Full Press Release Details
Bill Rader, (224) 948-5353
Clare Trachtman, (224) 948-3085
BAXTER REPORTS SECOND-QUARTER 2017 RESULTS AND
PROVIDES UPDATED FINANCIAL OUTLOOK FOR 2017 AND 2020
DEERFIELD, Ill., July 26, 2017 Baxter International Inc. (NYSE:BAX) today reported results
for the second quarter of 2017 and increased its financial outlook for full-year 2017 and 2020.
Our solid second quarter
performance reflects continued execution of our strategic objectives, said Jos (Joe) E. Almeida, chairman and chief executive officer. Baxter s focus on innovation and operational excellence is fueling our mission to save
and sustain lives, and deliver improved performance for our patients, customers and shareholders. In light of this progress and potential, we are raising our financial outlook for both full-year 2017 and 2020.
BAXTER REPORTS SECOND-QUARTER 2017 RESULTS AND PROVIDES UPDATED FINANCIAL OUTLOOK FOR 2017 AND
Second-Quarter Financial Results
In the second quarter, worldwide sales totaled $2.6 billion, an increase of 1 percent on a reported basis and 2 percent on a constant currency basis as compared to the prior-year period.
Operationally, Baxter s sales rose 3 percent, adjusting for the impact of foreign exchange, generic competition for U.S. cyclophosphamide and the previously communicated select strategic product exits the company is undertaking.
Sales within the U.S. were $1.1 billion, advancing 4 percent. International sales totaled approximately
$1.5 billion, representing a 2 percent decrease on a reported basis and a 1 percent increase on a constant currency basis. Baxter s operational sales increased 5 percent in the U.S. and 2 percent internationally.
Global sales for Hospital Products totaled $1.6 billion in the second quarter, increasing 1 percent on a reported
basis, 2 percent on a constant currency basis and 4 percent operationally as compared to the prior-year period. Performance in the quarter benefited from continued strength in our U.S. fluid systems business, favorable demand for
parenteral nutrition therapies and pre-mixed injectable pharmaceuticals, as well as for select anesthesia and critical care products.
Baxter s Renal sales totaled $968 million, comparable to the prior year on a reported basis and up 3 percent on both a constant currency basis and operational basis. Growth in the quarter
was driven by increased sales for in-center hemodialysis (HD) products in the U.S., international acute renal care sales and global sales of peritoneal dialysis (PD) therapies.
BAXTER REPORTS SECOND-QUARTER 2017 RESULTS AND PROVIDES UPDATED FINANCIAL OUTLOOK FOR 2017 AND
Baxter reported income from continuing operations of $264 million, or $0.48 per diluted share, on a GAAP (Generally Accepted Accounting Principles) basis for the second quarter. These results
included special items totaling $113 million ($84 million net after-tax), primarily related to business optimization, intangible asset amortization and the deconsolidation of the company s
On an adjusted basis, excluding special items, Baxter s second quarter income from continuing
operations totaled $348 million, or $0.63 per diluted share, exceeding the company s previously issued guidance of $0.55 to $0.57 per diluted share.
In support of its strategy to accelerate profitable
growth and deliver meaningful innovation for patients and healthcare professionals around the world, Baxter has achieved a number of recent operational, pipeline and commercial milestones.
BAXTER REPORTS SECOND-QUARTER 2017 RESULTS AND PROVIDES UPDATED FINANCIAL OUTLOOK FOR 2017 AND
BAXTER REPORTS SECOND-QUARTER 2017 RESULTS AND PROVIDES UPDATED FINANCIAL OUTLOOK FOR 2017 AND
For full-year 2017: Baxter is raising its financial outlook for the year and now expects sales growth of
approximately 3 percent on a reported basis, approximately 4 percent on a constant currency basis, and approximately 5 percent operationally. Earnings from continuing operations, before special items, are expected to be $2.34 to $2.40
per diluted share. This guidance assumes the closure of the company s proposed acquisition of Claris Injectables, to be complete by the end of July 2017.
For the third quarter: The company expects sales growth of approximately 4 percent on a reported basis, approximately 5 percent on a constant currency basis and approximately 6 percent
operationally. The company expects earnings from continuing operations, before special items, of $0.58 to $0.60 per diluted share.
Please see the schedules accompanying this press release for reconciliations between the projected 2017 operational sales and adjusted earnings per diluted share to the projected GAAP sales and earnings
2020 Financial Outlook
As a result of the company s ongoing business transformation efforts designed to accelerate performance, the
company is increasing its 2020 financial outlook. Baxter expects sales to grow approximately 4 percent on a compounded annual basis from 2016 to 20202 and now anticipates an adjusted operating margin in 2020 of approximately 20 percent as compared to previous
guidance of 17 to 18 percent. The company anticipates 2020 adjusted diluted earnings of
BAXTER REPORTS SECOND-QUARTER 2017 RESULTS AND PROVIDES UPDATED FINANCIAL OUTLOOK FOR 2017 AND
$3.40 per share. Baxter also increased its cash flow expectations for 2020 and now anticipates operating cash flow of approximately $2.65 billion. Capital expenditures are expected to total $650 million in 2020, resulting in free cash flow
generation of approximately $2 billion, an increase of $250 million versus prior guidance.
financial outlook and enhanced free cash flow generation provide the flexibility to invest in the business both organically and inorganically while also returning meaningful value to shareholders through dividends and share repurchases, said
Jay Saccaro, executive vice president and chief financial officer. The company is well-positioned to execute on its aspiration of delivering sustainable industry-leading performance.
The non-GAAP measures set forth above reflect the impact of several known items. The
reconciliation of adjusted operating margin for known intangible asset amortization expense of approximately 1 percent results in operating margin of approximately 19 percent in 2020. Additionally, the reconciliation of adjusted diluted
earnings per share for known intangible asset amortization expense ($0.17 in 2020) results in diluted earnings per share between $3.08 and $3.23, respectively.
A webcast of Baxter s second quarter conference call for investors can be accessed live from a link on the company s website at www.baxter.com beginning at 7:30 a.m. CDT on July 26, 2017.
Please see www.baxter.com for more information regarding this and future investor events and webcasts.
BAXTER REPORTS SECOND-QUARTER 2017 RESULTS AND PROVIDES UPDATED FINANCIAL OUTLOOK FOR 2017 AND
Baxter provides a broad portfolio of essential renal and hospital products, including home, acute and in-center dialysis; sterile IV solutions; infusion systems and devices; parenteral nutrition; surgery products and anesthetics; and pharmacy automation, software and services. The company s global footprint and
the critical nature of its products and services play a key role in expanding access to healthcare in emerging and developed countries. Baxter s employees worldwide are building upon the company s rich heritage of medical breakthroughs to
advance the next generation of healthcare innovations that enable patient care.
This release includes forward-looking statements
concerning the company s financial results, business development activities, capital structure, cost savings initiatives, R&D pipeline including results of clinical trials and planned product launches, and outlook for 2017 and 2020. The
statements are based on assumptions about many important factors, including the following, which could cause actual results to differ materially from those in the forward-looking statements: demand for and market acceptance of risks for new and
existing products, and the impact of those products on quality or patient safety concerns; product development risks; product quality or patient safety concerns; future actions of regulatory bodies and other governmental authorities, including the
FDA, the Department of Justice, the New York Attorney General and foreign regulatory agencies; failures with respect to compliance programs; future actions of third parties, including payers; U.S. healthcare reform and other global austerity
measures; pricing, reimbursement, taxation and rebate policies of government agencies and private payers; the impact of competitive products and pricing, including generic competition, drug reimportation and disruptive technologies; global, trade
and tax policies; accurate identification of and execution on business development and R&D opportunities and realization of anticipated benefits (including the proposed acquisition of Claris Injectables in July 2017); fluctuations in supply and
demand; the availability of acceptable raw materials and component supply; the inability to create timely production capacity or other manufacturing supply difficulties; the ability to achieve the intended results associated with the separation of
the biopharmaceutical and medical products businesses; the ability to enforce owned or in-licensed patents or the patents of third parties preventing or restricting manufacture, sale or use of affected
products or technology; the impact of global economic conditions; fluctuations in foreign exchange and
BAXTER REPORTS SECOND-QUARTER 2017 RESULTS AND PROVIDES UPDATED FINANCIAL OUTLOOK FOR 2017 AND
rates; any change in law concerning the taxation of income, including income earned outside the United States; actions taken by tax authorities in connection with ongoing tax audits; breaches or failures of the company s information technology
systems; loss of key employees or inability to identify and recruit new employees; the outcome of pending or future litigation; the adequacy of the company s cash flows from operations to meet its ongoing cash obligations and fund its
investment program; and other risks identified in Baxter s most recent filing on Form 10-K and other Securities and Exchange Commission filings, all of which are available on Baxter s website. Baxter
does not undertake to update its forward-looking statements.
BAXTER INTERNATIONAL INC.
Consolidated Statements of Income
Three Months Ended June 30, 2017 and
(in millions, except per share and percentage data)
| Three Months Ended June 30, | ||||||||||||
| 2017 | 2016 | Change | ||||||||||
| NET SALES | $2,605 | $ 2,585 | 1% | |||||||||
| COST OF SALES | 1,475 | 1,613 | (9% | ) | ||||||||
| GROSS MARGIN | 1,130 | 972 | 16% | |||||||||
| % of Net Sales | 43.4% | 37.6% | 5.8 pts | |||||||||
| MARKETING AND ADMINISTRATIVE EXPENSES | 635 | 709 | (10% | ) | ||||||||
| % of Net Sales | 24.4% | 27.4% | (3 pts | ) | ||||||||
| RESEARCH AND DEVELOPMENT EXPENSES | 156 | 195 | (20% | ) | ||||||||
| % of Net Sales | 6.0% | 7.5% | (1.5 pts | ) | ||||||||
| OPERATING INCOME | 339 | 68 | NM | |||||||||
| % of Net Sales | 13.0% | 2.6% | 10.4 pts | |||||||||
| NET INTEREST EXPENSE | 13 | 11 | 18% | |||||||||
| OTHER EXPENSE (INCOME), NET | 20 | (1,161 | ) | (102% | ) | |||||||
| INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES | 306 | 1,218 | (75% | ) | ||||||||
| INCOME TAX EXPENSE | 42 | 6 | NM | |||||||||
| % of Income from Continuing Operations before Income Taxes | 13.7% | 0.5% | 13.2 pts | |||||||||
| INCOME FROM CONTINUING OPERATIONS | 264 | 1,212 | (78% | ) | ||||||||
| INCOME FROM DISCONTINUED OPERATIONS, NET OF TAX | 1 | NM | ||||||||||
| NET INCOME | $265 | $ 1,212 | (78% | ) | ||||||||
| INCOME FROM CONTINUING OPERATIONS PER COMMON SHARE | ||||||||||||
| Basic | $0.49 | $ 2.21 | (78% | ) | ||||||||
| Diluted | $0.48 | $ 2.19 | (78% | ) | ||||||||
| INCOME FROM DISCONTINUED OPERATIONS PER COMMON SHARE | ||||||||||||
| Basic | $0.00 | $ 0.00 | NM | |||||||||
| Diluted | $0.00 | $ 0.00 | NM | |||||||||
| NET INCOME PER COMMON SHARE | ||||||||||||
| Basic | $0.49 | $ 2.21 | (78% | ) | ||||||||
| Diluted | $0.48 | $ 2.19 | (78% | ) | ||||||||
| WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING | ||||||||||||
| Basic | 544 | 548 | ||||||||||
| Diluted | 555 | 553 | ||||||||||
| ADJUSTED OPERATING INCOME (excluding special items) | $419 | A | $ 318 | A | 32% | |||||||
| ADJUSTED PRE-TAX INCOME FROM CONTINUING OPERATIONS (excluding special items) | $419 | A | $ 320 | A | 31% | |||||||
| ADJUSTED INCOME FROM CONTINUING OPERATIONS (excluding special items) | $348 | A | $ 256 | A | 36% | |||||||
| ADJUSTED DILUTED EPS FROM CONTINUING OPERATIONS (excluding special items) | $0.63 | A | $ 0.46 | A | 37% |
BAXTER INTERNATIONAL INC.
Note to Consolidated Statements of Income
June 30, 2017 and 2016
Description of Adjustments and Reconciliation of GAAP to
(in millions, except per share and percentage data)
The company s GAAP results for the three months ended June 30, 2017 and 2016 included special items which impacted the GAAP measures as follows:
| Three Months Ended June 30, | ||||||||||||
| 2017 | 2016 | Change | ||||||||||
| Gross Margin | $ 1,130 | $ 972 | 16% | |||||||||
| Intangible asset amortization expense 1 | 36 | 42 | ||||||||||
| Business optimization items 2 | 14 | 66 | ||||||||||
| Intangible asset impairment 3 | 51 | |||||||||||
| Baxalta separation-related costs 4 | 1 | |||||||||||
| Product-related items 5 | (4 | ) | ||||||||||
| Adjusted Gross Margin | $ 1,177 | $ 1,131 | 4% | |||||||||
| % of Net Sales | 45.2% | 43.8% | 1.4 pts | |||||||||
| Marketing and Administrative Expenses | $ 635 | $ 709 | (10% | ) | ||||||||
| Business optimization items 2 | (20 | ) | (28 | ) | ||||||||
| Baxalta separation-related costs 4 | (7 | ) | (18 | ) | ||||||||
| Claris acquisition and integration expenses 6 | (5 | ) | ||||||||||
| Adjusted Marketing and Administrative Expenses | $ 603 | $ 663 | (9% | ) | ||||||||
| % of Net Sales | 23.1% | 25.6% | (2.5 pts | ) | ||||||||
| Research and Development Expenses | $ 156 | $ 195 | (20% | ) | ||||||||
| Business optimization items 2 | (1 | ) | (45 | ) | ||||||||
| Adjusted Research and Development Expenses | $ 155 | $ 150 | 3% | |||||||||
| % of Net Sales | 6.0% | 5.8% | 0.2 pts | |||||||||
| Operating Income | $ 339 | $ 68 | NM | |||||||||
| Impact of special items | 80 | 250 | ||||||||||
| Adjusted Operating Income | $ 419 | $ 318 | 32% | |||||||||
| % of Net Sales | 16.1% | 12.3% | 3.8 pts | |||||||||
| Other Expense (Income), Net | $ 20 | $ (1,161 | ) | (102% | ) | |||||||
| Net realized gains on Baxalta Retained Share transactions 7 | 1,148 | |||||||||||
| Venezuela deconsolidation 8 | (33 | ) | ||||||||||
| Adjusted Other Income, Net | $ (13 | ) | $ (13 | ) | 0% | |||||||
| Pre-Tax Income from Continuing Operations | $ 306 | $ 1,218 | (75% | ) | ||||||||
| Impact of special items | 113 | (898 | ) | |||||||||
| Adjusted Pre-Tax Income from Continuing Operations | $ 419 | $320 | 31% | |||||||||
| Income Tax Expense | $ 42 | $ 6 | NM | |||||||||
| Impact of special items | 29 | 58 | ||||||||||
| Adjusted Income Tax Expense | $ 71 | $ 64 | 11% | |||||||||
| % of Adjusted Pre-Tax Income from Continuing Operations | 16.9% | 20.0% | (3.1 pts | ) | ||||||||
| Income from Continuing Operations | $ 264 | $ 1,212 | (78% | ) | ||||||||
| Impact of special items | 84 | (956 | ) | |||||||||
| Adjusted Income from Continuing Operations | $ 348 | $ 256 | 36% | |||||||||
| Diluted EPS from Continuing Operations | $ 0.48 | $ 2.19 | (78% | ) | ||||||||
| Impact of special items | 0.15 | (1.73 | ) | |||||||||
| Adjusted Diluted EPS from Continuing Operations | $ 0.63 | $ 0.46 | 37% | |||||||||
| WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING | ||||||||||||
| Diluted | 555 | 553 |
The company s results in 2016 included a net charge of $139 million ($107 million, or $0.19 per diluted share, on an after-tax basis) related to
business optimization initiatives. This included a net charge of $103 million related to restructuring activities, $15 million of costs to implement business optimization programs which included external consulting and employee salary and
related costs, $14 million of accelerated depreciation associated with facilities to be closed, and $7 million of Gambro integration costs. The $103 million of restructuring activities included $40 million of employee termination
costs, $58 million of costs related to the discontinuance of the VIVIA home hemodialysis development program, and $5 million of other exit costs.
information on the company s use of non-GAAP financial measures in this press release, please see the company s Current Report on Form 8-K filed with the
Securities and Exchange Commission on the date of this press release.
BAXTER INTERNATIONAL INC.
Consolidated Statements of Income
Six Months Ended June 30, 2017
(in millions, except per share and percentage data)
| Six Months Ended June 30, | ||||||||||||
| 2017 | 2016 | Change | ||||||||||
| NET SALES | $ 5,080 | $ 4,960 | 2% | |||||||||
| COST OF SALES | 2,908 | 3,023 | (4% | ) | ||||||||
| GROSS MARGIN | 2,172 | 1,937 | 12% | |||||||||
| % of Net Sales | 42.8% | 39.1% | 3.7 pts | |||||||||
| MARKETING AND ADMINISTRATIVE EXPENSES | 1,205 | 1,350 | (11% | ) | ||||||||
| % of Net Sales | 23.7% | 27.2% | (3.5 pts | ) | ||||||||
| RESEARCH AND DEVELOPMENT EXPENSES | 284 | 331 | (14% | ) | ||||||||
| % of Net Sales | 5.6% | 6.7% | (1.1 pts | ) | ||||||||
| OPERATING INCOME | 683 | 256 | 167% | |||||||||
| % of Net Sales | 13.4% | 5.2% | 8.2 pts | |||||||||
| NET INTEREST EXPENSE | 27 | 39 | (31% | ) | ||||||||
| OTHER EXPENSE (INCOME), NET A | 22 | (4,330 | ) | (101% | ) | |||||||
| INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES | 634 | 4,547 | (86% | ) | ||||||||
| INCOME TAX EXPENSE (BENEFIT) | 97 | (52 | ) | NM | ||||||||
| % of Income from Continuing Operations before Income Taxes | 15.3% | (1.1% | ) | 16.4 pts | ||||||||
| INCOME FROM CONTINUING OPERATIONS | 537 | 4,599 | (88% | ) | ||||||||
| (LOSS) INCOME FROM DISCONTINUED OPERATIONS, NET OF TAX | (7 | ) | (100% | ) | ||||||||
| NET INCOME | $ 537 | $ 4,592 | (88% | ) | ||||||||
| INCOME FROM CONTINUING OPERATIONS PER COMMON SHARE | ||||||||||||
| Basic | $ 0.99 | $ 8.39 | (88% | ) | ||||||||
| Diluted | $ 0.97 | $ 8.33 | (88% | ) | ||||||||
| (LOSS) INCOME FROM DISCONTINUED OPERATIONS PER COMMON SHARE | ||||||||||||
| Basic | $ 0.00 | ($0.01 | ) | (100% | ) | |||||||
| Diluted | $ 0.00 | ($0.01 | ) | (100% | ) | |||||||
| NET INCOME PER COMMON SHARE | ||||||||||||
| Basic | $ 0.99 | $ 8.38 | (88% | ) | ||||||||
| Diluted | $ 0.97 | $ 8.32 | (88% | ) | ||||||||
| WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING | ||||||||||||
| Basic | 542 | 548 | ||||||||||
| Diluted | 553 | 552 | ||||||||||
| ADJUSTED OPERATING INCOME (excluding special items) | $ 825 | B | $ 567 | B | 46% | |||||||
| ADJUSTED PRE-TAX INCOME FROM CONTINUING OPERATIONS (excluding special items) | $ 809 | B | $ 568 | B | 42% | |||||||
| ADJUSTED INCOME FROM CONTINUING OPERATIONS (excluding special items) | $ 666 | B | $ 455 | B | 46% | |||||||
| ADJUSTED DILUTED EPS FROM CONTINUING OPERATIONS (excluding special items) | $ 1.20 | B | $ 0.82 | B | 46% |
BAXTER INTERNATIONAL INC.
Note to Consolidated Statements of Income
Six Months Ended June 30,
Description of Adjustments and Reconciliation of GAAP to Non-GAAP
(in millions, except per share and percentage data)
The company s GAAP results for
the six months ended June 30, 2017 and 2016 included special items which impacted the GAAP measures as follows:
| Six Months Ended June 30, | ||||||||||||
| 2017 | 2016 | Change | ||||||||||
| Gross Margin | $ 2,172 | $ 1,937 | 12% | |||||||||
| Intangible asset amortization expense 1 | 74 | 82 | ||||||||||
| Business optimization items 2 | 30 | 78 | ||||||||||
| Intangible asset impairment 3 | 51 | |||||||||||
| Baxalta separation-related costs 4 | 1 | |||||||||||
| Product-related items 5 | (4 | ) | (12 | ) | ||||||||
| Adjusted Gross Margin | $ 2,273 | $ 2,136 | 6% | |||||||||
| % of Net Sales | 44.7% | 43.1% | 1.6 pts | |||||||||
| Marketing and Administrative Expenses | $ 1,205 | $ 1,350 | (11% | ) | ||||||||
| Business optimization items 2 | (35 | ) | (31 | ) | ||||||||
| Baxalta separation-related costs 4 | (14 | ) | (36 | ) | ||||||||
| Historical rebate and discount adjustments 6 | 12 | |||||||||||
| Claris acquisition and integration expenses 7 | (5 | ) | ||||||||||
| Adjusted Marketing and Administrative Expenses | $ 1,163 | $ 1,283 | (9% | ) | ||||||||
| % of Net Sales | 22.9% | 25.9% | (3 pts | ) | ||||||||
| Research and Development Expenses | $ 284 | $331 | (14% | ) | ||||||||
| Business optimization items 2 | 1 | (45 | ) | |||||||||
| Adjusted Research and Development Expenses | $ 285 | $ 286 | 0% | |||||||||
| % of Net Sales | 5.6% | 5.8% | (0.2 pts | ) | ||||||||
| Operating Income | $ 683 | $ 256 | 167% | |||||||||
| Impact of special items | 142 | 311 | ||||||||||
| Adjusted Operating Income | $ 825 | $ 567 | 46% | |||||||||
| % of Net Sales | 16.2% | 11.4% | 4.8 pts | |||||||||
| Other Expense (Income), Net | $ 22 | $ (4,330 | ) | (101% | ) | |||||||
| Net realized gains on Baxalta Retained Shares transactions 8 | 4,391 | |||||||||||
| Loss on debt extinguishment 9 | (101 | ) | ||||||||||
| Venezuelan deconsolidation 10 | (33 | ) | ||||||||||
| Adjusted Other Income, Net | $ (11 | ) | $ (40) | (73% | ) | |||||||
| Pre-Tax Income from Continuing Operations | $ 634 | $ 4,547 | (86% | ) | ||||||||
| Impact of special items | 175 | (3,979 | ) | |||||||||
| Adjusted Pre-Tax Income from Continuing Operations | $ 809 | $568 | 42% | |||||||||
| Income Tax Expense (Benefit) | $ 97 | $ (52 | ) | NM | ||||||||
| Impact of special items | 46 | 165 | ||||||||||
| Adjusted Income Tax Expense | $ 143 | $ 113 | 27% | |||||||||
| % of Adjusted Pre-Tax Income from Continuing Operations | 17.7% | 19.9% | (2.2 pts | ) | ||||||||
| Income from Continuing Operations | $ 537 | $ 4,599 | (88% | ) | ||||||||
| Impact of special items | 129 | (4,144 | ) | |||||||||
| Adjusted Income from Continuing Operations | $ 666 | $ 455 | 46% | |||||||||
| Diluted EPS from Continuing Operations | $ 0.97 | $ 8.33 | (88% | ) | ||||||||
| Impact of special items | 0.23 | (7.51 | ) | |||||||||
| Adjusted Diluted EPS from Continuing Operations | $ 1.20 | $ 0.82 | 46% | |||||||||
| WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING | ||||||||||||
| Diluted | 553 | 552 |
information on the company s use of non-GAAP financial measures in this press release, please see the company s Current Report on Form 8-K filed with the