[February 01, 2017] |
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Baxter Reports 2016 Fourth-Quarter and Full-Year Results
Baxter International Inc. (NYSE:BAX) today reported results for the
fourth quarter ended December 31, 2016, and provided its guidance for
the first quarter and full-year 2017.
"Baxter's solid operational performance in 2016 was fueled by strong
sales and disciplined execution across the organization," said José
(Joe) E. Almeida, chairman and chief executive officer. "We'll continue
to build on this momentum in 2017 and beyond, driven by new product
launches, effective portfolio management and further progress on our
business transformation initiatives - all in support of delivering
sustainable top-quartile results for our shareholders, and advancing our
mission to save and sustain lives."
Fourth-Quarter Financial Results
Baxter reported income from continuing operations of $240 million, or
$0.44 per diluted share, on a GAAP (Generally Accepted Accounting
Principles) basis for the fourth quarter. These results included special
items totaling $134 million ($72 million net after-tax), primarily
related to business optimization initiatives and intangible asset
amortization.
On an adjusted basis, excluding special items, Baxter's fourth quarter
income from continuing operations totaled $312 million, or $0.57 per
diluted share, exceeding the company's previously issued guidance of
$0.49 to $0.52 per diluted share.
Baxter's worldwide sales totaled $2.6 billion in the fourth quarter, an
increase of 2 percent on both a reported and constant currency basis as
compared to the prior-year period. Sales within the U.S. were $1.1
billion, advancing 5 percent, while international sales totaled $1.5
billion, representing a 1 percent decrease on a reported basis, and an
increase of 1 percent on a constant currency basis. Adjusting for the
impact of foreign exchange and generic competition for cyclophosphamide,
Baxter's sales increased 7 percent in the U.S. and rose 3 percent
globally in the fourth quarter.
By business, Hospital Products sales of $1.6 billion in the fourth
quarter increased 1 percent on a reported basis, and 1 percent on a
constant currency basis. Adjusting for the impact of foreign exchange
and cyclophosphamide, Hospital Products sales advanced 2 percent from
the prior-year period. Hospital Products performance in the quarter
benefited from strong sales of IV therapies, infusion pumps and related
IV access administration sets in the U.S., along with favorable demand
for anesthesia and critical care products globally. This performance was
partially offset by lower sales of IV solutions internationally, as the
company implements actions to optimize its global product portfolio, as
well as lower manufacturing service revenues from Shire, under the
company's manufacturing and supply agreement with Baxalta.
Baxter's Renal sales totaled $1 billion in the fourth quarter,
representing a 3 percent increase on a reported basis, and a 5 percent
increase on a constant currency basis. U.S. sales grew 7 percent to $222
million, and international sales totaled $793 million, representing
growth of 2 percent on a reported basis, and an increase of 4 percent on
a constant currency basis. Growth continued to be driven by robust sales
of peritoneal dialysis products as well as increased demand for the
company's acute renal care products.
During the quarter, Baxter repurchased $247 million worth of common
stock or approximately 5.4 million shares outstanding.
Summary of Full-Year 2016 Results
For full-year 2016, Baxter reported income from continuing operations of
approximately $5 billion, or $9.01 per diluted share, on a GAAP basis.
These results included a gain of $4.4 billion (on a pre and post-tax
basis), related to the company's disposition of its retained Baxalta
shares. Partially offsetting these results were special items of $817
million ($557 million net after-tax) related to business optimization
initiatives, intangible asset amortization, debt extinguishment costs,
Baxalta-related spin-off costs and asset impairments.
On an adjusted basis, excluding special items, Baxter's full-year income
from continuing operations totaled $1.1 billion, or $1.96 per diluted
share.
Baxter's worldwide sales totaled $10.2 billion in 2016, an increase of 2
percent on a reported basis and 4 percent on a constant currency basis
as compared to the prior year. Sales within the United States totaled
$4.3 billion, improving 6 percent over the prior year. International
sales totaled $5.9 billion, representing a 1 percent decrease on a
reported basis, and an increase of 3 percent on a constant currency
basis. Adjusting for the impact of foreign exchange and generic
competition for cyclophosphamide, Baxter's sales increased 9 percent in
the U.S. and rose 5 percent globally.
Full-year sales for Hospital Products totaled $6.3 billion, reflecting
growth of 2 percent on a reported basis and 4 percent at constant
currency. Adjusting for the impact of foreign exchange and
cyclophosphamide, sales increased 5 percent. Baxter's Renal sales
totaled $3.9 billion, increasing 2 and 5 percent on a reported and
constant currency basis, respectively.
In 2016, Baxter generated $1.6 billion in operating cash flow, an
increase of $371 million driven by improved operational performance and
implementation of new programs focused on improving the company's
working capital. In addition, through disciplined management of
expenditures Baxter reduced capital spending by $192 million to $711
million. As a result, the company generated an increase of $563 million
in free cash flow to $905 million (operating cash flow less capital
expenditures).
"We are extremely pleased with the significant improvements Baxter has
made in free cash flow generation. Our progress in 2016 represented an
increase of more than 2.5 times as compared to 2015, and further
supports our ability to reinvest in the business both organically and
inorganically to drive accelerated growth," said Jay Saccaro, Baxter's
chief financial officer.
Business Highlights
In 2016 Baxter continued delivering meaningful innovation for patients
and expanded access to life-sustaining therapies through a combination
of more than 20 new product launches, line extensions and geographic
expansions, including: NUMETA G13E, the only triple-chamber commercially
prepared parenteral nutrition system approved for vulnerable neonatal
patients; HEMOPATCH, an advanced surgical patch; premix generic drugs
such as VANCOMYCIN injection in 0.9% Sodium Chloride; new applications
and features for the SIGMA SPECTRUM infusion system; and HDx therapy
enabled by THERANOVA to provide high performance hemodialysis treatments.
Additionally, the company saw continued momentum with its new Automated
Peritoneal Dialysis (APD) systems, AMIA in the U.S. and HOMECHOICE
CLARIA outside the U.S., both featuring Baxter's SHARESOURCE
Connectivity Platform, the first and only two-way remote patient
management system for home dialysis therapy.
In December, Baxter announced plans to expand its presence in the
generic injectables space with the proposed acquisition of Claris
Injectables Limited (Claris). The acquisition of Claris, which is
expected to close in the second half of 2017, will provide Baxter with a
currently marketed portfolio of molecules in anesthesia and analgesics,
renal, anti-infectives and critical care in a variety of presentations
including bags, vials and ampoules, along with a robust pipeline and
high-quality manufacturing capabilities. This acquisition will provide
Baxter with a platform to establish a leadership position in generic
injectables.
Over the course of the year, the company also took actions to
significantly improve its balance sheet position and return value to
shareholders through the disposition of the Baxalta retained stake, a
$1.6 billion debt offering to retire existing higher coupon rate bonds
and pay off outstanding commercial paper, a 13 percent increase in its
shareholder dividend and share repurchases of approximately $300 million.
Financial Outlook
Baxter is providing its outlook for the full-year and first quarter of
2017:
-
For full-year 2017, Baxter expects sales
to be comparable to the prior-year period on a reported basis and to
increase approximately 2 percent on a constant currency basis.
Adjusting for the impact of generic cyclophosphamide competition (an
estimated one percent) and selected strategic product exits the
company is undertaking (an estimated one percent), Baxter expects
underlying constant currency sales growth of approximately 4 percent.
The company expects earnings from continuing operations, before
special items, of $2.10 to $2.18 per diluted share. This guidance does
not include any impact from the company's proposed acquisition of
Claris, which is expected to close in the second half of 2017.
-
For the first quarter, the company
expects sales growth of approximately 2 to 3 percent on a reported
basis, or 3 to 4 percent on a constant currency basis. Adjusting for
the impact of generic cyclophosphamide competition (an estimated
one-half percent) and selected strategic product exits the company is
undertaking (an estimated one and a half percent), Baxter expects
underlying constant currency sales growth of 5 to 6 percent. The
company expects earnings from continuing operations, before special
items, of $0.50 to $0.52 per diluted share.
The reconciliations between the projected 2017 adjusted diluted earnings
per share and projected GAAP diluted earnings per share follows:
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2017 Earnings per Share Guidance
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Q1 2017
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FY 2017
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Diluted Earnings per Share - Adjusted
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$0.50 - $0.52
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$2.10 - $2.18
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Estimated intangible asset amortization
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$0.04
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$0.18
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Estimated business optimization charges
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$0.05 - $0.06
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$0.31 - $0.38
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Estimated Baxalta separation-related expenses
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$0.01
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$0.02
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Diluted Earnings per Share - GAAP
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$0.39 - $0.42
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$1.52 - $1.67
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These estimates are based on information reasonably available at the
time of this release and future events or new information may result in
different actual results.
A webcast of Baxter's fourth quarter investor conference call can be
accessed live from a link on the company's website at www.baxter.com
beginning at 7:30 a.m. CST on February 1, 2017. Please visit the
Investors section at www.baxter.com
for a supplemental presentation regarding fourth quarter and full-year
performance, as well as for information on 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, cost savings initiatives, planned acquisition of Claris, R&D
pipeline including results of clinical trials and planned product
launches, and outlook for 2017. 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: failure to achieve the company's long-term financial
improvement goals; demand for and market acceptance of risks for new and
existing products, and the impact of those products on quality or
patient safety concerns; 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 the company's 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 regulatory, trade and
tax policies; accurate identification of and execution on business
development and R&D opportunities and realization of anticipated
benefits (including with respect to the proposed Claris acquisition);
fluctuations in supply and demand; the availability and pricing of
acceptable raw materials and component supply; the inability to create
timely production capacity or other manufacturing supply difficulties;
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; the impact of any future tax liability with respect to the
separation of the company's biopharmaceutical and medical products
businesses (including the 2016 disposition of the company's retained
stake in Baxalta); 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.
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BAXTER INTERNATIONAL INC.
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Consolidated Statements of Income
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Three Months Ended December 31, 2016 and 2015
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(unaudited)
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(in millions, except per share and percentage data)
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Three Months Ended
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December 31,
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2016
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2015
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Change
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NET SALES
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$2,645
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$2,603
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2%
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COST OF SALES
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1,543
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1,531
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1%
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GROSS MARGIN
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1,102
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1,072
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3%
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% of Net Sales
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41.7%
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41.2%
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0.5 pts
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MARKETING AND ADMINISTRATIVE EXPENSES
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663
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733
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(10%)
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% of Net Sales
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25.1%
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28.2%
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(3.1 pts)
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RESEARCH AND DEVELOPMENT EXPENSES
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157
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161
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(2%)
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% of Net Sales
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5.9%
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6.2%
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(0.3 pts)
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OPERATING INCOME
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282
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178
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58%
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% of Net Sales
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10.7%
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6.8%
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3.9 pts
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NET INTEREST EXPENSE
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13
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32
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(59%)
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OTHER INCOME, NET
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(10)
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(59)
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(83%)
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INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
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279
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205
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36%
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INCOME TAX EXPENSE
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39
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22
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77%
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% of Income from Continuing Operations before Income Taxes
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14.0%
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10.7%
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3.3 pts
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INCOME FROM CONTINUING OPERATIONS
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240
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183
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31%
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INCOME FROM DISCONTINUED OPERATIONS, NET OF TAX A
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3
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22
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(86%)
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NET INCOME
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$243
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$205
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19%
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INCOME FROM CONTINUING OPERATIONS PER COMMON SHARE
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Basic
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$0.44
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$0.33
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33%
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Diluted
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$0.44
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$0.33
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33%
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INCOME FROM DISCONTINUED OPERATIONS PER COMMON SHARE
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Basic
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$0.01
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$0.04
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(75%)
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Diluted
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$0.00
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$0.04
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(100%)
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NET INCOME PER COMMON SHARE
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Basic
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$0.45
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$0.37
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22%
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Diluted
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$0.44
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$0.37
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19%
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WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
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Basic
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542
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547
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Diluted
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549
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550
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ADJUSTED OPERATING INCOME (excluding special items)
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$407
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B
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$279
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B
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46%
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ADJUSTED PRE-TAX INCOME FROM CONTINUING OPERATIONS (excluding
special items)
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$413
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B
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$283
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B
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46%
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ADJUSTED INCOME FROM CONTINUING OPERATIONS (excluding special
items)
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$312
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B
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$236
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B
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32%
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ADJUSTED DILUTED EPS FROM CONTINUING OPERATIONS (excluding
special items)
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$0.57
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B
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$0.43
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B
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33%
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A
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Operating results from Baxalta Incorporated ("Baxalta") are
classified as discontinued operations for all periods presented.
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B
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Refer to page 10 for a description of the adjustments and a
reconciliation to GAAP measures.
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BAXTER INTERNATIONAL INC.
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Note to Consolidated Statements of Income
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Three Months Ended December 31, 2016 and 2015
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Description of Adjustments and Reconciliation of GAAP to Non-GAAP
Measures
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(unaudited)
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(in millions, except per share and percentage data)
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The company's GAAP results for the three months ended December 31,
2016 and 2015 included special items which impacted the GAAP
measures as follows:
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Three Months Ended
December 31,
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2016
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2015
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Change
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Gross Margin
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$1,102
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$1,072
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3%
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Intangible asset amortization expense 1
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39
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38
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Business optimization items 2
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43
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10
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Baxalta separation-related costs 3
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-
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(1)
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Product-related items 4
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(6)
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(10)
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Adjusted Gross Margin
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$1,178
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$1,109
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6%
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% of Net Sales
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44.5%
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42.6%
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1.9 pts
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Marketing and Administrative Expenses
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$663
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$733
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(10%)
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Business optimization items 2
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(36)
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(39)
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Baxalta separation-related costs 3
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(8)
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(22)
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Adjusted Marketing and Administrative Expenses
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$619
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$672
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(8%)
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% of Net Sales
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23.4%
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25.8%
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(2.4 pts)
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Research and Development Expenses
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$157
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$161
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(2%)
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Business optimization items 2
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(5)
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(2)
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Baxalta separation-related costs 3
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-
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(1)
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Adjusted Research and Development Expenses
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$152
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$158
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(4%)
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% of Net Sales
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5.7%
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6.1%
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(0.4 pts)
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Operating Income
|
|
|
$282
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$178
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58%
|
Impact of special items
|
|
|
125
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|
101
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|
|
Adjusted Operating Income
|
|
|
$407
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$279
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46%
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% of Net Sales
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15.4%
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10.7%
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4.7 pts
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Other Income, Net
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$(10)
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$(59)
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(83%)
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Business optimization items 2
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-
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3
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Business development items 5
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-
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20
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Tax matter 6
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(9)
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-
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Adjusted Other Income, Net
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$(19)
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$(36)
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(47%)
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Pre-Tax Income from Continuing Operations
|
|
|
$279
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$205
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36%
|
Impact of special items
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|
134
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|
78
|
|
|
Adjusted Pre-Tax Income from Continuing Operations
|
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|
$413
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$283
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46%
|
|
|
|
|
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Income Tax Expense
|
|
|
$39
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|
$22
|
|
77%
|
Impact of special items 6
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|
|
62
|
|
25
|
|
|
Adjusted Income Tax Expense
|
|
|
$101
|
|
$47
|
|
115%
|
% of Adjusted Pre-Tax Income from Continuing Operations
|
|
|
24.5%
|
|
16.6%
|
|
7.9 pts
|
|
|
|
|
|
|
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|
Income from Continuing Operations
|
|
|
$240
|
|
$183
|
|
31%
|
Impact of special items
|
|
|
72
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|
53
|
|
|
Adjusted Income from Continuing Operations
|
|
|
$312
|
|
$236
|
|
32%
|
|
|
|
|
|
|
|
|
Diluted EPS from Continuing Operations
|
|
|
$0.44
|
|
$0.33
|
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33%
|
Impact of special items
|
|
|
0.13
|
|
0.10
|
|
|
Adjusted Diluted EPS from Continuing Operations
|
|
|
$0.57
|
|
$0.43
|
|
33%
|
|
|
|
|
|
|
|
|
WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
|
|
|
|
|
Diluted
|
|
|
549
|
|
550
|
|
|
1
|
|
|
The company's results in 2016 and 2015 included intangible asset
amortization expense of $39 million ($25 million, or $0.05 per
diluted share, on an after-tax basis) and $38 million ($29 million,
or $0.06 per diluted share, on an after-tax basis), respectively.
|
|
|
|
|
2
|
|
|
The company's results in 2016 included a net charge of $84 million
($48 million, or $0.08 per diluted share, on an after-tax basis)
related to business optimization initiatives. This included a charge
of $48 million related to restructuring activities, $21 million of
costs to implement business optimization programs which primarily
included external consulting and project employee costs, $8 million
of accelerated depreciation associated with facilities to be closed
and $7 million of Gambro integration costs. The $48 million of
restructuring charges included $36 million of employee termination
costs, $10 million of asset impairment charges primarily related to
a facility closure and $2 million of other exit costs.
|
|
|
|
|
|
|
|
The company's results in 2015 included a net charge of $48 million
($34 million, or $0.06 per diluted share, on an after-tax basis)
primarily related to business optimization charges. This included a
net charge of $25 million related to restructuring activities and
$23 million of Gambro integration costs. The $25 million of net
restructuring charges included net $20 million of employee
termination costs and net $5 million of other exit costs.
|
|
|
|
|
3
|
|
|
The company's results in 2016 and 2015 included costs incurred
related to the Baxalta separation totaling $8 million ($3 million,
or $0.01 per diluted share, on an after-tax basis) and $22 million
($16 million, or $0.03 per diluted share, on an after-tax basis),
respectively.
|
|
|
|
|
4
|
|
|
The company's results in 2016 and 2015 included a net benefit of $6
million ($4 million, or $0.01 per diluted share, on an after-tax
basis) and $10 million ($15 million, or $0.03 per diluted share, on
an after-tax basis), respectively, primarily related to adjustments
to the COLLEAGUE and SIGMA SPECTRUM infusion pump reserves.
|
|
|
|
|
5
|
|
|
The company's results in 2015 included a benefit of $20 million ($18
million or $0.03 per diluted share on an after-tax basis) relating
to the reversal of contingent consideration milestone liabilities.
|
|
|
|
|
6
|
|
|
The company's results in 2016 included a net benefit to income tax
of $9 million offset by $9 million recorded in other income due to
the settlement of an income tax matter related to the company's
non-controlling interest in a joint venture in Turkey.
|
|
|
|
|
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
|
Twelve Months Ended December 31, 2016 and 2015
|
(unaudited)
|
(in millions, except per share and percentage data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve Months Ended
|
|
|
|
|
|
December 31,
|
|
|
|
|
|
2016
|
|
|
2015
|
|
|
Change
|
|
|
|
|
|
|
|
|
|
NET SALES
|
|
$10,163
|
|
|
$9,968
|
|
|
2%
|
|
|
|
|
|
|
|
|
|
COST OF SALES
|
|
6,053
|
|
|
5,822
|
|
|
4%
|
|
|
|
|
|
|
|
|
|
GROSS MARGIN
|
|
4,110
|
|
|
4,146
|
|
|
(1%)
|
% of Net Sales
|
|
40.4%
|
|
|
41.6%
|
|
|
(1.2 pts)
|
|
|
|
|
|
|
|
|
|
MARKETING AND ADMINISTRATIVE EXPENSES
|
|
2,739
|
|
|
3,094
|
|
|
(11%)
|
% of Net Sales
|
|
27.0%
|
|
|
31.0%
|
|
|
(4 pts)
|
|
|
|
|
|
|
|
|
|
RESEARCH AND DEVELOPMENT EXPENSES
|
|
647
|
|
|
603
|
|
|
7%
|
% of Net Sales
|
|
6.4%
|
|
|
6.0%
|
|
|
0.4 pts
|
|
|
|
|
|
|
|
|
|
OPERATING INCOME
|
|
724
|
|
|
449
|
|
|
61%
|
% of Net Sales
|
|
7.1%
|
|
|
4.5%
|
|
|
2.6 pts
|
|
|
|
|
|
|
|
|
|
NET INTEREST EXPENSE
|
|
66
|
|
|
126
|
|
|
(48%)
|
|
|
|
|
|
|
|
|
|
OTHER INCOME, NET A
|
|
(4,296)
|
|
|
(105)
|
|
|
NM
|
|
|
|
|
|
|
|
|
|
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
|
|
4,954
|
|
|
428
|
|
|
NM
|
|
|
|
|
|
|
|
|
|
INCOME TAX (BENEFIT) EXPENSE
|
|
(12)
|
|
|
35
|
|
|
NM
|
% of Income from Continuing Operations before Income Taxes
|
|
-0.2%
|
|
|
8.2%
|
|
|
(8.4 pts)
|
|
|
|
|
|
|
|
|
|
INCOME FROM CONTINUING OPERATIONS
|
|
4,966
|
|
|
393
|
|
|
NM
|
|
|
|
|
|
|
|
|
|
(LOSS) INCOME FROM DISCONTINUED OPERATIONS, NET OF TAX B
|
|
(1)
|
|
|
575
|
|
|
NM
|
|
|
|
|
|
|
|
|
|
NET INCOME
|
|
$4,965
|
|
|
$968
|
|
|
NM
|
|
|
|
|
|
|
|
|
|
INCOME FROM CONTINUING OPERATIONS PER COMMON SHARE
|
|
|
|
|
|
|
|
|
Basic
|
|
$9.10
|
|
|
$0.72
|
|
|
NM
|
Diluted
|
|
$9.01
|
|
|
$0.72
|
|
|
NM
|
|
|
|
|
|
|
|
|
|
(LOSS) INCOME FROM DISCONTINUED OPERATIONS PER COMMON SHARE
|
|
|
|
|
|
|
|
|
Basic
|
|
($0.01)
|
|
|
$1.06
|
|
|
(101%)
|
Diluted
|
|
$0.00
|
|
|
$1.04
|
|
|
(100%)
|
|
|
|
|
|
|
|
|
|
NET INCOME PER COMMON SHARE
|
|
|
|
|
|
|
|
|
Basic
|
|
$9.09
|
|
|
$1.78
|
|
|
NM
|
Diluted
|
|
$9.01
|
|
|
$1.76
|
|
|
NM
|
|
|
|
|
|
|
|
|
|
WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
|
|
|
|
|
|
|
|
|
Basic
|
|
546
|
|
|
545
|
|
|
|
Diluted
|
|
551
|
|
|
549
|
|
|
|
|
|
|
|
|
|
|
|
|
ADJUSTED OPERATING INCOME (excluding special items)
|
|
$1,383
|
|
C
|
$893
|
|
C
|
55%
|
ADJUSTED PRE-TAX INCOME FROM CONTINUING OPERATIONS (excluding
special items)
|
|
$1,380
|
|
C
|
$927
|
|
C
|
49%
|
ADJUSTED INCOME FROM CONTINUING OPERATIONS (excluding special
items)
|
|
$1,078
|
|
C
|
$755
|
|
C
|
43%
|
ADJUSTED DILUTED EPS FROM CONTINUING OPERATIONS (excluding
special items)
|
|
$1.96
|
|
C
|
$1.38
|
|
C
|
42%
|
A
|
|
|
Other Income, net for the period ended December 31, 2016
includes $4.4 billion net realized gains on the Baxalta retained
shares transactions and a $149 million net debt extinguishment loss.
|
B
|
|
|
Operating results from Baxalta are classified as discontinued
operations for all periods presented.
|
C
|
|
|
Refer to page 12 for a description of the adjustments and a
reconciliation to GAAP measures.
|
NM - Not Meaningful
|
|
|
BAXTER INTERNATIONAL INC.
|
Note to Consolidated Statements of Income
|
Twelve Months Ended December 31, 2016 and 2015
|
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 twelve months ended December 31,
2016 and 2015 included special items which impacted the GAAP
measures as follows:
|
|
|
|
|
Twelve Months Ended
December 31,
|
|
|
|
|
2016
|
|
2015
|
|
Change
|
Gross Margin
|
|
|
$4,110
|
|
$4,146
|
|
(1%)
|
Intangible asset amortization expense 1
|
|
|
163
|
|
158
|
|
|
Business optimization items 2
|
|
|
156
|
|
38
|
|
|
Intangible asset impairment 3
|
|
|
51
|
|
-
|
|
|
Baxalta separation-related costs 4
|
|
|
1
|
|
-
|
|
|
Product-related items 5
|
|
|
(18)
|
|
(28)
|
|
|
Adjusted Gross Margin
|
|
|
$4,463
|
|
$4,314
|
|
3%
|
% of Net Sales
|
|
|
43.9%
|
|
43.3%
|
|
0.6 pts
|
|
|
|
|
|
|
|
|
Marketing and Administrative Expenses
|
|
|
$2,739
|
|
$3,094
|
|
(11%)
|
Business optimization items 2
|
|
|
(173)
|
|
(152)
|
|
|
Baxalta separation-related costs 4
|
|
|
(53)
|
|
(110)
|
|
|
Adjusted Marketing and Administrative Expenses
|
|
|
$2,513
|
|
$2,832
|
|
(11%)
|
% of Net Sales
|
|
|
24.7%
|
|
28.4%
|
|
(3.7 pts)
|
|
|
|
|
|
|
|
|
Research and Development Expenses
|
|
|
$647
|
|
$603
|
|
7%
|
Business optimization items 2
|
|
|
(80)
|
|
(13)
|
|
|
Baxalta separation-related costs 4
|
|
|
-
|
|
(1)
|
|
|
Adjusted Research and Development Expenses
|
|
|
$567
|
|
$589
|
|
(4%)
|
% of Net Sales
|
|
|
5.6%
|
|
5.9%
|
|
(0.3 pts)
|
|
|
|
|
|
|
|
|
Operating Income
|
|
|
$724
|
|
$449
|
|
61%
|
Impact of special items
|
|
|
659
|
|
444
|
|
|
Adjusted Operating Income
|
|
|
$1,383
|
|
$893
|
|
55%
|
% of Net Sales
|
|
|
13.6%
|
|
9.0%
|
|
4.6 pts
|
|
|
|
|
|
|
|
|
Other Income, Net
|
|
|
$(4,296)
|
|
$(105)
|
|
NM
|
Business optimization items 2
|
|
|
-
|
|
3
|
|
|
Net realized gains on Retained Shares transactions 6
|
|
|
4,391
|
|
-
|
|
|
Loss on debt extinguishment 7
|
|
|
(149)
|
|
(130)
|
|
|
Reserve items and adjustments 8
|
|
|
-
|
|
52
|
|
|
Business development items 9
|
|
|
-
|
|
20
|
|
|
Tax matter 10
|
|
|
(9)
|
|
-
|
|
|
Adjusted Other Income, Net
|
|
|
$(63)
|
|
$(160)
|
|
(61%)
|
|
|
|
|
|
|
|
|
Pre-Tax Income from Continuing Operations
|
|
|
$4,954
|
|
$428
|
|
NM
|
Impact of special items
|
|
|
(3,574)
|
|
499
|
|
|
Adjusted Pre-Tax Income from Continuing Operations
|
|
|
$1,380
|
|
$927
|
|
49%
|
|
|
|
|
|
|
|
|
Income Tax (Benefit) Expense
|
|
|
$(12)
|
|
$35
|
|
(134%)
|
Impact of special items 10
|
|
|
314
|
|
137
|
|
|
Adjusted Income Tax Expense
|
|
|
$302
|
|
$172
|
|
76%
|
% of Adjusted Pre-Tax Income from Continuing Operations
|
|
|
21.9%
|
|
18.6%
|
|
3.3 pts
|
|
|
|
|
|
|
|
|
Income from Continuing Operations
|
|
|
$4,966
|
|
$393
|
|
NM
|
Impact of special items
|
|
|
(3,888)
|
|
362
|
|
|
Adjusted Income from Continuing Operations
|
|
|
$1,078
|
|
$755
|
|
43%
|
|
|
|
|
|
|
|
|
Diluted EPS from Continuing Operations
|
|
|
$9.01
|
|
$0.72
|
|
NM
|
Impact of special items
|
|
|
(7.05)
|
|
0.66
|
|
|
Adjusted Diluted EPS from Continuing Operations
|
|
|
$1.96
|
|
$1.38
|
|
42%
|
|
|
|
|
|
|
|
|
WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
|
|
|
|
|
Diluted
|
|
|
551
|
|
549
|
|
|
1
|
|
|
The company's results in 2016 and 2015 included intangible asset
amortization expense of $163 million ($116 million, or $0.21 per
diluted share, on an after-tax basis) and $158 million ($126
million, or $0.23 per diluted share, on an after-tax basis),
respectively.
|
|
|
|
|
2
|
|
|
The company's results in 2016 included a net charge of $409 million
($290 million, or $0.53 per diluted share, on an after-tax basis)
related to business optimization initiatives. This included a net
charge of $285 million related to restructuring activities, $65
million of costs to implement business optimization programs which
primarily included external consulting and project employee costs,
$33 million of accelerated depreciation associated with facilities
to be closed, and $26 million of Gambro integration costs. The $285
million of net restructuring charges included net $180 million of
employee termination costs, $54 million of costs related to the
discontinuance of the VIVIA home hemodialysis development program,
$47 million of asset impairment charges related to acquired
in-process R&D and facility closure costs, and net $4 million of
other exit costs.
|
|
|
|
|
|
|
|
The company's results in 2015 included a net charge of $200 million
($141 million, or $0.26 per diluted share, on an after-tax basis)
primarily related to business optimization charges. This included a
net charge of $127 million related to restructuring activities and
$73 million of Gambro integration costs. The $127 million of net
restructuring charges included net $91 million of employee
termination costs, a $20 million intangible asset impairment, and
$16 million of asset and other exit costs.
|
|
|
|
|
3
|
|
|
The company's results in 2016 included a $51 million ($37 million,
or $0.07 per diluted share, on an after-tax basis) impairment
primarily related to developed technology.
|
|
|
|
|
4
|
|
|
The company's results in 2016 and 2015 included costs incurred
related to the Baxalta separation of $54 million ($37 million, or
$0.07 per diluted share, on an after-tax basis) and $111 million
($83 million, or $0.15 per diluted share, on an after-tax basis),
respectively.
|
|
|
|
|
5
|
|
|
The company's results in 2016 and 2015 included a net benefit of $18
million ($13 million, or $0.02 per diluted share, on an after-tax
basis) and $28 million ($26 million, or $0.05 per diluted share, on
an after-tax basis), respectively, primarily related to adjustments
to the COLLEAGUE and SIGMA SPECTRUM infusion pump reserves.
|
|
|
|
|
6
|
|
|
The company's results in 2016 included net realized gains of $4.4
billion ($4.4 billion, or $8.07 per diluted share, on an after-tax
basis), related to the debt-for-equity exchanges of the company's
retained shares in Baxalta for certain company indebtedness, the
exchange of retained shares in Baxalta for Baxter shares and the
contribution of retained shares in Baxalta to Baxter's U.S. pension
fund. A tax benefit of $54 million was recognized as a result of
these transactions.
|
|
|
|
|
7
|
|
|
The company's results in 2016 included a net debt extinguishment
loss totaling $149 million ($100 million, or $0.18 per diluted
share, on an after-tax basis) related to the March 2016
debt-for-equity exchange for certain company indebtedness and
certain debt redemptions. The company's results in 2015 included a
loss of $130 million ($82 million, or $0.15 per diluted share, on an
after-tax basis) related to the July 2015 debt tender offers for
certain company indebtedness.
|
|
|
|
|
8
|
|
|
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.
|
|
|
|
|
9
|
|
|
The company's results in 2015 included a benefit of $20 million ($18
million or $0.03 per diluted share on an after-tax basis) relating
to the reversal of contingent consideration milestone liabilities.
|
|
|
|
|
10
|
|
|
The company's results in 2016 included a net after-tax benefit of
$10 million, or $0.02 per diluted share, related to the settlement
of an income tax matter in the company's non-wholly owned joint
venture in Turkey. This amount was comprised of $19 million included
in income tax expense offset by $9 million in non-controlling
interest recorded in other income.
|
|
|
|
|
For more information on the company's use of non-GAAP financial
measures in this press release, please see the company's Current
Report on Form 8-K filed with the Securities and Exchange Commission
on the date of this press release.
|
|
NM - Not Meaningful
|
|
|
BAXTER INTERNATIONAL INC.
|
Net Sales
|
Periods Ending December 31, 2016 and 2015
|
(unaudited)
|
($ in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q4
|
|
|
|
Q4
|
|
% Growth @
|
|
% Growth @
|
|
|
|
|
|
YTD
|
|
|
|
YTD
|
|
% Growth @
|
|
% Growth @
|
|
|
|
|
|
|
2016
|
|
|
|
2015
|
|
Actual Rates
|
|
Constant Rates
|
|
|
|
|
|
2016
|
|
|
|
2015
|
|
Actual Rates
|
|
Constant Rates
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Renal
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
|
|
|
|
$222
|
|
|
|
$207
|
|
7%
|
|
7%
|
|
|
|
|
|
$846
|
|
|
|
$782
|
|
8%
|
|
8%
|
International
|
|
|
|
|
|
793
|
|
|
|
777
|
|
2%
|
|
4%
|
|
|
|
|
|
3,009
|
|
|
|
3,007
|
|
0%
|
|
4%
|
Total Renal
|
|
|
|
|
|
$1,015
|
|
|
|
$984
|
|
3%
|
|
5%
|
|
|
|
|
|
$3,855
|
|
|
|
$3,789
|
|
2%
|
|
5%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hospital Products
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
|
|
|
|
$895
|
|
|
|
$856
|
|
5%
|
|
5%
|
|
|
|
|
|
$3,413
|
|
|
|
$3,219
|
|
6%
|
|
6%
|
International
|
|
|
|
|
|
735
|
|
|
|
763
|
|
(4%)
|
|
(2%)
|
|
|
|
|
|
2,895
|
|
|
|
2,960
|
|
(2%)
|
|
1%
|
Total Hospital Products
|
|
|
|
|
|
$1,630
|
|
|
|
$1,619
|
|
1%
|
|
1%
|
|
|
|
|
|
$6,308
|
|
|
|
$6,179
|
|
2%
|
|
4%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Baxter International Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
|
|
|
|
$1,117
|
|
|
|
$1,063
|
|
5%
|
|
5%
|
|
|
|
|
|
$4,259
|
|
|
|
$4,001
|
|
6%
|
|
6%
|
International
|
|
|
|
|
|
1,528
|
|
|
|
1,540
|
|
(1%)
|
|
1%
|
|
|
|
|
|
5,904
|
|
|
|
5,967
|
|
(1%)
|
|
3%
|
Total Baxter
|
|
|
|
|
|
$2,645
|
|
|
|
$2,603
|
|
2%
|
|
2%
|
|
|
|
|
|
$10,163
|
|
|
|
$9,968
|
|
2%
|
|
4%
|
|
|
BAXTER INTERNATIONAL INC.
|
Sales by Franchise
|
Periods Ending December 31, 2016 and 2015
|
(unaudited)
|
($ in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q4
|
|
|
|
Q4
|
|
% Growth @
|
|
% Growth @
|
|
|
|
|
|
YTD
|
|
|
|
YTD
|
|
% Growth @
|
|
% Growth @
|
|
|
|
|
|
|
2016
|
|
|
|
2015
|
|
Actual Rates
|
|
Constant Rates
|
|
|
|
|
|
2016
|
|
|
|
2015
|
|
Actual Rates
|
|
Constant Rates
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Renal 1
|
|
|
|
|
|
$1,015
|
|
|
|
$984
|
|
3%
|
|
5%
|
|
|
|
|
|
$3,855
|
|
|
|
$3,789
|
|
2%
|
|
5%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hospital Products
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fluid Systems 2
|
|
|
|
|
|
$614
|
|
|
|
$569
|
|
8%
|
|
8%
|
|
|
|
|
|
$2,300
|
|
|
|
$2,106
|
|
9%
|
|
11%
|
Integrated Pharmacy Solutions 3
|
|
|
|
|
|
563
|
|
|
|
595
|
|
(5%)
|
|
(4%)
|
|
|
|
|
|
2,245
|
|
|
|
2,297
|
|
(2%)
|
|
0%
|
Surgical Care 4
|
|
|
|
|
|
349
|
|
|
|
346
|
|
1%
|
|
1%
|
|
|
|
|
|
1,321
|
|
|
|
1,323
|
|
0%
|
|
1%
|
Other 5
|
|
|
|
|
|
104
|
|
|
|
109
|
|
(5%)
|
|
(6%)
|
|
|
|
|
|
442
|
|
|
|
453
|
|
(2%)
|
|
(2%)
|
Total Hospital Products
|
|
|
|
|
|
$1,630
|
|
|
|
$1,619
|
|
1%
|
|
1%
|
|
|
|
|
|
$6,308
|
|
|
|
$6,179
|
|
2%
|
|
4%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Baxter
|
|
|
|
|
|
$2,645
|
|
|
|
$2,603
|
|
2%
|
|
2%
|
|
|
|
|
|
$10,163
|
|
|
|
$9,968
|
|
2%
|
|
4%
|
1
|
|
|
Includes sales of the company's peritoneal dialysis, hemodialysis
and continuous renal replacement therapies.
|
|
|
|
|
2
|
|
|
Includes sales of the company's IV therapies, infusion pumps and
administration sets.
|
|
|
|
|
3
|
|
|
Includes sales of the company's premixed and oncology drug
platforms, nutrition products and pharmacy compounding services.
|
|
|
|
|
4
|
|
|
Includes sales of the company's inhaled anesthesia products as well
as biological products and medical devices used in surgical
procedures for hemostasis, tissue sealing and adhesion prevention.
|
|
|
|
|
5
|
|
|
Includes sales primarily from the company's pharmaceutical
partnering business.
|
|
|
BAXTER INTERNATIONAL INC.
|
Franchise Sales by U.S. and International
|
Three-Month Periods Ending December 31, 2016 and 2015
|
(unaudited)
|
($ in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q4 2016
|
|
|
|
|
|
Q4 2015
|
|
|
|
|
|
% Growth
|
|
|
|
|
|
|
|
U.S.
|
|
International
|
|
|
Total
|
|
|
|
|
|
U.S.
|
|
International
|
|
|
Total
|
|
|
|
|
|
U.S.
|
|
International
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Renal
|
|
|
|
|
|
$222
|
|
$793
|
|
|
$1,015
|
|
|
|
|
|
$207
|
|
$777
|
|
|
$984
|
|
|
|
|
|
7%
|
|
2%
|
|
3%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hospital Products
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fluid Systems
|
|
|
|
|
|
$353
|
|
$261
|
|
|
$614
|
|
|
|
|
|
$296
|
|
$273
|
|
|
$569
|
|
|
|
|
|
19%
|
|
(4%)
|
|
8%
|
Integrated Pharmacy Solutions
|
|
|
|
|
|
264
|
|
299
|
|
|
563
|
|
|
|
|
|
286
|
|
309
|
|
|
595
|
|
|
|
|
|
(8%)
|
|
(3%)
|
|
(5%)
|
Surgical Care
|
|
|
|
|
|
206
|
|
143
|
|
|
349
|
|
|
|
|
|
202
|
|
144
|
|
|
346
|
|
|
|
|
|
2%
|
|
(1%)
|
|
1%
|
Other
|
|
|
|
|
|
72
|
|
32
|
|
|
104
|
|
|
|
|
|
72
|
|
37
|
|
|
109
|
|
|
|
|
|
0%
|
|
(14%)
|
|
(5%)
|
Total Hospital Products
|
|
|
|
|
|
$895
|
|
$735
|
|
|
$1,630
|
|
|
|
|
|
$856
|
|
$763
|
|
|
$1,619
|
|
|
|
|
|
5%
|
|
(4%)
|
|
1%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Baxter
|
|
|
|
|
|
$1,117
|
|
$1,528
|
|
|
$2,645
|
|
|
|
|
|
$1,063
|
|
$1,540
|
|
|
$2,603
|
|
|
|
|
|
5%
|
|
(1%)
|
|
2%
|
|
|
BAXTER INTERNATIONAL INC.
|
Franchise Sales by U.S. and International
|
Periods Ending December 31, 2016 and 2015
|
(unaudited)
|
($ in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
YTD 2016
|
|
|
|
|
|
YTD 2015
|
|
|
|
|
|
% Growth
|
|
|
|
|
|
|
|
U.S.
|
|
International
|
|
|
Total
|
|
|
|
|
|
U.S.
|
|
International
|
|
|
Total
|
|
|
|
|
|
U.S.
|
|
International
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Renal
|
|
|
|
|
|
$846
|
|
$3,009
|
|
|
$3,855
|
|
|
|
|
|
$782
|
|
$3,007
|
|
|
$3,789
|
|
|
|
|
|
8%
|
|
0%
|
|
2%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hospital Products
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fluid Systems
|
|
|
|
|
|
$1,307
|
|
$993
|
|
|
$2,300
|
|
|
|
|
|
$1,041
|
|
$1,065
|
|
|
$2,106
|
|
|
|
|
|
26%
|
|
(7%)
|
|
9%
|
Integrated Pharmacy Solutions
|
|
|
|
|
|
1,048
|
|
1,197
|
|
|
2,245
|
|
|
|
|
|
1,104
|
|
1,193
|
|
|
2,297
|
|
|
|
|
|
(5%)
|
|
0%
|
|
(2%)
|
Surgical Care
|
|
|
|
|
|
775
|
|
546
|
|
|
1,321
|
|
|
|
|
|
771
|
|
552
|
|
|
1,323
|
|
|
|
|
|
1%
|
|
(1%)
|
|
0%
|
Other
|
|
|
|
|
|
283
|
|
159
|
|
|
442
|
|
|
|
|
|
303
|
|
150
|
|
|
453
|
|
|
|
|
|
(7%)
|
|
6%
|
|
(2%)
|
Total Hospital Products
|
|
|
|
|
|
$3,413
|
|
$2,895
|
|
|
$6,308
|
|
|
|
|
|
$3,219
|
|
$2,960
|
|
|
$6,179
|
|
|
|
|
|
6%
|
|
(2%)
|
|
2%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Baxter
|
|
|
|
|
|
$4,259
|
|
$5,904
|
|
|
$10,163
|
|
|
|
|
|
$4,001
|
|
$5,967
|
|
|
$9,968
|
|
|
|
|
|
6%
|
|
(1%)
|
|
2%
|
|
|
BAXTER INTERNATIONAL INC.
|
Free Cash Flow Reconciliation
|
(unaudited)
|
($ in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve Months Ended
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
|
|
|
|
2016
|
|
|
2015
|
Cash flows from operations - continuing operations
|
|
|
|
|
|
$1,624
|
|
|
$1,253
|
Capital expenditures
|
|
|
|
|
|
(719)
|
|
|
(911)
|
Free cash flow - continuing operations
|
|
|
|
|
|
$905
|
|
|
$342
|
View source version on businesswire.com: http://www.businesswire.com/news/home/20170201005609/en/
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