Full Press Release Details
Bill Rader, (224) 948-5353
Clare Trachtman, (224) 948-3085
BAXTER REPORTS SECOND-QUARTER 2018 RESULTS AND INCREASES
EARNINGS OUTLOOK FOR FULL-YEAR 2018
DEERFIELD, Ill., JULY 26, 2018 Baxter International Inc. (NYSE:BAX), a leading global medical products company, today
reported results for the second quarter of 2018 and increased its full-year 2018 earnings guidance.
quarter performance supports the strategic priorities we laid out at our May investor conference to deliver sustainable long-term growth across our diversified portfolio, said Jos (Joe) E. Almeida, chairman and chief executive officer.
We remain relentlessly focused on enhancing operational efficiency throughout the company, while also increasing investments in innovative therapies and products to benefit patients and healthcare providers and accelerate top-line growth.
Second-quarter Financial Results
In the second quarter, worldwide sales totaled approximately $2.8 billion, an increase of 9 percent on a reported basis,
5 percent on a constant currency basis and 4 percent on an operational basis compared to the prior-year period. Operational sales in the second quarter adjust for the impact of foreign exchange and generic competition for U.S.
cyclophosphamide, as well as the acquisitions of Claris Injectables (Claris) and two surgical products from Mallinckrodt plc, which closed in July 2017 and March 2018, respectively.
BAXTER REPORTS SECOND-QUARTER 2018 RESULTS AND
INCREASES EARNINGS OUTLOOK FOR FULL-YEAR 2018 Page
Sales in the U.S. totaled $1.2 billion, increasing 7 percent on a reported basis and 4 percent on an operational basis. International sales of $1.6 billion increased 11 percent on
a reported basis, 4 percent on a constant currency basis and 3 percent on an operational basis. Drivers of growth in the quarter included increased sales of injectable pharmaceuticals, strength in the company s renal care and acute
therapies businesses as well as solid performance from our compounding and contract manufacturing businesses.
2018, Baxter reports its operating results based on three geographic segments: Americas (North and South America), EMEA (Europe, Middle East and Africa) and APAC (Asia Pacific) as well as by the company s six Global Business Units (GBUs).
Please see the schedules accompanying this press release for more details on sales performance in the quarter.
income from continuing operations of $343 million, or $0.63 per diluted share, on a GAAP (Generally Accepted Accounting Principles) basis for the second quarter. These results included special items totaling $103 million ($78 million
net after-tax), primarily related to business optimization, intangible amortization and integration expenses. On an adjusted basis, Baxter s second quarter income from continuing operations totaled
$421 million, or $0.77 per diluted share. Adjusted earnings per diluted share advanced 22 percent in the quarter, driven by solid top-line performance and the ongoing benefit from the company s
business transformation initiatives.
In the second quarter of 2018, Baxter generated $405 million in operating cash flow,
or $852 million year to date. This represents a first half increase of $85 million driven by improved operational performance. As a result, the company generated an increase of over $50 million in free cash flow to $541 million
(operating cash flow less capital expenditures of $311 million) as compared to the first-half of 2017.
quarter, Baxter s Board of Directors approved an approximately 19 percent increase in the company s quarterly dividend rate, reflecting Baxter s strong financial position and ongoing focus on strategically deploying capital to
both fuel growth and enhance stockholder value.
BAXTER REPORTS SECOND-QUARTER 2018 RESULTS AND
INCREASES EARNINGS OUTLOOK FOR FULL-YEAR 2018 Page
In support of its strategy to accelerate profitable growth and deliver meaningful innovation for patients and
healthcare professionals around the world, Baxter achieved a number of recent operational, pipeline and commercial milestones:
BAXTER REPORTS SECOND-QUARTER 2018 RESULTS AND
INCREASES EARNINGS OUTLOOK FOR FULL-YEAR 2018 Page
2018 Financial Outlook
For full-year 2018: Based on the company s strong performance year to date, Baxter is raising its earnings outlook for the full year of 2018. The company now expects adjusted earnings from
continuing operations, before special items, of $2.94 to $3.00 per diluted share for the full year. The company now expects sales growth of approximately 6 percent on a reported basis as a result of changes in foreign exchange rates. The
company continues to expect sales growth of approximately 5 percent on a constant currency basis and 4 to 5 percent on an operational basis.*
For third-quarter 2018: The company expects sales growth of approximately 3 percent on a reported basis, approximately 3 to 4 percent on a constant currency basis and 3 to 4 percent
on an operational basis.* The company expects adjusted earnings from continuing operations, before special items, of $0.72 to $0.74 per diluted share.
*Full-year and third quarter operational sales have been adjusted for the impact of foreign exchange, generic competition for U.S. cyclophosphamide and the benefit from the acquisitions of Claris and the
two Mallinckrodt surgical assets.
Please see the schedules accompanying this press release for a reconciliation between the
projected 2018 adjusted earnings per diluted share and projected GAAP earnings per diluted share.
A webcast of Baxter s
second quarter 2018 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, 2018. Please see www.baxter.com for more information
regarding this and future investor events and webcasts.
BAXTER REPORTS SECOND-QUARTER 2018 RESULTS AND
INCREASES EARNINGS OUTLOOK FOR FULL-YEAR 2018 Page
Every day, millions of patients and caregivers rely on Baxter s leading portfolio of critical care, nutrition,
renal, hospital and surgical products. For more than 85 years, we ve been operating at the critical intersection where innovations that save and sustain lives meet the healthcare providers that make it happen. With products, technologies
and therapies available in more than 100 countries, Baxter s employees worldwide are now building upon the company s rich heritage of medical breakthroughs to advance the next generation of transformative healthcare innovations. To
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 2018. 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; product development risks; product quality or patient safety concerns; continuity, availability and pricing of acceptable raw materials and component supply; inability to create additional production capacity in a
timely manner or the occurrence of other manufacturing or supply difficulties (including as a result of a natural disaster or otherwise); breaches or failures of the company s information technology systems, including by cyberattack; future
actions of regulatory bodies and other governmental authorities, including 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
acquisitions of Claris Injectables and two surgical products from Mallinckrodt plc); 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 (including potential trade wars); fluctuations in foreign exchange and interest rates; any change in law concerning the taxation of income (including current or
future tax reform), including income earned outside the United States and potential taxes associated with the Base Erosion and Anti-Abuse Tax; actions taken by tax authorities in connection with ongoing tax audits; 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
Baxter, Spectrum IQ, Dose IQ, Evo IQ, oXiris, Prismaflex, Sharesource, Amia, Homechoice Claria, Kaguya and Olimel are
registered trademarks of Baxter International Inc.
BAXTER REPORTS SECOND-QUARTER 2018 RESULTS AND
INCREASES EARNINGS OUTLOOK FOR FULL-YEAR 2018 Page
BAXTER INTERNATIONAL INC.
Consolidated Statements of Income
Three Months Ended June 30, 2018
(in millions, except per share and percentage data)
| Three Months Ended June 30, | ||||||||||||
| 2018 | 2017 | Change | ||||||||||
| NET SALES | $ 2,842 | $ 2,605 | 9% | |||||||||
| COST OF SALES | 1,603 | 1,473 | 9% | |||||||||
| GROSS MARGIN | 1,239 | 1,132 | 9% | |||||||||
| % of Net Sales | 43.6% | 43.5% | 0.1 pts | |||||||||
| MARKETING AND ADMINISTRATIVE EXPENSES | 681 | 630 | 8% | |||||||||
| % of Net Sales | 24.0% | 24.2% | (0.2 pts | ) | ||||||||
| RESEARCH AND DEVELOPMENT EXPENSES | 174 | 155 | 12% | |||||||||
| % of Net Sales | 6.1% | 6.0% | 0.1 pts | |||||||||
| OPERATING INCOME | 384 | 347 | 11% | |||||||||
| % of Net Sales | 13.5% | 13.3% | 0.2 pts | |||||||||
| NET INTEREST EXPENSE | 11 | 13 | (15% | ) | ||||||||
| OTHER (INCOME) EXPENSE, NET | (31 | ) | 28 | NM | ||||||||
| INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES | 404 | 306 | 32% | |||||||||
| INCOME TAX EXPENSE | 61 | 42 | 45% | |||||||||
| % of Income from Continuing Operations before Income Taxes | 15.1% | 13.7% | 1.4 pts | |||||||||
| INCOME FROM CONTINUING OPERATIONS | 343 | 264 | 30% | |||||||||
| INCOME FROM DISCONTINUED OPERATIONS, NET OF TAX | 1 | NM | ||||||||||
| NET INCOME | $ 343 | $ 265 | 29% | |||||||||
| INCOME FROM CONTINUING OPERATIONS PER COMMON SHARE | ||||||||||||
| Basic | $ 0.64 | $ 0.49 | 31% | |||||||||
| Diluted | $ 0.63 | $ 0.48 | 31% | |||||||||
| 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 | $ 0.64 | $ 0.49 | 31% | |||||||||
| Diluted | $ 0.63 | $ 0.48 | 31% | |||||||||
| WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING | ||||||||||||
| Basic | 535 | 544 | ||||||||||
| Diluted | 547 | 555 | ||||||||||
| ADJUSTED OPERATING INCOME (excluding special items) | $ 487 | A | $ 427 | A | 14% | |||||||
| ADJUSTED PRE-TAX INCOME FROM CONTINUING OPERATIONS (excluding special items) | $ 507 | A | $ 419 | A | 21% | |||||||
| ADJUSTED INCOME FROM CONTINUING OPERATIONS (excluding special items) | $ 421 | A | $ 348 | A | 21% | |||||||
| ADJUSTED DILUTED EPS FROM CONTINUING OPERATIONS (excluding special items) | $ 0.77 | A | $ 0.63 | A | 22% |
BAXTER INTERNATIONAL INC.
Note to Consolidated Statements of Income
June 30, 2018 and 2017
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, 2018 and 2017 included special items which impacted the GAAP measures as follows:
| Three Months Ended June 30, | ||||||||||||
| 2018 | 2017 | Change | ||||||||||
| Gross Margin | $1,239 | $1,132 | 9% | |||||||||
| Intangible asset amortization expense 1 | 44 | 36 | ||||||||||
| Business optimization items 2 | 3 | 14 | ||||||||||
| Acquisition and integration expenses 3 | 6 | |||||||||||
| Product-related items 4 | (4 | ) | ||||||||||
| Separation-related costs 5 | 1 | |||||||||||
| Adjusted Gross Margin | $1,292 | $1,179 | 10% | |||||||||
| % of Net Sales | 45.5% | 45.3% | 0.2 pts | |||||||||
| Marketing and Administrative Expenses | $ 681 | $ 630 | 8% | |||||||||
| Business optimization items 2 | (34 | ) | (20 | ) | ||||||||
| Separation-related costs 5 | (7 | ) | ||||||||||
| Acquisition and integration expenses 3 | (6 | ) | (5 | ) | ||||||||
| Adjusted Marketing and Administrative Expenses | $ 641 | $ 598 | 7% | |||||||||
| % of Net Sales | 22.6% | 23.0% | (0.4 pts | ) | ||||||||
| Research and Development Expenses | $ 174 | $ 155 | 12% | |||||||||
| Business optimization items 2 | (10 | ) | (1 | ) | ||||||||
| Adjusted Research and Development Expenses | $ 164 | $ 154 | 6% | |||||||||
| % of Net Sales | 5.8% | 5.9% | (0.1 pts | ) | ||||||||
| Operating Income | $ 384 | $ 347 | 11% | |||||||||
| Impact of special items | 103 | 80 | ||||||||||
| Adjusted Operating Income | $ 487 | $ 427 | 14% | |||||||||
| % of Net Sales | 17.1% | 16.4% | 0.7 pts | |||||||||
| Other (Income) Expense, Net | $ (31 | ) | $ 28 | NM | ||||||||
| Venezuela deconsolidation 6 | (33 | ) | ||||||||||
| Adjusted Other Income, Net | $ (31 | ) | $ (5 | ) | NM | |||||||
| Pre-Tax Income from Continuing Operations | $ 404 | $ 306 | 32% | |||||||||
| Impact of special items | 103 | 113 | ||||||||||
| Adjusted Pre-Tax Income from Continuing Operations | $ 507 | $ 419 | 21% | |||||||||
| Income Tax Expense | $ 61 | $ 42 | 45% | |||||||||
| Impact of special items 7 | 25 | 29 | ||||||||||
| Adjusted Income Tax Expense | $ 86 | $ 71 | 21% | |||||||||
| % of Adjusted Pre-Tax Income from Continuing Operations | 17.0% | 16.9% | 0.1 pts | |||||||||
| Income from Continuing Operations | $ 343 | $ 264 | 30% | |||||||||
| Impact of special items | 78 | 84 | ||||||||||
| Adjusted Income from Continuing Operations | $ 421 | $ 348 | 21% | |||||||||
| Diluted EPS from Continuing Operations | $ 0.63 | $ 0.48 | 31% | |||||||||
| Impact of special items | 0.14 | 0.15 | ||||||||||
| Adjusted Diluted EPS from Continuing Operations | $ 0.77 | $ 0.63 | 22% | |||||||||
| WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING | ||||||||||||
| Diluted | 547 | 555 |
For 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
Six Months Ended June 30, 2018
(in millions, except per share and percentage data)
| Six Months Ended June 30, | ||||||||||||
| 2018 | 2017 | Change | ||||||||||
| NET SALES | $ 5,519 | $ 5,080 | 9% | |||||||||
| COST OF SALES | 3,166 | 2,904 | 9% | |||||||||
| GROSS MARGIN | 2,353 | 2,176 | 8% | |||||||||
| % of Net Sales | 42.6% | 42.8% | (0.2 pts | ) | ||||||||
| MARKETING AND ADMINISTRATIVE EXPENSES | 1,303 | 1,194 | 9% | |||||||||
| % of Net Sales | 23.6% | 23.5% | 0.1 pts | |||||||||
| RESEARCH AND DEVELOPMENT EXPENSES | 314 | 282 | 11% | |||||||||
| % of Net Sales | 5.7% | 5.6% | 0.1 pts | |||||||||
| CLARIS SETTLEMENT | (80 | ) | NM | |||||||||
| OPERATING INCOME | 816 | 700 | 17% | |||||||||
| % of Net Sales | 14.8% | 13.8% | 1 pts | |||||||||
| NET INTEREST EXPENSE | 23 | 27 | (15% | ) | ||||||||
| OTHER (INCOME) EXPENSE, NET | (49 | ) | 39 | NM | ||||||||
| INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES | 842 | 634 | 33% | |||||||||
| INCOME TAX EXPENSE | 110 | 97 | 13% | |||||||||
| % of Income from Continuing Operations before Income Taxes | 13.1% | 15.3% | (2.2 pts | ) | ||||||||
| INCOME FROM CONTINUING OPERATIONS | 732 | 537 | 36% | |||||||||
| NET INCOME | $ 732 | $ 537 | 36% | |||||||||
| INCOME FROM CONTINUING OPERATIONS PER COMMON SHARE | ||||||||||||
| Basic | $ 1.36 | $ 0.99 | 37% | |||||||||
| Diluted | $ 1.33 | $ 0.97 | 37% | |||||||||
| NET INCOME PER COMMON SHARE | ||||||||||||
| Basic | $ 1.36 | $ 0.99 | 37% | |||||||||
| Diluted | $ 1.33 | $ 0.97 | 37% | |||||||||
| WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING | ||||||||||||
| Basic | 537 | 542 | ||||||||||
| Diluted | 549 | 553 | ||||||||||
| ADJUSTED OPERATING INCOME (excluding special items) | $ 935 | A | $ 842 | A | 11% | |||||||
| ADJUSTED PRE-TAX INCOME FROM CONTINUING OPERATIONS (excluding special items) | $ 961 | A | $ 809 | A | 19% | |||||||
| ADJUSTED INCOME FROM CONTINUING OPERATIONS (excluding special items) | $ 809 | A | $ 666 | A | 21% | |||||||
| ADJUSTED DILUTED EPS FROM CONTINUING OPERATIONS (excluding special items) | $ 1.47 | A | $ 1.20 | A | 23% |
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, 2018 and 2017 included special items which impacted the GAAP measures as follows:
| Six Months Ended June 30, | ||||||||||||
| 2018 | 2017 | Change | ||||||||||
| Gross Margin | $ 2,353 | $ 2,176 | 8% | |||||||||
| Intangible asset amortization expense 1 | 85 | 74 | ||||||||||
| Business optimization items 2 | 9 | 30 | ||||||||||
| Acquisition and integration expenses 3 | 9 | |||||||||||
| Litigation 4 | 8 | |||||||||||
| Product-related items 5 | (4 | ) | ||||||||||
| Separation-related costs 6 | 1 | |||||||||||
| Adjusted Gross Margin | $ 2,464 | $ 2,277 | 8% | |||||||||
| % of Net Sales | 44.6% | 44.8% | (0.2 pts | ) | ||||||||
| Marketing and Administrative Expenses | $ 1,303 | $ 1,194 | 9% | |||||||||
| Business optimization items 2 | (63 | ) | (35 | ) | ||||||||
| Separation-related costs 6 | (14 | ) | ||||||||||
| Acquisition and integration expenses 3 | (10 | ) | (5 | ) | ||||||||
| Historical rebate and discount adjustments 7 | 12 | |||||||||||
| Litigation 4 | (2 | ) | ||||||||||
| Adjusted Marketing and Administrative Expenses | $ 1,228 | $ 1,152 | 7% | |||||||||
| % of Net Sales | 22.3% | 22.7% | (0.4 pts | ) | ||||||||
| Research and Development Expenses | $ 314 | $ 282 | 11% | |||||||||
| Business optimization items 2 | (13 | ) | 1 | |||||||||
| Adjusted Research and Development Expenses | $ 301 | $ 283 | 6% | |||||||||
| % of Net Sales | 5.5% | 5.6% | (0.1 pts | ) | ||||||||
| Claris Settlement | $ (80 | ) | $ | NM | ||||||||
| Claris settlement 8 | 80 | |||||||||||
| Adjusted Claris Settlement | $0 | $0 | 0% | |||||||||
| % of Net Sales | 0.0% | 0.0% | 0 pts | |||||||||
| Operating Income | $ 816 | $ 700 | 17% | |||||||||
| Impact of special items | 119 | 142 | ||||||||||
| Adjusted Operating Income | $ 935 | $ 842 | 11% | |||||||||
| % of Net Sales | 16.9% | 16.6% | 0.3 pts | |||||||||
| Other (Income) Expense, Net | $ (49 | ) | $ 39 | NM | ||||||||
| Venezuelan deconsolidation 9 | (33 | ) | ||||||||||
| Adjusted Other (Income) Expense, Net | $ (49 | ) | $ 6 | NM | ||||||||
| Pre-Tax Income from Continuing Operations | $ 842 | $ 634 | 33% | |||||||||
| Impact of special items | 119 | 175 | ||||||||||
| Adjusted Pre-Tax Income from Continuing Operations | $ 961 | $ 809 | 19% | |||||||||
| Income Tax Expense | $ 110 | $ 97 | 13% | |||||||||
| Impact of special items 10 | 42 | 46 | ||||||||||
| Adjusted Income Tax Expense | $ 152 | $ 143 | 6% | |||||||||
| % of Adjusted Pre-Tax Income from Continuing Operations | 15.8% | 17.7% | (1.9 pts | ) | ||||||||
| Income from Continuing Operations | $ 732 | $ 537 | 36% | |||||||||
| Impact of special items | 77 | 129 | ||||||||||
| Adjusted Income from Continuing Operations | $ 809 | $ 666 | 21% | |||||||||
| Diluted EPS from Continuing Operations | $ 1.33 | $ 0.97 | 37% | |||||||||
| Impact of special items | 0.14 | 0.23 | ||||||||||
| Adjusted Diluted EPS from Continuing Operations | $ 1.47 | $ 1.20 | 23% | |||||||||
| WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING | ||||||||||||
| Diluted | 549 | 553 |
For 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
BAXTER INTERNATIONAL INC.
Sales by Operating Segment