Baxter Earnings 2019-06-30

BAX 10Q Quarterly Report

Balance Sheet	Income Statement	Cash Flow

Comparables ($MM TTM)
Ticker	M Cap	Assets	Liab	Rev	G Profit	Net Inc	EBITDA	EV	G Margin	EV/EBITDA	ROA
SYK	77,600	26,354	14,411	14,478	9,274	3,550	2,986	83,820	64%	28.1	13%
BDX	68,109	52,233	30,736	17,107	8,112	935	4,536	85,531	47%	18.9	2%
BSX	59,063	24,309		10,078	7,188	1,396	2,605	63,831	71%	24.5	6%
BAX	45,469	17,544	9,708	11,080	4,667	1,582	2,490	42,544	42%	17.1	9%
RMD	17,425	4,108	2,035	2,607	1,537	405	848	18,540	59%	21.9	10%
TFX	15,750	6,314	3,650	2,521	1,426	271	600	17,595	57%	29.3	4%
XRAY	13,003	8,575	3,392	3,944	2,041	105	478	14,194	52%	29.7	1%
DXCM	12,908	2,066	1,378	1,222	767	-170	-87	12,198	63%	-140.0	-8%
ABMD	11,806	1,125	122	797	661	258	327	11,705	83%	35.8	23%
PODD	7,136	978	728	661	435	17	47	7,624	66%	163.9	2%

bax-10q_20190630.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2019

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 1-4448

BAXTER INTERNATIONAL INC.

(Exact name of registrant as specified in its charter)

Delaware		36-0781620
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

One Baxter Parkway, Deerfield, Illinois		60015
(Address of principal executive offices)		(Zip Code)

		224-948-2000
		(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $1.00 par value	BAX (NYSE)	New York Stock Exchange
		Chicago Stock Exchange
0.4% Global Notes due 2024	BAX 24	New York Stock Exchange
1.3% Global Notes due 2025	BAX 25	New York Stock Exchange
1.3% Global Notes due 2029	BAX 29	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares of the registrant’s Common Stock, par value $1.00 per share, outstanding as of July 25, 2019 was 510,555,869 shares.

BAXTER INTERNATIONAL INC.

FORM 10-Q

For the quarterly period ended June 30, 2019

TABLE OF CONTENTS

		Page Number
PART I.	FINANCIAL INFORMATION	2
Item 1.	Financial Statements (unaudited)	2
	Condensed Consolidated Balance Sheets	2
	Condensed Consolidated Statements of Income	3
	Condensed Consolidated Statements of Comprehensive Income	4
	Condensed Consolidated Statements of Changes in Equity	5
	Condensed Consolidated Statements of Cash Flows	7
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	41
Item 4.	Controls and Procedures	42
Review by Independent Registered Public Accounting Firm		43
Report of Independent Registered Public Accounting Firm		44

PART II.	OTHER INFORMATION	45
Item 1.	Legal Proceedings	45
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	45
Item 6.	Exhibits	46
Signature		47

PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements

Baxter International Inc.

Condensed Consolidated Balance Sheets (unaudited)

(in millions, except shares)

	June 30,			December 31,
	2019			2018
Current assets:
Cash and cash equivalents	$	2,925		$	1,832
Accounts and other current receivables, net		1,885			1,812
Inventories		1,757			1,653
Prepaid expenses and other		651			622
Total current assets		7,218			5,919
Property, plant and equipment, net		4,541			4,542
Goodwill		2,938			2,958
Other intangible assets, net		1,364			1,398
Operating lease right-of-use assets		588			—
Other non-current assets		895			824
Total assets	$	17,544		$	15,641
Current liabilities:
Short-term debt	$	2		$	2
Current maturities of long-term debt and finance lease obligations		2			2
Accounts payable and accrued liabilities		2,593			2,832
Total current liabilities		2,597			2,836
Long-term debt and finance lease obligations		5,157			3,473
Operating lease liabilities		490			—
Other non-current liabilities		1,464			1,516
Total liabilities		9,708			7,825
Equity:
Common stock, $1 par value, authorized 2,000,000,000 shares, issued 683,494,944 shares in 2019 and 2018		683			683
Common stock in treasury, at cost, 173,275,586 shares in 2019 and 170,495,859 shares in 2018		(10,322	)		(9,989	)
Additional contributed capital		5,906			5,898
Retained earnings		16,184			15,626
Accumulated other comprehensive (loss) income		(4,639	)		(4,424	)
Total Baxter stockholders’ equity		7,812			7,794
Noncontrolling interests		24			22
Total equity		7,836			7,816
Total liabilities and equity	$	17,544		$	15,641

The accompanying notes are an integral part of these condensed consolidated financial statements.

Baxter International Inc.

Condensed Consolidated Statements of Income (unaudited)

(in millions, except per share data)

	Three months ended						Six months ended
	June 30,						June 30,
	2019			2018			2019			2018
Net sales	$	2,840		$	2,842		$	5,472		$	5,519
Cost of sales		1,681			1,603			3,233			3,166
Gross margin		1,159			1,239			2,239			2,353
Selling, general and administrative expenses		642			681			1,242			1,303
Research and development expenses		166			174			295			314
Other operating income, net		(4	)		—			(37	)		(80	)
Operating income		355			384			739			816
Interest expense, net		20			11			38			23
Other income, net		(28	)		(31	)		(53	)		(49	)
Income before income taxes		363			404			754			842
Income tax expense		20			61			64			110
Net income	$	343		$	343		$	690		$	732
Net income per common share
Basic	$	0.67		$	0.64		$	1.35		$	1.36
Diluted	$	0.66		$	0.63		$	1.33		$	1.33
Weighted-average number of common shares outstanding
Basic		510			535			511			537
Diluted		519			547			520			549

The accompanying notes are an integral part of these condensed consolidated financial statements.

Baxter International Inc.

Condensed Consolidated Statements of Comprehensive Income (unaudited)

(in millions)

	Three months ended						Six months ended
	June 30,						June 30,
	2019			2018			2019			2018
Net income	$	343		$	343		$	690		$	732
Other comprehensive (loss) income, net of tax:
Currency translation adjustments, net of tax (benefit) expense of ($4) and ($24) for the three months ended June 30, 2019 and 2018, respectively, and $2 and ($31) for the six months ended June 30, 2019 and 2018, respectively		(78	)		(363	)		(48	)		(282	)
Pension and other postretirement benefits, net of tax expense of $3 and $4 for the three months ended June 30, 2019 and 2018, respectively, and $6 and $17 for the six months ended June 30, 2019 and 2018, respectively		13			29			21			81
Hedging activities, net of tax (benefit) expense of ($3) and $2 for the three months ended June 30, 2019 and 2018, respectively, and ($8) and $3 for the six months ended June 30, 2019 and 2018, respectively		(12	)		11			(27	)		6
Total other comprehensive (loss) income, net of tax		(77	)		(323	)		(54	)		(195	)
Comprehensive income	$	266		$	20		$	636		$	537

The accompanying notes are an integral part of these condensed consolidated financial statements.

Baxter International Inc.

Condensed Consolidated Statements of Changes in Equity (unaudited)

(in millions)

	For the three and six months ended June 30, 2019
	Baxter International Inc. stockholders' equity
	Common stock shares		Common stock		Common stock shares in treasury			Common stock in treasury			Additional contributed capital			Retained earnings			Accumulated other comprehensive income (loss)			Total Baxter stockholders' equity			Noncontrolling interests		Total equity
Balance as of January 1, 2019	683		$	683		170		$	(9,989	)	$	5,898		$	15,626		$	(4,424	)	$	7,794		$	22	$	7,816
Adoption of new accounting standards		—		—		—			—			—			161			(161	)		—			—		—
Net income		—		—		—			—			—			347			—			347			—		347
Other comprehensive income (loss)		—		—		—			—			—			—			23			23			—		23
Purchases of treasury stock		—		—		8			(586	)		—			—			—			(586	)		—		(586	)
Stock issued under employee benefit plans and other		—		—		(5	)		291			(59	)		(66	)		—			166			—		166
Dividends declared on common stock		—		—		—			—			—			(98	)		—			(98	)		—		(98	)
Change in noncontrolling interests		—		—		—			—			—			—			—			—			1		1
Balance as of March 31, 2019	683		$	683	173			$	(10,284	)	$	5,839		$	15,970		$	(4,562	)	$	7,646		$	23	$	7,669
Net income		—		—		—			—			—			343			—			343			—		343
Other comprehensive income (loss)		—		—		—			—			—			—			(77	)		(77	)		—		(77	)
Purchases of treasury stock		—		—		2			(157	)		46			—			—			(111	)		—		(111	)
Stock issued under employee benefit plans and other		—		—		(2	)		119			21			(17	)		—			123			—		123
Dividends declared on common stock		—		—		—			—			—			(112	)		—			(112	)		—		(112	)
Change in noncontrolling interests		—		—		—			—			—			—

Closing Price ($)	Shares Out (MM)	Market Cap ($MM)
$0.00	520	$45,469

10-Q	2019-07-30	Quarter: 2019-06-30
10-Q	2019-05-08	Quarter: 2019-03-31
10-K	2019-02-21	Annual: 2018-12-31
10-Q	2018-11-05	Quarter: 2018-09-30
10-Q	2018-08-06	Quarter: 2018-06-30
10-Q	2018-05-09	Quarter: 2018-03-31
10-K	2018-02-23	Annual: 2017-12-31
10-Q	2017-11-02	Quarter: 2017-09-30
10-Q	2017-08-07	Quarter: 2017-06-30
10-Q	2017-05-04	Quarter: 2017-03-31
10-K	2017-02-23	Annual: 2016-12-31
10-Q	2016-11-07	Quarter: 2016-09-30
10-Q	2016-08-04	Quarter: 2016-06-30
10-Q	2016-05-06	Quarter: 2016-03-31
10-K	2016-02-26	Annual: 2015-12-31
10-Q	2015-11-09	Quarter: 2015-09-30
10-Q	2015-08-07	Quarter: 2015-06-30
10-Q	2015-05-06	Quarter: 2015-03-31
10-K	2015-02-26	Annual: 2014-12-31
10-Q	2014-10-29	Quarter: 2014-09-30
10-Q	2014-07-30	Quarter: 2014-06-30
10-Q	2014-04-30	Quarter: 2014-03-31
10-K	2014-02-21	Annual: 2013-12-31
10-Q	2013-10-30	Quarter: 2013-09-30
10-Q	2013-07-31	Quarter: 2013-06-30
10-Q	2013-05-01	Quarter: 2013-03-31
10-K	2013-02-21	Annual: 2012-12-31
10-Q	2012-11-01	Quarter: 2012-09-30
10-Q	2012-08-02	Quarter: 2012-06-30
10-Q	2012-05-03	Quarter: 2012-03-31
10-K	2012-02-23	Annual: 2011-12-31
10-Q	2011-11-02	Quarter: 2011-09-30
10-Q	2011-08-02	Quarter: 2011-06-30
10-Q	2011-05-03	Quarter: 2011-03-31
10-K	2011-02-23	Annual: 2010-12-31
10-Q	2010-11-03	Quarter: 2010-09-30
10-Q	2010-08-05	Quarter: 2010-06-30
10-Q	2010-05-10	Quarter: 2010-03-31
10-K	2010-02-23	Annual: 2009-12-31

8-K	2020-02-13	Earnings, Amendment, Regulation FD
8-K	2020-01-12	Earnings, Regulation FD, Exhibits
8-K	2019-12-20	Enter Agreement, Leave Agreement, Off-BS Arrangement, Exhibits
8-K	2019-11-20	Exhibits
8-K	2019-10-31	Other Events
8-K	2019-10-28	Other Events
8-K	2019-10-24	Earnings, Other Events, Exhibits
8-K	2019-10-04	Enter Agreement, Other Events
8-K	2019-07-25	Earnings, Exhibits
8-K	2019-05-15	Other Events, Exhibits
8-K	2019-05-07	Shareholder Vote
8-K	2019-04-25	Earnings, Exhibits
8-K	2019-03-21	Officers, Other Events
8-K	2019-02-25	Officers, Regulation FD
8-K	2019-01-31	Earnings, Exhibits
8-K	2018-12-03	Officers, Other Events, Exhibits
8-K	2018-11-07	Officers, Amend Bylaw, Exhibits
8-K	2018-10-31	Earnings, Exhibits
8-K	2018-08-23	Other Events, Exhibits
8-K	2018-07-26	Earnings, Exhibits
8-K	2018-07-17	Other Events
8-K	2018-05-08	Shareholder Vote
8-K	2018-04-26	Earnings, Exhibits
8-K	2018-02-19	Officers
8-K	2018-02-01	Earnings, Exhibits
8-K	2018-01-05	Enter Agreement, Officers, Exhibits

EX-15	bax-ex15_8.htm
EX-31.1	bax-ex311_9.htm
EX-31.2	bax-ex312_10.htm
EX-32.1	bax-ex321_11.htm
EX-32.2	bax-ex322_6.htm