Full Press Release Details
Steve Brett, (224) 948-5353
Clare Trachtman, (224) 948-3085
BAXTER REPORTS FIRST-QUARTER 2019 RESULTS
DEERFIELD, Ill., APRIL 25, 2019 Baxter International Inc. (NYSE:BAX), a leading global medical products company, today reported results for the first quarter of 2019 and increased its
full-year 2019 earnings outlook.
We are pleased with the solid start to 2019, establishing a foundation for accelerating
performance over the course of the year, said Jos (Joe) E. Almeida, chairman and chief executive officer. Our first quarter results reflect the value of our diversified portfolio, an increased emphasis on high-value innovation
and an ongoing focus on operational excellence. We remain committed to executing on our strategy to deliver enhanced performance in 2019 and beyond.
First-Quarter Financial Results
Worldwide sales in the first quarter
totaled approximately $2.6 billion, a decrease of 2% on a reported basis and an increase of 2% on both a constant currency and an operational basis. Operational sales in the first quarter exclude the impact of foreign exchange and generic
competition for U.S. cyclophosphamide.
BAXTER REPORTS 1st QUARTER FINANCIAL RESULTS Page
Sales in the U.S. totaled $1.1 billion, decreasing 2% on both a reported and operational basis. International sales of $1.5 billion decreased 1% on a reported basis and increased 5% on a
constant currency basis.
Performance in the quarter was driven by growth of Baxter s peritoneal dialysis and continuous
renal replacement therapies, certain generic injectable pharmaceuticals, and hemostats and sealants. In addition, increased demand for Baxter s hospital pharmacy compounding and cytotoxic contract manufacturing services also contributed to
growth in the quarter. Sales growth in the quarter was partially offset by expected lower sales of Medication Delivery and Nutritional therapies. Baxter s performance in International markets reflects growth across both the Europe, Middle East
and Africa (EMEA) and Asia Pacific (APAC) regions.
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 net income of $347 million, or $0.66 per diluted share, on a GAAP (Generally Accepted Accounting Principles) basis for the first quarter. These results include special items totaling
$52 million after-tax, which were primarily related to business optimization charges and intangible asset amortization, partially offset by an insurance recovery from a legacy product-related matter. On
an adjusted basis, Baxter s first quarter net income totaled $399 million, or $0.76 per diluted share, ahead of the company s expectations of $0.66 to $0.68 per diluted share. Adjusted earnings per diluted share advanced 9% in the
quarter, driven by solid operational performance as well as benefits from a lower tax rate and share count as compared to the prior-year period.
Baxter continues to achieve notable milestones in
pursuit of its Mission for patients and emphasis on accelerating profitable growth. Among recent highlights, the company:
BAXTER REPORTS 1st QUARTER FINANCIAL RESULTS Page
BAXTER REPORTS 1st QUARTER FINANCIAL RESULTS Page
2019 Financial Outlook
For full-year 2019: Based on solid first quarter performance, Baxter is raising its earnings outlook for 2019. The company now
expects adjusted earnings from continuing operations, before special items, of $3.27 to $3.35 per diluted share. The company continues to expect 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.
For second-quarter 2019: The company expects sales to decline
approximately 2 percent on a reported basis, and to grow approximately 2 percent on a constant currency basis and 2 to 3 percent on an operational basis. The company expects adjusted earnings from continuing operations, before special
items, of $0.80 to $0.82 per diluted share.
Full-year and quarterly operational sales estimates for 2019 have been adjusted
for the impact of foreign exchange and generic competition for U.S. cyclophosphamide.
A webcast of Baxter s first-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. CDT on April 25, 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
BAXTER REPORTS 1st QUARTER FINANCIAL RESULTS Page
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 second 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 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 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; 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); 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; the ability to enforce owned or
in-licensed patents or the patents of third parties preventing or restricting the 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, Clinolipid, Floseal, Galaxy and Prismaflex are registered trademarks of Baxter International Inc.
BAXTER INTERNATIONAL INC.
Consolidated Statements of Income
Three Months Ended March 31, 2019
(in millions, except per share and percentage data)
| Three Months Ended March 31, | ||||||||||||
| 2019 | 2018 | Change | ||||||||||
| NET SALES | $ 2,632 | $ 2,677 | (2% | ) | ||||||||
| COST OF SALES | 1,552 | 1,563 | (1% | ) | ||||||||
| GROSS MARGIN | 1,080 | 1,114 | (3% | ) | ||||||||
| % of Net Sales | 41.0% | 41.6% | (0.6 pts | ) | ||||||||
| SELLING, GENERAL AND ADMINISTRATIVE EXPENSES | 600 | 622 | (4% | ) | ||||||||
| % of Net Sales | 22.8% | 23.2% | (0.4 pts | ) | ||||||||
| RESEARCH AND DEVELOPMENT EXPENSES | 129 | 140 | (8% | ) | ||||||||
| % of Net Sales | 4.9% | 5.2% | (0.3 pts | ) | ||||||||
| OTHER OPERATING INCOME, NET | (33 | ) | (80 | ) | (59% | ) | ||||||
| OPERATING INCOME | 384 | 432 | (11% | ) | ||||||||
| % of Net Sales | 14.6% | 16.1% | (1.5 pts | ) | ||||||||
| NET INTEREST EXPENSE | 18 | 12 | 50% | |||||||||
| OTHER INCOME, NET | (25 | ) | (18 | ) | 39% | |||||||
| INCOME BEFORE INCOME TAXES | 391 | 438 | (11% | ) | ||||||||
| INCOME TAX EXPENSE | 44 | 49 | (10% | ) | ||||||||
| % of Income Before Income Taxes | 11.3% | 11.2% | 0.1 pts | |||||||||
| NET INCOME | $ 347 | $ 389 | (11% | ) | ||||||||
| NET INCOME PER COMMON SHARE | ||||||||||||
| Basic | $ 0.68 | $ 0.72 | (6% | ) | ||||||||
| Diluted | $ 0.66 | $ 0.71 | (7% | ) | ||||||||
| WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING | ||||||||||||
| Basic | 512 | 539 | ||||||||||
| Diluted | 522 | 551 | ||||||||||
| ADJUSTED OPERATING INCOME (excluding special items) | $ 450 | A | $ 448 | A | 0% | |||||||
| ADJUSTED INCOME BEFORE INCOME TAXES (excluding special items) | $ 457 | A | $ 454 | A | 1% | |||||||
| ADJUSTED NET INCOME (excluding special items) | $ 399 | A | $ 388 | A | 3% | |||||||
| ADJUSTED DILUTED EPS (excluding special items) | $ 0.76 | A | $ 0.70 | A | 9% |
BAXTER INTERNATIONAL INC.
Note to Consolidated Statements of Income
March 31, 2019 and 2018
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 March 31, 2019 and 2018 included special items which impacted the GAAP measures as follows:
| Three Months Ended March 31, | ||||||||||||
| 2019 | 2018 | Change | ||||||||||
| Gross Margin | $ 1,080 | $ 1,114 | (3% | ) | ||||||||
| Intangible asset amortization expense 1 | 43 | 41 | ||||||||||
| Business optimization items 2 | 19 | 6 | ||||||||||
| Acquisition and integration expense 3 | 5 | 3 | ||||||||||
| Litigation 4 | 8 | |||||||||||
| European medical devices regulation 5 | 4 | |||||||||||
| Adjusted Gross Margin | $ 1,151 | $ 1,172 | (2% | ) | ||||||||
| % of Net Sales | 43.7% | 43.8% | (0.1 pts | ) | ||||||||
| Selling, General and Administrative Expenses | $ 600 | $ 622 | (4% | ) | ||||||||
| Business optimization items 2 | (8 | ) | (29 | ) | ||||||||
| Acquisition and integration expense 3 | (5 | ) | (4 | ) | ||||||||
| Litigation 4 | (2 | ) | ||||||||||
| Adjusted Selling, General and Administrative Expenses | $ 587 | $ 587 | 0% | |||||||||
| % of Net Sales | 22.3% | 21.9% | 0.4 pts | |||||||||
| Research and Development Expenses | $ 129 | $ 140 | (8% | ) | ||||||||
| Business optimization items 2 | (11 | ) | (3 | ) | ||||||||
| Acquisition and integration expense 3 | (4 | ) | ||||||||||
| Adjusted Research and Development Expenses | $ 114 | $ 137 | (17% | ) | ||||||||
| % of Net Sales | 4.3% | 5.1% | (0.8 pts | ) | ||||||||
| Other Operating Income, Net | $ (33 | ) | $ (80 | ) | (59% | ) | ||||||
| Insurance recovery from legacy product-related matter 6 | 33 | |||||||||||
| Claris settlement 7 | 80 | |||||||||||
| Adjusted Other Operating Income | $ | $ | 0% | |||||||||
| % of Net Sales | 0.0% | 0.0% | 0.0 pts | |||||||||
| Operating Income | $ 384 | $ 432 | (11% | ) | ||||||||
| Impact of special items | 66 | 16 | ||||||||||
| Adjusted Operating Income | $ 450 | $ 448 | 0% | |||||||||
| % of Net Sales | 17.1% | 16.7% | 0.4 pts | |||||||||
| Income Before Income Taxes | $ 391 | $ 438 | (11% | ) | ||||||||
| Impact of special items | 66 | 16 | ||||||||||
| Adjusted Income Before Income Taxes | $ 457 | $ 454 | 1% | |||||||||
| Income Tax Expense | $ 44 | $ 49 | (10% | ) | ||||||||
| Impact of special items and impact of U.S. Tax Reform 8 | 14 | 17 | ||||||||||
| Adjusted Income Tax Expense | $ 58 | $ 66 | (12% | ) | ||||||||
| % of Adjusted Income Before Income Taxes | 12.7% | 14.5% | (1.8 pts | ) | ||||||||
| Net Income | $ 347 | $ 389 | (11% | ) | ||||||||
| Impact of special items | 52 | (1 | ) | |||||||||
| Adjusted Net Income | $399 | $388 | 3% | |||||||||
| Diluted EPS from Net Income | $ 0.66 | $ 0.71 | (7% | ) | ||||||||
| Impact of special items | 0.10 | (0.01 | ) | |||||||||
| Adjusted Diluted EPS from Net Income | $ 0.76 | $ 0.70 | 9% | |||||||||
| WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING | ||||||||||||
| Diluted | 522 | 551 |
The company s results in 2018 included charges of $38 million ($34 million, or $0.06 per diluted share, on an after-tax basis) related to business
optimization charges. This included charges of $12 million related to restructuring activities, $25 million of costs to implement business optimization programs, which primarily included external consulting and internal transition costs,
and $1 million of accelerated depreciation associated with facilities to be closed. The $12 million of restructuring charges included $10 million of employee termination costs and $2 million of asset impairment charges related to
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.
Sales by Operating Segment
Periods Ending March 31, 2019 and 2018
| Q1 2019 | Q1 2018 | % Growth @ Actual Rates | % Growth @ Constant Rates | |||||||||||||
| Americas | $1,408 | $1,442 | (2% | ) | (1% | ) | ||||||||||
| EMEA | 705 | 724 | (3% | ) | 4% | |||||||||||
| APAC | 519 | 511 | 2% | 7% | ||||||||||||
| Total Baxter | $2,632 | $2,677 | (2% | ) | 2% |
BAXTER INTERNATIONAL INC.
Periods Ending March 31, 2019 and 2018
| Q1 2019 | Q1 2018 | % Growth @ Actual Rates | % Growth @ Constant Rates | |||||||||||||
| Renal Care 1 | $851 | $868 | (2% | ) | 3% | |||||||||||
| Medication Delivery 2 | 634 | 676 | (6% | ) | (4% | ) | ||||||||||
| Pharmaceuticals 3 | 509 | 496 | 3% | 6% | ||||||||||||
| Clinical Nutrition 4 | 205 | 223 | (8% | ) | (5% | ) | ||||||||||
| Advanced Surgery 5 | 198 | 182 | 9% | 12% | ||||||||||||
| Acute Therapies 6 | 128 | 129 | (1% | ) | 4% | |||||||||||
| Other 7 | 107 | 103 | 4% | 8% | ||||||||||||
| Total Baxter | $2,632 | $2,677 | (2% | ) | 2% |
BAXTER INTERNATIONAL INC.
GBU Sales by U.S. and International
Periods Ending March 31, 2019
| Q1 2019 | Q1 2018 | % Growth | ||||||||||||||||||||||||||||||||||
| U.S. | International | Total | U.S. | International | Total | U.S. | International | Total | ||||||||||||||||||||||||||||
| Renal Care | $ 192 | $ 659 | $ 851 | $ 196 | $ 672 | $ 868 | (2% | ) | (2% | ) | (2% | ) | ||||||||||||||||||||||||
| Medication Delivery | 406 | 228 | 634 | 436 | 240 | 676 | (7% | ) | (5% | ) | (6% | ) | ||||||||||||||||||||||||
| Pharmaceuticals | 232 | 277 | 509 | 243 | 253 | 496 | (5% | ) | 9% | 3% | ||||||||||||||||||||||||||
| Clinical Nutrition | 77 | 128 | 205 | 83 | 140 | 223 | (7% | ) | (9% | ) | (8% | ) | ||||||||||||||||||||||||
| Advanced Surgery | 120 | 78 | 198 | 99 | 83 | 182 | 21% | (6% | ) | 9% | ||||||||||||||||||||||||||
| Acute Therapies | 48 | 80 | 128 | 46 | 83 | 129 | 4% | (4% | ) | (1% | ) | |||||||||||||||||||||||||
| Other | 45 | 62 | 107 | 44 | 59 | 103 | 2% | 5% | 4% | |||||||||||||||||||||||||||
| Total Baxter | $1,120 | $1,512 | $2,632 | $1,147 | $1,530 | $2,677 | (2% | ) | (1% | ) | (2% | ) |
BAXTER INTERNATIONAL INC.
Free Cash Flow Reconciliation
| Three Months Ended March 31, | ||||||||
| 2019 | 2018 | |||||||
| Cash flows from operations continuing operations | $148 | $447 | ||||||
| Capital expenditures | (198 | ) | (155 | ) | ||||
| Free cash flow continuing operations | ($50 | ) | $292 |
BAXTER INTERNATIONAL INC.
Reconciliation of Non-GAAP Financial Measure
Change in Net Sales As Reported to Operational Sales
Months Ended March 31, 2018 to The Three Months Ended March 31, 2019
| Q1 2019 * | ||||||||||||||||
| Net sales As Reported | US Cyclophosphamide | FX | Operational Sales | |||||||||||||
| Renal Care | (2% | ) | 0% | 5% | 3% | |||||||||||
| Medication Delivery | (6% | ) | 0% | 2% | (4% | ) | ||||||||||
| Pharmaceuticals | 3% | 2% | 3% | 9% | ||||||||||||
| Clinical Nutrition | (8% | ) | 0% | 3% | (5% | ) | ||||||||||
| Advanced Surgery | 9% | 0% | 3% | 12% | ||||||||||||
| Acute Therapies | (1% | ) | 0% | 5% | 4% | |||||||||||
| Other | 4% | 0% | 4% | 8% | ||||||||||||
| Total Baxter | (2% | ) | 0% | 4% | 2% |
BAXTER INTERNATIONAL INC.
Reconciliation of Non-GAAP Financial Measures
Projected 2019 Adjusted Earnings Per Share and Projected GAAP Earnings Per Share, and
Projected 2019 Adjusted Sales Growth and Projected GAAP Sales Growth
| 2019 Earnings Per Share Guidance | Q2 2019 | FY 2019 | ||
| Earnings per Diluted Share Adjusted | $0.80 - $0.82 | $3.27 - $3.35 | ||
| Estimated intangible asset amortization | $0.07 | $0.26 | ||
| Estimated business optimization charges | $0.03 - $0.04 | $0.13 - $0.16 | ||
| Estimated acquisition and integration expenses | $0.02 | $0.06 | ||
| Insurance recovery from legacy product-related matter | ($0.05) | |||
| Estimated European medical devices regulation | $0.01 | $0.07 | ||
| Earnings per Diluted Share GAAP | $0.66 - $0.69 | $2.77 - $2.88 | ||
| 2019 Sales Growth Guidance | Q2 2019 | FY 2019 | ||
| Sales Growth Operational | 2% - 3% | 3% - 4% | ||
| U.S. cyclophosphamide | (1%) - 0% | (1%) - 0% | ||
| Foreign exchange | (4%) | (2%) - (3%) | ||
| Sales Growth GAAP | (2%) | 0% - 1% |