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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, 2022
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)
_________________________________________________________________________________
Delaware36-0781620
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
One Baxter Parkway,Deerfield,Illinois60015
(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 classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $1.00 par valueBAX (NYSE)New York Stock Exchange
Chicago Stock Exchange
0.4% Global Notes due 2024BAX 24New York Stock Exchange
1.3% Global Notes due 2025BAX 25New York Stock Exchange
1.3% Global Notes due 2029BAX 29New 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 x No o
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 x  No o
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 filerxAccelerated filero
Non-accelerated fileroSmaller 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.    o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes    No x
The number of shares of the registrant’s Common Stock, par value $1.00 per share, outstanding as of July 21, 2022 was 503,610,722 shares.




BAXTER INTERNATIONAL INC.
FORM 10-Q
For the quarterly period ended June 30, 2022






























PART I. FINANCIAL INFORMATION
Item 1.    Financial Statements
Baxter International Inc.
Condensed Consolidated Balance Sheets (unaudited)
(in millions, except share information)
June 30,
2022
December 31,
2021
Current assets:
Cash and cash equivalents $1,852 $2,951 
Accounts receivable, net of allowances of $125 in 2022 and $122 in 2021
2,473 2,629 
Inventories2,663 2,453 
Prepaid expenses and other current assets894 839 
Total current assets7,882 8,872 
Property, plant and equipment, net 4,976 5,178 
Goodwill 9,644 9,836 
Other intangible assets, net 7,459 7,792 
Operating lease right-of-use assets566 630 
Other non-current assets 1,304 1,213 
Total assets $31,831 $33,521 
Current liabilities:
Short-term debt $200 $301 
Current maturities of long-term debt and finance lease obligations208 210 
Accounts payable 1,282 1,246 
Accrued expenses and other current liabilities2,226 2,479 
Total current liabilities 3,916 4,236 
Long-term debt and finance lease obligations, less current portion16,278 17,149 
Operating lease liabilities470 522 
Other non-current liabilities 2,264 2,493 
Total liabilities 22,928 24,400 
Commitments and contingencies
Equity:
Common stock, $1 par value, authorized 2,000,000,000 shares, issued 683,494,944 shares in 2022 and 2021
683 683 
Common stock in treasury, at cost,179,687,824 shares in 2022 and 181,879,516 shares in 2021
(11,409)(11,488)
Additional contributed capital6,253 6,197 
Retained earnings17,099 17,065 
Accumulated other comprehensive (loss) income(3,767)(3,380)
Total Baxter stockholders’ equity8,859 9,077 
Noncontrolling interests44 44 
Total equity8,903 9,121 
Total liabilities and equity$31,831 $33,521 
The accompanying notes are an integral part of these condensed consolidated financial statements.
2


Baxter International Inc.
Condensed Consolidated Statements of Income (unaudited)
(in millions, except per share data)
Three months ended
June 30,
Six months ended
June 30,
2022202120222021
Net sales$3,746 $3,098 $7,453 $6,044 
Cost of sales2,293 1,865 4,652 3,666 
Gross margin1,453 1,233 2,801 2,378 
Selling, general and administrative expenses976 675 2,028 1,302 
Research and development expenses148 139 298 267 
Other operating income, net(11)(5)(28)(5)
Operating income340 424 503 814 
Interest expense, net89 34 174 68 
Other (income) expense, net(44)(2)(60)3 
Income before income taxes295 392 389 743 
Income tax expense 40 91 61 142 
Net income 255 301 328 601 
Net income attributable to noncontrolling interests3 3 5 5 
Net income attributable to Baxter stockholders$252 $298 $323 $596 
Earnings per share
Basic$0.50 $0.59 $0.64 $1.18 
Diluted$0.50 $0.59 $0.64 $1.17 
Weighted-average number of shares outstanding
Basic504 503 503 504 
Diluted508 509 508 510 
The accompanying notes are an integral part of these condensed consolidated financial statements.
3


Baxter International Inc.
Condensed Consolidated Statements of Comprehensive Income (Loss) (unaudited)
(in millions)
Three months ended
June 30,
Six months ended
June 30,
2022202120222021
Net income$255 $301 $328 $601 
Other comprehensive income (loss), net of tax:
Currency translation adjustments, net of tax expense (benefit) of $2 and $(4) for the three months ended June 30, 2022 and 2021, respectively, and ($9) and $13 for the six months ended June 30, 2022 and 2021, respectively.
(417)88 (432)(120)
Pension and other postretirement benefits, net of tax expense of $5 and $3 for the three months ended June 30, 2022 and 2021, respectively, and $8 and $11 for the six months ended June 30, 2022 and 2021, respectively.
23 11 32 41 
Hedging activities, net of tax expense of $4 and $2 for the three months ended June 30, 2022 and 2021, respectively, and $3 and $5 for the six months ended June 30, 2022 and 2021, respectively.
13 5 11 17 
Available-for-sale debt securities, net of tax expense of zero for the three months ended June 30, 2022 and 2021, respectively, and $1 and zero for the six months ended June 30, 2022 and 2021, respectively.
1  2  
Total other comprehensive income (loss), net of tax(380)104 (387)(62)
Comprehensive income (loss)(125)405 (59)539 
Less: Comprehensive income attributable to noncontrolling interests3 3 5 5 
Comprehensive income (loss) attributable to Baxter stockholders$(128)$402 $(64)$534 
The accompanying notes are an integral part of these condensed consolidated financial statements.
4


Baxter International Inc.
Condensed Consolidated Statements of Changes in Equity (unaudited)
(in millions)
For the three months ended June 30, 2022
Baxter International Inc. stockholders' equity
Common stock sharesCommon stockCommon stock shares
in treasury
Common stock in
treasury
Additional contributed capitalRetained earningsAccumulated other comprehensive
income (loss)
Total Baxter stockholders' equityNoncontrolling interestsTotal equity
Balance as of April 1, 2022683 $683 180 $(11,422)$6,207 $16,994 $(3,387)$9,075 $44 $9,119 
Net income— — — — — 252 — 252 3 255 
Other comprehensive income (loss)— — — — — — (380)(380)— (380)
Purchases of treasury stock— — — (8)— — — (8)— (8)
Stock issued under employee benefit plans and other— — — 21 46 — — 67 — 67 
Dividends declared on common stock— — — — — (147)— (147)— (147)
Change in noncontrolling interests— — — — — — — — (3)(3)
Balance as of June 30, 2022
683 $683 180 $(11,409)$6,253 $17,099 $(3,767)$8,859 $44 $8,903 
For the six months ended June 30, 2022
Baxter International Inc. stockholders' equity
Common stock sharesCommon stockCommon stock shares in treasuryCommon stock in treasuryAdditional contributed capitalRetained earningsAccumulated other comprehensive income (loss)Total Baxter stockholders' equityNoncontrolling interestsTotal equity
Balance as of January 1, 2022683 $683 182 $(11,488)$6,197 $17,065 $(3,380)$9,077 $44 $9,121 
Net income— — — — — 323 — 323 5 328 
Other comprehensive income (loss)— — — — — — (387)(387)— (387)
Purchases of treasury stock— — — (8)— — — (8)— (8)
Stock issued under employee benefit plans and other— — (2)87 56 — — 143 — 143 
Dividends declared on common stock— — — — — (289)— (289)— (289)
Change in noncontrolling interests— — — — — — — — (5)(5)
Balance as of June 30, 2022
683 $683 180 $(11,409)$6,253 $17,099 $(3,767)$8,859 $44 $8,903 

5


For the three months ended June 30, 2021
Baxter International Inc. stockholders' equity
Common stock sharesCommon stockCommon stock shares in treasuryCommon stock in treasuryAdditional contributed capitalRetained earningsAccumulated other comprehensive income (loss)Total Baxter stockholders' equityNoncontrolling interestsTotal equity
Balance as of April 1, 2021683 $683 181 $(11,296)$6,043 $16,502 $(3,480)$8,452 $38 $8,490 
Net income— — — — 298 — 298 3 301 
Other comprehensive income (loss)— — — — — — 104 104 — 104 
Purchases of treasury stock— — 3 (300)— — — (300)— (300)
Stock issued under employee benefit plans and other— — — 35 47 — — 82 — 82 
Dividends declared on common stock— — — — — (142)(142)— (142)
Balance as of June 30, 2021683 $683 184 $(11,561)$6,090 $16,658 $(3,376)$8,494 $41 $8,535 
For the six months ended June 30, 2021
Baxter International Inc. stockholders' equity
Common stock sharesCommon stockCommon stock shares in treasuryCommon stock in treasuryAdditional contributed capitalRetained earningsAccumulated other comprehensive income (loss)Total Baxter stockholders' equityNoncontrolling interestsTotal equity
Balance as of January 1, 2021683 $683 179 $(11,051)$6,043 $16,328 $(3,314)$8,689 $37 $8,726 
Net income— — — — — 596 — 596 5 601 
Other comprehensive income (loss)— — — — — — (62)(62)— (62)
Purchases of treasury stock— — 7 (600)— — — (600)— (600)
Stock issued under employee benefit plans and other— — (2)90 47 — — 137 — 137 
Dividends declared on common stock— — — — — (266)— (266)— (266)
Change in noncontrolling interests— — — — — — — — (1)(1)
Balance as of June 30, 2021
683 $683 184 $(11,561)$6,090 $16,658 $(3,376)$8,494 $41 $8,535 
The accompanying notes are an integral part of these condensed consolidated financial statements.
6


Baxter International Inc.
Condensed Consolidated Statements of Cash Flows (unaudited)
(in millions)
Six months ended
June 30,
20222021
Cash flows from operations
Net income$328 $601 
Adjustments to reconcile net income to cash flows from operations:
Depreciation and amortization735 439 
Deferred income taxes(87)(36)
Stock compensation77 59 
Net periodic pension and other postretirement costs28 51 
Other(41)10 
Changes in balance sheet items:
Accounts receivable, net43 (42)
Inventories(308)(155)
Prepaid expenses and other current assets(67)(24)
Accounts payable 91 (9)
Accrued expenses and other current liabilities(231)(9)
Other(86)(31)
Cash flows from operations482 854 
Cash flows from investing activities
Capital expenditures(311)(329)
Acquisitions, net of cash acquired, and investments(190)(417)
Other investing activities, net10 20 
Cash flows from investing activities(491)(726)
Cash flows from financing activities
Repayments of debt(749) 
Net increases (decreases) in debt with original maturities of three months or less(45)51 
Cash dividends on common stock(281)(249)
Proceeds from stock issued under employee benefit plans88 93 
Purchases of treasury stock (565)
Other financing activities, net(30)(37)
Cash flows from financing activities(1,017)(707)
Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash(74)(17)
Decrease in cash, cash equivalents and restricted cash(1,100)(596)
Cash, cash equivalents and restricted cash at beginning of period (1)
2,956 3,736 
Cash, cash equivalents and restricted cash at end of period (1)
$1,856 $3,140 
(1) The following table provides a reconciliation of cash, cash equivalents and restricted cash shown above to the amounts reported within the condensed consolidated balance sheet as of June 30, 2022, December 31, 2021, and June 30, 2021 (in millions):
June 30, 2022December 31, 2021June 30, 2021
Cash and cash equivalents$1,852 $2,951 $3,136 
Restricted cash included in prepaid expenses and other current assets4 5 4 
Cash, cash equivalents and restricted cash$1,856 $2,956 $3,140 
The accompanying notes are an integral part of these condensed consolidated financial statements.
7


Baxter International Inc.
Notes to Condensed Consolidated Financial Statements (unaudited)
1. BASIS OF PRESENTATION
The unaudited interim condensed consolidated financial statements of Baxter International Inc. and its subsidiaries (we or our) have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (SEC) for interim financial reporting. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP) in the United States have been condensed or omitted. These unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in our Annual Report on Form 10-K for the year ended December 31, 2021 (2021 Annual Report).
In the opinion of management, the unaudited interim condensed consolidated financial statements reflect all adjustments necessary for a fair presentation of the financial position, results of operations and cash flows for the periods presented. All such adjustments, unless otherwise noted herein, are of a normal, recurring nature. The results of operations for the current interim period are not necessarily indicative of the results of operations to be expected for the full year.
Risks and Uncertainties Related to COVID-19 and Global Economic and Other Conditions
Our global operations expose us to risks associated with public health crises and epidemics/pandemics, such as the novel strain of coronavirus (COVID-19). COVID-19 has had, and we expect will continue to have, an adverse impact on our operations, supply chains and distribution systems and has increased and we expect will continue to increase our expenses. Initial measures taken in 2020 led to unprecedented restrictions on, disruptions in, and other related impacts on business and personal activities, including a shift in healthcare priorities, which resulted in a significant decline in medical procedures in 2020. As a result, the pandemic has created significant volatility in the demand for our products. For further information about our revenues by product category, refer to Note 9. Significant uncertainty remains regarding the duration and overall impact of the COVID-19 pandemic. For example, concerns remain regarding the pace of economic recovery due to virus resurgence across the globe from the Omicron variants, subvariants and other virus mutations as well as vaccine distribution and hesitancy. The U.S. and other governments may continue existing measures or implement new restrictions and other requirements in light of the continuing spread of the pandemic (including with respect to mandatory vaccinations for certain of our employees, moratoriums on elective procedures and mandatory quarantines and travel restrictions). These measures have caused, and may continue to cause in the future, increased levels of absenteeism, including at our manufacturing and distributing facilities. Many of our manufacturing plant and distribution center personnel are currently unvaccinated, and we may also experience employee resistance in complying with current and future government vaccine and testing mandates, which may cause labor shortages significantly impacting manufacturing production and distribution center productivity. Due to the uncertainty caused by the pandemic, our operating performance and financial results, particularly in the short term, may be subject to volatility.
We have experienced significant challenges to our global supply chain in recent periods, including production delays and interruptions, increased costs and shortages of raw materials and component parts (including resins and electromechanical devices) and higher transportation costs, resulting from the pandemic and other exogenous factors including significant weather events, elevated inflation levels, disruptions to certain ports of call around the world, the war in Ukraine and certain other geopolitical events. We may continue to experience these and other challenges related to our supply chain in future periods. These challenges, including the unavailability of certain raw materials and component parts, have also had a negative impact on our sales for certain product categories due to our inability to fully satisfy demand and may continue to have a negative impact on our sales in the future.
We expect that these challenges as well as evolving governmental restrictions and requirements, among other factors, may continue to have an adverse effect on our business.
New Accounting Standards
Recently adopted accounting pronouncements
As of January 1, 2022, we adopted Accounting Standards Update (ASU) 2021-05, Leases (Topic 842), which requires a lessor to classify a lease with variable lease payments (that do not depend on an index or rate) as an operating lease if (1) the lease would have been classified as a sales-type or direct financing lease, and (2) the lessor would
8


have recognized a selling loss at lease commencement. These changes are intended to avoid recognizing a day-one loss for a lease with variable payments even though the lessor expects the arrangement will be profitable overall. The adoption of this ASU did not have a material impact on our condensed consolidated financial statements.
2. ACQUISITIONS AND OTHER ARRANGEMENTS
Hillrom
On December 13, 2021, we completed our acquisition of all outstanding equity interests of Hill-Rom Holdings, Inc. (Hillrom) for a purchase price of $10.5 billion. Including the assumption of Hillrom's outstanding debt, the enterprise value of the transaction was approximately $12.8 billion. Under the terms of the transaction agreement, Hillrom shareholders received $156.00 in cash per outstanding Hillrom common share.
The following table summarizes the fair value of the total consideration paid:
(in millions)
Cash consideration paid to Hillrom shareholders(a)
$10,474 
Fair value of equity awards issued to Hillrom equity award holders(b)
2 
Total Consideration$10,476 
(a) Represents cash consideration transferred of $156.00 per outstanding Hillrom common share to existing shareholders and holders of equity awards that vested at closing pursuant to their original terms.
(b) Represents the pre-acquisition service portion of the fair value of 668 thousand replacement restricted stock units issued to Hillrom equity award holders at closing.
The valuation of assets acquired and liabilities assumed has not yet been finalized as of June 30, 2022. Finalization of the valuation during the measurement period could result in a change in the amounts recorded for acquired intangible assets, goodwill and income taxes among other items. The completion of the valuation will occur no later than one year from the acquisition date. The following table summarizes the preliminary fair values of the assets acquired and liabilities assumed as of the acquisition date:
(in millions)
Assets acquired and liabilities assumed
Cash and cash equivalents$399 
Accounts receivable562 
Inventories557 
Prepaid expenses and other current assets49 
Property, plant and equipment502 
Goodwill6,820 
Other intangible assets6,029 
Operating lease right-of-use assets74 
Other non-current assets132 
Short-term debt(250)
Accounts payable(140)
Accrued expenses and other current liabilities(557)
Long-term debt and finance lease obligations(2,118)
Operating lease liabilities(57)
Other non-current liabilities(1,526)
Total assets acquired and liabilities assumed$10,476 
In the first half of 2022 we recorded measurement period adjustments, primarily impacting accounts receivable, other intangible assets, and deferred income tax liabilities. Individually the measurement period adjustments were not
9


material and in total increased goodwill by $35 million. The measurement period adjustments did not have a significant impact to our results of operations.
The goodwill from the Hillrom acquisition, which is not deductible for tax purposes, includes the value of an assembled workforce as well as the overall strategic benefits provided to our product portfolio and is included in the Hillrom segment.
For the six months ended June 30, 2022, we recognized $159 million of incremental costs of sales from the fair value step-ups on acquired Hillrom inventory that was sold in the first quarter.
Other Business Development Activities
In March 2022, we entered into an agreement with a subsidiary of Pfizer Inc. to acquire the rights to Zosyn, a premixed frozen piperacillin-tazobactam product, in the U.S. and Canada. Zosyn is used for the treatment of intra-abdominal infections, nosocomial pneumonia, skin and skin structure infections, female pelvic infections and community-acquired pneumonia. Under the terms of the acquisition, we paid the acquisition price of $122 million currently, received specified intellectual property, including patent rights, in the first quarter and will receive additional intellectual property, including the product rights to Zosyn, in the first quarter of 2023. Under the arrangement, we are entitled to receive profit sharing payments from sales of Zosyn until the product rights transfer to us in March 2023.
The transaction has been accounted for as an asset acquisition, as substantially all of the fair value of the assets being acquired under the arrangement was concentrated in the product rights that we will receive, which we classify as a developed technology intangible asset. Accordingly, the $122 million purchase price was primarily allocated to the developed technology intangible asset class and will be amortized over an estimated useful life of 9 years.
3. SUPPLEMENTAL FINANCIAL INFORMATION
Allowance for Doubtful Accounts
The following table is a summary of the changes in our allowance for doubtful accounts for the three and six months ended June 30, 2022 and 2021.
Three months ended
June 30,
Six months ended
June 30,
(in millions)2022202120222021
Balance at beginning of period$129 $120 $122 $125 
Charged to costs and expenses3 (4)9 (3)
Write-offs(1)(1)(2)(1)
Currency translation adjustments(6)2 (4)(4)
Balance at end of period$125 $117 $125 $117 
Inventories
(in millions)June 30,
2022
December 31,
2021
Raw materials$678 $591 
Work in process317 300 
Finished goods1,668 1,562 
Inventories$2,663 $2,453 
Property, Plant and Equipment, Net
(in millions)June 30,
2022
December 31,
2021
Property, plant and equipment, at cost$11,504 $11,728 
Accumulated depreciation(6,528)(6,550)
Property, plant and equipment, net$4,976 $5,178 
10


Interest Expense, Net
Three months ended
June 30,
Six months ended
June 30,
(in millions)2022202120222021
Interest expense, net of capitalized interest$93 $37 $181 $74 
Interest income(4)(3)(7)(6)
Interest expense, net$89 $34 $174 $68 
Other (Income) Expense, Net
Three months ended
June 30,
Six months ended
June 30,
(in millions)2022202120222021
Foreign exchange (gains) losses, net$(15)$8 $(26)$5 
Pension and other postretirement benefit plans(7)3 (12)7 
Pension curtailment(11) (11) 
Change in fair value of marketable equity securities(8)(9)(8)(7)
Other, net(3)(4)(3)(2)
Other (income) expense, net$(44)$(2)$(60)$3 
Non-Cash Operating and Investing Activities
Right-of-use operating lease assets obtained in exchange for lease obligations for the six months ended June 30, 2022 and 2021 were $23 million and $21 million, respectively.
Purchases of property, plant and equipment included in accounts payable as of June 30, 2022 and 2021 were $66 million and $70 million, respectively.
Unsettled share repurchases included in accrued expenses and other current liabilities as of June 30, 2022 and 2021 were $8 million and $35 million, respectively.
4. GOODWILL AND OTHER INTANGIBLE ASSETS, NET
Goodwill
The following is a reconciliation of goodwill by business segment.
(in millions)AmericasEMEAAPACHillromTotal
Balance as of December 31, 2021$2,517 $309 $224 $6,786 $9,836 
Acquisition accounting adjustments   35 35 
Currency translation(150)(17)(14)(46)(227)
Balance as of June 30, 2022$2,367 $292 $