Full Press Release Details
Stacey Eisen, (224) 948-5353
Clare Trachtman, (224) 948-3085
BAXTER REPORTS FOURTH-QUARTER AND FULL-YEAR 2019 RESULTS,
COMPLETES FINANCIAL RESTATEMENT PROCESS
DEERFIELD, Ill., March 17, 2020 Baxter International Inc. (NYSE:BAX), a leading global medical products company, today
announced its complete financial results for the fourth quarter and full year ended December 31, 2019. In addition, the company announced the filing of its Annual Report on Form 10-K for the year ended
December 31, 2019 (the Form 10-K), which includes audited restated financial statements as of December 31, 2018 and for the years ended December 31, 2018 and 2017, and its Quarterly Report on
Form 10-Q for the quarter ended September 30, 2019 (the 3Q Form 10-Q). The company has now completed its internal investigation into certain intra-company
transactions that impacted its previously reported non-operating foreign exchange gains and losses as it relates to the financial statement impacts. With these filings, Baxter is now current in its SEC
reporting obligations.
BAXTER REPORTS FOURTH-QUARTER AND FULL-YEAR FINANCIAL RESULTS Page
Our sales and earnings performance in 2019 demonstrate the momentum and underlying strength of our ongoing transformation, said Jos (Joe) E. Almeida, chairman, president and chief
executive officer. We are driving growth across our global businesses and regions, fueled by innovation and commercial execution that position us for sustained success. Our focus remains on advancing our Mission for patients and accelerating
value for all stakeholders. We look forward to building on our progress in quarters to come.
Fourth-Quarter Financial Results
Worldwide sales in the fourth quarter totaled $3.0 billion, an increase of 7% on a reported basis, 8% on a constant
currency basis and 9% on an operational basis compared to the prior-year period. Operational sales in the fourth quarter adjust for the impact of foreign exchange and generic competition for U.S. cyclophosphamide.
Sales in the U.S. were approximately $1.3 billion, increasing 10% on both a reported and operational basis. International sales of
approximately $1.8 billion increased 5% on a reported basis and 7% on both a constant currency and operational basis. Growth across all six of Baxter s Global Business Units (GBUs) and three geographic segments contributed to positive
performance in the quarter.
Please see the attached schedules accompanying this press release for additional details on sales
performance in the quarter, including breakouts by Baxter s GBUs and geographic segments.
For the fourth quarter, the net
loss from continuing operations attributable to Baxter was $23 million, or $0.05 per diluted share, on a U.S. GAAP (Generally Accepted Accounting Principles) basis. This represented a decline of 109% and included special items totaling
$524 million after-tax, primarily related to a noncash pension settlement charge ($568 million after-tax), business optimization expenses and intangible asset
amortization, partially offset by benefits related to global tax reform and insurance recoveries. On an adjusted basis, income from continuing operations attributable to Baxter totaled $501 million, or $0.97 per diluted share. Adjusted earnings
per diluted share increased 37% in the quarter, driven by solid operational performance and an ongoing benefit from the company s business transformation efforts.
BAXTER REPORTS FOURTH-QUARTER AND FULL-YEAR FINANCIAL RESULTS Page
Full-Year Financial Results
Baxter s 2019 worldwide sales totaled approximately $11.4 billion, an increase of 2% on a reported basis and 5% on both a constant currency and operational basis compared to 2018. Operational
sales for 2019 adjust for the impact of foreign exchange and generic competition for U.S. cyclophosphamide.
totaled $4.8 billion, increasing 2% on a reported basis and 3% on an operational basis. International sales of $6.5 billion increased 3% on a reported basis and 7% on both a constant currency and operational basis.
For the year, all six of Baxter s GBUs contributed to positive performance on a constant currency and operational basis, with
Medication Delivery, Pharmaceuticals and Acute Therapies delivering mid-to-high single-digit constant-currency growth, and Advanced Surgery achieving double-digit growth
at constant currency rates. All three of Baxter s geographic segments also contributed positively to growth for the year. The accompanying schedules include additional details on sales performance by geographic segment and GBU.
On a U.S. GAAP basis, 2019 income from continuing operations attributable to Baxter totaled $1.0 billion, or $1.93 per diluted share,
declining 32% as compared to the prior-year period. These results include special items totaling $716 million after-tax, primarily due to a noncash pension settlement charge, business optimization
expenses, and intangible asset amortization, partially offset by benefits related to global tax reform and insurance recoveries. On an adjusted basis, 2019 income from continuing operations attributable to Baxter totaled $1.7 billion, or $3.31
per diluted share, an increase of 14% over the prior-year period.
In 2019, Baxter generated $2.1 billion in operating
cash flow, driven by improved operational performance and the continuing impact of programs focused on improving the company s working capital. As a result, the company generated $1.4 billion in free cash flow (operating cash flow less
capital expenditures of $0.7 billion) for the year.
Baxter is committed to returning value to shareholders while also
investing in a range of strategic organic and inorganic growth opportunities, said Jay Saccaro, chief financial officer. In 2019, we increased our annual dividend rate by approximately 16%, paid out $423 million in dividends and
repurchased over $1.3 billion in shares.
BAXTER REPORTS FOURTH-QUARTER AND FULL-YEAR FINANCIAL RESULTS Page
Since the emergence of
COVID-19 (coronavirus), Baxter has implemented a detailed action plan, which includes taking proactive measures to protect employee workplace safety, providing aid to healthcare providers and those affected by
the pandemic, and maintaining global supply of its products. The company s plan follows the guidelines provided by the Centers for Disease Control (CDC) and the World Health Organization (WHO), as well as other actions recommended by its
medical advisors from the University of Illinois Chicago. Consistent with the company s focus on corporate citizenship and its Mission to Save and Sustain Lives, Baxter colleagues have been providing frontline support to healthcare providers
combating the spread of COVID-19. Baxter has assisted with the prompt installation of additional acute care technology in multiple facilities and has also provided monetary aid and equipment donations to help
address the surge in patients requiring treatment. In addition, over the last couple of years Baxter has executed several actions to enhance and diversify its global supply chain network.
While to date Baxter has experienced limited financial impact from COVID-19, given the rapid and
evolving nature of the virus, the company is not in a position to provide an estimate of any potential negative impact on its full-year financial results. Baxter will continue to actively monitor the situation and will provide further updates
as appropriate. The company remains confident in the long-term underlying strength of its portfolio and innovation pipeline.
In 2019, Baxter achieved many milestones in pursuit of its Mission for patients and emphasis on accelerating profitable growth through innovation. Among highlights of the past year, the company:
BAXTER REPORTS FOURTH-QUARTER AND FULL-YEAR FINANCIAL RESULTS Page
BAXTER REPORTS FOURTH-QUARTER AND FULL-YEAR FINANCIAL RESULTS Page
Baxter s progress continues into 2020, as reflected in additional
highlights to open the year. Most recently the company:
In addition, Baxter continues to be recognized for its commitment to corporate social responsibility and workplace excellence. The company most recently:
BAXTER REPORTS FOURTH-QUARTER AND FULL-YEAR FINANCIAL RESULTS Page
Financial Restatements
On October 24, 2019, Baxter announced that it had commenced an internal investigation into certain intra-company transactions that
impacted its previously reported non-operating foreign exchange gains and losses. That internal investigation is now complete as it relates to the financial statement impacts and the company s Audit
Committee authorized the filing of restated financial statements.
Today, Baxter filed its Form
10-K, which includes (i) restated audited financial statements as of December 31, 2018 and for the years ended December 31, 2017 and 2018, (ii) restated unaudited interim financial information
as of and for the quarterly periods ended March 31, 2018, June 30, 2018, December 31, 2018, March 31, 2019 and June 30, 2019, for the six months ended June 30, 2019 and 2018, and as of September 30, 2018 within the
notes to its 2019 financial statements, and (iii) restated unaudited financial information as of December 31, 2017, 2016 and 2015 and for the years ended December 31, 2016 and 2015 within Item 6. Selected Financial Data. Baxter also
filed its 3Q Form 10-Q, which included restated unaudited financial statements for the quarterly and year-to-date periods ended
September 30, 2018. As a result of these filings, Baxter is now current in its reporting obligations with the SEC.
company also corrected certain additional misstatements that were immaterial, individually and in the aggregate, to its previously issued financial statements that affected other items, including operating income and cash flows. For more information
about the restatement, including the impacts on the company s financial statements, see Baxter s Form 10-K and the 3Q Form 10-Q.
Our investigation of this matter as it relates to its financial impacts is now complete, said Mr. Almeida. The
relevant foreign exchange gains and losses were non-operational in nature, and our core operational performance across this period continues to demonstrate the strength and trajectory of our ongoing
transformation, fueled by revitalized innovation, increased efficiency and the dedication of our 50,000 employees worldwide.
BAXTER REPORTS FOURTH-QUARTER AND FULL-YEAR FINANCIAL RESULTS Page
At this time, given the high-degree of uncertainty around any potential negative financial impacts from COVID-19, Baxter is not providing guidance for full-year 2020. The company expects to provide an update in its first quarter 2020 earnings announcement on April 30, 2020.
For first-quarter 2020: The company expects sales growth of 4% to 5% on a reported basis and 5% to 6% on both a constant currency and
operational basis. The company expects adjusted net income, before special items, of $0.72 to $0.74 per diluted share.
First-quarter operational sales estimates for 2020 have been adjusted for the impact of foreign exchange and the acquisition of
Please see the schedules accompanying this press release for reconciliations of non-GAAP measures to the most closely related U.S. GAAP measures.
A webcast of Baxter s
fourth-quarter 2019 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. CST on March 17, 2020. Please see www.baxter.com for more information
regarding this and future investor events and webcasts.
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 learn more, visit
Non-GAAP Financial Measures
This press release and the accompanying tables contain financial measures that are not calculated in accordance with U.S. GAAP. The non-GAAP financial measures
include adjusted gross margin, adjusted selling, general and administrative expense, adjusted research and development expense, adjusted other operating income, net, adjusted operating margin, adjusted other (income) expense, net, adjusted income
from continuing operations before income taxes, adjusted income tax expense, adjusted income from continuing operations, and adjusted income from continuing operations attributable to Baxter stockholders, all of which exclude special items, sales
growth on a constant currency and operational basis, and free cash flow. Special items are excluded because they are highly variable or unusual, and of a size that may substantially affect the company s reported operations for a period. Certain
of those items represent estimates based on information reasonably available at the time of the press release. Future events or new information may result in different actual results.
BAXTER REPORTS FOURTH-QUARTER AND FULL-YEAR FINANCIAL RESULTS Page
Net sales growth rates are presented on a constant currency basis. These measures provide information on the percentage change in net sales growth assuming that foreign currency exchange rates have not
changed between the prior and current periods. Net sales growth rates are also presented on an operational basis. For the quarter and year ended December 31, 2019, operational sales growth excludes the impact of foreign exchange and generic
competition for U.S. cyclophosphamide. This measure provides information on the change in net sales growth rates assuming that foreign exchange rates remain constant and excluding the impact of U.S. cyclophosphamide competition.
The first quarter 2020 outlook for operational sales growth excludes the impact of foreign exchange and sales from the company s