Full Press Release Details
Deborah Spak, (224) 948-2349
BAXTER REPORTS FIRST QUARTER 2016 RESULTS AND PROVIDES
UPDATED FINANCIAL OUTLOOK FOR FULL-YEAR 2016
Positive Sales Mix and Disciplined Expense Management Contribute to
Strong First Quarter Performance
Adjusted Earnings Per Share were $0.36;
First-quarter GAAP Earnings Per
DEERFIELD, Ill., April 26, 2016 Baxter International Inc. (NYSE:BAX) today reported results
for the first quarter of 2016, and also increased its earnings per share outlook for full-year 2016. First quarter worldwide sales totaled $2.4 billion, an increase of 4 percent on a constant currency basis as compared to the prior year period. On a
reported basis, sales declined 1 point as foreign exchange negatively impacted sales by five percentage points in the quarter.
We are off to a strong start in 2016, with first quarter results exceeding our expectations, said Jos (Joe) E.
Almeida, chairman and chief executive officer. Our new strategic framework focused on portfolio optimization, operational excellence and capital allocation is driving improved performance throughout the organization and is reflected in our
increased financial outlook for the year. We are confident our strategy positions the company for sustainable growth and value creation for all our stakeholders.
BAXTER REPORTS FIRST QUARTER RESULTS Page
During the quarter, Baxter achieved a number of operational, pipeline and commercial milestones in support of its strategy to accelerate profitable growth, including:
BAXTER REPORTS FIRST QUARTER RESULTS Page
the quarter, Baxter reported income from continuing operations of $3.4 billion, or $6.13 per diluted share, on a GAAP (Generally Accepted Accounting Principles) basis. These results included an after-tax net gain of approximately $3.3 billion from
the disposition of shares the company retained following the spin-off of Baxalta in July 2015. Partially offsetting these results were net after-tax special items totaling $109 million (or $0.20 per diluted share) primarily related to debt
extinguishment, intangible asset amortization, Baxalta related spin-off costs and certain business optimization initiatives.
On an adjusted basis, excluding special items, Baxter s first quarter income from continuing operations totaled $199 million, or
$0.36 per diluted share, exceeding the company s previously-issued guidance of $0.28 to $0.30 per diluted share.
within the United States advanced 5 percent to $992 million, while international sales totaled $1.4 billion, representing a 4 percent increase on a constant currency basis, and a 5 percent decline on a reported basis. There was no impact on
Baxter s total sales growth in the quarter from U.S. cyclophosphamide.
By business, Hospital Products sales of $1.5
billion increased 4 percent on a constant currency basis and declined 1 percent on a reported basis. Hospital Products performance in the quarter benefited from strong sales of Baxter s next-generation SIGMA SPECTRUM infusion pump and IV
solutions in the United States as well as increased demand for the company s injectable drug compounding services.
BAXTER REPORTS FIRST QUARTER RESULTS Page
Baxter s Renal Products sales totaled $898 million, representing a 5 percent increase on a constant currency basis, and a 2 percent decline on a reported basis. Increased demand for peritoneal
dialysis products and continuous renal replacement therapies contributed to sales growth in the quarter.
Based on the company s strong first quarter performance, Baxter is raising its financial outlook for full-year 2016. Baxter now
expects constant currency growth for full-year 2016 of approximately 3 percent, or approximately 4 percent after adjusting for increased U.S. competition for cyclophosphamide. On a reported basis, including the impact of foreign exchange, Baxter now
expects sales to increase approximately 1 percent as compared to previous guidance of a decline of approximately 1 percent. In addition, the company now expects earnings from continuing operations, before special items, of $1.59 to $1.67 per diluted
share for the full year as compared to previous guidance of $1.46 to $1.54 per diluted share.
For the second quarter, the
company expects constant currency sales growth of approximately 4 percent, and on a reported basis, sales growth of approximately 2 percent. Baxter expects earnings from continuing operations, before special items, of $0.38 to $0.40 per diluted
share for the second quarter of 2016.
The earnings guidance for the second quarter and full-year 2016 excludes approximately
$1.94 and $8.01, respectively, per diluted share of realized gains related to the planned use of the Baxalta retained stake; $0.05 and $0.21,
BAXTER REPORTS FIRST QUARTER RESULTS Page
respectively, per diluted share of intangible asset amortization expense; an estimated $0.08 to $0.09 and $0.30 to $0.34, respectively, per diluted share
related to business optimization and Baxalta separation-related expense activities; and $0.11 per diluted share of debt extinguishment loss and product related reserve adjustments for full-year 2016. These estimates are based on information
reasonably available at the time of this release and future events or new information may result in different actual results. Reconciling for the inclusion of these items results in GAAP earnings of $2.18 to $2.21 per share for the second quarter of
2016 and $8.94 to $9.06 per diluted share for full-year 2016.
A webcast of Baxter s first 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 April 26, 2016. Baxter will be hosting an investor conference on Monday, May 9, 2016 in New York City. The investor
conference will feature an innovation hall displaying product and therapy advancements from Baxter s pipeline beginning at 11:00 a.m. EDT and presentations by certain members of the Baxter executive team will begin at 1:00 p.m. EDT. To register
for the conference and for more information visit http://www.cvent.com/events/2016-baxterinvestorconference/eventsummaryb89071f48e754416a83fd2187964dae0.aspx. Please see www.baxter.com for more information regarding these 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; biosurgery products and anesthetics; and pharmacy automation, software and services. The company s global footprint and
BAXTER REPORTS FIRST QUARTER RESULTS Page
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 2016. 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 and foreign
counterparts; failures with respect to compliance programs; future actions of third-parties, including payers; US 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; 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 (including targeted margin improvements) associated with the separation of the biopharmaceutical and medical products businesses and the associated disposition of the company s retained
stake in Baxalta on a tax-free basis; the ability to complete the disposition of the remainder of the Baxalta retained stake on a tax-free basis (including as a result of delays in obtaining required regulatory approvals or the impact of recently
issued US Treasury regulations on the proposed Baxalta Shire plc merger);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 (including with respect to emerging market currencies); 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 March 31, 2016
(in millions, except per share and percentage data)
| Three Months Ended March 31, | ||||||||||||
| 2016 | 2015 | Change | ||||||||||
| NET SALES | $ 2,375 | $ 2,403 | (1% | ) | ||||||||
| COST OF SALES | 1,410 | 1,384 | 2% | |||||||||
| GROSS MARGIN | 965 | 1,019 | (5% | ) | ||||||||
| % of Net Sales | 40.6% | 42.4% | (1.8 pts | ) | ||||||||
| MARKETING AND ADMINISTRATIVE EXPENSES | 641 | 784 | (18% | ) | ||||||||
| % of Net Sales | 27.0% | 32.6% | (5.6 pts | ) | ||||||||
| RESEARCH AND DEVELOPMENT EXPENSES | 136 | 143 | (5% | ) | ||||||||
| % of Net Sales | 5.7% | 6.0% | (0.3 pts | ) | ||||||||
| OPERATING INCOME | 188 | 92 | 104% | |||||||||
| % of Net Sales | 7.9% | 3.8% | 4.1 pts | |||||||||
| NET INTEREST EXPENSE | 28 | 30 | (7% | ) | ||||||||
| OTHER INCOME, NET A | (3,169 | ) | (86 | ) | NM | |||||||
| INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES | 3,329 | 148 | NM | |||||||||
| INCOME TAX (BENEFIT) EXPENSE | (58 | ) | 14 | NM | ||||||||
| % of Income from Continuing Operations before Income Taxes | -1.7% | 9.5% | (11.2 pts | ) | ||||||||
| INCOME FROM CONTINUING OPERATIONS | 3,387 | 134 | NM | |||||||||
| INCOME FROM DISCONTINUED OPERATIONS, NET OF TAX B | (7 | ) | 296 | (102% | ) | |||||||
| NET INCOME | $ 3,380 | $ 430 | NM | |||||||||
| INCOME FROM CONTINUING OPERATIONS PER COMMON SHARE | ||||||||||||
| Basic | $ 6.17 | $ 0.25 | NM | |||||||||
| Diluted | $ 6.13 | $ 0.24 | NM | |||||||||
| INCOME FROM DISCONTINUED OPERATIONS PER COMMON SHARE | ||||||||||||
| Basic | -$ 0.01 | $ 0.54 | (102% | ) | ||||||||
| Diluted | -$ 0.01 | $ 0.54 | (102% | ) | ||||||||
| NET INCOME PER COMMON SHARE | ||||||||||||
| Basic | $ 6.16 | $ 0.79 | NM | |||||||||
| Diluted | $ 6.12 | $ 0.78 | NM | |||||||||
| WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING | ||||||||||||
| Basic | 549 | 543 | ||||||||||
| Diluted | 552 | 548 | ||||||||||
| ADJUSTED OPERATING INCOME (excluding special items) | $ 249 | C | $ 161 | C | 55% | |||||||
| ADJUSTED PRE-TAX INCOME FROM CONTINUING OPERATIONS (excluding special items) | $ 248 | C | $ 217 | C | 14% | |||||||
| ADJUSTED INCOME FROM CONTINUING OPERATIONS (excluding special items) | $ 199 | C | $ 187 | C | 6% | |||||||
| ADJUSTED DILUTED EPS FROM CONTINUING OPERATIONS (excluding special items) | $ 0.36 | C | $ 0.34 | C | 6% |
BAXTER INTERNATIONAL INC.
Note to Consolidated Statements of Income
March 31, 2016 and 2015
Description of Adjustments and Reconciliation of GAAP to Non-GAAP Measures
(in millions, except per share and percentage data)
The company s GAAP results for the three months ended March 31, 2016 and 2015 included special items which impacted the GAAP measures as follows:
| Three Months Ended March 31, | ||||||||||||
| 2016 | 2015 | Change | ||||||||||
| Gross Margin | $ 965 | $ 1,019 | (5% | ) | ||||||||
| Intangible asset amortization expense 1 | 40 | 40 | ||||||||||
| Business optimization items 2 | 12 | (7 | ) | |||||||||
| Product-related items 3 | (12 | ) | ||||||||||
| Adjusted Gross Margin | $ 1,005 | $ 1,052 | (4% | ) | ||||||||
| % of Net Sales | 42.3% | 43.8% | (1.5 pts | ) | ||||||||
| Marketing and Administrative Expenses | $ 641 | $ 784 | (18% | ) | ||||||||
| Business optimization items 2 | (3 | ) | (24 | ) | ||||||||
| Separation-related costs 4 | (18 | ) | (12 | ) | ||||||||
| Adjusted Marketing and Administrative Expenses | $ 620 | $ 748 | (17% | ) | ||||||||
| % of Net Sales | 26.1% | 31.1% | (5 pts | ) | ||||||||
| Research and Development Expenses | $ 136 | $ 143 | (5% | ) | ||||||||
| % of Net Sales | 5.7% | 6.0% | (0.3 pts | ) | ||||||||
| Operating Income | $ 188 | $ 92 | 104% | |||||||||
| Impact of special items | 61 | 69 | ||||||||||
| Adjusted Operating Income | $ 249 | $ 161 | 55% | |||||||||
| % of Net Sales | 10.5% | 6.7% | 3.8 pts | |||||||||
| Other Income, Net | $ (3,169) | $ (86) | NM | |||||||||
| Net realized gains on Retained Share transactions 5 | 3,243 | |||||||||||
| Loss on debt extinguishment 6 | (101 | ) | ||||||||||
| Adjusted Other Income, Net | $ (27) | $ (86) | (69% | ) | ||||||||
| Pre-Tax Income from Continuing Operations | $ 3,329 | $ 148 | NM | |||||||||
| Impact of special items | (3,081 | ) | 69 | |||||||||
| Adjusted Pre-Tax Income from Continuing Operations | $ 248 | $ 217 | 14% | |||||||||
| Income Tax (Benefit) Expense | $ (58) | $ 14 | NM | |||||||||
| Impact of special items | 107 | 16 | ||||||||||
| Adjusted Income Tax Expense | $ 49 | $ 30 | 63% | |||||||||
| % of Adjusted Pre-Tax Income from Continuing Operations | 19.8% | 13.8% | 6 pts | |||||||||
| Income from Continuing Operations | $ 3,387 | $ 134 | NM | |||||||||
| Impact of special items | (3,188 | ) | 53 | |||||||||
| Adjusted Income from Continuing Operations | $ 199 | $ 187 | 6% | |||||||||
| Diluted EPS from Continuing Operations | $ 6.13 | $ 0.24 | NM | |||||||||
| Impact of special items | (5.77 | ) | 0.10 | |||||||||
| Adjusted Diluted EPS from Continuing Operations | $ 0.36 | $ 0.34 | 6% | |||||||||
| WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING | ||||||||||||
| Diluted | 552 | 548 |
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.
Periods Ending March 31, 2016 and 2015
| Q1 | Q1 | % Growth @ | % Growth @ | |||||||||||||
| 2016 | 2015 | Actual Rates | Constant Rates | |||||||||||||
| Renal | ||||||||||||||||
| United States | $ 201 | $ 186 | 8% | 8% | ||||||||||||
| International | 697 | 727 | (4% | ) | 5% | |||||||||||
| Total Renal | $ 898 | $ 913 | (2% | ) | 5% | |||||||||||
| Hospital Products | ||||||||||||||||
| United States | $ 791 | $ 759 | 4% | 4% | ||||||||||||
| International | 686 | 731 | (6% | ) | 3% | |||||||||||
| Total Hospital Products | $1,477 | $1,490 | (1% | ) | 4% | |||||||||||
| Baxter International Inc. | ||||||||||||||||
| United States | $ 992 | $ 945 | 5% | 5% | ||||||||||||
| International | 1,383 | 1,458 | (5% | ) | 4% | |||||||||||
| Total Baxter | $2,375 | $2,403 | (1% | ) | 4% |
BAXTER INTERNATIONAL INC.
Periods Ending March 31, 2016 and 2015
| Q1 | Q1 | % Growth @ | % Growth @ | |||||||||||||
| 2016 | 2015 | Actual Rates | Constant Rates | |||||||||||||
| Total Renal 1 | $ 898 | $ 913 | (2% | ) | 5% | |||||||||||
| Hospital Products | ||||||||||||||||
| Fluid Systems 2 | $ 524 | $ 493 | 6% | 11% | ||||||||||||
| Integrated Pharmacy Solutions 3 | 556 | 564 | (1% | ) | 3% | |||||||||||
| Surgical Care 4 | 305 | 322 | (5% | ) | (2% | ) | ||||||||||
| Other 5 | 92 | 111 | (17% | ) | (14% | ) | ||||||||||
| Total Hospital Products | $1,477 | $1,490 | (1% | ) | 4% | |||||||||||
| Total Baxter | $2,375 | $2,403 | (1% | ) | 4% |
BAXTER INTERNATIONAL INC.
Franchise Sales by U.S. and International
Periods Ending March 31,
| Q1 2016 | Q1 2015 | % Growth | ||||||||||||||||||||||||||||||||||
| U.S. | International | Total | U.S. | International | Total | U.S. | International | Total | ||||||||||||||||||||||||||||
| Total Renal | $201 | $ 697 | $ 898 | $186 | $ 727 | $ 913 | 8% | (4% | ) | (2% | ) | |||||||||||||||||||||||||
| Hospital Products | ||||||||||||||||||||||||||||||||||||
| Fluid Systems | $298 | $ 226 | $ 524 | $232 | $ 261 | $ 493 | 28% | (13% | ) | 6% | ||||||||||||||||||||||||||
| Integrated Pharmacy Solutions | 264 | 292 | 556 | 270 | 294 | 564 | (2% | ) | (1% | ) | (1% | ) | ||||||||||||||||||||||||
| Surgical Care | 181 | 124 | 305 | 186 | 136 | 322 | (3% | ) | (9% | ) | (5% | ) | ||||||||||||||||||||||||
| Other | 48 | 44 | 92 | 71 | 40 | 111 | (32% | ) | 10% | (17% | ) | |||||||||||||||||||||||||
| Total Hospital Products | $791 | $ 686 | $1,477 | $759 | $ 731 | $1,490 | 4% | (6% | ) | (1% | ) | |||||||||||||||||||||||||
| Total Baxter | $992 | $1,383 | $2,375 | $945 | $1,458 | $2,403 | 5% | (5% | ) | (1% | ) |