason began her career with General Electric (GE) in 1988 after serving with the U.S. General Accounting Office in Washington, D.C. Her GE experience included leadership roles in Europe for GE Information Services and GE Capital Real Estate. She is a member of the Board of Directors of Family Service of Lake County and is a member of the Executive Advisory Council for the Chicago Chapter of National Association of African Americans in Human Resources.

James K. Saccaro, age 49, is Executive Vice President and Chief Financial Officer. Mr. Saccaro was Senior Vice President and Chief Financial Officer at Hill-Rom Corporation prior to rejoining Baxter in 2014. He originally joined Baxter in 2002 as Manager of Strategy for our BioScience business, and over the years assumed positions of increasing responsibility, including Vice President of Financial Planning, Vice President of Finance for our operations in Europe, the Middle East and Africa and Corporate Vice President and Treasurer. He previously held strategy and business development positions at Clear Channel Communications and the Walt Disney Company.

All executive officers hold office until the next annual election of officers and until their respective successors are elected and qualified.

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PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Issuer Purchases of Equity Securities

On July 25, 2012, we announced that our Board of Directors authorized us to repurchase up to $2.0 billion of our common stock on the open market or in private transactions. The Board of Directors increased this authority by $1.5 billion in each of November 2016 and February 2018, by an additional $2.0 billion in November 2018 and by an additional $1.5 billion in October 2020. During the fourth quarter of 2021, we did not repurchase any shares under this authority. The remaining authorization under this program totaled approximately $1.3 billion at December 31, 2021. This program does not have an expiration date.

Market Information and Holders of our Common Stock

Our common stock is listed on the New York, Chicago and SIX Swiss stock exchanges. The New York Stock Exchange is the principal market on which our common stock is traded under the symbol “BAX”. As of January 31, 2022, there were 20,939 holders of record of our common stock.

Performance Graph

The following graph compares the change in our cumulative total stockholder return (including reinvested dividends) on our common stock with the Standard & Poor’s 500 Composite Index and the Standard & Poor’s 500 Health Care Index over the past five years.

Item 6. Reserved.

Item 7. Management’s Discussion and Analysis ofFinancial Condition and Results of Operations.

The following commentary should be read in conjunction with the consolidated financial statements and accompanying notes. The discussion and analysis of our financial condition as of December 31, 2020 and results of operations for the year ended December 31, 2020 compared to the year ended December 31, 2019, included in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations, can be found in our Current Report on Form 8-K filed with the SEC on April 29, 2021 (2020 Annual Report), which revised and superseded the Management's Discussion and Analysis of Financial Condition and Results of Operations section of the Annual Report on Form 10-K for the year ended December 31, 2020.

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EXECUTIVE OVERVIEW

Description of the Company and Business Segments

We manage our global operations based on four segments, consisting of the following geographic segments related to our legacy Baxter business: Americas, EMEA and APAC, and a new global segment for our recently acquired Hillrom business. The Americas, EMEA and APAC segments provide a broad portfolio of essential healthcare products, including acute and chronic dialysis therapies; sterile IV solutions; infusion systems and devices; parenteral nutrition therapies; inhaled anesthetics; generic injectable pharmaceuticals; and surgical hemostat and sealant products. These products are used by hospitals, kidney dialysis centers, nursing homes, rehabilitation centers, doctors’ offices and patients at home under physician supervision. The Hillrom segment provides digital and connected care solutions and collaboration tools, including smart bed systems, patient monitoring and diagnostic technologies, respiratory health devices and advanced equipment for the surgical space. Our global footprint and the critical nature of our products and services play a key role in expanding access to healthcare in emerging and developed countries. We expect to continue to evaluate our business structure as we integrate Hillrom and any changes as a result of that evaluation could impact the composition of our reportable segments in the future.

For financial information about our segments, see Note 17 in Item 8 of this Annual Report on Form 10-K.

Recent Business Combinations and Asset Acquisitions

Hillrom

On December 13, 2021, we completed the previously announced acquisition of all outstanding equity interests of Hillrom for a purchase price of $10.5 billion. Including the assumption of Hillrom's outstanding debt obligations, the enterprise value of the transaction was approximately $12.8 billion. Under the terms of the transaction agreement, Hillrom shareholders received $156.00 in cash per each outstanding Hillrom common share.

Prior to our acquisition of Hillrom, Hillrom was a global medical technology leader whose products and services help enable earlier diagnosis and treatment, optimize surgical efficiency, and accelerate patient recovery while simplifying clinical communication and shifting care closer to home. Hillrom made those outcomes possible through digital and connected care solutions and collaboration tools, including smart bed systems, patient monitoring and diagnostic technologies, respiratory health devices, advanced equipment for the surgical space and more, delivering actionable, real-time insights at the point of care. Refer to Note 2 and Note 5 in Item 8 of this Annual Report on Form 10-K for additional information on the Hillrom acquisition and related financing arrangements.

PerClot

On July 29, 2021, we acquired certain assets related to PerClot Polysaccharide Hemostatic System (PerClot), including distribution rights for the U.S. and specified territories outside of the U.S., from CryoLife, Inc. for an upfront purchase price of $25 million and the potential for additional cash consideration of up to $36 million, which had an acquisition-date fair value of $28 million, based upon regulatory and commercial milestones. PerClot is an absorbable powder hemostat indicated for use in surgical procedures, including cardiac, vascular, orthopedic, spinal, neurological, gynecological, ENT and trauma surgery as an adjunct hemostat when control of bleeding from capillary, venous, or arteriolar vessels by pressure, ligature, and other conventional means is either ineffective or impractical. Refer to Note 2 in Item 8 of this Annual Report on Form 10-K for additional information regarding the acquisition of PerClot.

Transderm Scop

On March 31, 2021, we acquired the rights to Transderm Scop (TDS) for the U.S. and specified territories outside of the U.S. from subsidiaries of GlaxoSmithKline for an upfront purchase price of $60 million including the cost of acquired inventory and the potential for additional cash consideration of $30 million, which had an acquisition-date fair value of $24 million, based upon regulatory approval of a new contract manufacturer by a specified date. We previously sold this product under a distribution license to the U.S. institutional market. TDS is indicated for post-operative nausea and vomiting in the U.S. and motion sickness in European markets. Refer to Note 2 in Item 8 of this Annual Report on Form 10-K for additional information regarding the acquisition of TDS.

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Caelyx and Doxil

On February 17, 2021, we acquired the rights to Caelyx and Doxil, the branded versions of liposomal doxorubicin, from a subsidiary of Johnson & Johnson for specified territories outside of the U.S for approximately $325 million in cash. We previously acquired the U.S. rights to this product in 2019. Liposomal doxorubicin is a chemotherapy medicine used to treat various types of cancer. Refer to Note 2 in Item 8 of this Annual Report on Form 10-K for additional information regarding the acquisition of Caelyx and Doxil.

Seprafilm Adhesion Barrier

In February 2020, we completed the acquisition of the product rights to Seprafilm Adhesion Barrier (Seprafilm) from Sanofi for approximately $342 million in cash. Seprafilm is indicated for use in patients undergoing abdominal or pelvic laparotomy as an adjunct intended to reduce the incidence, extent and severity of postoperative adhesions between the abdominal wall and the underlying viscera such as omentum, small bowel, bladder, and stomach, and between the uterus and surrounding structures such as tubes and ovaries, large bowel, and bladder. Refer to Note 2 in Item 8 of this Annual Report on Form 10-K for additional information regarding the acquisition of Seprafilm.

Financial Results

Our global net sales totaled $12.8 billion in 2021, an increase of 10% over 2020 on a reported and 7% on a constant currency basis. International sales totaled $7.6 billion in 2021, an increase of 12% compared to 2020 on a reported basis and 8% on a constant currency basis. Sales in the United States totaled $5.2 billion in 2021, an increase of 6% compared to 2020. Refer to the Net Sales discussion in the Results of Operations section below for more information related to changes in net sales on a constant currency basis.

Net income attributable to Baxter stockholders totaled $1.3 billion, or $2.53 per diluted share, in 2021. Net income in 2021 included special items which resulted in a net decrease to net income of $552 million, or $1.08 per diluted share. Our special items are discussed in the Results of Operations section below.

Our financial results included R&D expenses totaling $534 million in 2021, which reflects our focus on balancing investments to support our new product pipeline with efforts to optimize overall R&D spending.

Our financial position remains strong, with operating cash flows from continuing operations totaling $2.2 billion in 2021. We have continued to execute on our disciplined capital allocation framework, which is designed to optimize stockholder value creation through reinvestment in our businesses, dividends and share repurchases, as well as acquisitions and other business development initiatives as discussed in the Strategic Objectives section below.

Capital expenditures totaled $743 million in 2021 as we continue to invest across our businesses to support future growth, including additional investments in support of new and existing product capacity expansions. Our investments in capital expenditures in 2021 were focused on projects that improve production efficiency and enhance manufacturing capabilities to support our business growth.

We also continued to return value to our stockholders in the form of dividends. During 2021, we paid cash dividends to our stockholders totaling $530 million. Additionally, in 2021 we repurchased 7.3 million shares through cash repurchases pursuant to Rule 10b5-1 repurchase plans. For information on our share repurchase plans, see Note 8 in Item 8 of this Annual Report on Form 10-K.

Strategic Objectives

We continue to focus on several key objectives to successfully execute our long-term strategy to achieve sustainable growth and deliver enhanced stockholder value. Our diversified and broad portfolio of medical products that treat life-threatening acute or chronic conditions and our global presence are core components of our strategy to achieve these objectives. We are focused on three strategic factors as part of our pursuit of industry leading performance: optimizing our core portfolio globally; operational excellence focused on streamlining our cost structure and enhancing operational efficiency; and maintaining a disciplined and balanced approach to capital allocation.

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Optimizing the Core Portfolio Globally

Our global product portfolio optimization strategy identifies products that we believe to have characteristics of core growth, products that we expect to provide us with a core return on capital, products that we intend to maintain or manage differently and products that we consider to be strategic bets. For products with core growth characteristics, we look to invest for long-term, higher margin growth. For products that we expect to generate a core return on capital, we seek to optimize our return on investment and to maintain or enhance our market position. For products that we intend to maintain or manage differently, we look to sustain or reposition our underlying investment. Finally, we are evaluating our market position and investment strategy for products that we consider to be strategic bets.

As part of our portfolio management strategy, we seek to optimize our position in product areas where we have a stable, profitable business model and identify and alter investments in products that have reached the end of their life cycles or for which market positions have evolved unfavorably. In the course of doing so, we expect to continue to reallocate capital to more promising opportunities or business groupings, as described above. Additionally, to the extent we identify areas that do not align with our longer-term objectives, we will look to exit or divest these businesses while also continuing to identify new opportunities to enhance future performance.

As part of this strategy, we are shifting our investments to drive innovation in product areas where we have compelling opportunities to serve patients and healthcare professionals while advancing our business and we are accelerating the pace in which we bring these advances to market. We are in the midst of launching several new products, geographic expansions and line extensions including in such areas as chronic and acute renal care, smart pump technology, hospital pharmaceuticals and nutritionals, surgical sealants, and more. These comprise a mix of entirely new offerings, improvements on existing technologies, and the expansion of current products into new geographies. We are also evaluating product development opportunities that leverage the newly acquired Hillrom portfolio.

Operational Excellence

In recent years, we have undertaken a comprehensive review of all aspects of our operations and are actively implementing changes in line with our business goals. As part of our pursuit of improved margin performance, we are working to optimize our cost structure and we are critically assessing optimal support levels in light of our ongoing portfolio optimization efforts and the Hillrom integration. We intend to continue to actively manage our cost structure to help ensure that we are committing resources to the highest value uses. Such high value activities include supporting innovation, building out the portfolio, expanding patient access and accelerating growth for our stockholders.

Maintaining Disciplined and Balanced Capital Allocation

Subject to market conditions and our investment grade targets, our capital allocation strategies include the following:

•reinvest in the business by funding opportunities that are positioned to deliver sustainable growth, support our innovation efforts and improve margin performance;

•return capital to stockholders through dividends and share repurchases; and

•identify and pursue accretive merger and acquisition (M&A) opportunities.

Corporate Responsibility at Baxter

Driven by our mission to save and sustain lives, Baxter's corporate responsibility strategy focuses on tackling the environmental, social and governance (ESG) issues that affect our patients, customers, employees, communities and other stakeholders. Our corporate responsibility approach supports our business priorities to achieve top quartile results relative to industry peers and other comparators across four dimensions: patient safety and quality, growth through innovation, best place to work, and industry-leading performance. Advancing our corporate responsibility goals contributes to business, social and economic value, including through employee attraction and retention, enhanced operational efficiency, and implementation of enterprise risk management strategies, among others.

In 2021, we launched our 2030 CR Commitment featuring ten goals for focused action, anchored by three pillars - Empower Our Patients, Protect Our Planet and Champion Our People and Communities - on the foundation of

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principles of Ethics and Compliance, Human Rights, Inclusion and Diversity, and Privacy and Data Protection. The 2030 Commitment and Goals highlight Baxter's corporate responsibility focus and help to further advance our ESG performance. Our progress against these goals is published annually in our Corporate Responsibility Report which is available on our website under "Our Story-Corporate Responsibility". The Corporate Responsibility Report is not incorporated by reference into this Annual Report on Form 10-K or any other document filed with the SEC.

Risks and Uncertainties Related to COVID-19

Our global operations expose us to risks associated with public health crises and epidemics/pandemics, such as the COVID-19 pandemic. COVID-19 has had, and we expect will continue to have, an adverse impact on our operations, supply chains and distribution systems and has increased and we expect will continue to increase our expenses, including as a result of impacts associated with preventive and precautionary measures that we, other businesses and governments have taken and continue to take. Initial measures taken in 2020 led to unprecedented restrictions on, disruptions in, and other related impacts on business and personal activities, including a shift in healthcare priorities, which resulted in a significant decline in medical procedures in 2020. Some of these disruptions and impacts (including the suspension or postponement of elective medical procedures) in certain of our principal markets have continued into 2021. The pandemic has created significant volatility in the demand for our products. For further discussion, refer to the Product Category Net Sales Reporting section below. Significant uncertainty remains regarding the duration and overall impact of the COVID-19 pandemic. For example, concerns remain regarding the pace of economic recovery due to virus resurgence across the globe from the Delta and Omicron variants and other virus mutations as well as vaccine distribution and hesitancy. The U.S. and other governments may continue existing measures or implement new restrictions and other requirements in light of the continuing spread of the pandemic (including with respect to mandatory vaccinations for certain of our employees and moratoriums on elective procedures). Due to the uncertainty caused by the pandemic, our operating performance and financial results, particularly in the short term, may be subject to volatility. We have experienced significant challenges, including lengthy delays, shortages and interruptions, posed by the pandemic and other exogenous factors (including significant weather events and disruptions to certain ports of call around the world) to our global supply chain, including the cost and availability of raw materials and component parts (including resins and electromechanical devices) and higher transportation costs, and may experience these and other challenges in future periods. We expect that these challenges as well as evolving governmental restrictions and requirements, among other factors, may continue to have an adverse effect on our business. For further discussion, refer to Item 1A of this Annual Report on Form 10-K.

Risk Factors

Our ability to sustain long-term growth and successfully execute the strategies discussed above depends in part on our ability to manage within an increasingly competitive and regulated environment and to address the other risk factors described in Item 1A of this Annual Report on Form 10-K.

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RESULTS OF OPERATIONS

Special Items

The following table provides a summary of our special items and the related impact by line item on our results for 2021 and 2020.

Gross Margin

Intangible asset amortization expense $ (287) $ (222)

Intangible asset impairment1 — (17)

Business optimization items2 (53) (53)

Product-related items3 — (29)

Acquisition and integration expenses4 (50) (11)

European medical devices regulation5 (42) (33)

Investigation and related costs6 — (3)

Total Special Items $ (432) $ (368)

Impact on Gross Margin Ratio (3.4 pts) (3.1 pts)

Selling, General and Administrative (SG&A) Expenses

Intangible asset amortization expense $ 11 $ —

Business optimization items2 60 78

Acquisition and integration expenses4 144 9

Investigation and related costs6 31 19

Litigation matter7 13 —

Total Special Items $ 259 $ 106

Impact on SG&A Expense Ratio 2.0 pts 1.0 pts

R&D Expenses

Business optimization items2 $ 1 $ 3

Acquisition and integration expenses4 4 22

Investigation and related costs6 — 1

Total Special Items $ 5 $ 26

Impact on R&D Expense Ratio 0.1 pts 0.3 pts

Other Operating Income, net

Business optimization items2 $ — $ (17)

Acquisition and integration expenses4 (6) (2)

Total Special Items $ (6) $ (19)

Interest Expense, Net

Acquisition and integration expenses4 $ 48 $ —

Total Special Items $ 48 $ —

Other Expense, Net

Pension settlements8 — 43

Loss on debt extinguishment9 5 110

Total Special Items $ 5 $ 153

Income Tax Expense

Tax matters10 $ (54) $ —

Tax effects of special items11 (137) (139)

Total Special Items $ (191) $ (139)

Impact on Effective Tax Rate (4.5 pts) (2.6 pts)

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Intangible asset amortization expense is identified as a special item to facilitate an evaluation of current and past operating performance and is consistent with how management and our Board of Directors internally assess performance. Additional special items are identified above because they are highly variable, difficult to predict and of a size that may substantially impact our results of operations for a period. Management believes that providing the separate impact of the above items on our results in accordance with U.S. GAAP may provide a more complete understanding of our operations and can facilitate a fuller analysis of our results of operations, particularly in evaluating performance from one period to another.

1In 2020, our results included a charge of $17 million for an asset impairment related to a developed-technology intangible asset. Refer to Note 4 in Item 8 of this Annual Report on Form 10-K for further information regarding this asset impairment.

2In 2021 and 2020, our results were impacted by costs associated with our execution of programs to optimize our organization and cost structure. These actions included streamlining our international operations, rationalizing our manufacturing and distribution facilities, reducing our general and administrative infrastructure, re-aligning certain R&D activities and canceling certain R&D programs. Our results in 2021 and 2020 included business optimization charges of $114 million and $134 million, respectively. Additionally, we recognized a gain of $17 million in 2020 for property we sold in conjunction with our business optimization initiatives. Refer to Note 11 in Item 8 of this Annual Report on Form 10-K for further information regarding these charges and related liabilities.

3Our results in 2020 included a charge of $29 million related to Sigma Spectrum infusion pump inspection and remediation activities.

4Our results in 2021 included acquisition, integration and related financing expenses of $240 million. This included acquisition, integration and related financing expenses for our acquisition of Hillrom and the acquisition of the rights to Caelyx and Doxil for specified territories outside of the U.S. These expenses were partially offset by benefits from changes in the estimated fair value of contingent consideration liabilities. Our results in 2020 included $40 million of acquisition and integration expenses. This included acquisition and integration expenses related to our acquisitions of Cheetah Medical, Inc. (Cheetah), Seprafilm and in-process R&D assets, partially offset by a benefit related to the change in the estimated fair value of contingent consideration liabilities. Refer to Note 2 in Item 8 of this Annual Report on Form 10-K for further information regarding business development activities.

5Our results in 2021 and 2020 included costs of $42 million and $33 million, respectively, related to updating our quality systems and product labeling to comply with the new medical device reporting regulation and other requirements of the European Union’s regulations for medical devices that become effective in stages beginning in 2021.

6Our results in 2021 included charges of $31 million for investigation and related costs. Those costs related to matters associated with our previously announced investigation of foreign exchange gains and losses, including the settlement of shareholder litigation, a civil penalty from the SEC and related professional fees. Our results in 2020 included $23 million for investigation and related costs. Those costs primarily included professional fees for the investigation and related matters, as well as incremental stock compensation expense as we extended the terms of certain stock options that were scheduled to expire in the first quarter of 2020. Refer to Notes 7 and 8 in Item 8 of this Annual Report on Form 10-K for further information regarding the investigation and stock compensation expense.

7Our results in 2021 included legal charges of approximately $13 million associated with claimants alleging injuries as a result of proximity to one of our plants.

8Our results in 2020 included a charge of $43 million related to lump-sum settlement distributions made to certain former U.S. employees with vested pension benefits. Refer to Note 12 in Item 8 of this Annual Report on Form 10-K for further information regarding the lump-sum settlements.

9Our results in 2021 included a loss of $5 million on the early extinguishment of the $2.4 billion debt assumed as part of the Hillrom acquisition. Our results in 2020 included a loss of $110 million on the November 2020 early extinguishment of $750 million of 3.75% senior notes that were issued in March 2020. Refer to Note 5 in Item 8 of this Annual Report on Form 10-K for further information.

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10Our results in 2021 included a $58 million income tax benefit related to a tax-deductible foreign statutory loss on an investment in a foreign subsidiary and an $18 million income tax benefit related to a change in U.S. foreign tax credit regulations, partially offset by a $22 million income tax expense related to an unfavorable court ruling for an uncertain tax position.

11Reflected in this item is the income tax impact of the special items identified in this table. The tax effect of each special item is based on the jurisdiction in which the item was incurred and the tax laws in effect for each such jurisdiction.

Net Sales

Percent change

Net sales for the year ended December 31, 2021 increased 10% at actual and 7% at constant currency rates.

Foreign currency favorably impacted net sales by 3 percentage points during 2021 compared to the prior-year period principally due to the weakening of the U.S. Dollar relative to the Euro, Australian Dollar, British Pound, Chinese Renminbi and Canadian Dollar.

The comparisons presented at constant currency rates reflect current year local currency sales at the prior year’s foreign exchange rates. This measure provides information on the change in net sales assuming that foreign currency exchange rates had not changed between the prior and the current period. We believe that the non-GAAP measure of change in net sales at constant currency rates, when used in conjunction with the U.S. GAAP measure of change in net sales at actual currency rates, may provide a more complete understanding and facilitate a fuller analysis of our results of operations, particularly in evaluating performance from one period to another.

In 2021, the acquisition of Hillrom and the rights to Caleyx and Doxil for specified territories outside of the U.S. contributed $212 million and $108 million, respectively, in net sales.

As a result of the increase in COVID-19 cases in late 2021 and early 2022, we have experienced higher levels of absenteeism at our manufacturing facilities. In addition, a number of our suppliers are experiencing similar staffing challenges, which, together with other supply chain constraints in the current environment, has limited the availability of certain raw materials and component parts used in our products. These conditions have decreased our current production levels, which we expect to adversely impact our sales growth during the first quarter of 2022. We currently expect these conditions to improve and our production levels to normalize over the course of 2022.

Product Category Net Sales Reporting

Beginning in the first quarter of 2021, our product category net sales disclosures (previously referred to as global business units (GBUs)) separately present net sales from our BioPharma Solutions business, which was previously included within Other. Concurrent with that disaggregation of net sales from our BioPharma Solutions business, we have also allocated certain previously unallocated sales deductions from Other to various categories, primarily based on their respective net sales. Net sales for 2020 have been recast to conform to the current period presentation. Additionally, with the acquisition of Hillrom in December 2021, we have added three new product categories: Patient Support Systems, Front Line Care and Surgical Solutions.

Our product categories include the following:

•Renal Care includes sales of our peritoneal dialysis (PD), hemodialysis (HD) and additional dialysis therapies and services.

•Medication Delivery includes sales of our intravenous (IV) therapies, infusion pumps, administration sets and drug reconstitution devices.

•Pharmaceuticals includes sales of our premixed and oncology drug platforms, inhaled anesthesia and critical care products and pharmacy compounding services.

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•Clinical Nutrition includes sales of our parenteral nutrition (PN) therapies and related products.

•Advanced Surgery includes sales of our biological products and medical devices used in surgical procedures for hemostasis, tissue sealing and adhesion prevention.

•Acute Therapies includes sales of our continuous renal replacement therapies (CRRT) and other organ support therapies focused in the intensive care unit (ICU).

•BioPharma Solutions includes sales of contracted services we provide to various pharmaceutical and biopharmaceutical companies.

•Patient Support Systems includes sales of our connected care solutions: devices, software, communications and integration technologies.

•Front Line Care includes sales of our integrated patient monitoring and diagnostic technologies to help diagnose, treat and manage a wide variety of illness and diseases, including respiratory therapy, cardiology, vision screening and physical assessment.

•Surgical Solutions includes sales of our surgical video technologies, tables, lights, pendants, precision positioning devices and other accessories.

•Other includes sales of other miscellaneous product and service offerings.

The following is a summary of net sales by product category.

Percent change

Patient Support Systems 115 — n/a n/a

Front Line Care 70 — n/a n/a

Surgical Solutions 27 — n/a n/a

Renal Care net sales increased 4% in 2021, as compared to the prior-year period. The increase in 2021 was driven by a 2% positive impact from foreign exchange rate changes, as compared to the prior-year period, and global patient growth in PD, partially offset by lower in-center HD sales.

Medication Delivery net sales increased 7% in 2021, as compared to the prior-year period. The increase in 2021 was due to a favorable comparison to the comparable period of 2020 which was more severely impacted from lower demand for our infusion systems and related IV administration sets and solutions due to lower hospital admission rates and a reduction in elective surgeries resulting from the COVID-19 pandemic. Additionally, foreign exchange rates had a favorable impact on Medication Delivery net sales of 1% in 2021, as compared to the prior-year period.

Pharmaceuticals net sales increased 9% in 2021, as compared to the prior-year period. The increase in 2021 was driven by the acquisition of the rights to Caelyx and Doxil for specified territories outside of the U.S., which contributed $108 million of net sales in 2021. Additionally, foreign exchange rates had a favorable impact on Pharmaceuticals net sales of 4% in 2021, as compared to the prior-year period. Partially offsetting this increase was a significant nonrecurring purchase from the U.S. government in the prior year.

Clinical Nutrition net sales increased 6% in 2021, as compared to the prior-year period. The increase in 2021 was driven by growth in the U.S. for our PN therapies and related products and a 2% positive impact from foreign exchange rate changes, as compared to the prior-year period. The increase was partially offset by lower international sales of vitamins resulting from supply constraints.

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Advanced Surgery net sales increased 10% in 2021, as compared to the prior-year period. The increase in 2021 was driven by a recovery in elective surgeries, as many had been previously postponed due to the COVID-19 pandemic, and a 1% positive impact from foreign exchange rate changes, as compared to the prior-year period. Additionally, the acquisition of Seprafilm in February of 2020 contributed $8 million of incremental sales in the first quarter of 2021.

Acute Therapies net sales increased 6% in 2021, as compared to the prior-year period. The increase in 2021 was driven by increased global demand for our CRRT systems during the COVID-19 pandemic and a 3% positive impact from foreign exchange rate changes, as compared to the prior-year period.

BioPharma Solutions net sales increased 38% in 2021, as compared to the prior-year period. The increase was driven by manufacturing services and supply packaging related to the production of COVID-19 vaccines on behalf of multiple pharmaceutical companies and a 3% positive impact from foreign exchange rate changes, as compared to the prior-year period.

Patient Support Systems net sales were $115 million in 2021 and resulted from the acquisition of Hillrom in December 2021.

Front Line Care net sales were $70 million in 2021 and resulted from the acquisition of Hillrom in December 2021.

Surgical Solutions net sales were $27 million in 2021 and resulted from the acquisition of Hillrom in December 2021.

Gross Margin and Expense Ratios

Gross Margin

The gross margin ratio was 39.9% and 39.3% in 2021 and 2020, respectively. The special items identified above had an unfavorable impact of 3.4 and 3.1 percentage points on the gross margin ratio in 2021 and 2020, respectively. Refer to the Special Items section above for additional detail.

Excluding the impact of the special items, the gross margin ratio increased 0.9 percentage points in 2021 compared to 2020 due to a favorable product mix that was partially offset by higher manufacturing and supply chain costs resulting from the COVID-19 pandemic.

SG&A

The SG&A expenses ratio was 22.4% and 21.2% in 2021 and 2020, respectively. The special items identified above had an unfavorable impact of 2.0 and 1.0 percentage points on the SG&A expenses ratio in 2021 and 2020, respectively. Refer to the Special Items section above for additional detail.

Excluding the impact of the special items, the SG&A expenses ratio increased 0.2 percentage points in 2021 primarily due to higher bonus accruals under our annual employee incentive compensation plans.

R&D

The R&D expenses ratio was 4.2% and 4.5% in 2021 and 2020, respectively. The special items identified above had an unfavorable impact of 0.1 and 0.3 percentage points on the R&D expenses ratio in 2021 and 2020, respectively. Refer to the Special Items section above for additional detail.

Excluding the impact of the special items, the R&D expenses ratio decreased 0.1 percentage points in 2021 as a result of decreased project-related expenditures that was partially offset by higher bonus accruals under our annual employee incentive compensation plans.

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Business Optimization Items

In recent years, we have undertaken actions to transform our cost structure and enhance our operational efficiency. These efforts have included restructuring the organization, optimizing our manufacturing footprint, R&D operations and supply chain network, employing disciplined cost management, and centralizing and streamlining certain support functions. From the commencement of our business optimization actions in the second half of 2015 through December 31, 2021, we have incurred cumulative pre-tax costs of $1.2 billion related to these actions. The costs consisted primarily of employee termination costs, implementation costs, contract termination costs, asset impairments, and accelerated depreciation. We currently expect to incur additional pre-tax costs of approximately $30 million through the completion of the initiatives that are currently underway, primarily related to implementation costs. We continue to pursue cost savings initiatives and, to the extent further cost savings opportunities are identified, we may incur additional restructuring charges and costs to implement business optimization programs in future periods. The reductions in our cost base from these actions in the aggregate are expected to provide cumulative annual pretax savings of more than $1.2 billion once the remaining actions are complete. The savings from these actions have reduced cost of sales, SG&A expenses, and R&D expenses. Approximately 99 percent of the expected annual pre-tax savings has been realized through December 31, 2021, with the remainder expected to be realized by the end of 2022. Refer to Note 11 in Item 8 of this Annual Report on Form 10-K for additional information regarding our business optimization programs.

Other Operating Income, Net

Other operating income, net was $6 million and $19 million in 2021 and 2020, respectively. In 2021 and 2020, we recognized benefits of $6 million and $2 million, respectively, related to the change in the estimated fair value of contingent consideration liabilities. Additionally, in 2020, we recognized a $17 million gain on the sale of property in conjunction with our business optimization initiatives.

In September 2013, we entered into an agreement with Celerity Pharmaceutical, LLC (Celerity) to develop certain acute care generic injectable premix and oncolytic products through regulatory approval. We transferred our rights in these products to Celerity and Celerity assumed ownership and responsibility for development of the products. We are obligated to purchase the individual product rights from Celerity if the products obtain regulatory approval. In December 2020, we entered into an agreement with a third party to divest one of the products that is currently being developed by Celerity if that product receives regulatory approval in the U.S. and/or European Union. If regulatory approval is obtained, we would incur a loss ranging from $30 million to $60 million for the difference between our purchase price and the divestiture proceeds in connection with that transaction. Refer to Note 2 in Item 8 of this Annual Report on Form 10-K for additional information regarding this agreement.

Interest Expense, Net

Interest expense, net was $192 million and $134 million in 2021 and 2020, respectively. The increase in 2021 was primarily driven by financing-related fees incurred in connection with the Hillrom acquisition, which totaled $59 million, and lower interest income due to lower interest rates. Refer to Note 5 in Item 8 of this Annual Report on Form 10-K for a summary of the components of interest expense, net for 2021 and 2020.

Other Expense, Net

Other expense, net was $41 million and $190 million in 2021 and 2020, respectively. The net expense in 2021 was primarily driven by foreign exchange net losses and pension and OPEB net expenses. The net expense in 2020 was primarily driven by a $110 million loss on the early extinguishment of debt related to our November 2020 redemption of $750 million of senior notes that were issued in March 2020, foreign exchange net losses of $49 million and $46 million of pension settlement charges, which included a $43 million charge related to lump-sum settlement distributions made to certain former U.S. employees with vested pension benefits.These expenses in 2020 were partially offset by net unrealized gains of $13 million related to marketable equity securities.

We expect expenses from pension and OPEB plans to decrease in 2022 primarily due to prior year actuarial gains that will reduce ongoing benefit costs. Refer to Note 12 in Item 8 of this Annual Report on Form 10-K for further information regarding pension and OPEB plan expenses.

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In the first quarter of 2021, we began to wind down our operations in Argentina. Upon substantial liquidation of those operations in the future, we expect to reclassify currency translation adjustments (CTA) from accumulated other comprehensive (loss) income to other expense, net and recognize a non-cash charge. As of December 31, 2021, the CTA for our Argentina operations was in excess of $60 million.

Income Taxes

The effective income tax rate was 12.3% in 2021 and 14.1% in 2020. The special items identified above had a favorable impact of 4.5 and 2.6 percentage points on the effective income tax rate in 2021 and 2020, respectively. Refer to the Special Items section above for additional detail. Our effective income tax rate can differ from the 21% U.S. federal statutory rate due to a number of factors, including foreign rate differences, tax incentives, increases or decreases in valuation allowances and liabilities for uncertain tax positions and excess tax benefits on stock compensation awards.

For the twelve months ended December 31, 2021, the difference between our effective income tax rate and the U.S. federal statutory rate was primarily attributable to favorable geographic earnings mix, a $58 million tax benefit related to a tax-deductible foreign statutory loss on an investment in a foreign subsidiary, a tax benefit related to a change in U.S. foreign tax credit regulations and excess tax benefits on stock compensation awards, partially offset by an unfavorable court decision in a foreign jurisdiction related to an uncertain tax position.

For the twelve months ended December 31, 2020, the difference between our effective income tax rate and the U.S. federal statutory rate was primarily attributable to favorable geographic earnings mix and excess tax benefits on stock compensation awards.

Our tax provisions for 2021 and 2020 do not include any tax charges related to either the Base Erosion and Anti-Abuse Tax (BEAT) or Global Intangible Low Taxed Income (GILTI) provisions, except for the inability to fully utilize foreign tax credits against such GILTI. Our accounting policy is to recognize any GILTI charge as a period cost.

We anticipate that our effective income tax rate, calculated in accordance with U.S. GAAP, will be approximately 17% in 2022. This rate may be further impacted by a number of factors including discrete items, such as tax windfalls or deficiencies attributable to stock compensation awards, additional audit developments, or the tax effects of any future special items.

Net Income and Earnings per Diluted Share

Net income was $1.3 billion in 2021 and $1.1 billion in 2020. Diluted earnings per share was $2.53 in 2021 and $2.13 in 2020. The significant factors and events causing the net changes from 2020 to 2021 are discussed above. Additionally, earnings per share was positively impacted by the repurchase of 7.3 million shares in 2021 and 6.3 million shares in 2020 through Rule 10b5-1 purchase plans. Refer to Note 8 in Item 8 of this Annual Report on Form 10-K for further information regarding our stock repurchases.

Segment results

We manage our global operations based on four segments, consisting of the following geographic segments related to our legacy Baxter business: Americas, EMEA and APAC, and a new global segment for our recently acquired Hillrom business. We use net sales and operating income on a segment basis to make resource allocation decisions and assess the ongoing performance of our segments. In the first quarter of 2021, the information provided to our Chief Executive Officer for purposes of allocating resources and assessing performance was updated to reallocate contracted services activities performed at a German manufacturing facility from our EMEA segment to our Americas segment. The contracted services performed at that facility are part of our BioPharma Solutions business, which is managed as part of the Americas segment. Accordingly, the reported financial results of the Americas segment now include the contracted services activities performed at that facility. Segment results for 2020 have been recast to conform to this presentation. Refer to Note 17 in Item 8 of this Annual Report on Form 10-K for additional details regarding our segments.

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The following is a summary of financial information for our reportable segments.

Net sales Operating income

Americas

Segment net sales and operating income in 2021 was $6.7 billion and $2.6 billion, respectively. Segment net sales and operating income in 2020 was $6.3 billion and $2.4 billion, respectively. The increase in operating profit in 2021 was primarily driven by favorable sales performance in our BioPharma Solutions, Medication Delivery and Advanced Surgery product categories, partially offset by unfavorable performance in Pharmaceuticals.

EMEA

Segment net sales and operating income in 2021 was $3.1 billion and $632 million, respectively. Segment net sales and operating income in 2020 was $2.9 billion and $523 million, respectively. The increase in operating profit in 2021 was due to the favorable impact of foreign exchange rates on results as compared to the prior-year period and the acquisition of the rights to Caelyx and Doxil for specified territories outside of the U.S., which contributed $93 million of net sales and operating profit to the region, respectively.

APAC

Segment net sales and operating income in 2021 was $2.8 billion and $623 million, respectively. Segment net sales and operating income in 2020 was $2.5 billion and $591 million, respectively. The increase in operating profit in 2021 was due to the favorable impact of foreign exchange rates on results as compared to the prior-year period and the acquisition of the rights to Caelyx and Doxil for specified territories outside of the U.S., which contributed $13 million of net sales and operating profit to the region, respectively.

Hillrom

Segment net sales and operating loss for 2021 was $212 million and $80 million, respectively. The increase in operating loss in 2021 was due to the acquisition of Hillrom in December 2021.

Corporate and other

Certain items are maintained at Corporate and are not allocated to a segment. They primarily include certain headquarter costs, certain R&D costs, certain product categories support costs, stock compensation expense, certain employee benefit plan costs, certain foreign currency hedging activities, and certain gains, losses, and other charges (such as business optimization, acquisition and integration costs, intangible asset amortization and asset impairments). The operating loss in 2021 was higher than 2020 primarily due to acquisition and integration expenses related to the Hillrom acquisition, higher intangible asset amortization expense and higher bonus accruals under our annual employee incentive compensation plans in the current year.

LIQUIDITY AND CAPITAL RESOURCES

Cash Flows from Operations — Continuing Operations

In 2021 and 2020, cash provided by operating activities was $2.2 billion and $1.9 billion, respectively. Operating cash flows increased in 2021 primarily due to a lower increase in inventories in 2021 compared to 2020, an increase in our net income in 2021, payments of $173 million to settle interest rate derivative contracts in 2020 and lower

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employee incentive compensation payments in 2021 compared to 2020, partially offset by cash outflows of approximately $47 million in 2021 related to Hillrom acquisition and integration costs.

Cash Flows from Investing Activities

In 2021, cash used for investing activities included payments for acquisitions and investments of $10.5 billion, primarily related to Hillrom, Caleyx and Doxil, Transderm Scop and PerClot, and capital expenditures of $743 million. In 2020, cash used for investing activities included payments for acquisitions and investments of $494 million, primarily related to Seprafilm and multiple product acquisitions, and capital expenditures of $709 million.

We expect that our capital expenditures will increase in 2022 as we make investments in our manufacturing capacity in response to proposed regulatory changes of the U.S. Department of Health and Human Services in kidney health policy and reimbursement, which may substantially change the U.S. end stage renal disease market and demand for our peritoneal dialysis products.

Cash Flows from Financing Activities

In 2021, cash generated from financing activities included $11.8 billion to fund the consideration for the Hillrom acquisition, repay certain indebtedness of Hillrom, and to pay fees and expenses related to the foregoing. In September 2021, we entered into a term loan credit agreement (the Term Loan Credit Agreement), pursuant to which a syndicate of financial institutions has committed to provide us with a senior unsecured term loan facility in an aggregate principal amount of $4.0 billion (the Term Loan Facility), consisting of a $2.0 billion three-year term loan and a $2.0 billion five-year term loan. In December 2021, we issued $800 million senior notes due in 2023, $1.4 billion senior notes due in 2024, $1.45 billion senior notes due in 2027, $1.25 billion senior notes due in 2028, $1.55 billion senior notes due in 2032, $750 million senior notes due in 2051, $300 million floating rate senior notes due in 2023 and $300 million floating rate senior notes due in 2024. We also had net proceeds from commercial paper borrowings of $300 million and repaid debt obligations of $2.8 billion, including $2.4 billion of debt that was assumed in the Hillrom acquisition. Financing activities in 2021 also included payments for treasury stock repurchases of $600 million, dividend payments of $530 million and receipts from stock issued under employee benefit plans of $187 million.

In 2020, cash generated from financing activities included $1.2 billion of net proceeds from the March 2020 issuance of $750 million of senior notes due in 2025 and $500 million of senior notes due in 2030. In November 2020, we issued $650 million of senior notes due in 2031 and used the proceeds, along with cash on hand, to redeem the $750 million senior notes due in 2025 that were issued in March 2020 for $854 million, which included a $104 million make-whole premium. We have used the net proceeds from those senior notes issuances and redemptions for general corporate purposes, including to strengthen our balance sheet as a precautionary measure in light of the COVID-19 pandemic. In 2020, we also repaid $322 million of variable rate notes that matured and the borrowings under our Euro-denominated credit facility of €200 million ($225 million). Financing activities in 2020 also included payments for stock repurchases of $500 million, dividend payments of $473 million and receipts from stock issued under employee benefit plans of $202 million.

As authorized by the Board of Directors, we repurchase our stock depending upon our cash flows, net debt levels and market conditions. In July 2012, the Board of Directors authorized the repurchase of up to $2.0 billion of our common stock. The Board of Directors increased this authority by an additional $1.5 billion in each of November 2016 and February 2018, by an additional $2.0 billion in November 2018 and by an additional $1.5 billion in October 2020. We paid $600 million in cash to repurchase approximately 7.3 million shares under this authority pursuant to Rule 10b5-1 plans in 2021 and had $1.3 billion remaining available under this authorization as of December 31, 2021.

Credit Facilities and Access to Capital and Credit Ratings

Credit Facilities

On September 30, 2021, we entered into a new U.S. dollar-denominated revolving credit facility (the USD Revolver) and on October 1, 2021, we amended our existing Euro-denominated revolving credit facility (as amended, the Euro Revolver). As of December 31, 2021, our USD Revolver had capacity of $2.5 billion and our Euro Revolver had a capacity of approximately €200 million. Each of the facilities matures in 2026. The facilities enable us to borrow funds on an unsecured basis at variable interest rates, and contain various covenants, including a maximum net

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leverage ratio. Fees under the credit facilities are 0.09% annually as of December 31, 2021 and are based on our credit ratings and the total capacity of the facility. Prior to entering into the USD Revolver and the Euro Revolver, our previous U.S. dollar-denominated revolving credit facility and Euro-denominated senior revolving credit facility had a maximum capacity of $2.0 billion and €200 million, respectively. Fees under these credit facilities were 0.09% annually as of December 31, 2020 and were based on our credit ratings and the total capacity of the facility. There were no borrowings under these credit facilities as of December 31, 2021 or December 31, 2020. As of December 31, 2021, we were in compliance with the financial covenants in these agreements. The non-performance of any financial institution supporting either of the credit facilities would reduce the maximum capacity of these facilities by the institution’s respective commitment.

We also maintain other credit arrangements, as described in Note 5 in Item 8 of this Annual Report on Form 10-K.

Access to Capital and Credit Ratings

We intend to fund short-term and long-term obligations as they mature through cash on hand and future cash flows from operations or by issuing additional debt. We had $3.0 billion of cash and cash equivalents as of December 31, 2021, with adequate cash available to meet operating requirements in each jurisdiction in which we operate. We invest our excess cash in money market and other funds and diversify the concentration of cash among different financial institutions. As of December 31, 2021, we had approximately $17.7 billion of long-term debt and finance lease obligations, including current maturities, and short-term debt. Subject to market conditions and our investment grade targets, we regularly evaluate opportunities with respect to our capital structure.

Our ability to generate cash flows from operations, issue debt, including commercial paper, or enter into other financing arrangements on acceptable terms could be adversely affected if there is a material decline in the demand for our products or in the solvency of our customers or suppliers, deterioration in our key financial ratios or credit ratings or other significantly unfavorable changes in conditions. However, we believe we have sufficient financial flexibility to issue debt, enter into other financing arrangements and attract long-term capital on acceptable terms to support our growth objectives and reduce our post-acquisition debt levels.

Our credit ratings at December 31, 2021 were as follows:

Standard & Poor’s Fitch Moody’s

Ratings

Senior debt BBB BBB Baa2

Short-term debt A2 F2 P2

Outlook Stable Stable Stable

Our senior debt credit ratings were downgraded in 2021 as a result of the debt we issued to fund the Hillrom acquisition.

LIBOR Reform

In 2017, the United Kingdom’s Financial Conduct Authority announced that after 2021 it would no longer compel banks to submit the rates required to calculate the London Interbank Offered Rate (LIBOR) and other interbank offered rates, which have been widely used as reference rates for various securities and financial contracts, including loans, debt and derivatives. This announcement indicated that the continuation of LIBOR on the current basis was not guaranteed after 2021. Regulators in the U.S. and other jurisdictions have been working to replace these rates with alternative reference interest rates that are supported by transactions in liquid and observable markets, such as the Secured Overnight Financing Rate (SOFR). In 2020, it was announced that certain U.S. dollar LIBOR tenors would not cease until 2023. Currently, our $2.5 billion U.S. dollar-denominated revolving credit facility, our €200 million Euro-denominated revolving credit facility and our $4.0 billion Term Loan Credit Agreement reference LIBOR-based rates. The discontinuation of LIBOR will require these arrangements to be modified in order to replace LIBOR with an alternative reference interest rate, which could impact our cost of funds. Our credit facilities and term loan credit agreement include provisions related to the determination of a successor LIBOR rate.

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Contractual Obligations

As of December 31, 2021, we had contractual obligations, excluding accounts payable and accrued expenses and other current liabilities, payable or maturing in the following periods.

(in millions) Total Less thanone year More than one year

Other non-current liabilities2 590 — 590

1.Interest payments on debt and finance lease obligations are calculated for future periods using interest rates in effect at the end of 2021. Certain of these projected interest payments may differ in the future based on foreign currency fluctuations or other factors or events. The projected interest payments only pertain to obligations and agreements outstanding at December 31, 2021. Refer to Note 5 and Note 6, respectively, in Item 8 of this Annual Report on Form 10-K for further discussion regarding our debt instruments outstanding and finance lease obligations at December 31, 2021.

2.The primary components of other non-current liabilities in our consolidated balance sheet as of December 31, 2021 are pension and other postretirement benefits, deferred tax liabilities, long-term tax liabilities, and litigation and environmental reserves. We projected the timing of the related future cash payments based on contractual maturity dates (where applicable) and estimates of the timing of payments (for liabilities with no contractual maturity dates). The actual timing of payments could differ from our estimates.

We contributed $73 million and $74 million to our defined benefit pension plans in 2021 and 2020, respectively. The timing of funding in future periods is uncertain and is dependent on future movements in interest rates, investment returns, changes in laws and regulations, and other variables. Therefore, the table above excludes cash outflows related to our pension plans. The amount included within other non-current liabilities (and excluded from the table above) related to our pension plan liabilities was $858 million as of December 31, 2021. In 2022, we have no obligation to fund our principal plans in the United States and we expect to make contributions of at least $41 million to our foreign pension plans. Additionally, we have excluded long-term tax liabilities, which include liabilities for unrecognized tax positions, and deferred tax liabilities from the table above because we are unable to estimate the timing of the related cash outflows. The amounts of long-term tax liabilities and deferred tax liabilities included within other non-current liabilities (and excluded from the table above) were $80 million and $962 million, respectively, as of December 31, 2021.

3.Includes our significant contractual unconditional purchase obligations. For cancellable agreements, any penalty due upon cancellation is included. These commitments do not exceed our projected requirements and are in the normal course of business. Examples include firm commitments for raw material and component part purchases, utility agreements and service contracts.

Off-Balance Sheet Arrangements

We periodically enter into off-balance sheet arrangements. Certain contingencies arise in the normal course of business and are not recorded in the consolidated balance sheets in accordance with U.S. GAAP (such as contingent joint development and commercialization arrangement payments). Also, upon resolution of uncertainties, we may incur charges in excess of presently established liabilities for certain matters (such as contractual indemnifications). For a discussion of our significant off-balance sheet arrangements, refer to Note 15 in Item 8 of this Annual Report on Form 10-K for information regarding receivable transactions, and Note 2 and Note 7 in Item 8 of this Annual Report on Form 10-K for information regarding joint development and commercialization arrangements, indemnifications and legal contingencies.

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FINANCIAL INSTRUMENT MARKET RISK

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. Refer to Note 15 and Note 16 in Item 8 of this Annual Report on Form 10-K for further information regarding our financial instruments and hedging strategies.

Currency Risk