Full Press Release Details
Bill Rader, (224) 948-5353
Clare Trachtman, (224) 948-3085
BAXTER REPORTS THIRD-QUARTER 2017 RESULTS AND
UPDATES FINANCIAL OUTLOOK FOR FULL-YEAR 2017
DEERFIELD, Ill., October 25, 2017 Baxter International Inc. (NYSE:BAX) today reported results for the third quarter of 2017
and updated its financial outlook for full-year 2017.
Baxter s solid performance in the third quarter reflects our
continued focus on disciplined execution, said Jos (Joe) E. Almeida, chairman and chief executive officer. We are advancing innovation and operational excellence across the organization to deliver positive results for our
stakeholders even as we respond to extraordinary challenges like the recent natural disasters across the Americas and the Caribbean. I m proud of how our employees continuously step up to make a difference for our patients, healthcare
providers, global communities and fellow colleagues.
BAXTER REPORTS THIRD-QUARTER 2017 RESULTS AND UPDATES FINANCIAL OUTLOOK FOR FULL-YEAR 2017
Third-Quarter Financial Results
In the third quarter, worldwide sales totaled $2.7 billion, an increase of 6 percent on a reported, constant currency and operational basis as compared to the prior-year period. Operational
sales adjust for the impact of foreign exchange, generic competition for U.S. cyclophosphamide, the Claris Injectables (Claris) acquisition and the previously communicated select strategic product exits the company is undertaking.
Sales within the U.S. were approximately $1.1 billion, advancing 8 percent. International sales totaled approximately
$1.6 billion, representing a 5 percent increase on a reported basis and a 4 percent increase on a constant currency basis. Baxter s operational sales rose 7 percent in the U.S. and 6 percent internationally.
Global sales for Hospital Products totaled $1.7 billion in the third quarter, advancing 7 percent on both a reported basis and
constant currency basis and 6 percent operationally as compared to the prior-year period. Performance in the quarter benefited from continued strength in our U.S. fluid systems business as well as favorable demand for injectable pharmaceuticals
reflecting a contribution of approximately $27 million of sales from the July 27 acquisition of Claris. Sales in the quarter also benefited from increased sales of anesthesia and critical care products as well as hospital pharmacy
compounding services.
Baxter s third quarter Renal sales were approximately $1 billion, representing an increase of
3 percent on both a reported basis and constant currency basis. Operationally, Renal sales advanced 6 percent in the quarter driven by improved performance across all major product lines and therapies globally.
BAXTER REPORTS THIRD-QUARTER 2017 RESULTS AND UPDATES FINANCIAL OUTLOOK FOR FULL-YEAR 2017
Baxter reported income from continuing operations of $248 million, or $0.45 per diluted share, on a GAAP (Generally Accepted Accounting Principles) basis for the third quarter. These results included
special items totaling $149 million ($108 million net after-tax), primarily related to business optimization, intangible asset amortization, product-related reserves, Claris integration expenses and
Puerto Rico-related expenses post Hurricane Maria.
On an adjusted basis, excluding special items, Baxter s third quarter
income from continuing operations totaled $356 million, or $0.64 per diluted share, exceeding the company s previously issued guidance of $0.58 to $0.60 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 THIRD-QUARTER 2017 RESULTS AND UPDATES FINANCIAL OUTLOOK FOR FULL-YEAR 2017
In follow up to the company s Oct. 12 press release, Baxter remains in limited production across
all three manufacturing sites in Puerto Rico and is continuing to work with infrastructure providers to advance reliable restoration activities for power, communications and transportation.
BAXTER REPORTS THIRD-QUARTER 2017 RESULTS AND UPDATES FINANCIAL OUTLOOK FOR FULL-YEAR 2017
The company remains focused on helping ensure patients have continued access to the products and therapies they need. To this end, Baxter has been working with FDA and has recently been granted regulatory
discretion for temporary special importation of certain products from Baxter facilities in Ireland, Australia, Canada and Mexico to help support product supply for the U.S. market. While these actions will help mitigate some of the projected
shortfall in supply, they will not be adequate to fully bridge the gap in the fourth quarter.
2017 Financial Outlook
Baxter currently projects fourth quarter revenues to be negatively impacted by approximately $70 million due to the temporary
manufacturing disruptions resulting from Hurricane Maria.
For full-year 2017: Baxter now expects sales growth of approximately
4 percent on a reported basis, approximately 4 percent on a constant currency basis, and approximately 4 to 5 percent operationally. Earnings from continuing operations, before special items, are now expected to be $2.40 to $2.43 per
For the fourth quarter: The company expects sales growth of 4 to 5 percent on a reported basis,
approximately 2 percent on a constant currency basis and 1 to 2 percent operationally. The company expects earnings from continuing operations, before special items, of $0.56 to $0.59 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 per diluted share.
BAXTER REPORTS THIRD-QUARTER 2017 RESULTS AND UPDATES FINANCIAL OUTLOOK FOR FULL-YEAR 2017
A webcast of Baxter s third 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 October 25, 2017.
Please see www.baxter.com for more information regarding this and future investor events and webcasts.
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
(including estimates regarding the proposed impact of Hurricane Maria on the company s fourth quarter operations). 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 FDA, the Department of Justice, the New York Attorney General and foreign regulatory agencies (including with respect to the
granting of temporary importation approvals); 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
BAXTER REPORTS THIRD-QUARTER 2017 RESULTS AND UPDATES FINANCIAL OUTLOOK FOR FULL-YEAR 2017
anticipated benefits (including the acquisition of Claris Injectables in July 2017); fluctuations in supply and demand (including as a result of a
natural disaster or otherwise); 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 interest 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 September 30,
(in millions, except per share and percentage data)
| Three Months Ended September 30, | ||||||||||||
| 2017 | 2016 | Change | ||||||||||
| NET SALES | $ 2,707 | $ 2,558 | 6% | |||||||||
| COST OF SALES | 1,579 | 1,487 | 6% | |||||||||
| GROSS MARGIN | 1,128 | 1,071 | 5% | |||||||||
| % of Net Sales | 41.7% | 41.9% | (0.2 pts | ) | ||||||||
| MARKETING AND ADMINISTRATIVE EXPENSES | 685 | 726 | (6% | ) | ||||||||
| % of Net Sales | 25.3% | 28.4% | (3.1 pts | ) | ||||||||
| RESEARCH AND DEVELOPMENT EXPENSES | 151 | 159 | (5% | ) | ||||||||
| % of Net Sales | 5.6% | 6.2% | (0.6 pts | ) | ||||||||
| OPERATING INCOME | 292 | 186 | 57% | |||||||||
| % of Net Sales | 10.8% | 7.3% | 3.5 pts | |||||||||
| NET INTEREST EXPENSE | 14 | 14 | 0% | |||||||||
| OTHER (INCOME) EXPENSE, NET | (12 | ) | 44 | (127% | ) | |||||||
| INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES | 290 | 128 | 127% | |||||||||
| INCOME TAX EXPENSE | 42 | 1 | NM | |||||||||
| % of Income from Continuing Operations before Income Taxes | 14.5% | 0.8% | 13.7 pts | |||||||||
| INCOME FROM CONTINUING OPERATIONS | 248 | 127 | 95% | |||||||||
| INCOME FROM DISCONTINUED OPERATIONS, NET OF TAX | 3 | 3 | 0% | |||||||||
| NET INCOME | $ 251 | $ 130 | 93% | |||||||||
| INCOME FROM CONTINUING OPERATIONS PER COMMON SHARE | ||||||||||||
| Basic | $ 0.46 | $ 0.23 | 100% | |||||||||
| Diluted | $ 0.45 | $ 0.23 | 96% | |||||||||
| INCOME FROM DISCONTINUED OPERATIONS PER COMMON SHARE | ||||||||||||
| Basic | $ 0.00 | $ 0.01 | NM | |||||||||
| Diluted | $ 0.00 | $ 0.01 | NM | |||||||||
| NET INCOME PER COMMON SHARE | ||||||||||||
| Basic | $ 0.46 | $ 0.24 | 92% | |||||||||
| Diluted | $ 0.45 | $ 0.24 | 88% | |||||||||
| WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING | ||||||||||||
| Basic | 545 | 544 | ||||||||||
| Diluted | 557 | 551 | ||||||||||
| ADJUSTED OPERATING INCOME (excluding special items) | $ 441 | A | $ 409 | A | 8% | |||||||
| ADJUSTED PRE-TAX INCOME FROM CONTINUING OPERATIONS (excluding special items) | $ 439 | A | $ 399 | A | 10% | |||||||
| ADJUSTED INCOME FROM CONTINUING OPERATIONS (excluding special items) | $ 356 | A | $ 311 | A | 14% | |||||||
| ADJUSTED DILUTED EPS FROM CONTINUING OPERATIONS (excluding special items) | $ 0.64 | A | $ 0.56 | A | 14% |
BAXTER INTERNATIONAL INC.
Note to Consolidated Statements of Income
September 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 September 30, 2017 and 2016 included special items which impacted the GAAP measures as follows:
| Three Months Ended September 30, | ||||||||||||
| 2017 | 2016 | Change | ||||||||||
| Gross Margin | $ 1,128 | $ 1,071 | 5% | |||||||||
| Intangible asset amortization expense 1 | 38 | 42 | ||||||||||
| Business optimization items 2 | 12 | 35 | ||||||||||
| Hurricane Maria costs 3 | 21 | |||||||||||
| Baxalta separation-related costs 4 | 1 | |||||||||||
| Product-related items 5 | 21 | |||||||||||
| Claris acquisition and integration expenses 6 | 4 | |||||||||||
| Adjusted Gross Margin | $ 1,224 | $ 1,149 | 7% | |||||||||
| % of Net Sales | 45.2% | 44.9% | 0.3 pts | |||||||||
| Marketing and Administrative Expenses | $ 685 | $ 726 | (6% | ) | ||||||||
| Business optimization items 2 | (39 | ) | (106 | ) | ||||||||
| Baxalta separation-related costs 4 | (2 | ) | (9 | ) | ||||||||
| Claris acquisition and integration expenses 6 | (11 | ) | ||||||||||
| Adjusted Marketing and Administrative Expenses | $ 633 | $ 611 | 4% | |||||||||
| % of Net Sales | 23.4% | 23.9% | (0.5 pts | ) | ||||||||
| Research and Development Expenses | $ 151 | $ 159 | (5% | ) | ||||||||
| Business optimization items 2 | (1 | ) | (30 | ) | ||||||||
| Adjusted Research and Development Expenses | $ 150 | $ 129 | 16% | |||||||||
| % of Net Sales | 5.5% | 5.0% | 0.5 pts | |||||||||
| Operating Income | $ 292 | $ 186 | 57% | |||||||||
| Impact of special items | 149 | 223 | ||||||||||
| Adjusted Operating Income | $ 441 | $ 409 | 8% | |||||||||
| % of Net Sales | 16.3% | 16.0% | 0.3 pts | |||||||||
| Other (Income) Expense, Net | $ (12 | ) | $ 44 | (127% | ) | |||||||
| Loss on debt extinguishment 7 | (48 | ) | ||||||||||
| Adjusted Other Income, Net | $ (12 | ) | $ (4 | ) | NM | |||||||
| Pre-Tax Income from Continuing Operations | $ 290 | $ 128 | 127% | |||||||||
| Impact of special items | 149 | 271 | ||||||||||
| Adjusted Pre-Tax Income from Continuing Operations | $ 439 | $ 399 | 10% | |||||||||
| Income Tax Expense | $ 42 | $ 1 | NM | |||||||||
| Impact of special items | 41 | 87 | ||||||||||
| Adjusted Income Tax Expense | $ 83 | $ 88 | (6% | ) | ||||||||
| % of Adjusted Pre-Tax Income from Continuing Operations | 18.9% | 22.1% | (3.2 pts | ) | ||||||||
| Income from Continuing Operations | $ 248 | $ 127 | 95% | |||||||||
| Impact of special items | 108 | 184 | ||||||||||
| Adjusted Income from Continuing Operations | $ 356 | $ 311 | 14% | |||||||||
| Diluted EPS from Continuing Operations | $ 0.45 | $ 0.23 | 96% | |||||||||
| Impact of special items | 0.19 | 0.33 | ||||||||||
| Adjusted Diluted EPS from Continuing Operations | $ 0.64 | $ 0.56 | 14% | |||||||||
| WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING | ||||||||||||
| Diluted | 557 | 551 |
The company s results in 2016 included a net charge of $171 million ($124 million, or $0.23 per diluted share, on an after-tax basis) related to business optimization initiatives. This included a net charge of $130 million related to restructuring activities, $25 million of costs to implement business optimization
programs which included external consulting and employee salary and related costs, $11 million of accelerated depreciation associated with facilities to be closed, and $5 million of Gambro integration costs. The $130 million of
restructuring activities included $101 million of employee termination costs, a $27 million intangible asset impairment charge related to acquired in-process R&D, and net $2 million of other
more 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
Nine Months Ended September 30,
(in millions, except per share and percentage data)
| Nine Months Ended September 30, | ||||||||||||
| 2017 | 2016 | Change | ||||||||||
| NET SALES | $ 7,787 | $ 7,518 | 4% | |||||||||
| COST OF SALES | 4,487 | 4,510 | (1% | ) | ||||||||
| GROSS MARGIN | 3,300 | 3,008 | 10% | |||||||||
| % of Net Sales | 42.4% | 40.0% | 2.4 pts | |||||||||
| MARKETING AND ADMINISTRATIVE EXPENSES | 1,890 | 2,076 | (9% | ) | ||||||||
| % of Net Sales | 24.3% | 27.6% | (3.3 pts | ) | ||||||||
| RESEARCH AND DEVELOPMENT EXPENSES | 435 | 490 | (11% | ) | ||||||||
| % of Net Sales | 5.6% | 6.5% | (0.9 pts | ) | ||||||||
| OPERATING INCOME | 975 | 442 | 121% | |||||||||
| % of Net Sales | 12.5% | 5.9% | 6.6 pts | |||||||||
| NET INTEREST EXPENSE | 41 | 53 | (23% | ) | ||||||||
| OTHER EXPENSE (INCOME), NET A | 10 | (4,286 | ) | (100% | ) | |||||||
| INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES | 924 | 4,675 | (80% | ) | ||||||||
| INCOME TAX EXPENSE (BENEFIT) | 139 | (51 | ) | NM | ||||||||
| % of Income from Continuing Operations before Income Taxes | 15.0% | (1.1% | ) | 16.1 pts | ||||||||
| INCOME FROM CONTINUING OPERATIONS | 785 | 4,726 | (83% | ) | ||||||||
| INCOME (LOSS) FROM DISCONTINUED OPERATIONS, NET OF TAX | 3 | (4 | ) | NM | ||||||||
| NET INCOME | $ 788 | $ 4,722 | (83% | ) | ||||||||
| INCOME FROM CONTINUING OPERATIONS PER COMMON SHARE | ||||||||||||
| Basic | $ 1.45 | $ 8.64 | (83% | ) | ||||||||
| Diluted | $ 1.42 | $ 8.56 | (83% | ) | ||||||||
| INCOME (LOSS) FROM DISCONTINUED OPERATIONS PER COMMON SHARE | ||||||||||||
| Basic | $ 0.00 | ($0.01 | ) | NM | ||||||||
| Diluted | $ 0.00 | ($0.01 | ) | NM | ||||||||
| NET INCOME PER COMMON SHARE | ||||||||||||
| Basic | $ 1.45 | $ 8.63 | (83% | ) | ||||||||
| Diluted | $ 1.42 | $ 8.55 | (83% | ) | ||||||||
| WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING | ||||||||||||
| Basic | 543 | 547 | ||||||||||
| Diluted | 554 | 552 | ||||||||||
| ADJUSTED OPERATING INCOME (excluding special items) | $ 1,266 | B | $ 976 | B | 30% | |||||||
| ADJUSTED PRE-TAX INCOME FROM CONTINUING OPERATIONS (excluding special items) | $ 1,248 | B | $ 967 | B | 29% | |||||||
| ADJUSTED INCOME FROM CONTINUING OPERATIONS (excluding special items) | $ 1,022 | B | $ 766 | B | 33% | |||||||
| ADJUSTED DILUTED EPS FROM CONTINUING OPERATIONS (excluding special items) | $ 1.84 | B | $ 1.39 | B | 32% |
BAXTER INTERNATIONAL INC.
Note to Consolidated Statements of Income
September 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 nine months ended September 30, 2017 and 2016 included special items which impacted the GAAP measures as follows:
| Nine Months Ended September 30, | ||||||||||||
| 2017 | 2016 | Change | ||||||||||
| Gross Margin | $ 3,300 | $ 3,008 | 10% | |||||||||
| Intangible asset amortization expense 1 | 112 | 124 | ||||||||||
| Business optimization items 2 | 42 | 113 | ||||||||||
| Intangible asset impairment 3 | 51 | |||||||||||
| Baxalta separation-related costs 4 | 1 | 1 | ||||||||||
| Product-related items 5 | 17 | (12 | ) | |||||||||
| Claris acquisition and integration expenses 6 | 4 | |||||||||||
| Hurricane Maria costs 7 | 21 | |||||||||||
| Adjusted Gross Margin | $ 3,497 | $ 3,285 | 6% | |||||||||
| % of Net Sales | 44.9% | 43.7% | 1.2 pts | |||||||||
| Marketing and Administrative Expenses | $ 1,890 | $ 2,076 | (9% | ) | ||||||||
| Business optimization items 2 | (74 | ) | (137 | ) | ||||||||
| Baxalta separation-related costs 4 | (16 | ) | (45 | ) | ||||||||
| Historical rebate and discount adjustments 8 | 12 | |||||||||||
| Claris acquisition and integration expenses 6 | (16 | ) | ||||||||||
| Adjusted Marketing and Administrative Expenses | $ 1,796 | $ 1,894 | (5% | ) | ||||||||
| % of Net Sales | 23.1% | 25.2% | (2.1 pts | ) | ||||||||
| Research and Development Expenses | $ 435 | $ 490 | (11% | ) | ||||||||
| Business optimization items 2 | (75 | ) | ||||||||||
| Adjusted Research and Development Expenses | $ 435 | $ 415 | 5% | |||||||||
| % of Net Sales | 5.6% | 5.5% | 0.1 pts | |||||||||
| Operating Income | $ 975 | $ 442 | 121% | |||||||||
| Impact of special items | 291 | 534 | ||||||||||
| Adjusted Operating Income | $ 1,266 | $ 976 | 30% | |||||||||
| % of Net Sales | 16.3% | 13.0% | 3.3 pts | |||||||||
| Other Expense (Income), Net | $ 10 | $ (4,286 | ) | (100% | ) | |||||||
| Net realized gains on Baxalta Retained Shares transactions 9 | 4,391 | |||||||||||
| Loss on debt extinguishment 10 | (149 | ) | ||||||||||
| Venezuelan deconsolidation 11 | (33 | ) | ||||||||||
| Adjusted Other Income, Net | $ (23 | ) | $ (44 | ) | (48% | ) | ||||||
| Pre-Tax Income from Continuing Operations | $ 924 | $ 4,675 | (80% | ) | ||||||||
| Impact of special items | 324 | (3,708 | ) | |||||||||
| Adjusted Pre-Tax Income from Continuing Operations | $ 1,248 | $967 | 29% | |||||||||
| Income Tax Expense (Benefit) | $ 139 | $ (51) | NM | |||||||||
| Impact of special items | 87 | 252 | ||||||||||
| Adjusted Income Tax Expense | $ 226 | $ 201 | 12% | |||||||||
| % of Adjusted Pre-Tax Income from Continuing Operations | 18.1% | 20.8% | (2.7 pts | ) | ||||||||
| Income from Continuing Operations | $ 785 | $ 4,726 | (83% | ) | ||||||||
| Impact of special items | 237 | (3,960 | ) | |||||||||
| Adjusted Income from Continuing Operations | $ 1,022 | $766 | 33% | |||||||||
| Diluted EPS from Continuing Operations | $ 1.42 | $ 8.56 | (83% | ) | ||||||||
| Impact of special items | 0.42 | (7.17 | ) | |||||||||
| Adjusted Diluted EPS from Continuing Operations | $ 1.84 | $ 1.39 | 32% | |||||||||
| WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING | ||||||||||||
| Diluted | 554 | 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
Securities and Exchange Commission on the date of this press release.