Market Overview

Baxter Reports Second-Quarter 2018 Results and Increases Earnings Outlook for Full-Year 2018

Share:
  • Second-quarter revenue of $2.8 billion increased 9 percent on a
    reported basis and 4 percent on an operational basis
  • Second-quarter GAAP earnings per share (EPS) of $0.63; Adjusted EPS
    of $0.77 increased 22 percent
  • Company raises full-year 2018 GAAP EPS to $2.48 to $2.59; Adjusted
    EPS to $2.94 to $3.00

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.

"Our solid second 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 José (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.

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 its
compounding and contract manufacturing businesses.

Beginning in 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.

Baxter reported 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.

Also during the 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.

Business Highlights

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:

  • Hosted its 2018
    Investor Conference
    , outlining the company's strategies to drive
    sustained growth, deliver attractive shareholder value and advance
    patient care globally. The company also increased its financial
    guidance for 2020 and provided its financial outlook for 2023.
  • Expanded the company's medication delivery portfolio with two new
    innovative drug infusion pumps that help to meet the unique needs of
    markets around the world:
    • Received U.S.
      Food and Drug Administration (FDA) clearance
      and Health Canada
      approval of the Spectrum IQ Infusion System with Dose IQ
      Safety Software. The Spectrum IQ system is the
      first-of-its-kind designed specifically for bi-directional
      electronic medical records (EMR) integration with new exclusive
      features to help ensure the correct medications and fluids are
      delivered to the patient.
    • Secured CE Mark for the Evo IQ Infusion System in the
      United Kingdom and Ireland, representing the first in a series of
      planned regulatory submissions for the Evo IQ system
      internationally. The Evo IQ Infusion System includes
      advanced software to promote patient safety and delivers
      next-generation clinical workflows and clinician efficiency
      through a modular design that enables upgradable functionality to
      meet a wide range of clinical needs.
  • Received two approvals from Health Canada for innovations to patient
    care:
    • New
      indication for the company's oXiris set
      , which is used with
      Baxter's Prismaflex system and is now Canada's first blood
      purification set for simultaneous use in continuous renal
      replacement therapy and sepsis management protocols. oXiris
      previously received CE Mark and regulatory approval for the label
      expansion in more than 30 countries in Europe and certain
      countries in the Middle East and Africa, and Baxter plans to file
      for the expanded indication in additional countries.
    • Olimel 7.6% (globally referred to as Olimel N12), an
      olive-based, standardized solution with the highest protein and
      lowest glucose formulation available today. This triple-chamber
      bag represents the latest generation in the company's
      industry-leading parenteral nutrition portfolio; the Canadian
      launch will be the first in a series of planned global launches.
  • Announced key updates for the company's Sharesource
    remote patient management system
    , which is embedded in Baxter's Amia,
    Homechoice Claria and Kaguya automated peritoneal
    dialysis (APD) platforms, for home dialysis patients. The enhancements
    support greater accessibility and efficiencies for healthcare
    providers in remotely viewing patient data.

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.

About Baxter

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 www.baxter.com and
follow us on TwitterLinkedIn and Facebook.

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 statements.

Baxter, Spectrum IQ, Dose IQ, Evo IQ, oXiris, Prismaflex, Sharesource,
Amia, Homechoice Claria, Kaguya and Olimel are registered trademarks of
Baxter International Inc.

 
BAXTER INTERNATIONAL INC.
Consolidated Statements of Income
Three Months Ended June 30, 2018 and 2017
(unaudited)
(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%
 
A

Refer to page 7 for a description of the adjustments and a
reconciliation to GAAP measures.

NM - Not Meaningful
 
           
BAXTER INTERNATIONAL INC.
Note to Consolidated Statements of Income
Three Months Ended June 30, 2018 and 2017
Description of Adjustments and Reconciliation of GAAP to Non-GAAP
Measures
(unaudited)
(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    
 
1 The company's results in 2018 and 2017 included intangible asset
amortization expense of $44 million ($34 million, or $0.06 per
diluted share, on an after-tax basis) and $36 million ($27 million,
or $0.05 per diluted share, on an after-tax basis), respectively.
 
2 The company's results in 2018 included a charge of $47 million ($34
million, or $0.06 per diluted share, on an after-tax basis) related
to business optimization initiatives. This included a charge of $21
million related to restructuring activities, $25 million of costs to
implement business optimization programs which primarily included
external consulting and project employee costs, and $1 million of
accelerated depreciation associated with facilities to be closed.
The $21 million of net restructuring charges included $18 million of
employee termination costs and $3 million of other charges.
 

The company's results in 2017 included a charge of $35 million
($26 million, or $0.05 per diluted share, on an after-tax basis)
related to business optimization initiatives. This included a net
charge of $16 million related to restructuring activities, $16
million of costs to implement business optimization programs which
primarily included external consulting and project employee costs,
and $3 million of accelerated depreciation associated with
facilities to be closed. The $16 million of net restructuring
charges included net $7 million of employee termination costs, $4
million related to contract termination costs, and $5 million of
asset impairment charges primarily related to facility closures.

 
3

The company's results in 2018 include acquisition and integration
costs related to the company's acquisitions of Claris Injectables
Limited and the RECOTHROM and PREVELEAK products of $12 million
($10 million, or $0.02 per diluted share, on an after-tax basis).

 

The company's results in 2017 included acquisition and integration
costs of $5 million ($4 million, or $0.01 per diluted share, on an
after-tax basis) related to the company's acquisition of Claris
Injectables Limited.

 
4 The company's results in 2017 included a benefit of $4 million ($3
million, or $0.01 per diluted share, on an after-tax basis) related
to an adjustment to historical product reserves.
 
5 The company's results in 2017 included costs incurred related to the
Baxalta separation totaling $8 million ($6 million, or $0.01 per
diluted share, on an after-tax basis).
 
6 The company's results in 2017 included a charge of $33 million ($24
million, or $0.04 per diluted share, on an after-tax basis) related
to the deconsolidation of its Venezuelan operations.
 
7 Reflected in this item is the tax impact of the special items
identified in this table. 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 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.
 
NM - Not Meaningful
             
BAXTER INTERNATIONAL INC.
Consolidated Statements of Income
Six Months Ended June 30, 2018 and 2017
(unaudited)
(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%
 
A

Refer to page 9 for a description of the adjustments and a
reconciliation to GAAP measures.

NM - Not Meaningful
 
           
BAXTER INTERNATIONAL INC.
Note to Consolidated Statements of Income
Six Months Ended June 30, 2018 and 2017
Description of Adjustments and Reconciliation of GAAP to Non-GAAP
Measures
(unaudited)
(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    
 
 
1 The company's results in 2018 and 2017 included intangible asset
amortization expense of $85 million ($70 million, or $0.13 per
diluted share, on an after-tax basis) and $74 million ($55 million,
or $0.10 per diluted share, on an after-tax basis), respectively.
 
2 The company's results in 2018 included a net charge of $85 million
($68 million, or $0.12 per diluted share, on an after-tax basis)
related to business optimization initiatives. This included a net
charge of $33 million related to restructuring activities, $50
million of costs to implement business optimization programs which
primarily included external consulting and project employee costs,
and $2 million of accelerated depreciation associated with
facilities to be closed. The $33 million of net restructuring
charges included $28 million of employee termination costs, $3
million of asset impairment charges primarily related to facility
closures, and $2 million of other charges.
 
The company's results in 2017 included a net charge of $64 million
($47 million, or $0.08 per diluted share, on an after-tax basis)
related to business optimization initiatives. This included a net
charge of $19 million related to restructuring activities, $37
million of costs to implement business optimization programs which
primarily included external consulting and project employee costs,
and $8 million of accelerated depreciation associated with
facilities to be closed. The $19 million of net restructuring
charges included $9 million of employee termination costs, $5
million of contract termination costs, and $5 million of asset
impairment charges primarily related to facility closures.
 
3

The company's results in 2018 include acquisition and integration
costs related to the company's acquisitions of Claris Injectables
Limited and the RECOTHROM and PREVELEAK products of $19 million
($16 million, or $0.02 per diluted share, on an after-tax basis).

 
The company's results in 2017 included acquisition and integration
costs of $5 million ($4 million, or $0.01 per diluted share, on an
after-tax basis) related to the company's acquisition of Claris
Injectables Limited.
 
4 The company's results in 2018 included charges of $10 million ($9
million, or $0.02 per diluted share, on an after-tax basis) related
to certain product litigation.
 
5 The company's results in 2017 include a benefit of $4 million ($3
million, or $0.01 per diluted share, on an after-tax basis) related
to an adjustment to historical product reserves.
 
6 The company's results in 2017 included costs incurred related to the
Baxalta separation totaling $15 million ($11 million, or $0.02 per
diluted share, on an after-tax basis).
 
7 The company's results in 2017 include a benefit of $12 million ($9
million, or $0.02 per diluted share, on an after-tax basis) related
to an adjustment to the company's historical rebates and discount
reserves.
 
8 The company's results in 2018 included a benefit of $80 million ($78
million, or $0.14 per diluted share, on an after-tax basis) for the
settlement of certain claims related to the acquired operations of
Claris Injectables Limited.
 
9 The company's results in 2017 included a charge of $33 million ($24
million, or $0.05 per diluted share, on an after-tax basis) related
to the deconsolidation of its Venezuelan operations.
 
10 Reflected in this item is the tax impact of the special items
identified in this table as well as a benefit of $8 million, or
$0.01 per diluted share, from the first quarter of 2018, related to
an update to the estimated impact of U.S. federal tax reform
previously made by the company. 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 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.
NM - Not Meaningful
 
 
BAXTER INTERNATIONAL INC.
Sales by Operating Segment
Periods Ending June 30, 2018 and 2017
(unaudited)
($ in millions)
                                           
            Q2   Q2   % Growth @   % Growth @   YTD   YTD   % Growth @   % Growth @
              2018   2017   Actual Rates   Constant Rates   2018   2017   Actual Rates   Constant Rates
Americas $1,525 $1,433 6% 6% $2,967 $2,806 6% 5%
EMEA 758 666 14% 3% 1,482 1,297 14% 3%
APAC           559   506   10%   6%   1,070   977   10%   4%
Total Baxter           $2,842   $2,605   9%   5%   $5,519   $5,080   9%   5%
 
             
BAXTER INTERNATIONAL INC.
Sales by GBU
Periods Ending June 30, 2018 and 2017
(unaudited)
($ in millions)
                                             
            Q2 Q2 % Growth @ % Growth @ YTD YTD % Growth @ % Growth @
                2018   2017   Actual Rates   Constant Rates   2018   2017   Actual Rates   Constant Rates
Renal Care¹ $931 $854 9% 4% $1,799 $1,643 9% 4%
Medication Delivery² 681 683 0% (2%) 1,357 1,347 1% (1%)
Pharmaceuticals³ 537 450 19% 16% 1,033 877 18% 14%
Clinical Nutrition⁴ 221 216 2% (3%) 444 428 4% (2%)
Advanced Surgery⁵ 204 178 15% 12% 386 346 12% 8%
Acute Therapies⁶ 129 112 15% 10% 258 218 18% 12%
Other⁷             139   112   24%   20%   242   221   10%   4%
Total Baxter             $2,842   $2,605   9%   5%   $5,519   $5,080   9%   5%
 
1 Includes sales of the company's peritoneal dialysis (PD) and
hemodialysis (HD) and additional dialysis therapies and services.
2 Includes sales of the company's IV therapies, infusion pumps,
administration sets and drug reconstitution devices.
3 Includes sales of the company's premixed and oncology drug
platforms, inhaled anesthesia and critical care products and
pharmacy compounding services.
4 Includes sales of the company's parenteral nutrition (PN) therapies.
5 Includes sales of the company's biological products and medical
devices used in surgical procedures for hemostasis, tissue sealing
and adhesion prevention.
6 Includes sales of the company's continuous renal replacement
therapies (CRRT) and other organ support therapies focused in the
ICU.
7 Includes sales primarily from the company's pharmaceutical
partnering business.
 
 
BAXTER INTERNATIONAL INC.
GBU Sales by U.S. and International
Periods Ending June 30, 2018 and 2017
(unaudited)
($ in millions)
                                                                   
            Q2 2018           Q2 2017           % Growth
              U.S.   International   Total           U.S.   International   Total           U.S.   International   Total
Renal Care $204   $727   $931           $190   $664   $854           7%   9%   9%
Medication Delivery 426 255 681 431 252 683 (1%) 1% 0%
Pharmaceuticals 262 275 537 216 234 450 21% 18% 19%
Clinical Nutrition 80 141 221 96 120 216 (17%) 18% 2%
Advanced Surgery 118 86 204 101 77 178 17% 12% 15%
Acute Therapies 42 87 129 35 77 112 20% 13% 15%
Other           78   61   139           62   50   112           26%   22%   24%
Total Baxter           $1,210   $1,632   $2,842           $1,131   $1,474   $2,605           7%   11%   9%
   
                                   
BAXTER INTERNATIONAL INC.
GBU Sales by U.S. and International
Periods Ending June 30, 2018 and 2017
(unaudited)
($ in millions)
                                                                   
            YTD 2018           YTD 2017           % Growth
              U.S.   International   Total           U.S.   International   Total           U.S.   International   Total
Renal Care $400 $1,399 $1,799 $369 $1,274 $1,643 8% 10% 9%
Medication Delivery 862 495 1,357 860 487 1,347 0% 2% 1%
Pharmaceuticals 505 528 1,033 429 448 877 18% 18% 18%
Clinical Nutrition 163 281 444 184 244 428 (11%) 15% 4%
Advanced Surgery 217 169 386 198 148 346 10% 14% 12%
Acute Therapies 88 170 258 72 146 218 22% 16% 18%
Other           122   120   242           122   99   221           0%   21%   10%
Total Baxter           $2,357   $3,162   $5,519           $2,234   $2,846   $5,080           6%   11%   9%
 
 
BAXTER INTERNATIONAL INC.
Free Cash Flow Reconciliation
(unaudited)
($ in millions)
                   
            Six Months Ended
June 30,
              2018   2017
Cash flows from operations - continuing operations           $852   $767
  Capital expenditures           (311)   (279)
Free cash flow - continuing operations           $541   $488
 
                   
BAXTER INTERNATIONAL INC.
Reconciliation of Non-GAAP Financial Measure
Change in Net Sales As Reported to Operational Sales
From The Three Months Ended June 30, 2017 to The Three Months
Ended June 30, 2018
(unaudited)
 
 
 
                 
              Q2 2018 QTD*
Net sales US Operational
              As Reported   Cyclophosphamide   Acquisitions   FX   Sales
Renal Care 9% 0% 0% (5%) 4%
Medication Delivery 0% 0% 0% (2%) (2%)
Pharmaceuticals 19% 3% (8%) (3%) 11%
Clinical Nutrition 2% 0% 0% (5%) (3%)
Advanced Surgery 15% 0% (10%) (3%) 2%
Acute Therapies 15% 0% 0% (5%) 10%
Other 24% 0% 0% (4%) 20%
 
Total Baxter             9%   0%   (2%)   (4%)   4%
                               
U.S. 7% 1% (4%) 0% 4%
International             11%   0%   (1%)   (7%)   3%
 
*Totals may not foot due to rounding
                   
BAXTER INTERNATIONAL INC.
Reconciliation of Non-GAAP Financial Measure
Change in Net Sales As Reported to Operational Sales
From The Six Months Ended June 30, 2017 to The Six Months Ended
June 30, 2018
(unaudited)
 
 
 
                 
              Q2 2018 YTD*
Net sales US Operational
              As Reported   Cyclophosphamide   Acquisitions   FX   Sales
Renal Care 9% 0% 0% (5%) 4%
Medication Delivery 1% 0% 0% (2%) (1%)
Pharmaceuticals 18% 2% (8%) (4%) 8%
Clinical Nutrition 4% 0% 0% (6%) (2%)
Advanced Surgery 12% 0% (5%) (4%) 3%
Acute Therapies 18% 0% 0% (6%) 12%
Other 10% 0% 0% (6%) 4%
 
Total Baxter             9%   0%   (2%)   (4%)   3%
                               
U.S. 6% 0% (3%) 0% 3%
International             11%   0%   (1%)   (7%)   3%
 
*Totals may not foot due to rounding
 
BAXTER INTERNATIONAL INC.
Reconciliation of Non-GAAP Financial Measures
Projected 2018 Adjusted Earnings Per Share and Projected GAAP
Earnings Per Share, and
Projected 2018 Adjusted Sales Growth and Projected GAAP Sales
Growth
(unaudited)
                         
2018 Earnings Per Share Guidance           Q3 2018           FY 2018
Earnings per Diluted Share – Adjusted           $0.72 - $0.74           $2.94 - $3.00
Estimated intangible asset amortization           $0.07           $0.26
Estimated business optimization charges           $0.05 - $0.07           $0.22 - $0.27
Litigation costs           -           $0.01
Acquisition and integration expenses           $0.02           $0.07
Claris settlement           -           ($0.14)
U.S. tax reform           -           ($0.01)
Earnings per Diluted Share - GAAP           $0.56 - $0.60           $2.48 - $2.59
                   
 
 
                         
2018 Sales Growth Guidance           Q3 2018           FY 2018
Sales Growth – Operational           3% - 4%           4% - 5%
U.S. cyclophosphamide           (1%) - 0%           (1%) - 0%
Acquisitions           0% - 1%           1%
Foreign exchange           (1%) - 0%           1%
Sales Growth - GAAP           3%           6%

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