Attached files
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| 8-K - 8-K - BAXTER INTERNATIONAL INC | d570265d8k.htm |
Exhibit 99.1
FOR IMMEDIATE RELEASE
Media Contact:
Deborah Spak, (224) 948-2349
Investor Contacts:
Mary Kay Ladone, (224) 948-3371
Clare Trachtman, (224) 948-3085
BAXTER REPORTS SOLID SECOND QUARTER FINANCIAL RESULTS
Q2 Earnings Exceed Guidance
and Company Confirms Full-Year Expectations
DEERFIELD, Ill., July 18, 2013 — Baxter International Inc. (NYSE:BAX) today announced solid financial results for the second quarter, with earnings that exceeded the company’s previously issued guidance, and confirmed its full-year 2013 financial outlook.
For the second quarter, Baxter reported net income of $590 million and earnings per diluted share of $1.07, compared to net income of $661 million and earnings per diluted share of $1.19 in the same period last year. Second quarter 2013 results include after-tax special items totaling $49 million (or $0.09 per diluted share) primarily for costs associated with Baxter’s planned acquisition of Gambro AB. Second quarter 2012 results included a net after-tax benefit from special items totaling $42 million of income (or $0.07 per diluted share).
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BAXTER REPORTS 2nd QUARTER FINANCIAL RESULTS — Page 2
On an adjusted basis, excluding special items in both periods, Baxter’s second quarter net income of $639 million increased 3 percent from $619 million reported in 2012. Adjusted earnings per diluted share of $1.16 rose 4 percent from $1.12 per diluted share last year, exceeding the company’s previously issued earnings guidance of $1.12 to $1.14 per diluted share.
Worldwide sales totaled $3.7 billion and increased 3 percent from prior-year levels. Excluding the impact of foreign currency, worldwide sales rose 4 percent. Sales within the United States advanced 3 percent to $1.5 billion, and international sales of $2.1 billion also increased 3 percent. Excluding foreign currency, international sales grew 4 percent.
BioScience revenues of $1.6 billion increased 5 percent from the prior-year period. Excluding the impact of foreign currency, BioScience sales rose 6 percent driven primarily by improved demand for the company’s hemophilia therapies, including ADVATE [Antihemophilic Factor (Recombinant), Plasma/Albumin-Free Method] and FEIBA (an inhibitor therapy), as well as accelerated growth of select specialty plasma-based therapeutics and vaccines.
Medical Products sales of $2.0 billion increased 1 percent from the prior-year period, and excluding the impact of foreign currency, sales grew 2 percent. This performance was driven primarily by gains in peritoneal dialysis patients, as well as growth of certain injectable therapies and anesthesia products.
Six-Month Results
For the first six months of 2013, Baxter reported net income of $1.1 billion, or $2.07 per diluted share. Excluding special items, Baxter’s adjusted net income for the six-month period increased 3 percent to $1.2 billion, and earnings per diluted share of $2.22 grew 4 percent from $2.13 per diluted share reported in the comparable prior-year period.
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BAXTER REPORTS 2nd QUARTER FINANCIAL RESULTS — Page 3
Baxter’s worldwide sales for the six-month period totaled $7.1 billion and increased 2 percent, and excluding the impact of foreign currency, sales rose 3 percent. BioScience sales of $3.2 billion advanced 5 percent (and excluding foreign currency sales also increased 5 percent), while Medical Products sales of $3.9 billion were comparable to the prior-year period (and excluding foreign currency sales increased 1 percent).
During the first half of 2013, Baxter generated cash flows from operations of approximately $1.1 billion and returned significant value to shareholders. On a year-to-date basis, Baxter has returned over $1.2 billion to shareholders through share repurchases of $717 million (or approximately 10 million shares) and dividends totaling $490 million, reflecting more than a 30 percent increase in dividend payments versus the prior-year period.
“Baxter’s financial results reflect the benefits of our diversified healthcare model,” said Robert L. Parkinson, Jr., chairman and chief executive officer. “We continue to advance care across our key franchises in both developed and emerging markets, while focusing on innovation and R&D programs that will fuel future growth and enhance value for shareholders”.
Recent Highlights
Baxter continued to advance its new product pipeline, achieving several milestones during the quarter, including:
| • | Receipt of marketing authorization in all European Union (EU) Member States for the use of HyQvia (solution for subcutaneous use) as replacement therapy for adult patients with primary and secondary immunodeficiencies. Baxter will introduce HyQvia in select countries during 2013 and plans to expand the launch to other EU countries in 2014. |
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BAXTER REPORTS 2nd QUARTER FINANCIAL RESULTS — Page 4
| • | United States Food and Drug Administration (FDA) approval of RIXUBIS [Coagulation Factor IX (Recombinant)] for routine prophylactic treatment, control of bleeding episodes, and perioperative management in adults with hemophilia B. RIXUBIS is the first new recombinant factor IX (rFIX) approved for hemophilia B in more than 15 years and is the only rFIX indicated for both routine prophylaxis and control of bleeding episodes in the U.S. for adult patients living with this chronic condition. Hemophilia B is the second most common type of hemophilia and is the result of insufficient amounts of clotting factor IX, a naturally occurring protein in blood that controls bleeding. |
| • | Completion of enrollment in the pivotal Phase III study of rigosertib for patients with high-risk myelodysplastic syndrome (MDS), as part of an ongoing collaboration with Onconova Therapeutics. The primary endpoint for this study is overall survival, and top-line results from the study are expected during the first quarter of 2014. |
| • | Completion of the nocturnal in-center study of the company’s home hemodialysis system VIVIA, in Canada. Data from the Canadian study and the previously completed U.S. study will support the company’s submission for CE Mark in Europe later this year. |
Outlook for Third Quarter and Full-Year 2013
Baxter also announced today its guidance for the third quarter and confirmed its financial outlook for full-year 2013. As previously disclosed, the company’s guidance includes the impact of the Gambro AB acquisition which is anticipated to close during the third quarter.
For the third quarter of 2013, Baxter expects sales growth, excluding the impact of foreign currency, of approximately 6 percent (or approximately 5 percent including the impact of foreign exchange). Including revenues associated with the Gambro AB acquisition, Baxter expects sales growth, excluding the impact of foreign currency, of 10 to 13 percent (or approximately 9 to 12 percent including the impact of foreign currency). The company projects earnings per diluted share in the third quarter, including the impact of the Gambro AB acquisition, of $1.18 to $1.21, before any special items.
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BAXTER REPORTS 2nd QUARTER FINANCIAL RESULTS — Page 5
For full-year 2013, Baxter expects sales growth, excluding the impact of foreign exchange and the Gambro AB acquisition, of approximately 4 percent (or approximately 3 percent including the impact of foreign currency). Including revenues associated with the Gambro AB acquisition, Baxter now expects sales growth, excluding the impact of foreign currency, of 8 to 9 percent (or 7 to 8 percent including the impact of foreign currency). In addition, the company expects earnings, including the impact of the Gambro AB acquisition, of $4.62 to $4.70 per diluted share, before any special items, and cash flows from operations of approximately $3.3 billion.
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 18, 2013. 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, R&D pipeline and outlook for 2013, including as impacted by the pending Gambro AB acquisition. 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 risks for new and existing products, such as ADVATE, and other technologies; future actions of regulatory bodies and other governmental authorities that could delay, limit or
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BAXTER REPORTS 2nd QUARTER FINANCIAL RESULTS — Page 6
suspend product development, manufacturing or sales or result in sanctions; product quality or patient safety concerns leading to product recalls, withdrawals, launch delays, litigation, or declining sales; the ability of the company to obtain required regulatory approvals including additional antitrust approvals and satisfy closing conditions with respect to the Gambro AB transaction; the ability of the company to close the Gambro AB acquisition during the third quarter of 2013 and generate the sales included in the company’s outlook for 2013; future actions of governmental authorities and other third parties as U.S. healthcare reform legislation and other austerity measures are implemented globally; additional legislation, regulation and other governmental pressures, which may affect pricing, taxation, reimbursement and rebate policies of government agencies and private payers or other elements of the company’s business; product development risks, including satisfactory clinical performance; the company’s ability to realize the anticipated benefits from its business development and R&D activities; inventory reductions or fluctuations in buying patterns by wholesalers or distributors; 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 in certain countries in which the company operates; foreign currency fluctuations and other risks identified in the company’s most recent filing on Form 10-K and other Securities and Exchange Commission filings, all of which are available on the company’s website. The company does not undertake to update its forward-looking statements. Financial schedules are attached to this release and available on the company’s website.
# # #
BAXTER — PAGE 7
BAXTER INTERNATIONAL INC.
Consolidated Statements of Income
Three Months Ended June 30, 2013 and 2012
(unaudited)
(in millions, except per share and percentage data)
| Three Months Ended June 30, |
||||||||||||
| 2013 | 2012 | Change | ||||||||||
| NET SALES |
$ 3,669 | $ 3,572 | 3% | |||||||||
| COST OF SALES |
1,730 | 1,700 | 2% | |||||||||
|
|
||||||||||||
| GROSS MARGIN |
1,939 | 1,872 | 4% | |||||||||
|
|
||||||||||||
| % of Net Sales |
52.8% | 52.4% | 0.4 pts | |||||||||
| MARKETING AND ADMINISTRATIVE EXPENSES |
838 | 789 | 6% | |||||||||
| % of Net Sales |
22.8% | 22.1% | 0.7 pts | |||||||||
| RESEARCH AND DEVELOPMENT EXPENSES |
273 | 306 | (11% | ) | ||||||||
| % of Net Sales |
7.4% | 8.6% | (1.2 pts | ) | ||||||||
| NET INTEREST EXPENSE |
17 | 22 | (23% | ) | ||||||||
| OTHER EXPENSE (INCOME), NET |
68 | (62 | ) | N/M | ||||||||
|
|
||||||||||||
| PRE-TAX INCOME |
743 | 817 | (9% | ) | ||||||||
|
|
||||||||||||
| INCOME TAX EXPENSE |
153 | 156 | (2% | ) | ||||||||
|
|
||||||||||||
| % of Pre-Tax Income |
20.6% | 19.1% | 1.5 pts | |||||||||
| NET INCOME |
$ 590 | $ 661 | (11% | ) | ||||||||
|
|
||||||||||||
| BASIC EPS |
$ 1.09 | $ 1.20 | (9% | ) | ||||||||
|
|
||||||||||||
| DILUTED EPS |
$ 1.07 | $ 1.19 | (10% | ) | ||||||||
|
|
||||||||||||
| WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING |
||||||||||||
| Basic |
543 | 550 | ||||||||||
| Diluted |
549 | 553 | ||||||||||
|
|
||||||||||||
| ADJUSTED PRE-TAX INCOME (excluding special items) |
$ 819 | A | $ 786 | A | 4% | |||||||
| ADJUSTED NET INCOME (excluding special items) |
$ 639 | A | $ 619 | A | 3% | |||||||
| ADJUSTED DILUTED EPS (excluding special items) |
$ 1.16 | A | $ 1.12 | A | 4% | |||||||
| A | Refer to page 8 for a description of the adjustments and a reconciliation to generally accepted accounting principles (GAAP) measures. |
BAXTER — PAGE 8
BAXTER INTERNATIONAL INC.
Note to Consolidated Statements of Income
Three Months Ended June 30, 2013 and 2012
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, 2013 and 2012 included special items which impacted the GAAP measures as follows:
| Three Months Ended June 30, |
||||||||||||
| 2013 | 2012 | Change | ||||||||||
| Gross Margin |
$ 1,939 | $ 1,872 | 4% | |||||||||
| Business optimization items 1 |
(20 | ) | — | |||||||||
| Reserve adjustments 4 |
— | (23 | ) | |||||||||
|
|
|
|||||||||||
| Adjusted Gross Margin |
$ 1,919 | $ 1,849 | 4% | |||||||||
|
|
|
|||||||||||
| % of Net Sales |
52.3% | 51.8% | 0.5 pts | |||||||||
| Marketing and Administrative Expenses |
$ 838 | $ 789 | 6% | |||||||||
| Business development items 2 |
(23 | ) | — | |||||||||
|
|
|
|||||||||||
| Adjusted Marketing and Administrative Expenses |
$ 815 | $ 789 | 3% | |||||||||
|
|
|
|||||||||||
| % of Net Sales |
22.2% | 22.1% | 0.1 pts | |||||||||
| Research and Development Expenses |
$ 273 | $ 306 | (11% | ) | ||||||||
| Business optimization items 1 |
(18 | ) | — | |||||||||
| Business development items 5 |
— | (30 | ) | |||||||||
|
|
|
|||||||||||
| Adjusted Research and Development Expenses |
$ 255 | $ 276 | (8% | ) | ||||||||
|
|
|
|||||||||||
| % of Net Sales |
7.0% | 7.7% | (0.7 pts | ) | ||||||||
| Other Expense (Income), Net |
$ 68 | $ (62 | ) | N/M | ||||||||
| Currency-related items 3 |
(55 | ) | — | |||||||||
| Reserve adjustments 6 |
— | 38 | ||||||||||
|
|
|
|||||||||||
| Adjusted Other Expense (Income), Net |
$ 13 | $ (24 | ) | N/M | ||||||||
|
|
|
|||||||||||
| Pre-Tax Income |
$ 743 | $ 817 | (9% | ) | ||||||||
| Impact of special items |
76 | (31 | ) | |||||||||
|
|
|
|||||||||||
| Adjusted Pre-Tax Income |
$ 819 | $ 786 | 4% | |||||||||
|
|
|
|||||||||||
| Income Tax Expense |
$ 153 | $ 156 | (2% | ) | ||||||||
| Impact of special items |
27 | 11 | ||||||||||
|
|
|
|||||||||||
| Adjusted Income Tax Expense |
$ 180 | $ 167 | 8% | |||||||||
|
|
|
|||||||||||
| % of Adjusted Pre-Tax Income |
22.0% | 21.2% | 0.8 pts | |||||||||
| Net Income |
$ 590 | $ 661 | (11% | ) | ||||||||
| Impact of special items |
49 | (42 | ) | |||||||||
|
|
|
|||||||||||
| Adjusted Net Income |
$ 639 | $ 619 | 3% | |||||||||
|
|
|
|||||||||||
| Diluted EPS |
$ 1.07 | $ 1.19 | (10% | ) | ||||||||
| Impact of special items |
0.09 | (0.07 | ) | |||||||||
|
|
|
|||||||||||
| Adjusted Diluted EPS |
$ 1.16 | $ 1.12 | 4% | |||||||||
|
|
|
|||||||||||
| WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING |
||||||||||||
| Diluted |
549 | 553 | ||||||||||
|
|
||||||||||||
| 1 | Cost of sales 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. Research and development (R&D) expenses in 2013 included charges of $18 million ($14 million, or $0.03 per diluted share, on an after-tax basis) primarily related to contract termination costs associated with the discontinuation of the company’s Alzheimer’s disease program. |
| 2 | Marketing and administrative expenses in 2013 included business development charges of $23 million ($14 million, or $0.03 per diluted share, on an after-tax basis) primarily related to pre-acquisition costs for the planned acquisition of Gambro AB (Gambro). |
| 3 | Other expense (income), net in 2013 included a loss of $55 million ($35 million, or $0.06 per diluted share, on an after-tax basis) related to 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. |
| 4 | Cost of sales in 2012 included a net benefit of $23 million ($27 million, or $0.05 per diluted share, on an after-tax basis) primarily related to an adjustment to the COLLEAGUE infusion pump reserves as the company substantially completed its recall activities in the United States. |
| 5 | R&D expenses in 2012 included an R&D charge of $30 million ($23 million, or $0.04 per diluted share, on an after-tax basis) related to the company’s global collaboration with Chatham Therapeutics, LLC (Chatham). |
| 6 | Other expense (income), net in 2012 included a gain of $38 million, or $0.06 per diluted share, related to the reduction of a contingent payment liability for milestones associated with the acquisition of ApaTech Limited (ApaTech) in the first quarter of 2010, for which there was no tax expense recognized. |
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 — PAGE 9
BAXTER INTERNATIONAL INC.
Consolidated Statements of Income
Six Months Ended June 30, 2013 and 2012
(unaudited)
(in millions, except per share and percentage data)
| Six Months Ended June 30, |
||||||||||||
| 2013 | 2012 | Change | ||||||||||
| NET SALES |
$ 7,117 | $ 6,960 | 2% | |||||||||
| COST OF SALES |
3,422 | 3,374 | 1% | |||||||||
|
|
||||||||||||
| GROSS MARGIN |
3,695 | 3,586 | 3% | |||||||||
|
|
||||||||||||
| % of Net Sales |
51.9% | 51.5% | 0.4 pts | |||||||||
| MARKETING AND ADMINISTRATIVE EXPENSES |
1,633 | 1,541 | 6% | |||||||||
| % of Net Sales |
22.9% | 22.1% | 0.8 pts | |||||||||
| RESEARCH AND DEVELOPMENT EXPENSES |
519 | 575 | (10% | ) | ||||||||
| % of Net Sales |
7.3% | 8.3% | (1 pts | ) | ||||||||
| NET INTEREST EXPENSE |
42 | 40 | 5% | |||||||||
| OTHER EXPENSE (INCOME), NET |
65 | (119 | ) | N/M | ||||||||
|
|
||||||||||||
| PRE-TAX INCOME |
1,436 | 1,549 | (7% | ) | ||||||||
|
|
||||||||||||
| INCOME TAX EXPENSE |
294 | 300 | (2% | ) | ||||||||
|
|
||||||||||||
| % of Pre-Tax Income |
20.5% | 19.4% | 1.1 pts | |||||||||
| NET INCOME |
$ 1,142 | $ 1,249 | (9% | ) | ||||||||
|
|
||||||||||||
| BASIC EPS |
$ 2.10 | $ 2.25 | (7% | ) | ||||||||
|
|
||||||||||||
| DILUTED EPS |
$ 2.07 | $ 2.24 | (8% | ) | ||||||||
|
|
||||||||||||
| WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING |
||||||||||||
| Basic |
543 | 554 | ||||||||||
| Diluted |
550 | 558 | ||||||||||
|
|
||||||||||||
| ADJUSTED PRE-TAX INCOME (excluding special items) |
$ 1,557 | A | $ 1,513 | A | 3% | |||||||
| ADJUSTED NET INCOME (excluding special items) |
$ 1,220 | A | $ 1,188 | A | 3% | |||||||
| ADJUSTED DILUTED EPS (excluding special items) |
$ 2.22 | A | $ 2.13 | A | 4% | |||||||
| A | Refer to page 10 for a description of the adjustments and a reconciliation to GAAP measures. |
BAXTER — PAGE 10
BAXTER INTERNATIONAL INC.
Note to Consolidated Statements of Income
Six Months Ended June 30, 2013 and 2012
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, 2013 and 2012 included special items which impacted the GAAP measures as follows:
| Six Months Ended June 30, |
||||||||||||
| 2013 | 2012 | Change | ||||||||||
| Gross Margin |
$ 3,695 | $ 3,586 | 3% | |||||||||
| Currency-related items 1 |
1 | — | ||||||||||
| Business optimization items 2 |
(20 | ) | — | |||||||||
| Reserve adjustments 4 |
— | (23 | ) | |||||||||
| Business development items 5 |
— | 6 | ||||||||||
|
|
|
|||||||||||
| Adjusted Gross Margin |
$ 3,676 | $ 3,569 | 3% | |||||||||
|
|
|
|||||||||||
| % of Net Sales |
51.7% | 51.3% | 0.4 pts | |||||||||
| Marketing and Administrative Expenses |
$ 1,633 | $ 1,541 | 6% | |||||||||
| Business development items 3, 5 |
(40 | ) | (9 | ) | ||||||||
|
|
|
|||||||||||
| Adjusted Marketing and Administrative Expenses |
$ 1,593 | $ 1,532 | 4% | |||||||||
|
|
|
|||||||||||
| % of Net Sales |
22.4% | 22.0% | 0.4 pts | |||||||||
| Research and Development Expenses |
$ 519 | $ 575 | (10% | ) | ||||||||
| Business optimization items 2 |
(18 | ) | — | |||||||||
| Business development items 5 |
— | (63 | ) | |||||||||
|
|
|
|||||||||||
| Adjusted Research and Development Expenses |
$ 501 | $ 512 | (2% | ) | ||||||||
|
|
|
|||||||||||
| % of Net Sales |
7.0% | 7.4% | (0.4 pts | ) | ||||||||
| Other Expense (Income), Net |
$ 65 | $ (119 | ) | N/M | ||||||||
| Currency-related items 1 |
(82 | ) | — | |||||||||
| Reserve adjustments 6 |
— | 91 | ||||||||||
|
|
|
|||||||||||
| Adjusted Other Expense (Income), Net |
$ (17 | ) | $ (28 | ) | N/M | |||||||
|
|
|
|||||||||||
| Pre-Tax Income |
$ 1,436 | $ 1,549 | (7% | ) | ||||||||
| Impact of special items |
121 | (36 | ) | |||||||||
|
|
|
|||||||||||
| Adjusted Pre-Tax Income |
$ 1,557 | $ 1,513 | 3% | |||||||||
|
|
|
|||||||||||
| Income Tax Expense |
$ 294 | $ 300 | (2% | ) | ||||||||
| Impact of special items |
43 | 25 | ||||||||||
|
|
|
|||||||||||
| Adjusted Income Tax Expense |
$ 337 | $ 325 | 4% | |||||||||
|
|
|
|||||||||||
| % of Adjusted Pre-Tax Income |
21.6% | 21.5% | 0.1 pts | |||||||||
| Net Income |
$ 1,142 | $ 1,249 | (9% | ) | ||||||||
| Impact of special items |
78 | (61 | ) | |||||||||
|
|
|
|||||||||||
| Adjusted Net Income |
$ 1,220 | $ 1,188 | 3% | |||||||||
|
|
|
|||||||||||
| Diluted EPS |
$ 2.07 | $ 2.24 | (8% | ) | ||||||||
| Impact of special items |
0.15 | (0.11 | ) | |||||||||
|
|
|
|||||||||||
| Adjusted Diluted EPS |
$ 2.22 | $ 2.13 | 4% | |||||||||
|
|
|
|||||||||||
| WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING |
||||||||||||
| Diluted |
550 | 558 | ||||||||||
|
|
||||||||||||
| 1 | Cost of sales and other expense (income), net in 2013 included a charge of $11 million ($7 million, or $0.01 per diluted share, on an after-tax basis) related to the Venezuelan currency devaluation announced by the government of Venezuela in February 2013. Additionally, other expense (income), net in 2013 included a loss of $72 million ($46 million, or $0.09 per diluted share, on an after-tax basis) related to 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. |
| 2 | Cost of sales 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. R&D expenses in 2013 included charges of $18 million ($14 million, or $0.03 per diluted share, on an after-tax basis) primarily related to contract termination costs associated with the discontinuation of the company’s Alzheimer’s disease program. |
| 3 | Marketing and administrative expenses in 2013 included business development charges of $40 million ($25 million, or $0.05 per diluted share, on an after-tax basis) primarily related to pre-acquisition costs for the planned acquisition of Gambro. |
| 4 | Cost of sales in the second quarter of 2012 included a net benefit of $23 million ($27 million, or $0.05 per diluted share, on an after-tax basis) primarily related to an adjustment to the COLLEAGUE infusion pump reserves as the company substantially completed its recall activities in the United States. |
| 5 | Cost of sales, marketing and administrative expenses and R&D expenses in 2012 included business development charges totaling $78 million ($57 million, or $0.10 per diluted share, on an after-tax basis) which principally related to R&D charges of $33 million in the first quarter of 2012 associated with the company’s global collaboration with Momenta Pharmaceuticals, Inc. (Momenta) and $30 million in the second quarter of 2012 associated with the company’s global collaboration with Chatham. |
| 6 | Other expense (income), net in 2012 included a benefit of $91 million, or $0.16 per diluted share, consisting of gains of $53 million in the first quarter of 2012 and $38 million in the second quarter of 2012 for the reduction of certain contingent payment liabilities related to the prior acquisitions of Prism Pharmaceuticals, Inc. and ApaTech, respectively, for which there was no tax expense recognized. |
For more information on the company’s use of non-GAAP financial measures in this press release, please see the company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on the date of this press release.
BAXTER — PAGE 11
BAXTER INTERNATIONAL INC.
Cash Flows from Operations and Changes in Net Debt
(unaudited)
($ in millions)
|
Cash Flows from Operations |
| |||||||||||||||
| (Brackets denote cash outflows) | Three Months Ended June 30, |
Six Months Ended June 30, |
||||||||||||||
| 2013 | 2012 | 2013 | 2012 | |||||||||||||
| Net income |
$ 590 | $ 661 | $ 1,142 | $ 1,249 | ||||||||||||
| Adjustments |
||||||||||||||||
| Depreciation and amortization |
183 | 180 | 366 | 355 | ||||||||||||
| Deferred income taxes |
(101 | ) | 65 | (63 | ) | 119 | ||||||||||
| Stock compensation |
40 | 35 | 72 | 63 | ||||||||||||
| Realized excess tax benefits from stock issued under employee benefit plans |
(7 | ) | (1 | ) | (19 | ) | (8 | ) | ||||||||
| Other |
44 | (59 | ) | 54 | (84 | ) | ||||||||||
| Changes in balance sheet items |
||||||||||||||||
| Accounts and other current receivables, net |
(73 | ) | 90 | 12 | 114 | |||||||||||
| Inventories |
(125 | ) | (28 | ) | (306 | ) | (100 | ) | ||||||||
| Accounts payable and accrued liabilities |
128 | 59 | (171 | ) | (229 | ) | ||||||||||
| Business optimization and infusion pump payments |
(26 | ) | (79 | ) | (52 | ) | (163 | ) | ||||||||
| Other |
110 | 45 | 114 | 98 | ||||||||||||
|
|
||||||||||||||||
| Cash flows from operations |
$ 763 | $ 968 | $ 1,149 | $ 1,414 | ||||||||||||
|
|
||||||||||||||||
|
Changes in Net Debt |
| |||||||||||||||
| Increase (decrease) | Three Months Ended June 30, |
Six Months Ended June 30, |
||||||||||||||
| 2013 | 2012 | 2013 | 2012 | |||||||||||||
| Net debt, beginning of period A |
$3,178 | $2,937 | $ 2,660 | $ 2,290 | ||||||||||||
| Cash flows from operations |
(763 | ) | (968 | ) | (1,149 | ) | (1,414 | ) | ||||||||
| Capital expenditures |
347 | 264 | 639 | 503 | ||||||||||||
| Dividends |
244 | 186 | 490 | 374 | ||||||||||||
| Proceeds from stock issued under employee benefit plans |
(138 | ) | (18 | ) | (322 | ) | (172 | ) | ||||||||
| Purchases of treasury stock |
183 | 385 | 717 | 960 | ||||||||||||
| Acquisitions and investments |
20 | 132 | B | 87 | B | 469 | B | |||||||||
| Sales of investments and other investing activities |
— | (31 | ) | (10 | ) | (74 | ) | |||||||||
| Other, including the effect of exchange rate changes |
(25 | ) | 74 | (66 | ) | 25 | ||||||||||
|
(Decrease) increase in net debt |
(132 | ) | 24 | 386 | 671 | |||||||||||
| Net debt, June 30 A |
$3,046 | $2,961 | $ 3,046 | $ 2,961 | ||||||||||||
|
|
||||||||||||||||
| Key statistics, June 30: |
||||||||||||||||
| Days sales outstanding |
53.5 | 52.1 | 53.5 | 52.1 | ||||||||||||
| Inventory turns |
2.2 | 2.4 | 2.2 | 2.4 | ||||||||||||
| A | Net debt is a non-GAAP measure, refer to page 12 for a description of net debt and a reconciliation to GAAP measures. |
| B | Acquisitions and investments in 2013 and 2012 included $51 million for the first quarter 2013 acquisition of the investigational hemophilia compound OBI-1 and related assets from Inspiration BioPharmaceuticals, Inc. and Ipsen Pharma S.A.S., $90 million for the second quarter 2012 exercise of the company’s option to acquire the remaining equity interest in Sigma International General Medical Apparatus, LLC, $25 million for the second quarter 2012 payment to execute the Chatham collaboration, $304 million for the first quarter 2012 acquisition of Synovis Life Technologies, Inc., and $33 million for the first quarter 2012 payment to execute the Momenta collaboration. |
BAXTER — PAGE 12
BAXTER INTERNATIONAL INC.
Total Debt to Net Debt Reconciliation
(unaudited)
($ in millions)
|
Total Debt to Net Debt Reconciliation A |
| |||||||||||||||||||||||
| June 30, 2013 |
March 31, 2013 |
December 31, 2012 |
June 30, 2012 |
March 31, 2012 |
December 31, 2011 |
|||||||||||||||||||
| Short-term debt |
$ 33 | $ 333 | $ 27 | $ 385 | $ 313 | $ 256 | ||||||||||||||||||
| Current maturities of long-term debt and lease obligations |
378 | 377 | 323 | 497 | 485 | 190 | ||||||||||||||||||
| Long-term debt and lease obligations |
8,624 | 5,157 | 5,580 | 4,432 | 4,411 | 4,749 | ||||||||||||||||||
|
|
||||||||||||||||||||||||
| Total debt |
9,035 | 5,867 | 5,930 | 5,314 | 5,209 | 5,195 | ||||||||||||||||||
|
|
||||||||||||||||||||||||
| Less: Cash and equivalents |
(5,989 | ) | (2,689 | ) | (3,270 | ) | (2,353 | ) | (2,272 | ) | (2,905 | ) | ||||||||||||
|
|
||||||||||||||||||||||||
| Total net debt |
$ 3,046 | $ 3,178 | $ 2,660 | $ 2,961 | $ 2,937 | $ 2,290 | ||||||||||||||||||
|
|
||||||||||||||||||||||||
| 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 — PAGE 13
BAXTER INTERNATIONAL INC.
Net Sales
Periods Ending June 30, 2013 and 2012
(unaudited)
($ in millions)
| Q2 2013 |
Q2 2012 |
% Growth @ Actual Rates |
% Growth @ Constant Rates |
YTD 2013 |
YTD 2012 |
% Growth @ Actual Rates |
% Growth @ Constant Rates |
|||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
| BioScience |
||||||||||||||||||||||||||||||||
| United States |
$ 782 | $ 747 | 5% | 5% | $1,555 | $1,472 | 6% | 6% | ||||||||||||||||||||||||
|
International |
856 | 819 | 5% | 7% | 1,613 | 1,556 | 4% | 5% | ||||||||||||||||||||||||
| Total BioScience |
$1,638 | $1,566 | 5% | 6% | $3,168 | $3,028 | 5% | 5% | ||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
| Medical Products |
||||||||||||||||||||||||||||||||
| United States |
$ 764 | $ 756 | 1% | 1% | $1,473 | $1,499 | (2% | ) | (2% | ) | ||||||||||||||||||||||
|
International |
1,267 | 1,250 | 1% | 3% | 2,476 | 2,433 | 2% | 2% | ||||||||||||||||||||||||
|
Total Medical Products |
$2,031 | $2,006 | 1% | 2% | $3,949 | $3,932 | 0% | 1% | ||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Baxter International Inc. |
||||||||||||||||||||||||||||||||
| United States |
$1,546 | $1,503 | 3% | 3% | $3,028 | $2,971 | 2% | 2% | ||||||||||||||||||||||||
|
International |
2,123 | 2,069 | 3% | 4% | 4,089 | 3,989 | 3% | 3% | ||||||||||||||||||||||||
| Total Baxter |
$3,669 | $3,572 | 3% | 4% | $7,117 | $6,960 | 2% | 3% | ||||||||||||||||||||||||
BAXTER — PAGE 14
BAXTER INTERNATIONAL INC.
Sales by Franchise 1
Periods Ending June 30, 2013 and 2012
(unaudited)
($ in millions)
| Q2 2013 |
Q2 2012 |
% Growth @ Actual Rates |
% Growth @ Constant Rates |
YTD 2013 |
YTD 2012 |
% Growth @ Actual Rates |
% Growth @ Constant Rates |
|||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
| BioScience |
||||||||||||||||||||||||||||||||
| Hemophilia 2 |
$ 849 | $ 829 | 2% | 4% | $1,614 | $1,572 | 3% | 4% | ||||||||||||||||||||||||
| BioTherapeutics 3 |
513 | 484 | 6% | 6% | 1,022 | 982 | 4% | 4% | ||||||||||||||||||||||||
| BioSurgery 4 |
178 | 174 | 2% | 2% | 350 | 328 | 7% | 6% | ||||||||||||||||||||||||
| Vaccines 5 |
98 | 79 | 24% | 30% | 182 | 146 | 25% | 29% | ||||||||||||||||||||||||
| Total BioScience |
$1,638 | $1,566 | 5% | 6% | $3,168 | $3,028 | 5% | 5% | ||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
| Medical Products |
||||||||||||||||||||||||||||||||
| Fluid Systems 6 |
$ 755 | $ 740 | 2% | 2% | $1,495 | $1,460 | 2% | 2% | ||||||||||||||||||||||||
| Renal 7 |
654 | 635 | 3% | 5% | 1,244 | 1,223 | 2% | 3% | ||||||||||||||||||||||||
| Specialty Pharmaceuticals 8 |
366 | 364 | 1% | 1% | 729 | 732 | 0% | 0% | ||||||||||||||||||||||||
|
BioPharma Solutions 9 |
256 | 267 | (4% | ) | (3% | ) | 481 | 517 | (7% | ) | (7% | ) | ||||||||||||||||||||
|
Total Medical Products |
$2,031 | $2,006 | 1% | 2% | $3,949 | $3,932 | 0% | 1% | ||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
| Total Baxter |
$3,669 | $3,572 | 3% | 4% | $7,117 | $6,960 | 2% | 3% | ||||||||||||||||||||||||
| 1 | Effective January 1, 2013, Baxter has transitioned to a commercial franchise structure for reporting net sales. Prior period net sales have been reclassified to reflect the new commercial franchise structure. See Notes 2 - 9 below for a description of each commercial franchise. |
| 2 | Includes sales of recombinant FVIII products (ADVATE and RECOMBINATE) and plasma-derived hemophilia products (primarily FVII, FVIII and FEIBA). Recombinant and plasma-based products were previously reported separately. |
| 3 | Includes sales of the company’s liquid formulation of the antibody-replacement therapy immunoglobulin product (GAMMAGARD LIQUID) and other plasma-based therapies such as albumin and alpha-1 antitrypsin products. Antibody therapies and plasma-based products were previously reported separately. |
| 4 | Consists of biological products and delivery devices used for hemostasis, tissue sealing, adhesion reduction and hard tissue regeneration, as well as soft tissue repair and microsurgery products. |
| 5 | Consists of vaccines for seasonal and pandemic influenza, as well as meningitis C and tick-borne encephalitis. |
| 6 | Principally includes IV therapies, infusion pumps, administration sets and premixed drugs platforms. IV therapies were previously reported with nutrition products in IV Therapies, and Infusion Systems and Global Injectables were previously reported separately. |
| 7 | Consists of PD and HD therapies. |
| 8 | Principally includes nutrition and anesthesia products. Nutrition products were previously reported with IV therapies in IV Therapies and anesthesia products were previously reported separately. |
| 9 | Principally includes sales from the pharmaceutical partnering business and pharmacy compounding services, which were previously reported with Global Injectables. Also includes revenues associated with manufacturing, distribution and other services provided by the company to the buyer of the Transfusion Therapies business after the February 2007 divestiture. |
BAXTER — PAGE 15
BAXTER INTERNATIONAL INC.
Franchise Sales by U.S. and International 1
Three-Month Periods Ending June 30, 2013 and 2012
(unaudited)
($ in millions)
| Q2 2013 | Q2 2012 | % Growth | ||||||||||||||||||||||||||||||||||
| U.S. | International | Total | U.S. | International | Total | U.S. | International | Total | ||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||
| BioScience |
||||||||||||||||||||||||||||||||||||
| Hemophilia |
$ 346 | $ 503 | $ 849 | $ 328 | $ 501 | $ 829 | 5% | 0% | 2% | |||||||||||||||||||||||||||
| BioTherapeutics |
335 | 178 | 513 | 318 | 166 | 484 | 5% | 7% | 6% | |||||||||||||||||||||||||||
| BioSurgery |
101 | 77 | 178 | 101 | 73 | 174 | 0% | 5% | 2% | |||||||||||||||||||||||||||
|
Vaccines |
0 | 98 | 98 | 0 | 79 | 79 | 0% | 24% | 24% | |||||||||||||||||||||||||||
| Total BioScience |
$ 782 | $ 856 | $1,638 | $ 747 | $ 819 | $1,566 | 5% | 5% | 5% | |||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||
| Medical Products |
||||||||||||||||||||||||||||||||||||
| Fluid Systems |
$ 390 | $ 365 | $ 755 | $ 380 | $ 360 | $ 740 | 3% | 1% | 2% | |||||||||||||||||||||||||||
| Renal |
101 | 553 | 654 | 98 | 537 | 635 | 3% | 3% | 3% | |||||||||||||||||||||||||||
|
Specialty Pharmaceuticals |
163 | 203 | 366 | 161 | 203 | 364 | 1% | 0% | 1% | |||||||||||||||||||||||||||
|
BioPharma Solutions |
110 | 146 | 256 | 117 | 150 | 267 | (6% | ) | (3% | ) | (4% | ) | ||||||||||||||||||||||||
| Total Medical Products |
$ 764 | $1,267 | $2,031 | $ 756 | $1,250 | $2,006 | 1% | 1% | 1% | |||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||
| Total Baxter |
$1,546 | $2,123 | $3,669 | $1,503 | $2,069 | $3,572 | 3% | 3% | 3% | |||||||||||||||||||||||||||
| 1 | Effective January 1, 2013, Baxter has transitioned to a commercial franchise structure for reporting net sales. Prior period net sales have been reclassified to reflect the new commercial franchise structure. Refer to page 14 for additional details. |