[July 29, 2015] |
|
Baxter Reports Strong Second Quarter Financial Results Exceeding Guidance
Baxter International Inc. (NYSE:BAX) today reported second quarter
financial results that exceeded the company's previously issued
guidance, and provided its complete financial outlook for the second
half of 2015. The results for the second quarter of 2015 include the
company's BioScience business, which was officially spun-off on July 1st
and is now operating as a publicly traded biopharmaceutical company,
Baxalta Incorporated (NYSE: BXLT). Starting in the third quarter of
2015, the BioScience business will be presented as a discontinued
operation in Baxter's results.
For the second quarter, Baxter posted net income of $332 million and
earnings of $0.60 per diluted share. Second quarter 2015 results
included net after-tax special items totaling $218 million (or $0.40 per
diluted share) primarily related to costs associated with the company's
spin-off of Baxalta, select business development initiatives and
intangible asset amortization, partially offset by a benefit from a
litigation settlement in which Baxter was the beneficiary. Second
quarter 2014 results included net after-tax charges totaling $172
million or ($0.31 per diluted share).
On an adjusted basis, excluding special items, Baxter's second quarter
net income totaled $550 million, or $1.00 per diluted share, exceeding
the guidance the company previously provided of $0.92 to $0.96 per
diluted share.
Worldwide sales totaled $3.9 billion, a decline of 6 percent from the
same period last year. Excluding the impact of foreign currency,
Baxter's worldwide sales grew 3 percent exceeding the company's guidance
of 1 percent. Sales within the United States grew 1 percent to $1.8
billion, and international sales of $2.1 billion declined 12 percent.
Excluding the impact of foreign currency, Baxter's international sales
grew 4 percent in the quarter.
By business, sales within Medical Products totaled $2.5 billion, a
decline of 9 percent. Excluding the impact of foreign currency, Medical
Products sales were comparable to the prior year. Growth in the quarter
was negatively impacted by approximately 3 percent due to increased
competition in the United States for the company's generic oncology
injectable, cyclophosphamide. Medical Products performance in the
quarter benefited from strong sales of inhaled anesthetics, infusion
pumps and peritoneal dialysis products as well as increased demand for
the company's injectable drug compounding services.
On a reported basis, BioScience sales of $1.4 billion declined 2 percent
compared to the prior-year period. Excluding the impact of foreign
currency, BioScience sales increased 7 percent driven by solid growth
across the portfolio. Additional details on Baxalta's performance in the
second quarter will be provided by Baxalta in a press release and
investor webcast to be held on July 30th. See www.baxalta.com
for more information.
''The spin-off of Baxalta was a historic event for the company, and we
are excited to embark on this new chapter for Baxter with a newfound
focus and vision that furthers our mission to help save and sustain
lives,'' said Robert L. Parkinson, Jr., chairman and chief executive
officer. ''As the new Baxter evolves, we are intensely focused on
accelerating profitable growth and expanding margins through disciplined
portfolio management, implementation of cost reduction initiatives and
the near-term launches of innovative new products. These efforts will
drive meaningful value, both in the near and long terms, for our
shareholders, partners, employees, and the patients and healthcare
providers we serve.''
Six-Month Results
For the first six months of 2015, Baxter reported net income of $762
million, or $1.39 per diluted share. Excluding special items, Baxter's
adjusted net income for the six-month period totaled $1.1 billion, or
$2.01 per diluted share.
Baxter's worldwide sales for the six-month period totaled approximately
$7.7 billion, declining 4 percent from the prior-year period. Excluding
the impact of foreign currency, Baxter's sales increased 3 percent
during the first six months of the 2015.
Medical Products sales of $4.9 billion declined 7 percent from the
prior-year period, and increased 3 percent after adjusting for the
impact of foreign currency and increased competition for
cyclophosphamide.
BioScience sales of $2.8 billion through June 30, 2015 were comparable
to the prior-year period on a reported basis, and advanced 8 percent
excluding the impact of foreign currency.
Recent Highlights
In addition to completing its spin-off of Baxalta during the quarter,
Baxter achieved a number of additional milestones, including:
-
Completion of 510K submission with the U.S. Food and Drug
Administration (FDA) for AMIA with SHARESOURCE, Baxter's next
generation peritoneal dialysis cycler which incorporates several
benefits designed to improve the patient experience and increase the
adoption of peritoneal dialysis. In addition, the SHARESOURCE
functionality provides secure two-way connectivity so healthcare
professionals can effectively monitor their patients' home treatments.
-
Successful launch of Baxter's next-generation SIGMA SPECTRUM infusion
pump in the U.S., Puerto Rico and Canada. The SPECTRUM platform has
been honored with the Best in KLAS customer satisfaction award for
four consecutive years, and the latest generation pump includes
several innovative features, including an enhanced Master Drug
Library, which helps to reduce pump-related adverse drug events and
improve patient safety. Customer response has been very positive, and
the SIGMA SPECTRUM is currently being used or in the process of being
placed in six of the top seven hospital systems in the U.S. as ranked
by U.S. News & World Report.
-
FDA acceptance of Baxter's Investigational Device Exemption, or IDE,
for VIVIA, a home-based hemodialysis (HD) system. This milestone
allows Baxter to initiate its final U.S. study in the coming months.
VIVIA has the potential to transform home hemodialysis and allow more
patients to benefit from high-dose HD in their homes.
-
Launch of the AK98 in-center hemodialysis monitor in several markets
in Eastern and Central Europe, the Middle East and Africa. The AK98 is
the latest monitor in the AK series and improves the usability,
reliability and total cost of operation for customers.
-
Baxter's BioPharma Solutions contract manufacturing business was
recognized as Best Contract Manufacturer at the annual Vaccine
Industry Excellence (ViE) Awards, held at the World Vaccine Congress
in Washington, D.C. This is the fourth time that Baxter's BioPharma
Solutions business has been recognized for this honor.
Outlook for Third Quarter and Second Half 2015
Baxter also announced today its outlook for the third quarter and second
half of 2015.
For both the third quarter and second half of the year, the company
expects sales to be comparable to the prior year periods, excluding the
impact of foreign currency. Including the impact of foreign currency,
the company expects sales to decline approximately 9 percent in both
periods. After adjusting for the impact of foreign currency and
increased competition in the U.S. for cyclophosphamide, Baxter expects
sales growth of approximately 3 percent in both the third quarter and
second half of 2015.
Baxter also expects earnings from continuing operations, before special
items, of $0.29 to $0.31 per diluted share for the third quarter and
$0.58 to $0.62 per diluted share for second half of 2015.
The third quarter and second half of 2015 earnings guidance excludes
approximately $0.29 per diluted share and $0.35 per diluted share,
respectively, of projected intangible amortization expense and a loss on
extinguishment of debt, net of gains from the unwinding of interest rate
swaps related to the company's debt tender offers. Reconciling for the
inclusion of intangible asset amortization and the loss on
extinguishment of debt results in expected GAAP (Generally Accepted
Accounting Principles) earnings of $0.00 to $0.02 per diluted share and
$0.23 to $0.27 per diluted share, before other special items, for the
third quarter and second half periods.
A webcast of Baxter's second quarter conference call for investors can
be accessed live from a link on the company's website at www.baxter.com
beginning at 4:00 p.m. CDT on July 29, 2015. Please visit Baxter's
website for more information regarding this 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 the 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, R&D pipeline including results of clinical trials and planned
product launches, and outlook for 2015. 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; 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 associated with the recent
separation of the biopharmaceutical and medical products businesses; 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; 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 June 30, 2015 and 2014
|
(unaudited)
|
(in millions, except per share and percentage data)
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
June 30,
|
|
|
|
|
2015
|
|
2014
|
|
Change
|
|
|
|
|
|
|
|
NET SALES
|
|
$3,893
|
|
$4,154
|
|
(6%)
|
|
|
|
|
|
|
|
COST OF SALES
|
|
1,973
|
|
2,185
|
|
(10%)
|
|
|
|
|
|
|
|
GROSS MARGIN
|
|
1,920
|
|
1,969
|
|
(2%)
|
% of Net Sales
|
|
49.3%
|
|
47.4%
|
|
1.9 pts
|
|
|
|
|
|
|
|
MARKETING AND ADMINISTRATIVE EXPENSES
|
|
1,097
|
|
988
|
|
11%
|
% of Net Sales
|
|
28.2%
|
|
23.8%
|
|
4.4 pts
|
|
|
|
|
|
|
|
RESEARCH AND DEVELOPMENT EXPENSES
|
|
388
|
|
322
|
|
20%
|
% of Net Sales
|
|
10.0%
|
|
7.8%
|
|
2.2 pts
|
|
|
|
|
|
|
|
NET INTEREST EXPENSE
|
|
34
|
|
42
|
|
(19%)
|
|
|
|
|
|
|
|
OTHER (INCOME) EXPENSE, NET
|
|
(67)
|
|
15
|
|
N/M
|
|
|
|
|
|
|
|
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
|
|
468
|
|
602
|
|
(22%)
|
|
|
|
|
|
|
|
INCOME TAX EXPENSE
|
|
132
|
|
134
|
|
(1%)
|
% of Income from Continuing Operations before Income Taxes
|
|
28.2%
|
|
22.3%
|
|
5.9 pts
|
|
|
|
|
|
|
|
INCOME FROM CONTINUING OPERATIONS
|
|
336
|
|
468
|
|
(28%)
|
|
|
|
|
|
|
|
INCOME FROM DISCONTINUED OPERATIONS, NET OF TAX A
|
|
(4)
|
|
52
|
|
N/M
|
|
|
|
|
|
|
|
NET INCOME
|
|
$332
|
|
$520
|
|
(36%)
|
|
|
|
|
|
|
|
INCOME FROM CONTINUING OPERATIONS PER COMMON SHARE
|
|
|
|
|
|
|
Basic
|
|
$0.62
|
|
$0.86
|
|
(28%)
|
Diluted
|
|
$0.61
|
|
$0.85
|
|
(28%)
|
|
|
|
|
|
|
|
INCOME FROM DISCONTINUED OPERATIONS PER COMMON SHARE
|
|
|
|
|
|
|
Basic
|
|
$(0.01)
|
|
$0.10
|
|
N/M
|
Diluted
|
|
$(0.01)
|
|
$0.10
|
|
N/M
|
|
|
|
|
|
|
|
NET INCOME PER COMMON SHARE
|
|
|
|
|
|
|
Basic
|
|
$0.61
|
|
$0.96
|
|
(36%)
|
Diluted
|
|
$0.60
|
|
$0.95
|
|
(37%)
|
|
|
|
|
|
|
|
WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
|
|
|
|
|
|
|
Basic
|
|
544
|
|
542
|
|
|
Diluted
|
|
549
|
|
548
|
|
|
|
|
|
|
|
|
|
ADJUSTED PRE-TAX INCOME FROM CONTINUING OPERATIONS (excluding
special items)
|
|
$716
|
B
|
$826
|
B
|
(13%)
|
ADJUSTED INCOME FROM CONTINUING OPERATIONS (excluding special
items)
|
|
$550
|
B
|
$640
|
B
|
(14%)
|
ADJUSTED DILUTED EPS FROM CONTINUING OPERATIONS (excluding
special items)
|
|
$1.00
|
B
|
$1.16
|
B
|
(14%)
|
A
|
|
Operating results from the company's vaccines franchise are
classified as discontinued operations for all periods presented.
|
B
|
|
Refer to page 8 for a description of the adjustments and a
reconciliation to generally accepted accounting principles (GAAP)
measures.
|
BAXTER INTERNATIONAL INC.
|
Note to Consolidated Statements of Income
|
Three Months Ended June 30, 2015 and 2014
|
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,
2015 and 2014 included special items which impacted the
GAAP measures as follows:
|
|
|
Three Months Ended
June 30,
|
|
|
|
|
2015
|
|
2014
|
|
Change
|
Gross Margin
|
|
$1,920
|
|
$1,969
|
|
(2%)
|
Intangible asset amortization expense 1
|
|
48
|
|
47
|
|
|
Business optimization items 2
|
|
3
|
|
(14)
|
|
|
Separation-related costs 3
|
|
3
|
|
-
|
|
|
Product-related items 4
|
|
-
|
|
89
|
|
|
Adjusted Gross Margin
|
|
$1,974
|
|
$2,091
|
|
(6%)
|
% of Net Sales
|
|
50.7%
|
|
50.3%
|
|
0.4 pts
|
|
|
|
|
|
|
|
Marketing and Administrative Expenses
|
|
$1,097
|
|
$988
|
|
11%
|
Gambro integration items 5
|
|
(20)
|
|
(27)
|
|
|
Business optimization items 2
|
|
(8)
|
|
16
|
|
|
Separation-related costs 3
|
|
(118)
|
|
(22)
|
|
|
Product-related items 4
|
|
-
|
|
(4)
|
|
|
Adjusted Marketing and Administrative Expenses
|
|
$951
|
|
$951
|
|
0%
|
% of Net Sales
|
|
24.4%
|
|
22.9%
|
|
1.5 pts
|
|
|
|
|
|
|
|
Research and Development Expenses
|
|
$388
|
|
$322
|
|
20%
|
Business development items 6
|
|
(87)
|
|
(35)
|
|
|
Business optimization items 2
|
|
(3)
|
|
2
|
|
|
Separation-related costs 3
|
|
(6)
|
|
-
|
|
|
Adjusted Research and Development Expenses
|
|
$292
|
|
$289
|
|
1%
|
% of Net Sales
|
|
7.5%
|
|
7.0%
|
|
0.5 pts
|
|
|
|
|
|
|
|
Net Interest Expense
|
|
$34
|
|
$42
|
|
(19%)
|
Separation-related costs 3
|
|
(4)
|
|
-
|
|
|
Adjusted Net Interest Expense
|
|
$30
|
|
$42
|
|
(29%)
|
|
|
|
|
|
|
|
Other (Income) Expense, Net
|
|
$(67)
|
|
$15
|
|
N/M
|
Reserve items and adjustments 7
|
|
52
|
|
(30)
|
|
|
Gambro integration items 5
|
|
-
|
|
(2)
|
|
|
Adjusted Other Income, Net
|
|
$(15)
|
|
$(17)
|
|
N/M
|
|
|
|
|
|
|
|
Pre-Tax Income from Continuing Operations
|
|
$468
|
|
$602
|
|
(22%)
|
Impact of special items
|
|
248
|
|
224
|
|
|
Adjusted Pre-Tax Income from Continuing Operations
|
|
$716
|
|
$826
|
|
(13%)
|
|
|
|
|
|
|
|
Income Tax Expense
|
|
$132
|
|
$134
|
|
(1%)
|
Impact of special items
|
|
34
|
|
52
|
|
|
Adjusted Income Tax Expense
|
|
$166
|
|
$186
|
|
(11%)
|
% of Adjusted Pre-Tax Income from Continuing Operations
|
|
23.2%
|
|
22.5%
|
|
0.7 pts
|
|
|
|
|
|
|
|
Income from Continuing Operations
|
|
$336
|
|
$468
|
|
(28%)
|
Impact of special items
|
|
214
|
|
172
|
|
|
Adjusted Income from Continuing Operations
|
|
$550
|
|
$640
|
|
(14%)
|
|
|
|
|
|
|
|
Adjusted Income from Discontinued Operations
|
|
-
|
|
52
|
|
|
|
|
|
|
|
|
|
Adjusted Net Income
|
|
$550
|
|
$692
|
|
(21%)
|
|
|
|
|
|
|
|
Diluted EPS from Continuing Operations
|
|
$0.61
|
|
$0.85
|
|
(28%)
|
Impact of special items
|
|
0.39
|
|
0.31
|
|
|
Adjusted Diluted EPS from Continuing Operations
|
|
$1.00
|
|
$1.16
|
|
(14%)
|
|
|
|
|
|
|
|
Adjusted Diluted EPS from Discontinued Operations
|
|
0.00
|
|
0.10
|
|
|
|
|
|
|
|
|
|
Adjusted Diluted EPS
|
|
$1.00
|
|
$1.26
|
|
(21%)
|
|
|
|
|
|
|
|
WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
|
|
|
|
|
Diluted
|
|
549
|
|
548
|
|
|
1
|
|
The company's results in 2015 and 2014 included intangible asset
amortization expense of $48 million ($37 million, or $0.07 per
diluted share, on an after-tax basis) and $47 million ($36 million,
or $0.07 per diluted share, on an after-tax basis), respectively.
|
2
|
|
The company's results in 2015 included business optimization charges
of $14 million ($9 million, or $0.01 per diluted share). The
company's results in 2014 included a net benefit of $32 million ($18
million, or $0.03 per diluted share, on an after-tax basis)
primarily related to an adjustment to previous business optimization
reserves that are no longer probable of being utilized.
|
3
|
|
The company's results in 2015 and 2014 included separation-related
costs of $131 million ($115 million, or $0.21 per diluted share, on
an after-tax basis) and $22 million ($21 million, or $0.04 per
diluted share, on an after-tax basis), respectively, for the planned
spin-off of Baxter's biopharmaceuticals business, Baxalta
Incorporated (Baxalta).
|
4
|
|
The company's results in 2014 included total charges of $93
million ($58 million, or $0.10 per diluted share, on an after-tax
basis) primarily related to product remediation efforts for the
SIGMA SPECTRUM infusion pump.
|
5
|
|
The company's results in 2015 and 2014 included total charges of $20
million ($15 million, or $0.03 per diluted share, on an after-tax
basis) and $29 million ($21 million, or $0.04 per diluted share, on
an after-tax basis), respectively, primarily related to the
integration of Gambro AB (Gambro).
|
6
|
|
The company's results in 2015 and 2014 included total charges of $87
million ($71 million, or $0.13 per diluted share, on an after-tax
basis) and $35 million ($30 million, or $0.05 per diluted share, on
an after-tax basis), respectively, related to certain milestone
payments associated with the company's collaboration arrangements.
|
7
|
|
The company's results in 2015 included income, net of expenses, of
$52 million ($33 million, or $0.06 per diluted share, on an
after-tax basis) related to a litigation settlement in which Baxter
was the beneficiary. The company's results in 2014 included a net
expense of $30 million ($24 million, or $0.04 per diluted share, on
an after-tax basis) primarily due to an increase in the estimated
fair value of acquisition-related contingent payment liabilities,
partially offset by a third-party recovery on previous litigation
reserves.
|
|
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.
|
Consolidated Statements of Income
|
Six Months Ended June 30, 2015 and 2014
|
(unaudited)
|
(in millions, except per share and percentage data)
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
|
June 30,
|
|
|
|
|
2015
|
|
2014
|
|
Change
|
|
|
|
|
|
|
|
NET SALES
|
|
$7,657
|
|
$8,002
|
|
(4%)
|
|
|
|
|
|
|
|
COST OF SALES
|
|
3,936
|
|
4,142
|
|
(5%)
|
|
|
|
|
|
|
|
GROSS MARGIN
|
|
3,721
|
|
3,860
|
|
(4%)
|
% of Net Sales
|
|
48.6%
|
|
48.2%
|
|
0.4 pts
|
|
|
|
|
|
|
|
MARKETING AND ADMINISTRATIVE EXPENSES
|
|
2,112
|
|
1,898
|
|
11%
|
% of Net Sales
|
|
27.6%
|
|
23.7%
|
|
3.9 pts
|
|
|
|
|
|
|
|
RESEARCH AND DEVELOPMENT EXPENSES
|
|
688
|
|
631
|
|
9%
|
% of Net Sales
|
|
9.0%
|
|
7.9%
|
|
1.1 pts
|
|
|
|
|
|
|
|
NET INTEREST EXPENSE
|
|
64
|
|
85
|
|
(25%)
|
|
|
|
|
|
|
|
OTHER INCOME, NET
|
|
(141)
|
|
(9)
|
|
N/M
|
|
|
|
|
|
|
|
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
|
|
998
|
|
1,255
|
|
(20%)
|
|
|
|
|
|
|
|
INCOME TAX EXPENSE
|
|
242
|
|
280
|
|
(14%)
|
% of Income from Continuing Operations before Income Taxes
|
|
24.2%
|
|
22.3%
|
|
1.9 pts
|
|
|
|
|
|
|
|
INCOME FROM CONTINUING OPERATIONS
|
|
756
|
|
975
|
|
(22%)
|
|
|
|
|
|
|
|
INCOME FROM DISCONTINUED OPERATIONS, NET OF TAX A
|
|
6
|
|
101
|
|
N/M
|
|
|
|
|
|
|
|
NET INCOME
|
|
$762
|
|
$1,076
|
|
(29%)
|
|
|
|
|
|
|
|
INCOME FROM CONTINUING OPERATIONS PER COMMON SHARE
|
|
|
|
|
|
|
Basic
|
|
$1.39
|
|
$1.79
|
|
(22%)
|
Diluted
|
|
$1.38
|
|
$1.78
|
|
(22%)
|
|
|
|
|
|
|
|
INCOME FROM DISCONTINUED OPERATIONS PER COMMON SHARE
|
|
|
|
|
|
|
Basic
|
|
$0.01
|
|
$0.19
|
|
N/M
|
Diluted
|
|
$0.01
|
|
$0.18
|
|
N/M
|
|
|
|
|
|
|
|
NET INCOME PER COMMON SHARE
|
|
|
|
|
|
|
Basic
|
|
$1.40
|
|
$1.98
|
|
(29%)
|
Diluted
|
|
$1.39
|
|
$1.96
|
|
(29%)
|
|
|
|
|
|
|
|
WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
|
|
|
|
|
|
|
Basic
|
|
544
|
|
542
|
|
|
Diluted
|
|
548
|
|
548
|
|
|
|
|
|
|
|
|
|
ADJUSTED PRE-TAX INCOME FROM CONTINUING OPERATIONS (excluding
special items)
|
|
$1,418
|
B
|
$1,591
|
B
|
(11%)
|
ADJUSTED INCOME FROM CONTINUING OPERATIONS (excluding special
items)
|
|
$1,099
|
B
|
$1,235
|
B
|
(11%)
|
ADJUSTED DILUTED EPS FROM CONTINUING OPERATIONS (excluding
special items)
|
|
$2.01
|
B
|
$2.25
|
B
|
(11%)
|
A
|
|
Operating results from the company's vaccines franchise are
classified as discontinued operations for all periods presented.
|
B
|
|
Refer to page 10 for a description of the adjustments and a
reconciliation to generally accepted accounting principles (GAAP)
measures.
|
BAXTER INTERNATIONAL INC.
|
Note to Consolidated Statements of Income
|
Six Months Ended June 30, 2015 and 2014
|
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, 2015
and 2014 included special items which impacted the
GAAP measures as follows:
|
|
|
Six Months Ended
June 30,
|
|
|
|
|
2015
|
|
2014
|
|
Change
|
Gross Margin
|
|
$3,721
|
|
$3,860
|
|
(4%)
|
Intangible asset amortization expense 1
|
|
96
|
|
90
|
|
|
Business optimization items 2
|
|
(4)
|
|
(10)
|
|
|
Separation-related costs 3
|
|
4
|
|
-
|
|
|
Product-related items 4
|
|
-
|
|
89
|
|
|
Adjusted Gross Margin
|
|
$3,817
|
|
$4,029
|
|
(5%)
|
% of Net Sales
|
|
49.8%
|
|
50.3%
|
|
(0.5 pts)
|
|
|
|
|
|
|
|
Marketing and Administrative Expenses
|
|
$2,112
|
|
$1,898
|
|
11%
|
Gambro integration items 5
|
|
(38)
|
|
(44)
|
|
|
Reserve items and adjustments 6
|
|
-
|
|
10
|
|
|
Business optimization items 2
|
|
(10)
|
|
6
|
|
|
Separation-related costs 3
|
|
(226)
|
|
(22)
|
|
|
Product-related items 4
|
|
-
|
|
(4)
|
|
|
Adjusted Marketing and Administrative Expenses
|
|
$1,838
|
|
$1,844
|
|
(0%)
|
% of Net Sales
|
|
24.0%
|
|
23.0%
|
|
1 pts
|
|
|
|
|
|
|
|
Research and Development Expenses
|
|
$688
|
|
$631
|
|
9%
|
Business development items 7
|
|
(87)
|
|
(60)
|
|
|
Business optimization items 2
|
|
3
|
|
(4)
|
|
|
Separation-related costs 3
|
|
(14)
|
|
-
|
|
|
Adjusted Research and Development Expenses
|
|
$590
|
|
$567
|
|
4%
|
% of Net Sales
|
|
7.7%
|
|
7.1%
|
|
0.6 pts
|
|
|
|
|
|
|
|
Net Interest Expense
|
|
$64
|
|
$85
|
|
(25%)
|
Separation-related costs 3
|
|
(4)
|
|
-
|
|
|
Adjusted Net Interest Expense
|
|
$60
|
|
$85
|
|
(29%)
|
|
|
|
|
|
|
|
Other Income, Net
|
|
$(141)
|
|
$(9)
|
|
N/M
|
Gambro integration items 5
|
|
-
|
|
(19)
|
|
|
Reserve items and adjustments 6
|
|
52
|
|
(30)
|
|
|
Adjusted Other Income, Net
|
|
$(89)
|
|
$(58)
|
|
N/M
|
|
|
|
|
|
|
|
Pre-Tax Income from Continuing Operations
|
|
$998
|
|
$1,255
|
|
(20%)
|
Impact of special items
|
|
420
|
|
336
|
|
|
Adjusted Pre-Tax Income from Continuing Operations
|
|
$1,418
|
|
$1,591
|
|
(11%)
|
|
|
|
|
|
|
|
Income Tax Expense
|
|
$242
|
|
$280
|
|
(14%)
|
Impact of special items
|
|
77
|
|
76
|
|
|
Adjusted Income Tax Expense
|
|
$319
|
|
$356
|
|
(10%)
|
% of Adjusted Pre-Tax Income from Continuing Operations
|
|
22.5%
|
|
22.4%
|
|
0.1 pts
|
|
|
|
|
|
|
|
Income from Continuing Operations
|
|
$756
|
|
$975
|
|
(22%)
|
Impact of special items
|
|
343
|
|
260
|
|
|
Adjusted Income from Continuing Operations
|
|
$1,099
|
|
$1,235
|
|
(11%)
|
|
|
|
|
|
|
|
Adjusted Income from Discontinued Operations
|
|
1
|
|
109
|
|
|
|
|
|
|
|
|
|
Adjusted Net Income
|
|
$1,100
|
|
$1,344
|
|
(18%)
|
|
|
|
|
|
|
|
Diluted EPS from Continuing Operations
|
|
$1.38
|
|
$1.78
|
|
(22%)
|
Impact of special items
|
|
0.63
|
|
0.47
|
|
|
Adjusted Diluted EPS from Continuing Operations
|
|
$2.01
|
|
$2.25
|
|
(11%)
|
|
|
|
|
|
|
|
Adjusted Diluted EPS from Discontinued Operations
|
|
0.00
|
|
0.20
|
|
|
|
|
|
|
|
|
|
Adjusted Diluted EPS
|
|
$2.01
|
|
$2.45
|
|
(18%)
|
|
|
|
|
|
|
|
WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
|
|
|
|
|
Diluted
|
|
548
|
|
548
|
|
|
1
|
|
The company's results in 2015 and 2014 included intangible asset
amortization expense of $96 million ($75 million, or $0.14 per
diluted share, on an after-tax basis) and $90 million ($70 million,
or $0.13 per diluted share, on an after-tax basis), respectively.
|
2
|
|
The company's results in 2015 included a net charge of $3 million
($1 million, or $0.00 per diluted share, on an after-tax basis)
primarily related to business optimization charges of $32 million,
partially offset by an adjustment to previous business optimization
reserves that are no longer probable of being utilized. The
company's results in 2014 included a net benefit of $12 million ($5
million, or $0.01 per diluted share, on an after-tax basis)
primarily related to an adjustment of $37 million to previous
business optimization reserves that are no longer probable of being
utilized, partially offset by additional business optimization
charges of $25 million.
|
3
|
|
The company's results in 2015 and 2014 included separation-related
costs of $248 million ($202 million, or $0.37 per diluted share, on
an after-tax basis) and $22 million ($21 million, or $0.04 per
diluted share, on an after-tax basis), respectively, for the planned
spin-off of Baxalta.
|
4
|
|
The company's results in 2014 included total charges of $93
million ($58 million, or $0.10 per diluted share, on an after-tax
basis) primarily related to product remediation efforts for the
SIGMA SPECTRUM infusion pump.
|
5
|
|
The company's results in 2015 and 2014 included total charges of $38
million ($27 million, or $0.05 per diluted share, on an after-tax
basis) and $63 million ($47 million, or $0.09 per diluted share, on
an after-tax basis), respectively, primarily related to the
integration of Gambro, including a loss on the divestiture of
Baxter's legacy Continuous Renal Replacement Therapy business.
|
6
|
|
The company's results in 2015 included income, net of expenses, of
$52 million ($33 million, or $0.06 per diluted share, on an
after-tax basis) related to a litigation settlement in which Baxter
was the beneficiary. The company's results in 2014 included a net
expense of $20 million ($17 million, or $0.03 per diluted share, on
an after-tax basis) primarily related to an increase in the
estimated fair value of acquisition-related contingent payment
liabilities, partially offset by third-party recoveries and
reversals of prior litigation reserves.
|
7
|
|
The company's results in 2015 and 2014 included total charges of $87
million ($71 million, or $0.13 per diluted share, on an after-tax
basis) and $60 million ($52 million, or $0.09 per diluted share, on
an after-tax basis), respectively, related to certain milestone
payments associated with the company's collaboration arrangements.
|
|
|
|
For more information on the company's use of non-GAAP financial
measures in this press release, please see the company's Current
Report on Form 8-K filed with the Securities and Exchange
Commission on the date of this press release.
|
BAXTER INTERNATIONAL INC.
|
|
Net Sales
|
|
Periods Ending June 30, 2015 and 2014
|
|
(unaudited)
|
|
($ in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q2
|
|
Q2
|
|
% Growth @
|
|
% Growth @
|
|
|
|
|
|
|
YTD
|
|
YTD
|
|
% Growth @
|
|
% Growth @
|
|
|
|
|
|
|
|
|
2015
|
|
2014
|
|
Actual Rates
|
|
Constant Rates
|
|
|
|
|
|
|
2015
|
|
2014
|
|
Actual Rates
|
|
Constant Rates
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BioScience 1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
|
|
|
|
|
$775
|
|
$733
|
|
6%
|
|
6%
|
|
|
|
|
|
|
$1,530
|
|
$1,439
|
|
6%
|
|
6%
|
|
International
|
|
|
|
|
|
|
654
|
|
719
|
|
(9%)
|
|
9%
|
|
|
|
|
|
|
1,260
|
|
1,342
|
|
(6%)
|
|
9%
|
|
Total BioScience
|
|
|
|
|
|
|
$1,429
|
|
$1,452
|
|
(2%)
|
|
7%
|
|
|
|
|
|
|
$2,790
|
|
$2,781
|
|
0%
|
|
8%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Medical Products 1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
|
|
|
|
|
$977
|
|
$999
|
|
(2%)
|
|
(2%)
|
|
|
|
|
|
|
$1,922
|
|
$1,934
|
|
(1%)
|
|
(1%)
|
|
International
|
|
|
|
|
|
|
1,487
|
|
1,703
|
|
(13%)
|
|
2%
|
|
|
|
|
|
|
2,945
|
|
3,287
|
|
(10%)
|
|
2%
|
|
Total Medical Products
|
|
|
|
|
|
|
$2,464
|
|
$2,702
|
|
(9%)
|
|
0%
|
|
|
|
|
|
|
$4,867
|
|
$5,221
|
|
(7%)
|
|
1%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Baxter International Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
|
|
|
|
|
$1,752
|
|
$1,732
|
|
1%
|
|
1%
|
|
|
|
|
|
|
$3,452
|
|
$3,373
|
|
2%
|
|
2%
|
|
International
|
|
|
|
|
|
|
2,141
|
|
2,422
|
|
(12%)
|
|
4%
|
|
|
|
|
|
|
4,205
|
|
4,629
|
|
(9%)
|
|
4%
|
|
Total Baxter
|
|
|
|
|
|
|
$3,893
|
|
$4,154
|
|
(6%)
|
|
3%
|
|
|
|
|
|
|
$7,657
|
|
$8,002
|
|
(4%)
|
|
3%
|
|
1
|
|
In connection with the planned spin-off of Baxalta, the company
realigned its biosurgery products and services to the Medical
Products segment in the first quarter of 2015. Effective January 1,
2015, the company changed its segment presentation to reflect this
new structure, and recast all prior periods presented to conform to
the new presentation.
|
BAXTER INTERNATIONAL INC.
|
|
Sales by Franchise 1
|
|
Periods Ending June 30, 2015 and 2014
|
|
(unaudited)
|
|
($ in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q2
|
|
Q2
|
|
% Growth @
|
|
% Growth @
|
|
YTD
|
|
YTD
|
|
% Growth @
|
|
% Growth @
|
|
|
|
|
|
|
|
|
2015
|
|
2014
|
|
Actual Rates
|
|
Constant Rates
|
|
2015
|
|
2014
|
|
Actual Rates
|
|
Constant Rates
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BioScience
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hemophilia
|
|
|
|
|
|
|
$672
|
|
$720
|
|
(7%)
|
|
4%
|
|
$1,313
|
|
$1,395
|
|
(6%)
|
|
3%
|
|
Immunoglobulin Therapies
|
|
|
|
|
|
|
422
|
|
393
|
|
7%
|
|
13%
|
|
842
|
|
791
|
|
6%
|
|
11%
|
|
Inhibitor Therapies
|
|
|
|
|
|
|
183
|
|
184
|
|
(1%)
|
|
12%
|
|
349
|
|
336
|
|
4%
|
|
15%
|
|
BioTherapeutics
|
|
|
|
|
|
|
152
|
|
155
|
|
(2%)
|
|
3%
|
|
286
|
|
259
|
|
10%
|
|
16%
|
|
Total BioScience
|
|
|
|
|
|
|
$1,429
|
|
$1,452
|
|
(2%)
|
|
7%
|
|
$2,790
|
|
$2,781
|
|
0%
|
|
8%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Medical Products
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Renal
|
|
|
|
|
|
|
$949
|
|
$1,044
|
|
(9%)
|
|
3%
|
|
$1,862
|
|
$2,035
|
|
(9%)
|
|
2%
|
|
Fluid Systems
|
|
|
|
|
|
|
518
|
|
534
|
|
(3%)
|
|
3%
|
|
1,011
|
|
1,038
|
|
(3%)
|
|
3%
|
|
Integrated Pharmacy Solutions
|
|
|
|
|
|
|
548
|
|
655
|
|
(16%)
|
|
(8%)
|
|
1,112
|
|
1,247
|
|
(11%)
|
|
(4%)
|
|
Surgical Care
|
|
|
|
|
|
|
333
|
|
346
|
|
(4%)
|
|
4%
|
|
655
|
|
668
|
|
(2%)
|
|
4%
|
|
Other
|
|
|
|
|
|
|
116
|
|
123
|
|
(6%)
|
|
2%
|
|
227
|
|
233
|
|
(3%)
|
|
4%
|
|
Total Medical Products
|
|
|
|
|
|
|
$2,464
|
|
$2,702
|
|
(9%)
|
|
0%
|
|
$4,867
|
|
$5,221
|
|
(7%)
|
|
1%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Baxter
|
|
|
|
|
|
|
$3,893
|
|
$4,154
|
|
(6%)
|
|
3%
|
|
$7,657
|
|
$8,002
|
|
(4%)
|
|
3%
|
|
1
|
|
Effective January 1, 2015, Baxter has transitioned to a new
commercial franchise structure for reporting net sales. Prior period
net sales have been recast to reflect the new commercial franchise
structure. A description of each commercial franchise can be found
in the earnings press release for the quarterly period ended March
31, 2015 filed as Exhibit 99.1 to Baxter's Current Report on Form
8-K on April 23, 2015.
|
BAXTER INTERNATIONAL INC.
|
|
Franchise Sales by U.S. and International 1
|
|
Three-Month Periods Ending June 30, 2015 and 2014
|
|
(unaudited)
|
|
($ in millions)
|
|
|
|
|
|
|
|
|
|
|
Q2 2015
|
|
|
|
|
|
|
Q2 2014
|
|
|
|
|
|
|
% Growth
|
|
|
|
|
|
|
|
|
U.S.
|
|
International
|
|
Total
|
|
|
|
|
|
|
U.S.
|
|
International
|
|
Total
|
|
|
|
|
|
|
U.S.
|
|
International
|
|
Total
|
|
BioScience
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hemophilia
|
|
|
|
|
|
|
$322
|
|
$350
|
|
$672
|
|
|
|
|
|
|
$323
|
|
$397
|
|
$720
|
|
|
|
|
|
|
0%
|
|
(12%)
|
|
(7%)
|
|
Immunoglobulin Therapies
|
|
|
|
|
|
|
318
|
|
104
|
|
422
|
|
|
|
|
|
|
294
|
|
99
|
|
393
|
|
|
|
|
|
|
8%
|
|
5%
|
|
7%
|
|
Inhibitor Therapies
|
|
|
|
|
|
|
69
|
|
114
|
|
183
|
|
|
|
|
|
|
52
|
|
132
|
|
184
|
|
|
|
|
|
|
33%
|
|
(14%)
|
|
(1%)
|
|
BioTherapeutics
|
|
|
|
|
|
|
66
|
|
86
|
|
152
|
|
|
|
|
|
|
64
|
|
91
|
|
155
|
|
|
|
|
|
|
3%
|
|
(5%)
|
|
(2%)
|
|
Total BioScience
|
|
|
|
|
|
|
$775
|
|
$654
|
|
$1,429
|
|
|
|
|
|
|
$733
|
|
$719
|
|
$1,452
|
|
|
|
|
|
|
6%
|
|
(9%)
|
|
(2%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Medical Products
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Renal
|
|
|
|
|
|
|
$193
|
|
$756
|
|
$949
|
|
|
|
|
|
|
$186
|
|
$858
|
|
$1,044
|
|
|
|
|
|
|
4%
|
|
(12%)
|
|
(9%)
|
|
Fluid Systems
|
|
|
|
|
|
|
247
|
|
271
|
|
518
|
|
|
|
|
|
|
225
|
|
309
|
|
534
|
|
|
|
|
|
|
10%
|
|
(12%)
|
|
(3%)
|
|
Integrated Pharmacy Solutions
|
|
|
|
|
|
|
260
|
|
288
|
|
548
|
|
|
|
|
|
|
321
|
|
334
|
|
655
|
|
|
|
|
|
|
(19%)
|
|
(14%)
|
|
(16%)
|
|
Surgical Care
|
|
|
|
|
|
|
196
|
|
137
|
|
333
|
|
|
|
|
|
|
188
|
|
158
|
|
346
|
|
|
|
|
|
|
4%
|
|
(13%)
|
|
(4%)
|
|
Other
|
|
|
|
|
|
|
81
|
|
35
|
|
116
|
|
|
|
|
|
|
79
|
|
44
|
|
123
|
|
|
|
|
|
|
3%
|
|
(20%)
|
|
(6%)
|
|
Total Medical Products
|
|
|
|
|
|
|
$977
|
|
$1,487
|
|
$2,464
|
|
|
|
|
|
|
$999
|
|
$1,703
|
|
$2,702
|
|
|
|
|
|
|
(2%)
|
|
(13%)
|
|
(9%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Baxter
|
|
|
|
|
|
|
$1,752
|
|
$2,141
|
|
$3,893
|
|
|
|
|
|
|
$1,732
|
|
$2,422
|
|
$4,154
|
|
|
|
|
|
|
1%
|
|
(12%)
|
|
(6%)
|
|
1
|
|
Effective January 1, 2015, Baxter has transitioned to a new
commercial franchise structure for reporting net sales. Prior period
net sales have been recast to reflect the new commercial franchise
structure. Refer to page 12 for additional details.
|
View source version on businesswire.com: http://www.businesswire.com/news/home/20150729006649/en/
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|