EX-99.1 2 d581709dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

 

LOGO

FOR IMMEDIATE RELEASE

Media Contact

Bill Rader, (224) 948-5353

media@baxter.com

Investor Contact

Clare Trachtman, (224) 948-3085

BAXTER REPORTS SECOND-QUARTER 2018 RESULTS AND INCREASES

EARNINGS OUTLOOK FOR FULL-YEAR 2018

 

  •  

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

DEERFIELD, Ill., JULY 26, 2018 — 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.

 

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BAXTER REPORTS SECOND-QUARTER 2018 RESULTS AND

INCREASES EARNINGS OUTLOOK FOR FULL-YEAR 2018 — Page  2

 

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 our 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.

 

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BAXTER REPORTS SECOND-QUARTER 2018 RESULTS AND

INCREASES EARNINGS OUTLOOK FOR FULL-YEAR 2018 — Page  3

 

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.

 

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BAXTER REPORTS SECOND-QUARTER 2018 RESULTS AND

INCREASES EARNINGS OUTLOOK FOR FULL-YEAR 2018 — Page  4

 

 

  •  

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.

 

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BAXTER REPORTS SECOND-QUARTER 2018 RESULTS AND

INCREASES EARNINGS OUTLOOK FOR FULL-YEAR 2018 — Page  5

 

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 Twitter, LinkedIn 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.

 

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BAXTER REPORTS SECOND-QUARTER 2018 RESULTS AND

INCREASES EARNINGS OUTLOOK FOR FULL-YEAR 2018 — Page  6

 

###

 

BAXTER — PAGE  7

 

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 8 for a description of the adjustments and a reconciliation to GAAP measures.

 

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BAXTER — PAGE  8

 

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.

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BAXTER — PAGE  9

 

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 10 for a description of the adjustments and a reconciliation to GAAP measures.

 

NM - Not Meaningful

BAXTER — PAGE  10

 

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 — PAGE  11

 

BAXTER INTERNATIONAL INC.

Sales by Operating Segment

Periods Ending June 30, 2018 and 2017

(unaudited)

($ in millions)

 

                                                                                                                                                       
    

Q2

2018

     

Q2

2017

      % Growth @
Actual Rates		      % Growth @
Constant Rates		      YTD
2018		      YTD
2017		      % Growth @
Actual Rates		      % Growth @
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 — PAGE  12

 

BAXTER INTERNATIONAL INC.

Sales by GBU

Periods Ending June 30, 2018 and 2017

(unaudited)

($ in millions)

 

                                                                                                                                                       
     Q2
2018		      Q2
2017		      % Growth @
Actual Rates		      % Growth @
Constant Rates		      YTD
2018		      YTD
2017		      % Growth @
Actual Rates		      % Growth @
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 — PAGE  13

 

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 — PAGE  14

 

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 — PAGE  15

 

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 — PAGE  16

 

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
As Reported		      US
Cyclophosphamide		      Acquisitions      FX      Operational
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 — PAGE  17

 

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
As Reported		      US
Cyclophosphamide		      Acquisitions      FX      Operational
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 — PAGE  18

 

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%