Baxter Exceeds Expectations in Second Quarter with Strong Growth across Global Franchises

Company Confirms Full-Year 2014 Outlook, Narrows EPS Range

DEERFIELD, Ill.--()--Baxter International Inc. (NYSE:BAX) today reported strong growth across its global franchises in the second quarter, generating sales and earnings that exceeded the company’s previously issued guidance. The company also confirmed its financial outlook for 2014, narrowing the guidance range for adjusted earnings per diluted share to $5.10 to $5.20.

Baxter posted net income of $520 million and earnings per diluted share of $0.95 in the second quarter, compared to net income of $590 million and earnings per diluted share of $1.07 in the same period last year. Second quarter 2014 results include net after-tax special items totaling $172 million (or $0.31 per diluted share) primarily for intangible amortization and costs associated with contingent revenue and product development milestone payments, remediation efforts related to the in-progress SPECTRUM Infusion Pump recall, integration of the company’s acquisition of Gambro AB, and Baxter’s planned separation into two independent healthcare companies. These charges were partially offset by the reversal of certain business optimization and litigation reserves. Second quarter 2013 results included after-tax special items totaling $69 million (or $0.13 per diluted share).

On an adjusted basis, excluding special items in both periods, Baxter’s second quarter net income of $692 million increased 5 percent from $659 million reported in 2013. Adjusted earnings per diluted share of $1.26 also increased 5 percent from $1.20 per diluted share last year, exceeding the company’s previously issued earnings guidance of $1.18 to $1.22 per diluted share.

Worldwide sales totaled $4.3 billion, which advanced 16 percent from $3.7 billion reported in the same period last year. Sales within the United States grew 12 percent to $1.7 billion, and international sales of $2.5 billion increased 19 percent (foreign currency had no impact on sales growth). Excluding the contribution of Gambro revenues in the quarter totaling $408 million, Baxter’s worldwide sales rose 5 percent.

BioScience revenues advanced 7 percent to $1.8 billion compared to the prior-year period. Excluding the impact of foreign currency, BioScience sales rose 6 percent, with solid growth reported across all the global franchises. Performance was led by double-digit growth of ADVATE [Antihemophilic Factor (Recombinant), Plasma/Albumin-Free Method] and albumin, as well as increased global demand for GAMMAGARD LIQUID [Immune Globulin Intravenous (Human)], biosurgery products and select vaccines.

Medical Products sales of $2.5 billion grew 24 percent from the prior-year period, and excluding revenues associated with the Gambro acquisition, Medical Products sales increased 4 percent (foreign currency had no impact on sales growth). This performance was driven primarily by strong sales of injectable drugs, anesthetics and nutritional therapies, as well as gains in peritoneal dialysis patients, particularly in the U.S. and emerging markets.

''We are driving solid performance across our entire business portfolio, and advancing care across our key franchises in both developed and emerging markets,'' said Robert L. Parkinson, Jr., chairman and chief executive officer. ''This provides a strong global foundation as we continue to improve our competitive position and performance, enhance operational, commercial and scientific effectiveness, meet challenges posed by the global marketplace, and create value for patients, healthcare providers, and other key stakeholders.''

Six-Month Results

For the first six months of 2014, Baxter reported net income of $1.1 billion, or $1.96 per diluted share, compared to net income of $1.1 billion and earnings per diluted share of $2.07 reported in 2013. Excluding special items, Baxter’s adjusted net income for the six-month period increased 7 percent to $1.3 billion, and earnings per diluted share of $2.45 also increased 7 percent from $2.29 per diluted share reported in the comparable prior-year period.

Baxter’s worldwide sales for the six-month period totaled $8.2 billion and increased 15 percent (or 16 percent excluding the impact of foreign currency). Excluding the contribution of Gambro revenues of $808 million, Baxter’s worldwide sales rose 4 percent (or 5 percent excluding the impact of foreign currency).

BioScience sales of $3.4 billion increased 6 percent (foreign currency had no impact on sales growth), while Medical Products sales of $4.9 billion advanced 23 percent (or 24 percent excluding the impact of foreign currency) from the prior-year period. Excluding the contribution of Gambro revenues, Medical Products sales grew 3 percent (or 4 percent excluding the impact of foreign currency).

In the first half of 2014, Baxter generated cash flows from operations of approximately $1.2 billion and returned approximately $1.0 billion to shareholders through share repurchases of $450 million (or approximately 6 million shares) and dividends totaling $531 million (reflecting more than a 8 percent increase in dividend payments versus the prior-year period).

Recent Highlights

''During the quarter, Baxter announced a number of new product pipeline achievements and approvals, advanced collaborations, and marked progress towards our separation into two leading healthcare companies,'' continued Parkinson. ''We remain on track to complete the separation by mid-year 2015.''

Recent highlights include:

  • Global expansion of ADVATE, including European approval of a new production facility in Singapore, new multi-year tender awards in Australia and the UK, and new regulatory approvals in Turkey and Russia. ADVATE is now approved in 62 countries.
  • Approval from the U.S. Food and Drug Administration (FDA) of BAXJECT III reconstitution system with ADVATE, reducing the number of steps in the reconstitution process for patients and caregivers.
  • European CE marking of myPKFiT, a new web-based individualized dosing device for prophylactic treatment of hemophilia A with ADVATE. The device allows physicians to calculate personalized ADVATE treatment regimens based on patient information and individual pharmacokinetic (PK) profiles.
  • Completion of dosing in the Phase III clinical trial of BAX 855, an investigational extended half-life, recombinant factor VIII treatment for hemophilia A. The ongoing trial is aimed at assessing the efficacy of BAX 855, and will also evaluate its safety and pharmacokinetic profile. Top line data is expected to be announced in the third quarter.
  • Presentation of a range of data on the company’s bleeding disorder pipeline during the World Federation of Hemophilia World Congress in Australia, including studies on BAX 855, ADVATE, OBI-1, BAX 111 and BAX 930.
  • 510(k) clearance from the FDA for Baxter’s next-generation SIGMA Spectrum Infusion Pump with Master Drug Library.
  • Presentation of data supporting the safety and efficacy of the VIVIA hemodialysis system at the European Renal Association and European Dialysis and Transplant Association (ERA-EDTA). The VIVIA system, which completed the CE marking in Europe late last year, is being introduced on a limited basis in select European dialysis clinics in 2014.
  • Initiation of Phase 3 trials for CHS-0214, an investigational etanercept biosimilar, in rheumatoid arthritis and chronic plaque psoriasis, by Baxter’s partner Coherus BioSciences.
  • Announcement by Baxter’s partner, CTI BioPharma, of the completion of enrollment in its PERSIST-1 pivotal trial of pacritinib for patients with myelofibrosis.
  • Acquisition of AesRx, including its sickle cell disease development program, Aes-103. The investigational treatment, which is currently being evaluated in a Phase 2 clinical trial, has the potential to address an extremely high unmet clinical need in a community with inadequate treatment options and no recent major clinical developments.
  • Naming of several key executives, including the chief financial officers for both the new biopharmaceutical and medical products companies and the new head of research and development for BioScience.

Outlook for Third Quarter and Full-Year 2014

Baxter also announced today its guidance for the third quarter and confirmed its guidance for the full year.

For the third quarter of 2014, the company expects sales growth of approximately 12 to 13 percent, excluding the impact of foreign currency. Baxter expects earnings, before special items, of $1.28 to $1.32 per diluted share in the third quarter.

Baxter now expects sales growth for full-year 2014 of 10 to 11 percent, before the impact of foreign exchange. Also for the full year, Baxter expects earnings, before special items, of $5.10 to $5.20 per diluted share and cash flows from operations of approximately $3.5 billion, excluding cash costs related to the spin-off of the biopharmaceutical business.

The third quarter 2014 earnings guidance excludes approximately $0.07 per diluted share of projected intangible asset amortization expense. The full-year 2014 earnings guidance excludes the $0.62 per diluted share of special items comprising $0.49 per diluted share of items recorded in the first half of the year, and projected intangible asset amortization expense of $0.13 per diluted share for the remainder of the year. Reconciling for the inclusion of these items results in GAAP (Generally Accepted Accounting Principles) earnings of $4.48 to $4.58 per diluted share for the full-year 2014.

A webcast of Baxter's second quarter conference call for investors can be accessed live from a link on the company's website at www.baxter.com beginning at 7:30 a.m. CDT on July 17, 2014. Please visit Baxter's website for more information regarding this and future investor events and webcasts.

Baxter International Inc., through its subsidiaries, develops, manufactures and markets products that save and sustain the lives of people with hemophilia, immune disorders, infectious diseases, kidney disease, trauma, and other chronic and acute medical conditions. As a global, diversified healthcare company, Baxter applies a unique combination of expertise in medical devices, pharmaceuticals and biotechnology to create products that advance patient care worldwide.

This release includes forward-looking statements concerning the company’s financial results, business development activities, capital structure, R&D pipeline including results of clinical trials and planned product launches, outlook for 2014 and the planned separation of Baxter’s biopharmaceutical and medical products businesses and the expected leadership of the two resulting companies after the separation. 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; future actions of regulatory bodies and other governmental authorities, including the FDA and foreign counterparts; product quality or patient safety concerns leading to product recalls, withdrawals, launch delays, litigation, or declining sales; U.S. healthcare reform and other global austerity measures; reimbursement and rebate policies of government agencies and private payers; product development risks; the ability to successfully separate the biopharmaceutical and medical products businesses on the terms or timeline currently contemplated, if at all, and achieve the intended results; accurate identification of business development and R&D opportunities and realization of anticipated benefits, including the ability to successfully integrate the Gambro business and achieve anticipated efficiencies; timely submission and approval of regulatory filings; inventory reductions or fluctuations in buying patterns; the impact of geographic and product mix on the company's sales; the impact of competitive products and pricing, including generic competition, drug reimportation and disruptive technologies; the availability of acceptable raw materials and component supply; fluctuations in supply and demand and the pricing of plasma-based therapies; the ability to enforce company patents; patents of third parties preventing or restricting the company's manufacture, sale or use of affected products or technology; the impact of global economic conditions on Baxter and its customers, including foreign governments; foreign currency fluctuations and other risks identified in Baxter’s most recent filing on Form 10-K and other Securities and Exchange Commission filings, all of which are available on Baxter’s website. Baxter does not undertake to update its forward-looking statements.

 
BAXTER INTERNATIONAL INC.
Consolidated Statements of Income
Three Months Ended June 30, 2014 and 2013
(unaudited)
(in millions, except per share and percentage data)
       
 
Three Months Ended
June 30,
2014 2013 Change
 
NET SALES $4,264 $3,669 16%
 
COST OF SALES 2,223 1,730 28%
                   
GROSS MARGIN     2,041     1,939     5%
% of Net Sales 47.9% 52.8% (4.9 pts)
 
MARKETING AND ADMINISTRATIVE EXPENSES 998 838 19%
% of Net Sales 23.4% 22.8% 0.6 pts
 
RESEARCH AND DEVELOPMENT EXPENSES 325 273 19%
% of Net Sales 7.6% 7.4% 0.2 pts
 
NET INTEREST EXPENSE 42 17 N/M
 
OTHER EXPENSE, NET 15 68 N/M
                   
PRE-TAX INCOME     661     743     (11%)
 
INCOME TAX EXPENSE     141     153     (8%)
% of Pre-Tax Income 21.3% 20.6% 0.7 pts
 
NET INCOME     $520     $590     (12%)
 
BASIC EPS     $0.96     $1.09     (12%)
DILUTED EPS     $0.95     $1.07     (11%)
 
WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
Basic 542 543
Diluted     548     549      
 
ADJUSTED PRE-TAX INCOME (excluding special items) $885

A

$844

A

5%
ADJUSTED NET INCOME (excluding special items) $692

A

$659

A

5%
ADJUSTED DILUTED EPS (excluding special items) $1.26

A

$1.20

A

5%

A

  Refer to page 9 for a description of the adjustments and a reconciliation to generally accepted accounting principles (GAAP) measures.
 
BAXTER INTERNATIONAL INC.
Note to Consolidated Statements of Income
Three Months Ended June 30, 2014 and 2013
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, 2014 and 2013 included special items which impacted the GAAP measures as follows:

Three Months Ended

June 30,

2014 2013 Change
Gross Margin $2,041 $1,939 5%

Intangible asset amortization expense 1

47 25

Business optimization items 2

(14) (20)

Product-related items 3

89     -      
Adjusted Gross Margin $2,163     $1,944     11%
% of Net Sales 50.7% 53.0% (2.3 pts)
 
Marketing and Administrative Expenses $998 $838 19%
Gambro acquisition and integration items 4 (27) (23)
Separation-related costs 6 (22) -

Business optimization items 2

16 -

Product-related items 3

(4)     -      
Adjusted Marketing and Administrative Expenses $961     $815     18%
% of Net Sales 22.5% 22.2% 0.3 pts
 
Research and Development Expenses $325 $273 19%
Business optimization items 2 2 (18)

Business development items 5

(35)     -      
Adjusted Research and Development Expenses $292     $255     15%
% of Net Sales 6.8% 7.0% (0.2 pts)
 
Other Expense, Net $15 $68 N/M

Reserve items and adjustments 7

(30) -
Gambro acquisition and integration items 4 (2)     (55)      
Adjusted Other (Income) Expense, Net $(17)     $13     N/M
 
Pre-Tax Income $661 $743 (11%)
Impact of special items 224     101      
Adjusted Pre-Tax Income $885     $844     5%
 
Income Tax Expense $141 $153 (8%)
Impact of special items 52     32      
Adjusted Income Tax Expense $193     $185     4%
% of Adjusted Pre-Tax Income 21.8% 21.9% (0.1 pts)
 
Net Income $520 $590 (12%)
Impact of special items 172     69      
Adjusted Net Income $692     $659     5%
 
Diluted EPS $0.95 $1.07 (11%)
Impact of special items 0.31     0.13      
Adjusted Diluted EPS $1.26     $1.20     5%
 
WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
Diluted     548     549      
 

1

  Effective January 1, 2014, Baxter has updated its non-GAAP measures above to exclude intangible asset amortization expense. Prior period non-GAAP measures have been revised to reflect the updated measures. Intangible asset amortization expense totaled $47 million ($36 million, or $0.07 per diluted share, on an after-tax basis) and $25 million ($20 million, or $0.04 per diluted share, on an after-tax basis) in 2014 and 2013, respectively.

2

The company's results in 2014 included a net benefit of $32 million ($18 million, or $0.03 per diluted share, on an after-tax basis) primarily related to an adjustment to a previous business optimization reserve that is no longer probable of being utilized. The company's results in 2013 included a benefit of $20 million ($14 million, or $0.03 per diluted share, on an after-tax basis) related to an adjustment to a previous business optimization reserve that is no longer probable of being utilized, which was partially offset by additional business optimization charges of $18 million ($14 million, or $0.03 per diluted share, on an after-tax basis).

3

The company's results in 2014 included total charges of $93 million ($58 million, or $0.10 per diluted share, on an after-tax basis) principally related to product remediation efforts for the SIGMA Spectrum Infusion Pump.

4

The company's results in 2014 included total charges of $29 million ($21 million, or $0.04 per diluted share, on an after-tax basis) principally related to the acquisition and integration of Gambro AB (Gambro). The company's results in 2013 included total charges of $78 million ($49 million, or $0.09 per diluted share, on an after-tax basis) primarily related to pre-acquisition costs for the planned acquisition of Gambro and losses on derivative instruments entered into during December 2012 and the first six months of 2013 to hedge the anticipated foreign currency cash outflows for the planned acquisition of Gambro.

5

The company's results in 2014 included a charge of $35 million ($30 million, or $0.05 per diluted share, on an after-tax basis) primarily related to certain milestone payments associated with the company's collaboration arrangements.

6

The company's results in 2014 included separation-related costs of $22 million ($21 million, or $0.04 per diluted share, on an after-tax basis) for the planned separation of Baxter's biopharmaceutical and medical products businesses.

7

The company's results in 2014 included a net expense of $30 million ($24 million, or $0.04 per diluted share, on an after-tax basis) primarily due to an increase in the estimated fair value of acquisition-related contingent payment liabilities, partially offset by a third-party recovery on previous litigation reserves.
For more information on the company's use of non-GAAP financial measures in this press release, please see the company's Current Report on Form 8-K filed with the Securities and Exchange Commission on the date of this press release.
 
BAXTER INTERNATIONAL INC.
Consolidated Statements of Income
Six Months Ended June 30, 2014 and 2013
(unaudited)
(in millions, except per share and percentage data)
       
 
Six Months Ended
June 30,
2014 2013 Change
 
NET SALES $8,215 $7,117 15%
 
COST OF SALES 4,213 3,422 23%
                   
GROSS MARGIN     4,002     3,695     8%
% of Net Sales 48.7% 51.9% (3.2 pts)
 
MARKETING AND ADMINISTRATIVE EXPENSES 1,918 1,633 17%
% of Net Sales 23.3% 22.9% 0.4 pts
 
RESEARCH AND DEVELOPMENT EXPENSES 638 519 23%
% of Net Sales 7.8% 7.3% 0.5 pts
 
NET INTEREST EXPENSE 85 42 N/M
 
OTHER (INCOME) EXPENSE, NET (9) 65 N/M
                   
PRE-TAX INCOME     1,370     1,436     (5%)
 
INCOME TAX EXPENSE     294     294     0%
% of Pre-Tax Income 21.5% 20.5% 1 pts
 
NET INCOME     $1,076     $1,142     (6%)
 
BASIC EPS     $1.98     $2.10     (6%)
DILUTED EPS     $1.96     $2.07     (5%)
 
WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
Basic 542 543
Diluted     548     550      
 
ADJUSTED PRE-TAX INCOME (excluding special items) $1,714

A

$1,607

A

7%
ADJUSTED NET INCOME (excluding special items) $1,344

A

$1,260

A

7%
ADJUSTED DILUTED EPS (excluding special items) $2.45

A

$2.29

A

7%

A

  Refer to page 11 for a description of the adjustments and a reconciliation to GAAP measures.
 
BAXTER INTERNATIONAL INC.
Note to Consolidated Statements of Income
Six Months Ended June 30, 2014 and 2013
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, 2014 and 2013 included special items which impacted the GAAP measures as follows:

 

Six Months Ended
June 30,
2014 2013 Change
Gross Margin $4,002 $3,695 8%

Intangible asset amortization expense 1

90 50

Business optimization items 2

(2) (20)

Product-related items 3

89 -

Gambro acquisition and integration items 4

-     1      
Adjusted Gross Margin $4,179     $3,726     12%
% of Net Sales 50.9% 52.4% (1.5 pts)
 
Marketing and Administrative Expenses $1,918 $1,633 17%

Gambro acquisition and integration items 4

(44) (40)
Reserve items and adjustments 6 10 -
Separation-related costs 7 (22) -

Business optimization items 2

6 -

Product-related items 3

(4)     -      
Adjusted Marketing and Administrative Expenses $1,864     $1,593     17%
% of Net Sales 22.7% 22.4% 0.3 pts
 
Research and Development Expenses $638 $519 23%

Business optimization items 2

(4) (18)

Business development items 5

(60)     -      
Adjusted Research and Development Expenses $574     $501     15%
% of Net Sales 7.0% 7.0% 0 pts
 
Other (Income) Expense, Net $(9) $65 N/M

Reserve items and adjustments 6

(30) -
Gambro acquisition and integration items 4 (19)     (82)      
Adjusted Other Income, Net $(58)     $(17)     N/M
 
Pre-Tax Income $1,370 $1,436 (5%)
Impact of special items 344     171      
Adjusted Pre-Tax Income $1,714     $1,607     7%
 
Income Tax Expense $294 $294 0%
Impact of special items 76     53      
Adjusted Income Tax Expense $370     $347     7%
% of Adjusted Pre-Tax Income 21.6% 21.6% 0 pts
 
Net Income $1,076 $1,142 (6%)
Impact of special items 268     118      
Adjusted Net Income $1,344     $1,260     7%
 
Diluted EPS $1.96 $2.07 (5%)
Impact of special items 0.49     0.22      
Adjusted Diluted EPS $2.45     $2.29     7%
 
WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
Diluted     548     550      
 

1

  Effective January 1, 2014, Baxter has updated its non-GAAP measures above to exclude intangible asset amortization expense. Prior period non-GAAP measures have been revised to reflect the updated measures. Intangible asset amortization expense totaled $90 million ($70 million, or $0.13 per diluted share, on an after-tax basis) and $50 million ($40 million, or $0.07 per diluted share, on an after-tax basis) in 2014 and 2013, respectively.

2

The company's results in 2014 included a net benefit of $4 million (net charge of $3 million, or $0.01 per diluted share, on an after-tax basis) primarily related to an adjustment of $37 million to a previous business optimization reserve that is no longer probable of being utilized, partially offset by additional business optimization charges of $33 million. The company's results in 2013 included a benefit of $20 million ($14 million, or $0.03 per diluted share, on an after-tax basis) related to an adjustment to a previous business optimization reserve that is no longer probable of being utilized, which was partially offset by additional business optimization charges of $18 million ($14 million, or $0.03 per diluted share, on an after-tax basis).

3

The company's results in 2014 included total charges of $93 million ($58 million, or $0.10 per diluted share, on an after-tax basis) principally related to product remediation efforts for the SIGMA Spectrum Infusion Pump.

4

The company's results in 2014 included total charges of $63 million ($47 million, or $0.09 per diluted share, on an after-tax basis) principally related to the acquisition and integration of Gambro, including a loss on the divestiture of Baxter's legacy Continuous Renal Replacement Therapy business. The company's results in 2013 included total charges of $123 million ($78 million, or $0.15 per diluted share, on an after-tax basis) primarily related to pre-acquisition costs for the planned acquisition of Gambro and losses on derivative instruments entered into in December 2012 and the first six months of 2013 to hedge the anticipated foreign currency cash outflows associated with the planned acquisition of Gambro.

5

The company's results in 2014 included charges of $60 million ($52 million, or $0.09 per diluted share, on an after-tax basis) related to certain milestone payments associated with the company's collaboration arrangements.

6

The company's results in 2014 included a net expense of $20 million ($17 million, or $0.03 per diluted share, on an after-tax basis) primarily related to an increase in the estimated fair value of acquisition-related contingent payment liabilities, partially offset by third-party recoveries and reversals of prior litigation reserves.

7

The company's results in 2014 included separation-related costs of $22 million ($21 million, or $0.04 per diluted share, on an after-tax basis) for the planned separation of Baxter's biopharmaceutical and medical products businesses.
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.
Cash Flows from Operations and Changes in Net Debt
(unaudited)
($ in millions)
           
 
Cash Flows from Operations
(Brackets denote cash outflows) Three Months Ended Six Months Ended
June 30,     June 30,
2014 2013 2014 2013
 
Net income $520 $590 $1,076 $1,142
Adjustments
Depreciation and amortization 253 183 489 366
Deferred income taxes (14) (101) (31) (63)
Stock compensation 41 40 72 72

Realized excess tax benefits from stock issued under employee benefit plans

(5) (7) (17) (19)
Business optimization charges (32) (2) (4) (2)
Net periodic pension benefit and OPEB costs 70 93 141 187
Infusion pump and other product-related charges 93 - 93 -
Other 93 44 78 54
Changes in balance sheet items
Accounts and other current receivables, net (230) (73) 3 12
Inventories (127) (125) (360) (306)
Accounts payable and accrued liabilities 14 128 (222) (171)
Business optimization and infusion pump payments (38) (26) (83) (52)
Other     (39)     19       (77)     (71)
Cash flows from operations     $599     $763       $1,158     $1,149
                           
Changes in Net Debt                          
Increase (decrease) Three Months Ended Six Months Ended
June 30,     June 30,
2014 2013 2014 2013
 

Net debt, beginning of period A

$6,645 $3,178 $6,433 $2,660
 
Cash flows from operations (599) (763) (1,158) (1,149)
Capital expenditures 423 347 844 639
Dividends 265 244 531 490
Proceeds from stock issued under employee benefit plans (106) (138) (232) (322)
Purchases of treasury stock 200 183 450 717
Acquisitions and investments 117 20 176 87
Sales of investments and other investing activities 2 - (94) (10)
Other, including the effect of exchange rate changes     26     (25)       23     (66)
Increase (decrease) in net debt     328     (132)       540     386
 

Net debt, June 30 A

    $6,973     $3,046       $6,973     $3,046
                           
Key statistics, June 30:
Days sales outstanding 56.7

B

53.5 56.7

B

53.5
Inventory turns     2.2     2.2       2.2     2.2

A

  Net debt is a non-GAAP measure, refer to page 13 for a description of net debt and a reconciliation to GAAP measures.

B

Includes the impact from the acquisition of Gambro. Excluding Gambro, the company's days sales outstanding was 53.1 days as of June 30, 2014.
 
BAXTER INTERNATIONAL INC.
Total Debt to Net Debt Reconciliation
(unaudited)
($ in millions)
                       
 

Total Debt to Net Debt Reconciliation A

June 30, March 31, December 31, June 30, March 31, December 31,
2014 2014 2013 2013 2013 2012
Short-term debt $186 $49 $181 $33 $333 $27
Current maturities of long-term debt and lease obligations 1,125 1,128 859 378 377 323
Long-term debt and lease obligations     7,528     7,517     8,126     8,624     5,157     5,580
Total debt     8,839     8,694     9,166     9,035     5,867     5,930
Less: Cash and equivalents     (1,866)     (2,049)     (2,733)     (5,989)     (2,689)     (3,270)
Total net debt     $6,973     $6,645     $6,433     $3,046     $3,178     $2,660

A

  Net debt represents the difference between total debt (defined as short-term debt, current maturities of long-term debt and lease obligations, and long-term debt and lease obligations as presented on the company's consolidated balance sheets) and cash and equivalents.
For more information on the company's use of non-GAAP financial measures in this press release, please see the company's Current Report on Form 8-K filed with the Securities and Exchange Commission on the date of this press release.
 
BAXTER INTERNATIONAL INC.
Net Sales
Periods Ending June 30, 2014 and 2013
(unaudited)
($ in millions)
                                                   
 
Q2 Q2 % Growth @ % Growth @ YTD YTD % Growth @ % Growth @
                2014     2013     Actual Rates     Constant Rates               2014     2013     Actual Rates     Constant Rates
                                                                     
BioScience
United States $835 $782 7% 7% $1,659 $1,555 7% 7%
International               916     856     7%     5%               1,700     1,613     5%     5%
Total BioScience               $1,751     $1,638     7%     6%               $3,359     $3,168     6%     6%
                                                                     
Medical Products
United States $897 $764 17% 17% $1,733 $1,473 18% 18%
International               1,616     1,267     28%     28%               3,123     2,476     26%     28%

Total Medical Products 1

              $2,513     $2,031     24%     24%               $4,856     $3,949     23%     24%
                                                                     
Baxter International Inc.
United States $1,732 $1,546 12% 12% $3,392 $3,028 12% 12%
International               2,532     2,123     19%     19%               4,823     4,089     18%     19%

Total Baxter 1

              $4,264     $3,669     16%     16%               $8,215     $7,117     15%     16%

1

 

Includes Gambro net sales of $408 million in the second quarter of 2014 and $808 million for the six months ended June 30, 2014. Medical Products net sales excluding Gambro grew 4% at both actual rates and constant rates during the second quarter of 2014. Total Baxter net sales excluding Gambro grew 5% at both actual rates and constant rates during the second quarter of 2014. Medical Products net sales excluding Gambro grew 3% at actual rates and 4% at constant rates for the six months ended June 30, 2014. Total Baxter net sales excluding Gambro grew 4% at actual rates and 5% at constant rates for the six months ended June 30, 2014.

 
BAXTER INTERNATIONAL INC.
Sales by Franchise
Periods Ending June 30, 2014 and 2013
(unaudited)
($ in millions)
 
              Q2     Q2     % Growth @     % Growth @               YTD     YTD     % Growth @     % Growth @
                2014     2013     Actual Rates     Constant Rates               2014     2013     Actual Rates     Constant Rates
                                                                     
BioScience
Hemophilia $904 $849 6% 6% $1,731 $1,614 7% 7%
BioTherapeutics 548 513 7% 6% 1,050 1,022 3% 2%
BioSurgery 189 178 6% 5% 365 350 4% 4%
Vaccines               110     98     12%     6%               213     182     17%     15%
Total BioScience               $1,751     $1,638     7%     6%               $3,359     $3,168     6%     6%
                                                                     
Medical Products
Fluid Systems $816 $755 8% 8% $1,573 $1,495 5% 6%

Renal 1

1,044 654 60% 61% 2,035 1,244 64% 66%
Specialty Pharmaceuticals 404 366 10% 9% 771 729 6% 6%
BioPharma Solutions               249     256     (3%)     (4%)               477     481     (1%)     0%
Total Medical Products               $2,513     $2,031     24%     24%               $4,856     $3,949     23%     24%
                                                                     
Total Baxter               $4,264     $3,669     16%     16%               $8,215     $7,117     15%     16%

1

  Consists of PD and HD therapies, and includes Gambro net sales of $408 million in the second quarter of 2014 and $808 million for the six months ended June 30, 2014. Renal sales excluding Gambro decreased by 3% at actual rates and 1% at constant rates during the second quarter of 2014. Renal sales excluding Gambro decreased by 1% at actual rates and grew by 1% at constant rates for the six months ended June 30, 2014.
 
BAXTER INTERNATIONAL INC.
Franchise Sales by U.S. and International
Three-Month Periods Ending June 30, 2014 and 2013
(unaudited)
($ in millions)
                                                                 
                                                                                     
Q2 2014               Q2 2013               % Growth
                U.S.     International     Total               U.S.     International     Total               U.S.     International     Total
BioScience
Hemophilia $375 $529 $904 $346 $503 $849 8% 5% 6%
BioTherapeutics 358 190 548 335 178 513 7% 7% 7%
BioSurgery 102 87 189 101 77 178 1% 13% 6%
Vaccines               -     110     110               -     98     98               -     12%     12%
Total BioScience               $835     $916     $1,751               $782     $856     $1,638               7%     7%     7%
                                                                                     
Medical Products
Fluid Systems $443 $373 $816 $390 $365 $755 14% 2% 8%

Renal 1

186 858 1,044 101 553 654 84% 55% 60%
Specialty Pharmaceuticals 174 230 404 163 203 366 7% 13% 10%
BioPharma Solutions               94     155     249               110     146     256               (15%)     6%     (3%)

Total Medical Products 1

              $897     $1,616     $2,513               $764     $1,267     $2,031               17%     28%     24%
                                                                                     

Total Baxter 1

              $1,732     $2,532     $4,264               $1,546     $2,123     $3,669               12%     19%     16%

1

  Includes Gambro net sales of $408 million in the second quarter of 2014. Renal sales excluding Gambro decreased by 3% at actual rates and 1% at constant rates during the second quarter of 2014. Medical Products net sales excluding Gambro grew 4% at both actual rates and constant rates during the second quarter of 2014. Total Baxter net sales excluding Gambro grew 5% at both actual rates and constant rates during the second quarter of 2014.
 

Contacts

Baxter International Inc.
Media Contact:
Deborah Spak, (224) 948-2349
or
Investor Contacts:
Mary Kay Ladone, (224) 948-3371
Clare Trachtman, (224) 948-3085

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Contacts

Baxter International Inc.
Media Contact:
Deborah Spak, (224) 948-2349
or
Investor Contacts:
Mary Kay Ladone, (224) 948-3371
Clare Trachtman, (224) 948-3085