Full Press Release Details
Steve Brett, (224) 948-5353
Clare Trachtman, (224) 948-3085
BAXTER REPORTS 2018 FOURTH-QUARTER AND FULL-YEAR RESULTS
DEERFIELD, Ill., JAN. 31, 2019 Baxter International Inc. (NYSE:BAX), a leading global medical products company, today reported
results for the fourth quarter and full year ended Dec. 31, 2018, and provided its financial guidance for 2019.
continued building momentum in 2018, delivering solid top-line and strong bottom-line performance for the year, said Jos (Joe) E. Almeida, chairman and chief executive officer. Our focus on
increased innovation, combined with our diverse portfolio, global footprint and unwavering financial discipline, helped us maintain our trajectory in a dynamic marketplace.
Almeida added, Our ongoing business transformation will continue throughout 2019 as we prepare to launch new products, pursue
high-value capital deployment opportunities and deliver on additional operational excellence initiatives. Our goal remains to drive top quartile performance for all stakeholders in line with our Mission to Save and Sustain Lives.
BAXTER REPORTS 4th QUARTER FINANCIAL RESULTS Page
Fourth-Quarter Financial Results
Worldwide sales in the fourth quarter totaled approximately $2.8 billion, an increase of 2 percent on a reported basis and 5 percent on both a constant currency basis and 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, as well as the company s acquisition of two surgical products from
Mallinckrodt plc, which closed in March 2018.
Sales in the U.S. totaled $1.2 billion, increasing 4 percent on a
reported basis and 2 percent on an operational basis. International sales of $1.7 billion increased 1 percent on a reported basis and 6 percent on both a constant currency and operational basis. Drivers of growth in the quarter
included Baxter s Renal Care, Pharmaceuticals, Advanced Surgery and Acute Therapies businesses. Increased demand for Baxter s contract manufacturing services also contributed to 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 three geographic segments and six global business units (GBUs).
Baxter reported income from
continuing operations of $354 million, or $0.66 per diluted share, on a GAAP (Generally Accepted Accounting Principles) basis for the fourth quarter. These results include special items totaling $67 million
after-tax, primarily related to business optimization and intangible amortization. On an adjusted basis, Baxter s fourth quarter income from continuing operations totaled $421 million, or $0.78 per
diluted share. Adjusted earnings per diluted share advanced 22 percent in the quarter, driven by solid operational performance, an ongoing benefit from the company s business transformation efforts and lower pension expenses.
Full-year Financial Results
Baxter s 2018 worldwide sales totaled approximately $11.1 billion, an increase of 5 percent on a reported basis, 4 percent on a constant currency basis and 3 percent on an
operational basis compared to 2017. Operational sales for 2018 adjust for the impact of foreign exchange, generic competition for U.S. cyclophosphamide, the company s March 2018 acquisition of two surgical products from Mallinckrodt plc, and
the company s July 2017 acquisition of Claris Injectables.
BAXTER REPORTS 4th QUARTER FINANCIAL RESULTS Page
Sales in the U.S. totaled $4.7 billion, increasing 5 percent on a reported basis and 3 percent on an operational basis. International sales of $6.4 billion increased 6 percent on
a reported basis and 4 percent on both a constant currency and operational basis.
For the year, Baxter s
Pharmaceuticals, Advanced Surgery and Acute Therapies businesses delivered double-digit growth at constant currency rates; and Renal Care achieved mid-single-digit growth on a constant currency basis. This
growth helped offset low-single-digit declines in the company s Medication Delivery and Clinical Nutrition businesses. The accompanying schedules include additional details on sales performance by
geographic segment and GBU.
Baxter reported 2018 income from continuing operations of $1.6 billion, or $2.99 per diluted
share, on a GAAP basis. These results include special items totaling $36 million after-tax, primarily due to business optimization and intangible amortization, partially offset by a benefit related to the
company s U.S. foreign credit deferred tax assets. On an adjusted basis, Baxter s 2018 income from continuing operations totaled $1.7 billion, or $3.05 per diluted share, an increase of 23 percent over the prior-year period.
In 2018, 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 $681 million) for the year.
Baxter s sustained improvement in cash generation gives us the flexibility to evaluate and pursue a growing range of organic
and inorganic growth opportunities, said Jay Saccaro, chief financial officer. It also augments our ability to return value directly to our shareholders. In 2018, we increased our annual dividend rate by approximately 19 percent,
paid out $376 million in dividends and repurchased over $2.4 billion in shares.
In 2018 Baxter achieved notable milestones in pursuit of its Mission for patients as well as its emphasis on accelerating profitable
growth. Among highlights of the past year, the company:
BAXTER REPORTS 4th QUARTER FINANCIAL RESULTS Page
BAXTER REPORTS 4th QUARTER FINANCIAL RESULTS Page
Baxter s progress continues into 2019,
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 was recently:
The company would also like to note that the United States Department of Justice, Washington Criminal Section of the Antitrust Division,
has advised Baxter that it has officially closed its grand jury investigation of the saline market, and Baxter is no longer a subject or target of that investigation.
BAXTER REPORTS 4th QUARTER FINANCIAL RESULTS Page
For full-year 2019: Baxter expects sales growth of 0 to 1 percent on a reported basis, 2 to
3 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 $3.22 to $3.30 per diluted share.
For first-quarter 2019: The company expects sales to decline approximately 3 percent on a reported basis, to increase
approximately 1 percent on a constant currency basis and to grow approximately 1 to 2 percent on an operational basis. The company expects adjusted earnings from continuing operations, before special items, of $0.66 to $0.68 per diluted
Full-year and first-quarter operational sales estimates for 2019 have been adjusted for the impact of foreign exchange
and generic competition for U.S. cyclophosphamide.
Please see the schedules accompanying this press release for
reconciliations of non-GAAP measures to the most closely related GAAP measures.
webcast of Baxter s fourth-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. CST on Jan. 31, 2019. 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,
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 the first quarter and full year 2019. 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
BAXTER REPORTS 4th QUARTER FINANCIAL RESULTS Page
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 or products, including by cyberattack,
unauthorized access or theft; 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 statements.
Baxter, Amia, Dose IQ, Evo IQ, Floseal, Galaxy, HomeChoice Claria, Kaguya, Olimel,
Preveleak, Prismaflex, PrisMax, Recothrom, Sharesource, and Spectrum IQ are registered trademarks of Baxter International Inc.
BAXTER INTERNATIONAL INC.
Consolidated Statements of Income
Three Months Ended December 31,
(in millions, except per share and percentage data)
| Three Months Ended December 31, | ||||||||||||
| 2018 | 2017 | Change | ||||||||||
| NET SALES | $ 2,841 | $ 2,774 | 2% | |||||||||
| COST OF SALES | 1,649 | 1,610 | 2% | |||||||||
| GROSS MARGIN | 1,192 | 1,164 | 2% | |||||||||
| % of Net Sales | 42.0% | 42.0% | 0.0 pts | |||||||||
| MARKETING AND ADMINISTRATIVE EXPENSES | 629 | 692 | (9% | ) | ||||||||
| % of Net Sales | 22.1% | 24.9% | (2.8 pts | ) | ||||||||
| RESEARCH AND DEVELOPMENT EXPENSES | 175 | 181 | (3% | ) | ||||||||
| % of Net Sales | 6.2% | 6.5% | (0.3 pts | ) | ||||||||
| OTHER OPERATING INCOME | (10 | ) | NM | |||||||||
| OPERATING INCOME | 398 | 291 | 37% | |||||||||
| % of Net Sales | 14.0% | 10.5% | 3.5 pts | |||||||||
| NET INTEREST EXPENSE | 11 | 14 | (21% | ) | ||||||||
| OTHER INCOME, NET | (58 | ) | (16 | ) | NM | |||||||
| INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES | 445 | 293 | 52% | |||||||||
| INCOME TAX EXPENSE | 91 | 354 | (74% | ) | ||||||||
| % of Income from Continuing Operations before Income Taxes | 20.4% | 120.8% | (100.4 pts | ) | ||||||||
| INCOME (LOSS) FROM CONTINUING OPERATIONS | 354 | (61 | ) | NM | ||||||||
| LOSS FROM DISCONTINUED OPERATIONS, NET OF TAX | (6 | ) | (10 | ) | NM | |||||||
| NET INCOME (LOSS) | $ 348 | ($71 | ) | NM | ||||||||
| INCOME (LOSS) FROM CONTINUING OPERATIONS PER COMMON SHARE | ||||||||||||
| Basic | $ 0.67 | ($0.11 | ) | NM | ||||||||
| Diluted | $ 0.66 | ($0.11 | ) | NM | ||||||||
| LOSS FROM DISCONTINUED OPERATIONS PER COMMON SHARE | ||||||||||||
| Basic | ($0.01 | ) | ($0.02 | ) | NM | |||||||
| Diluted | ($0.01 | ) | ($0.02 | ) | NM | |||||||
| NET INCOME (LOSS) PER COMMON SHARE | ||||||||||||
| Basic | $ 0.66 | ($0.13 | ) | NM | ||||||||
| Diluted | $ 0.65 | ($0.13 | ) | NM | ||||||||
| WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING | ||||||||||||
| Basic | 528 | 543 | ||||||||||
| Diluted | 538 | 556 | ||||||||||
| ADJUSTED OPERATING INCOME (excluding special items) | $ 496 | A | $ 428 | A | 16% | |||||||
| ADJUSTED PRE-TAX INCOME FROM CONTINUING OPERATIONS (excluding special items) | $ 519 | A | $ 430 | A | 21% | |||||||
| ADJUSTED INCOME FROM CONTINUING OPERATIONS (excluding special items) | $ 421 | A | $ 354 | A | 19% | |||||||
| ADJUSTED DILUTED EPS FROM CONTINUING OPERATIONS (excluding special items) | $ 0.78 | A | $ 0.64 | A | 22% |
BAXTER INTERNATIONAL INC.
Note to Consolidated Statements of Income
December 31, 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 December 31, 2018 and 2017 included special items which impacted the GAAP measures as follows:
| Three Months Ended December 31, | ||||||||||||
| 2018 | 2017 | Change | ||||||||||
| Gross Margin | $ 1,192 | $ 1,164 | 2% | |||||||||
| Intangible asset amortization expense 1 | 42 | 42 | ||||||||||
| Business optimization items 2 | 19 | 11 | ||||||||||
| Hurricane Maria (benefits) costs 3 | (9 | ) | 11 | |||||||||
| Acquisition and integration expenses 4 | 11 | 4 | ||||||||||
| Product-related items 5 | (3 | ) | ||||||||||
| European medical devices regulation 6 | 6 | |||||||||||
| Adjusted Gross Margin | $ 1,258 | $ 1,232 | 2% | |||||||||
| % of Net Sales | 44.3% | 44.4% | (0.1 pts | ) | ||||||||
| Marketing and Administrative Expenses | $ 629 | $ 692 | (9% | ) | ||||||||
| Business optimization items 2 | (23 | ) | (42 | ) | ||||||||
| Separation-related costs 7 | (2 | ) | ||||||||||
| Acquisition and integration expenses 4 | (9 | ) | (4 | ) | ||||||||
| Litigation and contractual disputes 8 | (21 | ) | ||||||||||
| Adjusted Marketing and Administrative Expenses | $ 597 | $ 623 | (4% | ) | ||||||||
| % of Net Sales | 21.0% | 22.5% | (1.5 pts | ) | ||||||||
| Research and Development Expenses | $ 175 | $ 181 | (3% | ) | ||||||||
| Business optimization items 2 | (3 | ) | ||||||||||
| Acquisition and integration expenses 4 | (7 | ) | ||||||||||
| Adjusted Research and Development Expenses | $ 165 | $ 181 | (9% | ) | ||||||||
| % of Net Sales | 5.8% | 6.5% | (0.7 pts | ) | ||||||||
| Other Operating Income | $ (10 | ) | $ | NM | ||||||||
| Hurricane Maria benefits 3 | 10 | |||||||||||
| Adjusted Other Operating Income | $ | $ | NM | |||||||||
| % of Net Sales | 0.0% | 0.0% | 0 pts | |||||||||
| Operating Income | $ 398 | $ 291 | 37% | |||||||||
| Impact of special items | 98 | 137 | ||||||||||
| Adjusted Operating Income | $ 496 | $ 428 | 16% | |||||||||
| % of Net Sales | 17.5% | 15.4% | 2.1 pts | |||||||||
| Other Income, Net | $ (58 | ) | $ (16 | ) | NM | |||||||
| Acquisition and integration benefits 4 | 24 | |||||||||||
| Adjusted Other Income, Net | $ (34 | ) | $ (16 | ) | NM | |||||||
| Pre-Tax Income from Continuing Operations | $ 445 | $ 293 | 52% | |||||||||
| Impact of special items | 74 | 137 | ||||||||||
| Adjusted Pre-Tax Income from Continuing Operations | $ 519 | $ 430 | 21% | |||||||||
| Income Tax Expense | $ 91 | $ 354 | (74% | ) | ||||||||
| Impact of special items 9 | 7 | (278 | ) | |||||||||
| Adjusted Income Tax Expense | $ 98 | $ 76 | 29% | |||||||||
| % of Adjusted Pre-Tax Income from Continuing Operations | 18.9% | 17.7% | 1.2 pts | |||||||||
| Income (loss) from Continuing Operations | $ 354 | $ (61 | ) | NM | ||||||||
| Impact of special items | 67 | 415 | ||||||||||
| Adjusted Income from Continuing Operations | $ 421 | $ 354 | 19% | |||||||||
| Diluted EPS from Continuing Operations | $ 0.66 | $ (0.11 | ) | NM | ||||||||
| Impact of special items | 0.12 | 0.75 | ||||||||||
| Adjusted Diluted EPS from Continuing Operations | $ 0.78 | $ 0.64 | 22% | |||||||||
| WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING | ||||||||||||
| Diluted | 538 | 556 |
Reflected in this item for 2017 is the tax
impact of the special items identified in this table as well as a net tax expense of $322 million, or $0.58 per diluted share, related to the estimated impact of U.S. tax reform on the company s
tax-related assets and liabilities. The tax effect of each adjustment is based on the jurisdiction in which the adjustment is incurred and the tax laws in effect for each such jurisdiction.
For more information on the company s use of non-GAAP financial measures in this presentation, please see
the company s Current Report on Form 8-K filed with the Securities and Exchange Commission on the date of this presentation.