| |||||
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| |||||
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|
| |||||||||||||
Delaware | 36-0781620 | |||||||||||||
(State or other jurisdiction of
| (I.R.S. Employer
| |||||||||||||
One Baxter Parkway, | Deerfield, | Illinois | 60015 | |||||||||||
(Address of | (Zip Code) |
224. | 948.2000 | ||||||||||||||||
(Registrant’s telephone number, including area code) |
| ||||||||||||||
Title of each class |
| Name of each exchange on which registered | ||||||||||||
Common Stock, $1.00 par value | BAX (NYSE) | New York Stock Exchange | ||||||||||||
Chicago Stock Exchange | ||||||||||||||
0.4% Global Notes due 2024 | BAX 24 | New York Stock Exchange | ||||||||||||
1.3% Global Notes due 2025 | BAX 25 | New York Stock Exchange | ||||||||||||
1.3% Global Notes due 2029 | BAX 29 | New York Stock Exchange |
Large accelerated filer |
| Accelerated filer |
| ||||||||||||
Non-accelerated filer |
|
| Smaller reporting company | ☐ | |||||||||||
Emerging growth company | ☐ |
2022 PART II. Item 1A. Three months ended Nine months ended September 30, September 30, 2017 2016 2017 2016 Net sales $ 2,707 $ 2,558 $ 7,787 $ 7,518 Cost of sales 1,579 1,487 4,487 4,510 Gross margin 1,128 1,071 3,300 3,008 Marketing and administrative expenses 685 726 1,890 2,076 Research and development expenses 151 159 435 490 Operating income 292 186 975 442 Net interest expense 14 14 41 53 Other (income) expense, net (12 ) 44 10 (4,286 ) Income from continuing operations before income taxes 290 128 924 4,675 Income tax expense (benefit) 42 1 139 (51 ) Income from continuing operations 248 127 785 4,726 Income (loss) from discontinued operations, net of tax 3 3 3 (4 ) Net income $ 251 $ 130 $ 788 $ 4,722 Income from continuing operations per common share Basic $ 0.46 $ 0.23 $ 1.45 $ 8.64 Diluted $ 0.45 $ 0.23 $ 1.42 $ 8.56 Income (loss) from discontinued operations per common share Basic $ — $ 0.01 $ — $ (0.01 ) Diluted $ — $ 0.01 $ — $ (0.01 ) Net income per common share Basic $ 0.46 $ 0.24 $ 1.45 $ 8.63 Diluted $ 0.45 $ 0.24 $ 1.42 $ 8.55 Weighted-average number of common shares outstanding Basic 545 544 543 547 Diluted 557 551 554 552 Cash dividends declared per common share $ 0.160 $ 0.130 $ 0.450 $ 0.375 The accompanying notes are an integral part of these condensed consolidated financial statements.2017Page NumberPage Number 2345626394041424343434445FINANCIALFINANCIAL INFORMATIONItem 1.Statements of IncomeBalance Sheets (unaudited)per share data)information)September 30,
2022December 31,
2021Current assets: Cash and cash equivalents $ 1,601 $ 2,951 Accounts receivable, net of allowances of $120 in 2022 and $122 in 2021 2,555 2,629 Inventories 2,675 2,453 Prepaid expenses and other current assets 979 839 Total current assets 7,810 8,872 Property, plant and equipment, net 4,799 5,178 Goodwill 6,639 9,836 Other intangible assets, net 6,927 7,792 Operating lease right-of-use assets 546 630 Other non-current assets 1,244 1,213 Total assets $ 27,965 $ 33,521 Current liabilities: Short-term debt $ 275 $ 301 Current maturities of long-term debt and finance lease obligations 4 210 Accounts payable 1,234 1,246 Accrued expenses and other current liabilities 2,195 2,479 Total current liabilities 3,708 4,236 Long-term debt and finance lease obligations, less current portion 16,153 17,149 Operating lease liabilities 454 522 Other non-current liabilities 2,071 2,493 Total liabilities 22,386 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,179,451,293 shares in 2022 and 181,879,516 shares in 2021 (11,406) (11,488) Additional contributed capital 6,297 6,197 Retained earnings 14,015 17,065 Accumulated other comprehensive income (loss) (4,054) (3,380) Total Baxter stockholders’ equity 5,535 9,077 Noncontrolling interests 44 44 Total equity 5,579 9,121 Total liabilities and equity $ 27,965 $ 33,521
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||||
Net sales | $ | 3,773 | $ | 3,226 | $ | 11,226 | $ | 9,270 | |||||||||
Cost of sales | 2,640 | 1,905 | 7,292 | 5,571 | |||||||||||||
Gross margin | 1,133 | 1,321 | 3,934 | 3,699 | |||||||||||||
Selling, general and administrative expenses | 947 | 680 | 2,975 | 1,982 | |||||||||||||
Research and development expenses | 152 | 129 | 450 | 396 | |||||||||||||
Goodwill impairments | 2,785 | — | 2,785 | — | |||||||||||||
Other operating expense (income), net | 48 | (1) | 20 | (6) | |||||||||||||
Operating income (loss) | (2,799) | 513 | (2,296) | 1,327 | |||||||||||||
Interest expense, net | 104 | 50 | 278 | 118 | |||||||||||||
Other (income) expense, net | 63 | 12 | 3 | 15 | |||||||||||||
Income (loss) before income taxes | (2,966) | 451 | (2,577) | 1,194 | |||||||||||||
Income tax expense (benefit) | (32) | (1) | 29 | 141 | |||||||||||||
Net income (loss) | (2,934) | 452 | (2,606) | 1,053 | |||||||||||||
Net income attributable to noncontrolling interests | 3 | 2 | 8 | 7 | |||||||||||||
Net income (loss) attributable to Baxter stockholders | $ | (2,937) | $ | 450 | $ | (2,614) | $ | 1,046 | |||||||||
Earnings (loss) per share | |||||||||||||||||
Basic | $ | (5.83) | $ | 0.90 | $ | (5.20) | $ | 2.08 | |||||||||
Diluted | $ | (5.83) | $ | 0.89 | $ | (5.20) | $ | 2.06 | |||||||||
Weighted-average number of shares outstanding | |||||||||||||||||
Basic | 504 | 500 | 503 | 503 | |||||||||||||
Diluted | 504 | 506 | 503 | 509 |
|
| Three months ended |
|
| Nine months ended |
| ||||||||||
|
| September 30, |
|
| September 30, |
| ||||||||||
|
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| ||||
Net income |
| $ | 251 |
|
| $ | 130 |
|
| $ | 788 |
|
| $ | 4,722 |
|
Other comprehensive income (loss), net of tax: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency translation adjustments, net of tax expense (benefit) of $21 and ($2) for the three months ended September 30, 2017 and 2016, respectively, and $69 and ($12) for the nine months ended September 30, 2017 and 2016, respectively |
|
| 181 |
|
|
| 10 |
|
|
| 530 |
|
|
| (16 | ) |
Pension and other employee benefits, net of tax expense of $6 and $11 for the three months ended September 30, 2017 and 2016, respectively, and $26 and $32 for the nine months ended September 30, 2017 and 2016, respectively |
|
| 6 |
|
|
| 21 |
|
|
| 44 |
|
|
| 61 |
|
Hedging activities, net of tax benefit of ($2) and zero for the three months ended September 30, 2017 and 2016, respectively, and ($7) and ($5) for the nine months ended September 30, 2017 and 2016, respectively |
|
| (6 | ) |
|
| 1 |
|
|
| (16 | ) |
|
| (10 | ) |
Available-for-sale securities, net of tax expense of zero for the three months ended September 30, 2017 and 2016, and $1 and zero for the nine months ended September 30, 2017 and 2016, respectively |
|
| 1 |
|
|
| — |
|
|
| 4 |
|
|
| (4,431 | ) |
Total other comprehensive income (loss), net of tax |
|
| 182 |
|
|
| 32 |
|
|
| 562 |
|
|
| (4,396 | ) |
Comprehensive income |
| $ | 433 |
|
| $ | 162 |
|
| $ | 1,350 |
|
| $ | 326 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||||
Net income (loss) | $ | (2,934) | $ | 452 | $ | (2,606) | $ | 1,053 | |||||||||
Other comprehensive income (loss), net of tax: | |||||||||||||||||
Currency translation adjustments, net of tax expense (benefit) of ($16) and $3 for the three months ended September 30, 2022 and 2021, respectively, and ($25) and $16 for the nine months ended September 30, 2022 and 2021, respectively. | (319) | (137) | (751) | (257) | |||||||||||||
Pension and other postretirement benefits, net of tax expense of $5 and $8 for the three months ended September 30, 2022 and 2021, respectively, and $13 and $19 for the nine months ended September 30, 2022 and 2021, respectively. | 16 | 22 | 48 | 63 | |||||||||||||
Hedging activities, net of tax expense of $5 and $3 for the three months ended September 30, 2022 and 2021, respectively, and $8 and $8 for the nine months ended September 30, 2022 and 2021, respectively. | 16 | 9 | 27 | 26 | |||||||||||||
Available-for-sale debt securities, net of tax expense of zero for the three months ended September 30, 2022 and 2021, respectively, and $1 and zero for the nine months ended September 30, 2022 and 2021, respectively. | — | — | 2 | — | |||||||||||||
Total other comprehensive income (loss), net of tax | (287) | (106) | (674) | (168) | |||||||||||||
Comprehensive income (loss) | (3,221) | 346 | (3,280) | 885 | |||||||||||||
Less: Comprehensive income attributable to noncontrolling interests | 3 | 2 | 8 | 7 | |||||||||||||
Comprehensive income (loss) attributable to Baxter stockholders | $ | (3,224) | $ | 344 | $ | (3,288) | $ | 878 |
|
|
|
| September 30, |
|
| December 31, |
| ||
|
|
|
| 2017 |
|
| 2016 |
| ||
Current assets |
| Cash and equivalents |
| $ | 3,517 |
|
| $ | 2,801 |
|
|
| Accounts and other current receivables, net |
|
| 1,748 |
|
|
| 1,691 |
|
|
| Inventories |
|
| 1,550 |
|
|
| 1,430 |
|
|
| Prepaid expenses and other |
|
| 633 |
|
|
| 602 |
|
|
| Current assets held for disposition |
|
| — |
|
|
| 50 |
|
|
| Total current assets |
|
| 7,448 |
|
|
| 6,574 |
|
Property, plant and equipment, net |
|
| 4,488 |
|
|
| 4,289 |
| ||
Other assets |
| Goodwill |
|
| 3,117 |
|
|
| 2,595 |
|
|
| Other intangible assets, net |
|
| 1,371 |
|
|
| 1,111 |
|
|
| Other |
|
| 1,117 |
|
|
| 977 |
|
|
| Total other assets |
|
| 5,605 |
|
|
| 4,683 |
|
Total assets |
|
|
| $ | 17,541 |
|
| $ | 15,546 |
|
Current liabilities |
| Current maturities of long-term debt and lease obligations |
| $ | 3 |
|
| $ | 3 |
|
|
| Accounts payable and accrued liabilities |
|
| 2,572 |
|
|
| 2,612 |
|
|
| Current income taxes payable |
|
| 87 |
|
|
| 126 |
|
|
| Current liabilities held for disposition |
|
| — |
|
|
| 3 |
|
|
| Total current liabilities |
|
| 2,662 |
|
|
| 2,744 |
|
Long-term debt and lease obligations |
|
| 3,495 |
|
|
| 2,779 |
| ||
Other long-term liabilities |
|
| 1,925 |
|
|
| 1,743 |
| ||
Equity |
| Common stock, $1 par value, authorized 2,000,000,000 shares, issued 683,494,944 shares in 2017 and 2016 |
|
| 683 |
|
|
| 683 |
|
|
| Common stock in treasury, at cost, 138,870,075 shares in 2017 and 143,890,064 shares in 2016 |
|
| (7,756 | ) |
|
| (7,995 | ) |
|
| Additional contributed capital |
|
| 5,918 |
|
|
| 5,958 |
|
|
| Retained earnings |
|
| 14,615 |
|
|
| 14,200 |
|
|
| Accumulated other comprehensive (loss) income |
|
| (3,994 | ) |
|
| (4,556 | ) |
|
| Total Baxter shareholders’ equity |
|
| 9,466 |
|
|
| 8,290 |
|
|
| Noncontrolling interests |
|
| (7 | ) |
|
| (10 | ) |
|
| Total equity |
|
| 9,459 |
|
|
| 8,280 |
|
Total liabilities and equity |
| $ | 17,541 |
|
| $ | 15,546 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
|
|
|
| Nine months ended |
| |||||
|
|
|
| September 30, |
| |||||
|
|
|
| 2017 |
|
| 2016 |
| ||
Cash flows from operations |
| Net income |
| $ | 788 |
|
| $ | 4,722 |
|
|
| Adjustments to reconcile income from continuing operations to net cash from operating activities: |
|
|
|
|
|
|
|
|
|
| Loss (income) from discontinued operations, net of tax |
|
| (3 | ) |
|
| 4 |
|
|
| Depreciation and amortization |
|
| 562 |
|
|
| 599 |
|
|
| Deferred income taxes |
|
| (30 | ) |
|
| (298 | ) |
|
| Stock compensation |
|
| 77 |
|
|
| 84 |
|
|
| Net periodic pension benefit and OPEB costs |
|
| 93 |
|
|
| 90 |
|
|
| Net realized gains on the Baxalta Retained Share transactions |
|
| — |
|
|
| (4,387 | ) |
|
| Other |
|
| 69 |
|
|
| 437 |
|
|
| Changes in balance sheet items |
|
|
|
|
|
|
|
|
|
| Accounts and other current receivables, net |
|
| 32 |
|
|
| 22 |
|
|
| Inventories |
|
| — |
|
|
| (11 | ) |
|
| Accounts payable and accrued liabilities |
|
| (36 | ) |
|
| (326 | ) |
|
| Business optimization and infusion pump payments |
|
| (116 | ) |
|
| (119 | ) |
|
| Other |
|
| (93 | ) |
|
| 121 |
|
|
| Cash flows from operations – continuing operations |
|
| 1,343 |
|
|
| 938 |
|
|
| Cash flows from operations – discontinued operations |
|
| (20 | ) |
|
| 3 |
|
|
| Cash flows from operations |
|
| 1,323 |
|
|
| 941 |
|
Cash flows from investing activities |
| Capital expenditures |
|
| (410 | ) |
|
| (519 | ) |
|
| Acquisitions and investments, net of cash acquired |
|
| (680 | ) |
|
| (47 | ) |
|
| Divestitures and other investing activities, net |
|
| 2 |
|
|
| 17 |
|
|
| Cash flows from investing activities – continuing operations |
|
| (1,088 | ) |
|
| (549 | ) |
|
| Cash flows from investing activities – discontinued operations |
|
| — |
|
|
| 13 |
|
|
| Cash flows from investing activities |
|
| (1,088 | ) |
|
| (536 | ) |
Cash flows from financing activities |
| Issuances of debt |
|
| 633 |
|
|
| 1,641 |
|
|
| Payments of obligations |
|
| — |
|
|
| (1,383 | ) |
|
| Debt extinguishment costs |
|
| — |
|
|
| (16 | ) |
|
| Increase (decrease) in debt with original maturities of three months or less, net |
|
| — |
|
|
| (300 | ) |
|
| Cash dividends on common stock |
|
| (228 | ) |
|
| (197 | ) |
|
| Proceeds from stock issued under employee benefit plans |
|
| 298 |
|
|
| 251 |
|
|
| Purchases of treasury stock |
|
| (275 | ) |
|
| (45 | ) |
|
| Other |
|
| (37 | ) |
|
| 5 |
|
|
| Cash flows from financing activities |
|
| 391 |
|
|
| (44 | ) |
Effect of foreign exchange rate changes on cash and equivalents |
|
| 90 |
|
|
| 23 |
| ||
Increase in cash and equivalents |
|
| 716 |
|
|
| 384 |
| ||
Cash and equivalents at beginning of period |
|
| 2,801 |
|
|
| 2,213 |
| ||
Cash and equivalents at end of period |
| $ | 3,517 |
|
| $ | 2,597 |
| ||
Supplemental Schedule of Non-Cash Investing and Financing Activities |
|
|
|
|
|
|
|
| ||
Net proceeds on the Baxalta Retained Share transactions |
| $ | — |
|
| $ | 4,387 |
| ||
Payment of obligations in exchange for Baxalta Retained Shares |
| $ | — |
|
| $ | 3,646 |
| ||
Exchange of Baxter shares with Baxalta Retained Shares |
| $ | — |
|
| $ | 611 |
|
For the three months ended September 30, 2022 | ||||||||||||||||||||||||||||||||
Baxter International Inc. stockholders' equity | ||||||||||||||||||||||||||||||||
Common stock shares | Common stock | Common stock shares in treasury | Common stock in treasury | Additional contributed capital | Retained earnings | Accumulated other comprehensive income (loss) | Total Baxter stockholders' equity | Noncontrolling interests | Total equity | |||||||||||||||||||||||
Balance as of July 1, 2022 | 683 | $ | 683 | 180 | $ | (11,409) | $ | 6,253 | $ | 17,099 | $ | (3,767) | $ | 8,859 | $ | 44 | $ | 8,903 | ||||||||||||||
Net income (loss) | — | — | — | — | — | (2,937) | — | (2,937) | 3 | (2,934) | ||||||||||||||||||||||
Other comprehensive income (loss) | — | — | — | — | — | — | (287) | (287) | — | (287) | ||||||||||||||||||||||
Purchases of treasury stock | — | — | — | (24) | — | — | — | (24) | — | (24) | ||||||||||||||||||||||
Stock issued under employee benefit plans and other | — | — | (1) | 27 | 44 | — | — | 71 | — | 71 | ||||||||||||||||||||||
Dividends declared on common stock | — | — | — | — | — | (147) | — | (147) | — | (147) | ||||||||||||||||||||||
Change in noncontrolling interests | — | — | — | — | — | — | — | — | (3) | (3) | ||||||||||||||||||||||
Balance as of September 30, 2022 | 683 | $ | 683 | 179 | $ | (11,406) | $ | 6,297 | $ | 14,015 | $ | (4,054) | $ | 5,535 | $ | 44 | $ | 5,579 |
For the nine months ended September 30, 2022 | ||||||||||||||||||||||||||||||||
Baxter International Inc. stockholders' equity | ||||||||||||||||||||||||||||||||
Common stock shares | Common stock | Common stock shares in treasury | Common stock in treasury | Additional contributed capital | Retained earnings | Accumulated other comprehensive income (loss) | Total Baxter stockholders' equity | Noncontrolling interests | Total equity | |||||||||||||||||||||||
Balance as of January 1, 2022 | 683 | $ | 683 | 182 | $ | (11,488) | $ | 6,197 | $ | 17,065 | $ | (3,380) | $ | 9,077 | $ | 44 | $ | 9,121 | ||||||||||||||
Net income (loss) | — | — | — | — | — | (2,614) | — | (2,614) | 8 | (2,606) | ||||||||||||||||||||||
Other comprehensive income (loss) | — | — | — | — | — | — | (674) | (674) | — | (674) | ||||||||||||||||||||||
Purchases of treasury stock | — | — | — | (32) | — | — | — | (32) | — | (32) | ||||||||||||||||||||||
Stock issued under employee benefit plans and other | — | — | (3) | 114 | 100 | — | — | 214 | — | 214 | ||||||||||||||||||||||
Dividends declared on common stock | — | — | — | — | — | (436) | — | (436) | — | (436) | ||||||||||||||||||||||
Change in noncontrolling interests | — | — | — | — | — | — | — | — | (8) | (8) | ||||||||||||||||||||||
Balance as of September 30, 2022 | 683 | $ | 683 | 179 | $ | (11,406) | $ | 6,297 | $ | 14,015 | $ | (4,054) | $ | 5,535 | $ | 44 | $ | 5,579 |
For the three months ended September 30, 2021 | ||||||||||||||||||||||||||||||||
Baxter International Inc. stockholders' equity | ||||||||||||||||||||||||||||||||
Common stock shares | Common stock | Common stock shares in treasury | Common stock in treasury | Additional contributed capital | Retained earnings | Accumulated other comprehensive income (loss) | Total Baxter stockholders' equity | Noncontrolling interests | Total equity | |||||||||||||||||||||||
Balance as of July 1, 2021 | 683 | $ | 683 | 184 | $ | (11,561) | $ | 6,090 | $ | 16,658 | $ | (3,376) | $ | 8,494 | $ | 41 | $ | 8,535 | ||||||||||||||
Net income (loss) | — | — | — | — | — | 450 | — | 450 | 2 | 452 | ||||||||||||||||||||||
Other comprehensive income (loss) | — | — | — | — | — | — | (106) | (106) | — | (106) | ||||||||||||||||||||||
Stock issued under employee benefit plans and other | — | — | (1) | 32 | 41 | — | — | 73 | — | 73 | ||||||||||||||||||||||
Dividends declared on common stock | — | — | — | — | — | (141) | — | (141) | — | (141) | ||||||||||||||||||||||
Change in noncontrolling interests | — | — | — | — | — | — | — | — | 2 | 2 | ||||||||||||||||||||||
Balance as of September 30, 2021 | 683 | $ | 683 | 183 | $ | (11,529) | $ | 6,131 | $ | 16,967 | $ | (3,482) | $ | 8,770 | $ | 45 | $ | 8,815 |
For the nine months ended September 30, 2021 | ||||||||||||||||||||||||||||||||
Baxter International Inc. stockholders' equity | ||||||||||||||||||||||||||||||||
Common stock shares | Common stock | Common stock shares in treasury | Common stock in treasury | Additional contributed capital | Retained earnings | Accumulated other comprehensive income (loss) | Total Baxter stockholders' equity | Noncontrolling interests | Total equity | |||||||||||||||||||||||
Balance as of January 1, 2021 | 683 | $ | 683 | 179 | $ | (11,051) | $ | 6,043 | $ | 16,328 | $ | (3,314) | $ | 8,689 | $ | 37 | $ | 8,726 | ||||||||||||||
Net income (loss) | — | — | — | — | — | 1,046 | — | 1,046 | 7 | 1,053 | ||||||||||||||||||||||
Other comprehensive income (loss) | — | — | — | — | — | — | (168) | (168) | — | (168) | ||||||||||||||||||||||
Purchases of treasury stock | — | — | 7 | (600) | — | — | — | (600) | — | (600) | ||||||||||||||||||||||
Stock issued under employee benefit plans and other | — | — | (3) | 122 | 88 | — | — | 210 | — | 210 | ||||||||||||||||||||||
Dividends declared on common stock | — | — | — | — | — | (407) | — | (407) | — | (407) | ||||||||||||||||||||||
Change in noncontrolling interests | — | — | — | — | — | — | — | — | 1 | 1 | ||||||||||||||||||||||
Balance as of September 30, 2021 | 683 | $ | 683 | 183 | $ | (11,529) | $ | 6,131 | $ | 16,967 | $ | (3,482) | $ | 8,770 | $ | 45 | $ | 8,815 |
Nine months ended September 30, | ||||||||
2022 | 2021 | |||||||
Cash flows from operations | ||||||||
Net income (loss) | $ | (2,606) | $ | 1,053 | ||||
Adjustments to reconcile net income (loss) to cash flows from operations: | ||||||||
Depreciation and amortization | 1,069 | 645 | ||||||
Deferred income taxes | (174) | (98) | ||||||
Stock compensation | 122 | 93 | ||||||
Net periodic pension and other postretirement costs | 42 | 77 | ||||||
Intangible asset impairments | 332 | — | ||||||
Goodwill impairments | 2,785 | — | ||||||
Loss on product divestiture arrangement | 54 | — | ||||||
Reclassification of cumulative translation loss to earnings | 65 | — | ||||||
Other | (35) | 46 | ||||||
Changes in balance sheet items: | ||||||||
Accounts receivable, net | (116) | (128) | ||||||
Inventories | (410) | (149) | ||||||
Prepaid expenses and other current assets | (98) | (51) | ||||||
Accounts payable | 84 | 14 | ||||||
Accrued expenses and other current liabilities | (250) | 91 | ||||||
Other | (92) | (64) | ||||||
Cash flows from operations | 772 | 1,529 | ||||||
Cash flows from investing activities | ||||||||
Capital expenditures | (479) | (508) | ||||||
Acquisitions, net of cash acquired, and investments | (206) | (463) | ||||||
Other investing activities, net | 10 | 38 | ||||||
Cash flows from investing activities | (675) | (933) | ||||||
Cash flows from financing activities | ||||||||
Repayments of debt | (953) | (407) | ||||||
Issuances of debt | — | 50 | ||||||
Net increases (decreases) in debt with original maturities of three months or less | 30 | 251 | ||||||
Cash dividends on common stock | (427) | (390) | ||||||
Proceeds from stock issued under employee benefit plans | 114 | 135 | ||||||
Purchases of treasury stock | (32) | (600) | ||||||
Debt issuance costs | — | (37) | ||||||
Other financing activities, net | (51) | (33) | ||||||
Cash flows from financing activities | (1,319) | (1,031) | ||||||
Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash | (130) | (40) | ||||||
Decrease in cash, cash equivalents and restricted cash | (1,352) | (475) | ||||||
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) | $ | 1,604 | $ | 3,261 |
September 30, 2022 | December 31, 2021 | September 30, 2021 | |||||||||
Cash and cash equivalents | $ | 1,601 | $ | 2,951 | $ | 3,258 | |||||
Restricted cash included in prepaid expenses and other current assets | 3 | 5 | 3 | ||||||||
Cash, cash equivalents and restricted cash | $ | 1,604 | $ | 2,956 | $ | 3,261 |
Certain reclassifications
Accounting for Venezuelan Operations
Currency restrictions enacted in Venezuela require Baxter to obtain approval from the Venezuelan government to exchange Venezuelan bolivars for U.S. dollars and require such exchange to be made at the official exchange rate established by the government. In the first quarter of 2016, the Venezuelan government moved from the three-tier exchange rate system to a two-tiered exchange rate system and the official rate for food and medicine imports was adjusted from 6.3 to 10 bolivars per U.S. dollar. Due to a recent decline in transactions settled at the official rate or the secondary rate and limitations on the company’s ability to repatriate funds generated by its Venezuela operations, the company concluded in the second quarter of 2017 that it no longer met the accounting criteria for control over its business in Venezuela and the company deconsolidated its Venezuelan operations on June 30, 2017. As a result of deconsolidating the Venezuelan operations, the company recorded a pre-tax charge of $33 million in other (income) expense, net in the second quarter of 2017. This charge included the write-off of the company’s investment in its Venezuelan operations, related unrealized translation adjustments and elimination of intercompany amounts. Beginning in the third quarter of 2017, the company no longer included the results of its Venezuelan business in its consolidated financial statements.
Hurricane Maria
In September 2017, Hurricane Maria caused damage to certain of the company's assets in Puerto Rico and disrupted operations. Insurance, less applicable deductibles and subject to any coverage exclusions, covers the repair or replacement of the company's assets that suffered loss or damage, and the company is working closely with its insurance carriers and claims adjusters to ascertain the full amount of insurance proceeds due to the company as a result of the damages and the loss the company suffered. The company's insurance policies also provide coverage for interruption to its business, including lost profits, and reimbursement for other expenses and costs that have been incurred relating to the damages and losses suffered. In the third quarter of 2017, the Company recorded $21 million of pre-tax charges related to damagesuncertainty caused by the hurricane,pandemic, our operating performance and financial results, particularly in the short term, may be subject to volatility.
New accounting standards
Recently issued accounting standards not yetJanuary 1, 2022, we adopted
In August 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2017-12, Targeted Improvements2021-05, Leases (Topic 842), which requires a lessor to Accountingclassify 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 have recognized a selling loss at lease commencement. These changes are intended to avoid recognizing a day-one loss for Hedging Activities, which amends ASC 815, Derivatives and Hedging.a lease with variable payments even though the lessor expects the arrangement will be profitable overall. The purposeadoption of this ASU is to better align a company’s risk management activities and financial reporting for hedging relationships, simplify the hedge accounting requirements, and improve the disclosures of hedging arrangements. The effective date for this ASU is January 1, 2019, with early adoption permitted. The company is evaluating the potential effects on the consolidated financial statements.
In March 2017, the FASB issued ASU No. 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, which amends ASC 715, Compensation – Retirement Benefits, to require employers that present a measure of operating income in their statements of earnings to include only the service cost component of net periodic postretirement benefit cost in operating expenses. The service cost component of net periodic postretirement benefit cost should be presented in the same operating expense line items as other employee compensation costs arising from services rendered during the period. The other components of net benefit cost, including interest costs, expected return on assets, amortization of prior service cost/credit, and settlement and curtailment effects, are to be included separately and outside of any subtotal of operating income. The company intends to adopt the standard effective January 1, 2018. This guidance will impact the presentation of the company’s consolidated statements of income with no impact on net income. Upon adoption of the standard on January 1, 2018, operating income for the three and nine months ended September 30, 2017, will be recast to increase $8 million and $25 million, respectively, with a corresponding increase in other (income) expense, net.
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which amends the existing accounting standards for revenue recognition. ASU No. 2014-09 is based on principles that govern the recognition of revenue at an amount an entity expects to be entitled when products are transferred to customers. ASU No. 2014-09 will be effective for the company beginning on January 1, 2018. The standard may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of adoption. The company has completed an assessment of the new standard and is currently executing its detailed implementation plan and developing processes for gathering information for required disclosures. Based on the work performed to date, the company doesdid not expect the adoption of the new standard to have a material impact on theour condensed consolidated financial statements. The company expects to adopt
Recently adopted accounting pronouncements
As of January 1, 2017, the company adopted on a prospective basis ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting, which amends ASC Topic 718, Compensation – Stock Compensation. The updated guidance requires all tax effects related to share-based payments to be recorded in income tax expense in the consolidated statement of income. Previous guidance required that tax effects of deductions in excess of share-based compensation costs (windfall tax benefits) be recorded in additional paid-in capital, and tax deficiencies be recorded in additional paid-in capital to the extent of previously recognized windfall tax benefits, with the remainder recorded in income tax expense. The new guidance also requires the cash flows resulting from windfall tax benefits to be reported as operating activities in the consolidated statement of cash flows, rather than the previous requirement to present windfall tax benefits as an inflow from financing activities and an outflow from operating activities. As a resultenterprise value of the adoption, net income and operating cash flow for the three and nine months ended September 30, 2017, increased bytransaction was approximately $18 million and $48 million, respectively. The prior periods have not been restated and therefore, windfall tax benefits of $8 million and $35 million, respectively, for the three and nine months ended September 30, 2016, were not included in net income and were included as an inflow from financing activities and an outflow from operating activities in the condensed consolidated statement of cash flows.
2. SEPARATION OF BAXALTA INCORPORATED
On July 1, 2015, Baxter completed the distribution of approximately 80.5% of the outstanding common stock of Baxalta Incorporated (Baxalta) to Baxter shareholders (the Distribution). After giving effect to the Distribution, the company retained 19.5% of the outstanding common stock, or 131,902,719 shares of Baxalta (Retained Shares). The Distribution was made to Baxter’s shareholders of record as of the close of business on June 17, 2015 (Record Date), who received one share of Baxalta common stock for each Baxter common share held as of the Record Date. As a result of the Distribution, Baxalta became an independent public company trading under the symbol “BXLT” on the New York Stock Exchange.
On June 3, 2016, Baxalta became a wholly-owned subsidiary of Shire plc (Shire) through a merger of a wholly-owned Shire subsidiary with and into Baxalta, with Baxalta as the surviving subsidiary (the Merger). References in this report to Baxalta prior to the Merger closing date refer to Baxalta as a stand-alone public company. References in this report to Baxalta subsequent to the Merger closing date refer to Baxalta as a subsidiary of Shire.
For a portion of Baxalta’s operations, the legal transfer of Baxalta’s assets and liabilities did not occur with the separation of Baxalta on July 1, 2015 due to the time required to transfer marketing authorizations and other regulatory requirements in certain countries.$12.8 billion. Under the terms of the International Commercial Operations Agreement (ICOA), Baxalta is subject to the risks and entitled to the benefits generated by these operations and assets until legal transfer; therefore, the net economic benefit and any cash collected by these entities by Baxter are transferred to Baxalta. As of September 30, 2017, all countries have been separated.
Following is a summary of the operating results of Baxalta, which have been reflected as discontinued operations for the three and nine months ended September 30, 2017 and 2016. The assets and liabilities have been classified as held for disposition as of December 31, 2016. All assets and liabilities have been transferred as of September 30, 2017.
|
| Three months ended September 30, |
|
| Nine months ended September 30, |
| ||||||||||
(in millions) |
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| ||||
Major classes of line items constituting income from discontinued operations before income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
| $ | 1 |
|
| $ | 24 |
|
| $ | 7 |
|
| $ | 144 |
|
Cost of sales |
|
| — |
|
|
| (20 | ) |
|
| (5 | ) |
|
| (135 | ) |
Marketing and administrative expenses |
|
| — |
|
|
| — |
|
|
| (1 | ) |
|
| (20 | ) |
Income (loss) from discontinued operations before income taxes |
|
| 1 |
|
|
| 4 |
|
|
| 1 |
|
|
| (11 | ) |
Gain on disposal of discontinued operations |
|
| 2 |
|
|
| — |
|
|
| 2 |
|
|
| 17 |
|
Income tax expense |
|
| — |
|
|
| 1 |
|
|
| — |
|
|
| 10 |
|
Income (loss) from discontinued operations, net of tax |
| $ | 3 |
|
| $ | 3 |
|
| $ | 3 |
|
| $ | (4 | ) |
|
| December 31, |
| |
(in millions) |
| 2016 |
| |
Carrying amounts of major classes of assets included as part of discontinued operations |
|
|
|
|
Accounts and other current receivables, net |
| $ | 48 |
|
Property, plant, and equipment, net |
|
| 1 |
|
Other |
|
| 1 |
|
Total assets of the disposal group |
| $ | 50 |
|
|
|
|
|
|
Carrying amounts of major classes of liabilities included as part of discontinued operations |
|
|
|
|
Accounts payable and accrued liabilities |
| $ | 3 |
|
Total liabilities of the disposal group |
| $ | 3 |
|
As of December 31, 2016, Baxter recorded a liability of $47 million for its obligation to transfer these net assets to Baxalta.
Baxter and Baxalta entered into several agreements in connection with the July 1, 2015 separation, including a transition servicestransaction agreement, (TSA), separation and distribution agreement, manufacturing and supply agreements (MSA), tax matters agreement, an employee matters agreement, a long-term services agreement, and a shareholder’s and registration rights agreement.
Pursuant to the TSA, Baxter and Baxalta and their respective subsidiaries are providing to each other, on an interim, transitional basis, various services. Services being provided by Baxter include, among others, finance, information technology, human resources, quality supply chain and certain other administrative services. The services generally commenced on the Distribution date and are expected to terminate within 36 months of the Distribution date. Billings by Baxter under the TSA are recorded as a reduction of the costs to provide the respective service in the applicable expense category, primarily in marketing and administrative expenses, in the condensed consolidated statements of income. In the three and nine months ended September 30, 2017, the company recognized approximately $11 million and $47 million, respectively, as a reduction to marketing and administrative expenses related to the TSA. In the three and nine months ended September 30, 2016, the company recognized approximately $26 million and $79 million, respectively, as a reduction to marketing and administrative expenses related to the TSA.
Pursuant to the MSA, Baxalta or Baxter, as the case may be, manufactures, labels, and packages products for the other party. The terms of the agreements range in initial duration from five to 10 years. In the three and nine months ended September 30, 2017, Baxter recognized approximately $6 million and $18 million, respectively, in sales to Baxalta. In the three and nine months ended September 30, 2016, Baxter recognized approximately $6 million and $31 million, respectively, in sales to Baxalta. In addition, in the three and nine months ended September 30, 2017, Baxter recognized $35 million and $133 million, respectively, in cost of sales related to purchases from Baxalta pursuant to the MSA. In the three and nine months ended September 30, 2016, Baxter recognized $47 million and $139 million, respectively, in cost of sales related to purchases from Baxalta pursuant to the MSA. The cash flows associated with these agreements are includedHillrom shareholders received $156.00 in cash flows from operations — continuing operations.
Cash outflows of $20 million and inflows of $3 million were reported in cash flows from operations – discontinued operations for the nine-month periods ending September 30, 2017 and 2016, respectively. These relate to non-assignable tenders whereby Baxter
remains the seller of Baxalta products, transactions related to importation services Baxter provides in certain countries, in addition to trade payables settled post local separation on Baxalta’s behalf.
3. SUPPLEMENTAL FINANCIAL INFORMATION
Net interest expense
|
| Three months ended |
|
| Nine months ended |
| ||||||||||
|
| September 30, |
|
| September 30, |
| ||||||||||
(in millions) |
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| ||||
Interest expense, net of capitalized interest |
| $ | 22 |
|
| $ | 20 |
|
| $ | 62 |
|
| $ | 69 |
|
Interest income |
|
| (8 | ) |
|
| (6 | ) |
|
| (21 | ) |
|
| (16 | ) |
Net interest expense |
| $ | 14 |
|
| $ | 14 |
|
| $ | 41 |
|
| $ | 53 |
|
Other (income) expense, net
|
| Three months ended |
|
| Nine months ended |
| ||||||||||
|
| September 30, |
|
| September 30, |
| ||||||||||
(in millions) |
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| ||||
Foreign exchange |
| $ | (12 | ) |
| $ | — |
|
| $ | (27 | ) |
| $ | (12 | ) |
Net loss on debt extinguishment |
|
| — |
|
|
| 52 |
|
|
| — |
|
|
| 153 |
|
Net realized gains on Baxalta Retained Shares transactions |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (4,387 | ) |
Venezuela deconsolidation |
|
| — |
|
|
| — |
|
|
| 33 |
|
|
| — |
|
All other |
|
| — |
|
|
| (8 | ) |
|
| 4 |
|
|
| (40 | ) |
Other (income) expense, net |
| $ | (12 | ) |
| $ | 44 |
|
| $ | 10 |
|
| $ | (4,286 | ) |
Inventories
|
| September 30, |
|
| December 31, |
| ||
(in millions) |
| 2017 |
|
| 2016 |
| ||
Raw materials |
| $ | 351 |
|
| $ | 319 |
|
Work in process |
|
| 135 |
|
|
| 122 |
|
Finished goods |
|
| 1,064 |
|
|
| 989 |
|
Inventories |
| $ | 1,550 |
|
| $ | 1,430 |
|
Property, plant and equipment, net
|
| September 30, |
|
| December 31, |
| ||
(in millions) |
| 2017 |
|
| 2016 |
| ||
Property, plant and equipment, at cost |
| $ | 9,954 |
|
| $ | 9,162 |
|
Accumulated depreciation |
|
| (5,466 | ) |
|
| (4,873 | ) |
Property, plant and equipment, net |
| $ | 4,488 |
|
| $ | 4,289 |
|
4. EARNINGS PER SHARE
The numerator for both basic and diluted earnings per share (EPS) is either net income, income from continuing operations, or income from discontinued operations. The denominator for basic EPS is the weighted-average number ofoutstanding Hillrom common shares outstanding during the period. The dilutive effect of outstanding stock options, restricted stock units (RSUs) and performance share units (PSUs) is reflected in the denominator for diluted EPS using the treasury stock method.
The following table is a reconciliation of basic shares to diluted shares.
|
| Three months ended |
|
| Nine months ended |
| ||||||||||
|
| September 30, |
|
| September 30, |
| ||||||||||
(in millions) |
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| ||||
Basic shares |
|
| 545 |
|
|
| 544 |
|
|
| 543 |
|
|
| 547 |
|
Effect of dilutive securities |
|
| 12 |
|
|
| 7 |
|
|
| 11 |
|
|
| 5 |
|
Diluted shares |
|
| 557 |
|
|
| 551 |
|
|
| 554 |
|
|
| 552 |
|
The effect of dilutive securities included unexercised stock options, unvested RSUs and contingently issuable shares related to granted PSUs. The computation of diluted EPS excluded 0.1 million and 2.8 million of equity awards for the third quarter and nine months ended September 30, 2017, respectively, and 0.3 million and 10 million of equity awards for the third quarter and nine months ended September 30, 2016, respectively, because their inclusion would have had an anti-dilutive effect on diluted EPS. Refer to Note 9 for additional information regarding items impacting basic shares.
Stock repurchases
In July 2012, the Board of Directors authorized the repurchase of up to $2 billion of the company’s common stock. The board of directors increased this authority by an additional $1.5 billion in November 2016. During the first three quarters of 2017, the company repurchased 4.7 million shares for $275 million in cash. The company has $1.4 billion remaining available under the authorization as of September 30, 2017.
5. ACQUISITIONS AND OTHER ARRANGEMENTS
Claris Injectables Limited
On July 27, 2017, Baxter acquired 100 percent of Claris Injectables Limited (Claris), a wholly owned subsidiary of Claris Lifesciences Limited, for total cash consideration of approximately $629 million, net of cash acquired. Through the acquisition, Baxter added capabilities in production of essential generic injectable medicines, such as anesthesia and analgesics, renal, anti-infectives and critical care in a variety of presentations including bags, vials and ampoules. 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 |
(in millions) | |||||
Assets acquired and liabilities assumed | |||||
Cash and cash equivalents | $ | 399 | |||
Accounts receivable | 562 | ||||
Inventories | 557 | ||||
Prepaid expenses and other current assets | 49 | ||||
Property, plant and equipment | 514 | ||||
Goodwill | 6,810 | ||||
Other intangible assets | 6,029 | ||||
Operating lease right-of-use assets | 74 | ||||
Other non-current assets | 132 | ||||
Short-term debt | (250) | ||||
Accounts payable | (140) | ||||
Accrued expenses and other current liabilities | (558) | ||||
Long-term debt and finance lease obligations | (2,118) | ||||
Operating lease liabilities | (57) | ||||
Other non-current liabilities | (1,527) | ||||
Total assets acquired and liabilities assumed | $ | 10,476 |
(in millions) |
|
|
|
|
Assets acquired and liabilities assumed |
|
|
|
|
Cash |
| $ | 11 |
|
Accounts and other current receivables |
|
| 16 |
|
Inventories |
|
| 30 |
|
Prepaid expenses and other |
|
| 16 |
|
Property, plant and equipment |
|
| 132 |
|
Goodwill |
|
| 310 |
|
Other intangible assets |
|
| 235 |
|
Other |
|
| 20 |
|
Accounts payable and accrued liabilities |
|
| (22 | ) |
Other long-term liabilities |
|
| (108 | ) |
Total assets acquired and liabilities assumed |
| $ | 640 |
|
The valuation of total assets acquired and liabilities assumed are preliminary and2022 we recorded measurement period adjustments, may be recordedprimarily impacting accounts receivable, property, plant and equipment, other intangible assets, and deferred income tax liabilities. Individually the
Baxter allocated $235 million of the total consideration to acquired intangible assets with the residual consideration of $310 million recorded as goodwill. The acquired intangible assets include $115 million of developed technology with a weighted-average useful life of 8 years and $120 million of in-process research and development with an indefinite useful life. For the in-process research and development, additional R&D will be required prior to technological feasibility. The goodwill, which is not deductible for tax purposes, includes the value of potential future technologiesan assembled workforce as well as the overall strategic benefits provided to Baxter in the injectables market,our product portfolio and is included in the Hospital ProductsHillrom segment.
TheFor the nine months ended September 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.
Three months ended September 30, | Nine months ended September 30, | |||||||||||||
(in millions) | 2022 | 2021 | 2022 | 2021 | ||||||||||
Balance at beginning of period | $ | 125 | $ | 117 | $ | 122 | $ | 125 | ||||||
Charged to costs and expenses | 2 | 2 | 11 | (1) | ||||||||||
Write-offs | (2) | (2) | (4) | (3) | ||||||||||
Currency translation adjustments | (5) | (2) | (9) | (6) | ||||||||||
Balance at end of period | $ | 120 | $ | 115 | $ | 120 | $ | 115 |
(in millions) | September 30, 2022 | December 31, 2021 | ||||||
Raw materials | $ | 690 | $ | 591 | ||||
Work in process | 305 | 300 | ||||||
Finished goods | 1,680 | 1,562 | ||||||
Inventories | $ | 2,675 | $ | 2,453 |
(in millions) | September 30, 2022 | December 31, 2021 | ||||||
Property, plant and equipment, at cost | $ | 11,084 | $ | 11,728 | ||||
Accumulated depreciation | (6,285) | (6,550) | ||||||
Property, plant and equipment, net | $ | 4,799 | $ | 5,178 |
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||
(in millions) | 2022 | 2021 | 2022 | 2021 | |||||||||||||
Interest expense, net of capitalized interest | $ | 109 | $ | 54 | $ | 290 | $ | 128 | |||||||||
Interest income | (5) | (4) | (12) | (10) | |||||||||||||
Interest expense, net | $ | 104 | $ | 50 | $ | 278 | $ | 118 |
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||
(in millions) | 2022 | 2021 | 2022 | 2021 | |||||||||||||
Foreign exchange (gains) losses, net | $ | — | $ | — | $ | (26) | $ | 5 | |||||||||
Pension and other postretirement benefit plans | (5) | 4 | (17) | 11 | |||||||||||||
Pension curtailment | — | — | (11) | — | |||||||||||||
Change in fair value of marketable equity securities | 3 | 9 | (5) | 2 | |||||||||||||
Reclassification of cumulative translation loss to earnings | 65 | — | 65 | — | |||||||||||||
Other, net | — | (1) | (3) | (3) | |||||||||||||
Other (income) expense, net | $ | 63 | $ | 12 | $ | 3 | $ | 15 |
Celerity Pharmaceuticals, LLC
Inrelated entities were substantially liquidated during the third quarter of 2017, Baxter paid approximately $102022. As a result of that determination, we reclassified their $65 million cumulative translation loss from accumulated other comprehensive income (loss) to acquire the rights to Clindamycin Dextrose from Celerity Pharmaceuticals, LLC (Celerity). Baxter capitalized the purchase price as an intangible assetother (income) expense, net.
In the second quarter of 2017, Baxter paid approximately $10 million to acquire the rights to Clindamycin Saline from Celerity. Baxter capitalized the purchase price as an intangible asset and is amortizing the asset over the estimated economic life of 12 years.
In the first quarter of 2016, Baxter paid approximately $23 million to acquire the rights to Vancomycin injectionInvesting Activities
Wound Care Technologies, Inc.
In April 2017, Baxter paid approximately $8 million to acquire Wound Care Technologies, Inc., a medical technology company that develops and markets external tissue expansion deviceslease obligations for the wound care market. The purchase price allocation resultednine months ended September 30, 2022 and 2021 were $59 million and $69 million, respectively.
6.and $49 million, respectively.
(in millions) | Americas | EMEA | APAC | Hillrom | Total | ||||||||||||
Balance as of December 31, 2021 | $ | 2,517 | $ | 309 | $ | 224 | $ | 6,786 | $ | 9,836 | |||||||
Acquisition accounting adjustments | — | — | — | 25 | 25 | ||||||||||||
Impairments | — | — | — | (2,785) | (2,785) | ||||||||||||
Currency translation | (241) | (29) | (22) | (145) | (437) | ||||||||||||
Balance as of September 30, 2022 | $ | 2,276 | $ | 280 | $ | 202 | $ | 3,881 | $ | 6,639 |
(in millions) |
| Renal |
|
| Hospital Products |
|
| Total |
| |||
Balance as of December 31, 2016 |
| $ | 397 |
|
| $ | 2,198 |
|
| $ | 2,595 |
|
Additions |
|
| 5 |
|
|
| 312 |
|
|
| 317 |
|
Currency translation adjustments |
|
| 31 |
|
|
| 174 |
|
|
| 205 |
|
Balance as of September 30, 2017 |
| $ | 433 |
|
| $ | 2,684 |
|
| $ | 3,117 |
|
Indefinite-lived intangible assets | ||||||||||||||||||||
(in millions) | Customer relationships | Developed technology, including patents | Other amortized intangible assets | Trade names | In process Research and Development | Total | ||||||||||||||
September 30, 2022 | ||||||||||||||||||||
Gross other intangible assets | $ | 3,447 | $ | 3,752 | $ | 310 | $ | 1,578 | $ | 213 | $ | 9,300 | ||||||||
Accumulated amortization | (410) | (1,743) | (220) | — | — | (2,373) | ||||||||||||||
Other intangible assets, net | $ | 3,037 | $ | 2,009 | $ | 90 | $ | 1,578 | $ | 213 | $ | 6,927 | ||||||||
December 31, 2021 | ||||||||||||||||||||
Gross other intangible assets | $ | 3,437 | $ | 3,801 | $ | 344 | $ | 1,910 | $ | 230 | $ | 9,722 | ||||||||
Accumulated amortization | (162) | (1,556) | (212) | — | — | (1,930) | ||||||||||||||
Other intangible assets, net | $ | 3,275 | $ | 2,245 | $ | 132 | $ | 1,910 | $ | 230 | $ | 7,792 |
Other intangible assets, net
other comprehensive income (loss) (AOCI) by component for the nine months ended September 30, 2022 and 2021.
(in millions) | CTA | Pension and OPEB plans | Hedging activities | Available-for-sale Debt securities | Total | ||||||||||||
Gains (losses) | |||||||||||||||||
Balance as of December 31, 2021 | $ | (2,907) | $ | (347) | $ | (126) | $ | — | $ | (3,380) | |||||||
Other comprehensive income (loss) before reclassifications | (816) | 29 | 33 | 2 | (752) | ||||||||||||
Amounts reclassified from AOCI (a) | 65 | 19 | (6) | — | 78 | ||||||||||||
Net other comprehensive income (loss) | (751) | 48 | 27 | 2 | (674) | ||||||||||||
Balance as of September 30, 2022 | $ | (3,658) | $ | (299) | $ | (99) | $ | 2 | $ | (4,054) |
(in millions) | CTA | Pension and OPEB plans | Hedging activities | Total | ||||||||||
Gains (losses) | ||||||||||||||
Balance as of December 31, 2020 | $ | (2,587) | $ | (574) | $ | (153) | $ | (3,314) | ||||||
Other comprehensive income (loss) before reclassifications | (257) | 13 | 5 | (239) | ||||||||||
Amounts reclassified from AOCI (a) | — | 50 | 21 | 71 | ||||||||||
Net other comprehensive income (loss) | (257) | 63 | 26 | (168) | ||||||||||
Balance as of September 30, 2021 | $ | (2,844) | $ | (511) | $ | (127) | $ | (3,482) |
(in millions) |
| Developed technology, including patents |
|
| Other amortized intangible assets |
|
| Indefinite-lived intangible assets |
|
| Total |
| ||||
September 30, 2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross other intangible assets |
| $ | 1,979 |
|
| $ | 432 |
|
| $ | 152 |
|
| $ | 2,563 |
|
Accumulated amortization |
|
| (977 | ) |
|
| (215 | ) |
|
| — |
|
|
| (1,192 | ) |
Other intangible assets, net |
| $ | 1,002 |
|
| $ | 217 |
|
| $ | 152 |
|
| $ | 1,371 |
|
December 31, 2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross other intangible assets |
| $ | 1,690 |
|
| $ | 384 |
|
| $ | 57 |
|
| $ | 2,131 |
|
Accumulated amortization |
|
| (855 | ) |
|
| (165 | ) |
|
| — |
|
|
| (1,020 | ) |
Other intangible assets, net |
| $ | 835 |
|
| $ | 219 |
|
| $ | 57 |
|
| $ | 1,111 |
|
Intangible asset amortization expense was $38 millionamounts reclassified from AOCI to net income during the three and $42 million in the threenine months ended September 30, 20172022 and 2016, respectively,2021.
Amounts reclassified from AOCI (a) | |||||||||||
(in millions) | Three months ended September 30, 2022 | Nine months ended September 30, 2022 | Location of impact in income statement | ||||||||
CTA | |||||||||||
Reclassification of cumulative translation loss to earnings | $ | (65) | $ | (65) | Other (income) expense, net | ||||||
Less: Tax effect | — | — | Income tax expense | ||||||||
$ | (65) | $ | (65) | Net of tax | |||||||
Pension and OPEB items | |||||||||||
Amortization of net losses and prior service costs or credits | $ | (8) | $ | (25) | Other (income) expense, net | ||||||
Less: Tax effect | 2 | 6 | Income tax expense | ||||||||
$ | (6) | $ | (19) | Net of tax | |||||||
Gains (losses) on hedging activities | |||||||||||
Foreign exchange contracts | $ | 6 | $ | 11 | Cost of sales | ||||||
Interest rate contracts | (1) | (4) | Interest expense, net | ||||||||
5 | 7 | Total before tax | |||||||||
Less: Tax effect | (1) | (1) | Income tax expense | ||||||||
$ | 4 | $ | 6 | Net of tax | |||||||
Total reclassifications for the period | $ | (67) | $ | (78) | Total net of tax |
Amounts reclassified from AOCI (a) | |||||||||||
(in millions) | Three months ended September 30, 2021 | Nine months ended September 30, 2021 | Location of impact in income statement | ||||||||
Amortization of pension and OPEB items | |||||||||||
Amortization of net losses and prior service costs or credits | $ | (21) | $ | (62) | Other (income) expense, net | ||||||
Less: Tax effect | 4 | 12 | Income tax expense | ||||||||
$ | (17) | $ | (50) | Net of tax | |||||||
Gains on hedging activities | |||||||||||
Foreign exchange contracts | $ | (5) | $ | (23) | Cost of sales | ||||||
Interest rate contracts | (1) | (4) | Interest expense, net | ||||||||
(6) | (27) | Total before tax | |||||||||
Less: Tax effect | 1 | 6 | Income tax expense | ||||||||
$ | (5) | $ | (21) | Net of tax | |||||||
Total reclassifications for the period | $ | (22) | $ | (71) | Total net of tax |
(in millions) | September 30, 2022 | December 31, 2021 | ||||||
Contract manufacturing services | $ | 65 | $ | 50 | ||||
Software sales | 44 | 45 | ||||||
Bundled equipment and consumable medical products contracts | 120 | 100 | ||||||
Contract assets | $ | 229 | $ | 195 |
(in millions) | September 30, 2022 | December 31, 2021 | ||||||
Prepaid expenses and other current assets | $ | 106 | $ | 84 | ||||
Other non-current assets | 123 | 111 | ||||||
Contract assets | $ | 229 | $ | 195 | ||||
Accrued expenses and other current liabilities | $ | 158 | $ | 162 | ||||
Other non-current liabilities | 82 | 84 | ||||||
Contract liabilities | $ | 240 | $ | 246 |
Nine months ended September 30, 2022 | |||||
Balance at beginning of period | $ | 246 | |||
New revenue deferrals | 460 | ||||
Revenue recognized upon satisfaction of performance obligations | (463) | ||||
Currency translation | (3) | ||||
Balance at end of period | $ | 240 |
In
Three Months Ended September 30, | ||||||||||||||||||||
2022 | 2021 | |||||||||||||||||||
(in millions) | U.S. | International | Total | U.S. | International | Total | ||||||||||||||
Renal Care 1 | $ | 240 | $ | 702 | $ | 942 | $ | 222 | $ | 759 | $ | 981 | ||||||||
Medication Delivery 2 | 475 | 250 | 725 | 490 | 257 | 747 | ||||||||||||||
Pharmaceuticals 3 | 173 | 352 | 525 | 188 | 401 | 589 | ||||||||||||||
Clinical Nutrition 4 | 92 | 139 | 231 | 88 | 156 | 244 | ||||||||||||||
Advanced Surgery 5 | 141 | 106 | 247 | 135 | 114 | 249 | ||||||||||||||
Acute Therapies 6 | 53 | 105 | 158 | 69 | 116 | 185 | ||||||||||||||
BioPharma Solutions 7 | 99 | 73 | 172 | 109 | 97 | 206 | ||||||||||||||
Patient Support Systems 8 | 301 | 79 | 380 | — | — | — | ||||||||||||||
Front Line Care 9 | 209 | 70 | 279 | — | — | — | ||||||||||||||
Surgical Solutions 10 | 38 | 38 | 76 | — | — | — | ||||||||||||||
Other 11 | 28 | 10 | 38 | 18 | 7 | 25 | ||||||||||||||
Total Baxter | $ | 1,849 | $ | 1,924 | $ | 3,773 | $ | 1,319 | $ | 1,907 | $ | 3,226 |
Nine Months Ended September 30, | ||||||||||||||||||||
2022 | 2021 | |||||||||||||||||||
(in millions) | U.S. | International | Total | U.S. | International | Total | ||||||||||||||
Renal Care 1 | $ | 690 | $ | 2,077 | $ | 2,767 | $ | 655 | $ | 2,212 | $ | 2,867 | ||||||||
Medication Delivery 2 | 1,406 | 735 | 2,141 | 1,345 | 751 | 2,096 | ||||||||||||||
Pharmaceuticals 3 | 494 | 1,080 | 1,574 | 550 | 1,137 | 1,687 | ||||||||||||||
Clinical Nutrition 4 | 266 | 422 | 688 | 255 | 460 | 715 | ||||||||||||||
Advanced Surgery 5 | 428 | 310 | 738 | 405 | 317 | 722 | ||||||||||||||
Acute Therapies 6 | 179 | 340 | 519 | 211 | 369 | 580 | ||||||||||||||
BioPharma Solutions 7 | 226 | 265 | 491 | 218 | 306 | 524 | ||||||||||||||
Patient Support Systems 8 | 880 | 247 | 1,127 | — | — | — | ||||||||||||||
Front Line Care 9 | 618 | 237 | 855 | — | — | — | ||||||||||||||
Surgical Solutions 10 | 111 | 112 | 223 | — | — | — | ||||||||||||||
Other 11 | 72 | 31 | 103 | 58 | 21 | 79 | ||||||||||||||
Total Baxter | $ | 5,370 | $ | 5,856 | $ | 11,226 | $ | 3,697 | $ | 5,573 | $ | 9,270 |
In the second quarterdiseases, including respiratory therapy, cardiology, vision screening and physical assessment.
7. INFUSION PUMP AND BUSINESS OPTIMIZATION CHARGES
Infusion Pump Charges
The company has undertaken a field corrective action with respect to the SIGMA SPECTRUM infusion pump. Remediation primarily includes inspectionservice offerings.
(in millions) | Three months ended September 30, 2022 | Nine months ended September 30, 2022 | ||||||
Sales-type lease revenue | $ | 3 | $ | 11 | ||||
Operating lease revenue | 145 | 380 | ||||||
Variable lease revenue | 9 | 41 | ||||||
Total lease revenue | $ | 157 | $ | 432 |
(in millions) | Three months ended September 30, 2021 | Nine months ended September 30, 2021 | ||||||
Sales-type lease revenue | $ | 3 | $ | 19 | ||||
Operating lease revenue | 21 | 90 | ||||||
Variable lease revenue | 27 | 59 | ||||||
Total lease revenue | $ | 51 | $ | 168 |
Business Optimization Charges
Beginning2022, of which $18 million originated in the second half of 2015, the company initiated2018 and prior, $19 million in 2019, $26 million in 2020, $24 million in 2021, and $8 million in 2022.
to implement business optimization programs in future periods.
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||
(in millions) | 2022 | 2021 | 2022 | 2021 | |||||||||||||
Restructuring charges | $ | 57 | $ | 32 | $ | 150 | $ | 67 | |||||||||
Costs to implement business optimization programs | 16 | 4 | 46 | 14 | |||||||||||||
Total business optimization charges | $ | 73 | $ | 36 | $ | 196 | $ | 81 |
|
| Three months ended |
|
| Nine months ended |
| ||||||||||
|
| September 30, |
|
| September 30, |
| ||||||||||
(in millions) |
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| ||||
Restructuring charges, net |
| $ | 31 |
|
| $ | 130 |
|
| $ | 50 |
|
| $ | 237 |
|
Costs to implement business optimization programs |
|
| 21 |
|
|
| 25 |
|
|
| 58 |
|
|
| 44 |
|
Gambro integration costs |
|
| — |
|
|
| 5 |
|
|
| — |
|
|
| 19 |
|
Accelerated depreciation |
|
| — |
|
|
| 11 |
|
|
| 8 |
|
|
| 25 |
|
Total business optimization charges |
| $ | 52 |
|
| $ | 171 |
|
| $ | 116 |
|
| $ | 325 |
|
For segment reporting purposes, business optimization charges are unallocated expenses.
During the three and nine months ended September 30, 2017 and 2016, the company recorded the following restructuring charges.
|
| Three months ended |
| |||||||||||||
|
| September 30, 2017 |
| |||||||||||||
(in millions) |
| COGS |
|
| SGA |
|
| R&D |
|
| Total |
| ||||
Employee termination costs |
| $ | 7 |
|
| $ | 24 |
|
| $ | — |
|
| $ | 31 |
|
Total restructuring charges |
| $ | 7 |
|
| $ | 24 |
|
| $ | — |
|
| $ | 31 |
|
|
| Three months ended |
| |||||||||||||
|
| September 30, 2016 |
| |||||||||||||
(in millions) |
| COGS |
|
| SGA |
|
| R&D |
|
| Total |
| ||||
Employee termination costs |
| $ | 21 |
|
| $ | 84 |
|
| $ | 1 |
|
| $ | 106 |
|
Asset impairments |
|
| 6 |
|
| — |
|
|
| 27 |
|
|
| 33 |
| |
Reserve adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee termination costs |
| — |
|
|
| (3 | ) |
|
| (2 | ) |
|
| (5 | ) | |
Contract termination costs |
|
| (3 | ) |
| — |
|
|
| (1 | ) |
|
| (4 | ) | |
Total restructuring charges |
| $ | 24 |
|
| $ | 81 |
|
| $ | 25 |
|
| $ | 130 |
|
|
| Nine months ended |
| |||||||||||||
|
| September 30, 2017 |
| |||||||||||||
(in millions) |
| COGS |
|
| SGA |
|
| R&D |
|
| Total |
| ||||
Employee termination costs |
| $ | 21 |
|
| $ | 33 |
|
| $ | — |
|
| $ | 54 |
|
Contract termination costs |
|
| — |
|
|
| 5 |
|
|
| — |
|
|
| 5 |
|
Asset impairments |
|
| 5 |
|
|
| — |
|
|
| — |
|
|
| 5 |
|
Reserve adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee termination costs |
|
| (7 | ) |
|
| (5 | ) |
|
| (2 | ) |
|
| (14 | ) |
Total restructuring charges |
| $ | 19 |
|
| $ | 33 |
|
| $ | (2 | ) |
| $ | 50 |
|
|
| Nine months ended |
| |||||||||||||
|
| September 30, 2016 |
| |||||||||||||
(in millions) |
| COGS |
|
| SGA |
|
| R&D |
|
| Total |
| ||||
Employee termination costs |
| $ | 52 |
|
| $ | 94 |
|
| $ | 13 |
|
| $ | 159 |
|
Contract termination costs |
|
| 9 |
|
|
| 2 |
|
|
| 13 |
|
|
| 24 |
|
Asset impairments |
|
| 28 |
|
|
| — |
|
|
| 40 |
|
|
| 68 |
|
Reserve adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee termination costs |
|
| (1 | ) |
|
| (11 | ) |
|
| (2 | ) |
|
| (14 | ) |
Total restructuring charges |
| $ | 88 |
|
| $ | 85 |
|
| $ | 64 |
|
| $ | 237 |
|
Costs to implement business optimization programs for the three and nine months ended September 30, 2017, were $21 million2022 and $58 million2021, respectively, and consisted primarily of external consulting and transition costs, as well asincluding employee salarycompensation and related costs. These costs were primarily included within cost of sales and marketingSG&A expense.
Costsnine months ended September 30, 2022 and 2021, we recorded the following restructuring charges.
Three months ended September 30, 2022 | ||||||||||||||
(in millions) | COGS | SG&A | R&D | Total | ||||||||||
Employee termination costs | $ | 13 | $ | 36 | $ | 4 | $ | 53 | ||||||
Contract termination and other costs | — | 2 | — | 2 | ||||||||||
Asset impairments | 1 | 1 | — | 2 | ||||||||||
Total restructuring charges | $ | 14 | $ | 39 | $ | 4 | $ | 57 |
Three months ended September 30, 2021 | ||||||||||||||
(in millions) | COGS | SG&A | Total | |||||||||||
Employee termination costs | $ | 11 | $ | 8 | $ | 19 | ||||||||
Contract termination and other costs | — | 2 | 2 | |||||||||||
Asset impairments | 11 | — | 11 | |||||||||||
Total restructuring charges | $ | 22 | $ | 10 | $ | 32 |
Nine months ended September 30, 2022 | ||||||||||||||
(in millions) | COGS | SG&A | R&D | Total | ||||||||||
Employee termination costs | $ | 19 | $ | 99 | $ | 4 | $ | 122 | ||||||
Contract termination and other costs | — | 19 | — | 19 | ||||||||||
Asset impairments | 1 | 8 | — | 9 | ||||||||||
Total restructuring charges | $ | 20 | $ | 126 | $ | 4 | $ | 150 |
Nine months ended September 30, 2021 | ||||||||||||||
(in millions) | COGS | SG&A | Total | |||||||||||
Employee termination costs | $ | 35 | $ | 14 | $ | 49 | ||||||||
Contract termination and other costs | — | 2 | 2 | |||||||||||
Asset impairments | 16 | — | 16 | |||||||||||
Total restructuring charges | $ | 51 | $ | 16 | $ | 67 |
(in millions) | |||||
Liability balance as of December 31, 2021 | $ | 109 | |||
Charges | 147 | ||||
Payments | (108) | ||||
Reserve adjustments | (6) | ||||
Currency translation | (14) | ||||
Liability balance as of September 30, 2022 | $ | 128 |
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||
(in millions) | 2022 | 2021 | 2022 | 2021 | |||||||||||||
Pension benefits | |||||||||||||||||
Service cost | $ | 19 | $ | 22 | $ | 59 | $ | 66 | |||||||||
Interest cost | 25 | 18 | 73 | 54 | |||||||||||||
Expected return on plan assets | (39) | (36) | (118) | (108) | |||||||||||||
Amortization of net losses and prior service costs | 11 | 23 | 34 | 69 | |||||||||||||
Net periodic pension cost | $ | 16 | $ | 27 | $ | 48 | $ | 81 | |||||||||
OPEB | |||||||||||||||||
Interest cost | $ | 1 | $ | 1 | $ | 3 | $ | 3 | |||||||||
Amortization of net loss and prior service credit | (3) | (2) | (9) | (7) | |||||||||||||
Net periodic OPEB cost (income) | $ | (2) | $ | (1) | $ | (6) | $ | (4) |
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||
(in millions) | 2022 | 2021 | 2022 | 2021 | |||||||||||||
Basic shares | 504 | 500 | 503 | 503 | |||||||||||||
Effect of dilutive securities | — | 6 | — | 6 | |||||||||||||
Diluted shares | 504 | 506 | 503 | 509 |
Costs related to the integrationour net losses for those periods. The effect of Gambro AB (Gambro) were included within marketing and administrative expensedilutive securities for all referenced periods.
For the three and nine months ended September 30, 2017, the company recognized accelerated depreciation, primarily associated with facilities2021 includes unexercised stock options, unvested RSUs and contingently issuable shares related to be closed, of zero and $8granted PSUs.
Forshares issuable under equity awards for the three and nine months ended September 30, 2016, the company recognized $112022, respectively, and 7 million and $25 million, respectively, of accelerated depreciation, primarily associated with facilities to be closed. The costs were recorded in cost of sales for all referenced periods.
The following table summarizes activity in the reserves related to the company’s business optimization initiatives.
(in millions) |
|
|
|
|
Reserves as of December 31, 2016 |
| $ | 164 |
|
Charges |
|
| 59 |
|
Reserve adjustments |
|
| (14 | ) |
Utilization |
|
| (114 | ) |
CTA |
|
| 24 |
|
Reserves as of September 30, 2017 |
| $ | 119 |
|
Reserve adjustments primarily relate to employee termination cost reserves established in prior periods.
Approximately 80% of the company’s restructuring reserves as of September 30, 2017 relate to employee termination costs, with the remaining reserves attributable to contract termination costs. The reserves are expected to be substantially utilized by the end of 2018.
8. DEBT, FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS
Debt Issuance
In May 2017, Baxter issued €600 million of senior notes at a fixed coupon rate of 1.30% due in May 2025. The company has designated this debt as a non-derivative net investment hedge of its European operations for accounting purposes.
Debt Redemptions
In September 2016, Baxter redeemed an aggregate of approximately $1 billion in principal amount of its 1.850% Senior Notes due 2017, 1.850% Senior Notes due 2018, 5.375% Senior Notes due 2018, 4.500% Senior Notes due 2019, 4.250% Senior Notes due 2020, and 3.200% Senior Notes due 2023. Baxter paid approximately $1 billion, including accrued and unpaid interest and tender premium, to redeem such notes. As a result of the debt redemptions, the company recognized a loss on extinguishment of debt in the third quarter of 2016 of approximately $52 million, which is included in other (income) expense, net.
Debt-for-equity exchanges
On January 27, 2016, Baxter exchanged Baxalta Retained Sharesshares issuable under equity awards for the extinguishment of $1.45 billion aggregate principal amount outstanding under its $1.8 billion U.S. dollar-denominated revolving credit facility. This exchange extinguished the indebtedness under the facility, which was terminated in connection with such debt-for-equity exchange. There were no material prepayment penalties or breakage costs associated with the termination of the facility. Baxter recognized a net realized gain of $1.25 billion related to the Baxalta Retained Shares exchanged, which was included in other (income) expense, net for the periodthree and nine months ended September 30, 2016.
On March 16, 2016, the company exchanged Baxalta Retained Shares for the extinguishment of approximately $2.2 billion in aggregate principal amount of its 0.950% Notes due May 2016, 5.900% Notes due August 2016, 1.850% Notes due January 2017, 5.375% Notes due May 2018, 1.850% Notes due June 2018, 4.500% Notes due August 2019, and 4.250% Notes due February 2020 purchased by certain third party purchasers in the previously announced debt tender offers. As a result, the company recognized a net loss2021, respectively, because their inclusion would have had an anti-dilutive effect on extinguishment of debt totaling $101 million and a net realized gain of $2.0 billion on the Baxalta Retained Shares exchanged, which are included in other (income) expense, net for the period ended September 30, 2016.
Securitization arrangement
The following is a summary of the activity relating to the company’s securitization arrangement in Japan.
|
| Three months ended September 30, |
|
| Nine months ended September 30, |
| ||||||||||
(in millions) |
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| ||||
Sold receivables at beginning of period |
| $ | 63 |
|
| $ | 62 |
|
| $ | 68 |
|
| $ | 81 |
|
Proceeds from sales of receivables |
|
| 69 |
|
|
| 75 |
|
|
| 198 |
|
|
| 272 |
|
Cash collections (remitted to the owners of the receivables) |
|
| (66 | ) |
|
| (71 | ) |
|
| (203 | ) |
|
| (299 | ) |
Effect of currency exchange rate changes |
|
| — |
|
|
| 2 |
|
|
| 3 |
|
|
| 14 |
|
Sold receivables at end of period |
| $ | 66 |
|
| $ | 68 |
|
| $ | 66 |
|
| $ | 68 |
|
The impacts on the condensed consolidated statements of income relating to the sale of receivables were immaterial for each period.diluted EPS. Refer to the 2016 Annual ReportNote 7 for furtheradditional information regarding the company’s securitization agreements.
Concentrations of credit risk
The company invests excess cash in certificates of deposit or money market fundsitems impacting basic and diversifies the concentration of cash among different financial institutions. With respect to financial instruments, where appropriate, the company has diversified its selection of counterparties, and has arranged collateralization and master-netting agreements to minimize the risk of loss.
The company continues to do business with foreign governments in certain countries including Greece, Spain, Portugal and Italy that have experienced a deterioration in credit and economic conditions. As of September 30, 2017, the company’s net accounts receivable from the public sector in Greece, Spain, Portugal and Italy totaled $151 million.
Global economic conditions and liquidity issues in certain countries have resulted, and may continue to result, in delays in the collection of receivables and credit losses. Governmental actions and customer-specific factors may also require the company to re-evaluate the collectability of its receivables and the company could potentially incur additional credit losses. These conditions may also impact the stability of the Euro.
Derivatives and hedging activities
The company operates
The company is
The company is
appropriate at that time. To manage this mix in a cost-efficient manner, the companywe periodically entersenter into interest rate swaps in which the company agreeswe agree to exchange, at specified intervals, the difference between fixed and floating interest amounts calculated by reference to an agreed-upon notional amount.
The company does
The companyHed
We periodically use treasury rate locks to hedge the risk to earnings associated with movements in interest rates relating to anticipated issuances of debt.
Fair Value Hedges
The company usesHedges
The total notional amount of
2021.
Hed
gesHowever, if it is probable that the hedged forecasted transactions will not occur, any gains or losses would be immediately reclassified from AOCI to earnings.
2022 or 2021.
The company uses
Instruments and Undesignated Derivative Instruments
Gain (loss) recognized in OCI | Location of gain (loss) in income statement | Gain (loss) reclassified from AOCI into income | ||||||||||||||||||||||||
(in millions) | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||
Cash flow hedges | ||||||||||||||||||||||||||
Interest rate contracts | $ | — | $ | — | Interest expense, net | $ | (1) | $ | (1) | |||||||||||||||||
Foreign exchange contracts | 26 | 6 | Cost of sales | 6 | (5) | |||||||||||||||||||||
Net investment hedges | 126 | 60 | Other (income) expense, net | — | — | |||||||||||||||||||||
Total | $ | 152 | $ | 66 | $ | 5 | $ | (6) |
|
| Gain (loss) recognized in OCI |
|
| Location of gain (loss) |
| Gain (loss) reclassified from AOCI into income |
| ||||||||||
(in millions) |
| 2017 |
|
| 2016 |
|
| in income statement |
| 2017 |
|
| 2016 |
| ||||
Cash flow hedges |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts |
| $ | — |
|
| $ | — |
|
| Other (income) expense, net |
| $ | — |
|
| $ | 5 |
|
Foreign exchange contracts |
|
| (11 | ) |
|
| 3 |
|
| Cost of sales |
|
| (3 | ) |
|
| (2 | ) |
Net investment hedge |
|
| (39 | ) |
|
| — |
|
| Other (income) expense, net |
|
| — |
|
|
| — |
|
Total |
| $ | (50 | ) |
| $ | 3 |
|
|
|
| $ | (3 | ) |
| $ | 3 |
|
Location of gain (loss) in income statement | Gain (loss) recognized in income | |||||||||||||
(in millions) | 2022 | 2021 | ||||||||||||
Undesignated derivative instruments | ||||||||||||||
Foreign exchange contracts | Other (income) expense, net | $ | (11) | $ | (7) |
|
|
|
| Gain (loss) recognized in income |
| |||||
(in millions) |
| Location of gain (loss) in income statement |
| 2017 |
|
| 2016 |
| ||
Fair value hedges |
|
|
|
|
|
|
|
|
|
|
Interest rate contracts |
| Net interest expense |
| $ | (1 | ) |
| $ | (7 | ) |
Undesignated derivative instruments |
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts |
| Other (income) expense, net |
| $ | (3 | ) |
| $ | 9 |
|
The following tables summarize the income statement locations and gains and losses on our hedging instruments and the company’s derivative instrumentsclassification of those gains and losses within our condensed consolidated financial statements for the nine months ended September 30, 20172022 and 2016.
|
| Gain (loss) recognized in OCI |
|
| Location of gain (loss) |
| Gain (loss) reclassified from AOCI into income |
| Gain (loss) recognized in OCI | Location of gain (loss) in income statement | Gain (loss) reclassified from AOCI into income | ||||||||||||||||||||||||
(in millions) |
| 2017 |
|
| 2016 |
|
| in income statement |
| 2017 |
|
| 2016 |
| (in millions) | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||
Cash flow hedges |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Cash flow hedges | ||||||||||||||||
Interest rate contracts |
| $ | (3 | ) |
| $ | — |
|
| Other (income) expense, net |
| $ | — |
|
| $ | 9 |
| Interest rate contracts | $ | — | $ | — | Interest expense, net | $ | (4) | $ | (4) | |||||||
Foreign exchange contracts |
|
| (24 | ) |
|
| (8 | ) |
| Cost of sales |
|
| (4 | ) |
|
| (3 | ) | Foreign exchange contracts | 42 | 7 | Cost of sales | 11 | (23) | |||||||||||
Net investment hedge |
|
| (70 | ) |
|
| — |
|
| Other (income) expense, net |
|
| — |
|
|
| — |
| |||||||||||||||||
Net investment hedges | Net investment hedges | 311 | 143 | Other (income) expense, net | — | — | |||||||||||||||||||||||||||||
Total |
| $ | (97 | ) |
| $ | (8 | ) |
|
|
| $ | (4 | ) |
| $ | 6 |
| Total | $ | 353 | $ | 150 | $ | 7 | $ | (27) |
|
|
|
| Gain (loss) recognized in income |
| Location of gain (loss) in income statement | Gain (loss) recognized in income | ||||||||||||||
(in millions) |
| Location of gain (loss) in income statement |
| 2017 |
|
| 2016 |
| (in millions) | 2022 | 2021 | ||||||||||
Fair value hedges |
|
|
|
|
|
|
|
|
|
| |||||||||||
Interest rate contracts |
| Net interest expense |
| $ | (1 | ) |
| $ | 19 |
| |||||||||||
Undesignated derivative instruments |
|
|
|
|
|
|
|
|
|
| Undesignated derivative instruments | ||||||||||
Foreign exchange contracts |
| Other (income) expense, net |
| $ | (7 | ) |
| $ | 4 |
| Foreign exchange contracts | Other (income) expense, net | $ | (34) | $ | (26) |
For the company’s fair value hedges, an equal and offsetting gain of $1 million was recognized in net interest expense in the third quarter and first nine months of 2017, respectively, and an equal and offsetting gain of $7 million and loss of $19 million was recognized in net interest expense in the third quarter and first nine months of 2016, respectively, as adjustments to the underlying hedged item, fixed-rate debt. Ineffectiveness related to the company’s cash flow and fair value hedges for all periods presented were not material.
Fair Values of
Assets and Liabilities
Derivatives in asset positions | Derivatives in liability positions | ||||||||||||||||
(in millions) | Balance sheet location | Fair value | Balance sheet location | Fair value | |||||||||||||
Derivative instruments designated as hedges | |||||||||||||||||
Foreign exchange contracts | Prepaid expenses and other current assets | $ | 31 | Accrued expenses and other current liabilities | $ | — | |||||||||||
Total derivative instruments designated as hedges | 31 | — | |||||||||||||||
Undesignated derivative instruments | |||||||||||||||||
Foreign exchange contracts | Prepaid expenses and other current assets | 4 | Accrued expenses and other current liabilities | 9 | |||||||||||||
Total derivative instruments | $ | 35 | $ | 9 |
|
| Derivatives in asset positions |
|
| Derivatives in liability positions |
| ||||||
(in millions) |
| Balance sheet location |
| Fair value |
|
| Balance sheet location |
| Fair value |
| ||
Derivative instruments designated as hedges |
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts |
| Other long-term assets |
| $ | 6 |
|
| Other long- term liabilities |
| $ | — |
|
Foreign exchange contracts |
| Prepaid expenses and other |
|
| 11 |
|
| Accounts payable and accrued liabilities |
|
| 4 |
|
Foreign exchange contracts |
| Other long-term assets |
|
| 2 |
|
| Other long- term liabilities |
|
| — |
|
Total derivative instruments designated as hedges |
|
|
| $ | 19 |
|
|
|
| $ | 4 |
|
Undesignated derivative instruments |
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts |
| Prepaid expenses and other |
| $ | — |
|
| Accounts payable and accrued liabilities |
| $ | 1 |
|
Total derivative instruments |
|
|
| $ | 19 |
|
|
|
| $ | 5 |
|
The following table summarizes the classification and fair values of derivative instruments reported in the condensed consolidated balance sheet as of December 31, 2016.
Derivatives in asset positions | Derivatives in liability positions | ||||||||||||||||
(in millions) | Balance sheet location | Fair value | Balance sheet location | Fair value | |||||||||||||
Derivative instruments designated as hedges | |||||||||||||||||
Foreign exchange contracts | Prepaid expenses and other current assets | $ | 6 | Accrued expenses and other current liabilities | $ | 3 | |||||||||||
Total derivative instruments designated as hedges | 6 | 3 | |||||||||||||||
Undesignated derivative instruments | |||||||||||||||||
Foreign exchange contracts | Prepaid expenses and other current assets | 2 | Accrued expenses and other current liabilities | 2 | |||||||||||||
Total derivative instruments | $ | 8 | $ | 5 |
|
| Derivatives in asset positions |
|
| Derivatives in liability positions |
| ||||||
(in millions) |
| Balance sheet location |
| Fair value |
|
| Balance sheet location |
| Fair value |
| ||
Derivative instruments designated as hedges |
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts |
| Other long-term assets |
| $ | 7 |
|
| Other long- term liabilities |
| $ | — |
|
Foreign exchange contracts |
| Prepaid expenses and other |
|
| 22 |
|
| Accounts payable and accrued liabilities |
|
| 1 |
|
Total derivative instruments designated as hedges |
|
|
| $ | 29 |
|
|
|
| $ | 1 |
|
Undesignated derivative instruments |
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts |
| Prepaid expenses and other |
| $ | 1 |
|
| Accounts payable and accrued liabilities |
| $ | 2 |
|
Total derivative instruments |
|
|
| $ | 30 |
|
|
|
| $ | 3 |
|
While the company’ssome of our derivatives are all subject to master netting arrangements, the company presents itswe present our assets and liabilities related to derivative instruments on a gross basis within the condensed consolidated balance sheets. Additionally, the company iswe are not required to post collateral for any of itsour outstanding derivatives.
September 30, 2022 | December 31, 2021 | ||||||||||||||||
(in millions) | Asset | Liability | Asset | Liability | |||||||||||||
Gross amounts recognized in the condensed consolidated balance sheets | $ | 35 | $ | 9 | $ | 8 | $ | 5 | |||||||||
Gross amount subject to offset in master netting arrangements not offset in the condensed consolidated balance sheet | (7) | (7) | (2) | (2) | |||||||||||||
Total | $ | 28 | $ | 2 | $ | 6 | $ | 3 |
|
| September 30, 2017 |
|
| December 31, 2016 |
| ||||||||||
(in millions) |
| Asset |
|
| Liability |
|
| Asset |
|
| Liability |
| ||||
Gross amounts recognized in the consolidated balance sheet |
| $ | 19 |
|
| $ | 5 |
|
| $ | 30 |
|
| $ | 3 |
|
Gross amount subject to offset in master netting arrangements not offset in the consolidated balance sheet |
|
| (5 | ) |
|
| (5 | ) |
|
| (3 | ) |
|
| (3 | ) |
Total |
| $ | 14 |
|
| $ | — |
|
| $ | 27 |
|
| $ | — |
|
Fair
hedges:
Carrying amount of hedged item | Cumulative amount of fair value hedging adjustment included in the carrying amount of the hedged item (a) | ||||||||||||||||
(in millions) | Balance as of September 30, 2022 | Balance as of December 31, 2021 | Balance as of September 30, 2022 | Balance as of December 31, 2021 | |||||||||||||
Long-term debt | $ | 101 | $ | 101 | $ | 4 | $ | 4 |
Basis of fair value measurement | ||||||||||||||
(in millions) | Balance as of September 30, 2022 | Quoted prices in active markets for identical assets (Level 1) | Significant other observable inputs (Level 2) | Significant unobservable inputs (Level 3) | ||||||||||
Assets | ||||||||||||||
Foreign exchange contracts | $ | 35 | $ | — | $ | 35 | $ | — | ||||||
Available-for-sale debt securities | 44 | — | — | 44 | ||||||||||
Marketable equity securities | 25 | 25 | — | — | ||||||||||
Total | $ | 104 | $ | 25 | $ | 35 | $ | 44 | ||||||
Liabilities | ||||||||||||||
Foreign exchange contracts | $ | 9 | $ | — | $ | 9 | $ | — | ||||||
Contingent payments related to acquisitions | 90 | — | — | 90 | ||||||||||
Total | $ | 99 | $ | — | $ | 9 | $ | 90 |
|
|
|
|
|
| Basis of fair value measurement |
| |||||||||
(in millions) |
| Balance as of September 30, 2017 |
|
| Quoted prices in active markets for identical assets (Level 1) |
|
| Significant other observable inputs (Level 2) |
|
| Significant unobservable inputs (Level 3) |
| ||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency hedges |
| $ | 13 |
|
| $ | — |
|
| $ | 13 |
|
| $ | — |
|
Interest rate hedges |
|
| 6 |
|
|
| — |
|
|
| 6 |
|
|
| — |
|
Available-for-sale securities |
|
| 11 |
|
|
| 11 |
|
|
| — |
|
|
| — |
|
Total assets |
| $ | 30 |
|
| $ | 11 |
|
| $ | 19 |
|
| $ | — |
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency hedges |
| $ | 5 |
|
| $ | — |
|
| $ | 5 |
|
| $ | — |
|
Contingent payments related to acquisitions |
|
| 10 |
|
|
| — |
|
|
| — |
|
|
| 10 |
|
Total liabilities |
| $ | 15 |
|
| $ | — |
|
| $ | 5 |
|
| $ | 10 |
|
Basis of fair value measurement | ||||||||||||||
(in millions) | Balance as of December 31, 2021 | Quoted prices in active markets for identical assets (Level 1) | Significant other observable inputs (Level 2) | Significant unobservable inputs (Level 3) | ||||||||||
Assets | ||||||||||||||
Foreign exchange contracts | $ | 8 | $ | — | $ | 8 | $ | — | ||||||
Available-for-sale debt securities | 30 | — | — | 30 | ||||||||||
Marketable equity securities | 10 | 10 | — | — | ||||||||||
Total | $ | 48 | $ | 10 | $ | 8 | $ | 30 | ||||||
Liabilities | ||||||||||||||
Foreign exchange contracts | $ | 5 | $ | — | $ | 5 | $ | — | ||||||
Contingent payments related to acquisitions | 143 | — | — | 143 | ||||||||||
Total | $ | 148 | $ | — | $ | 5 | $ | 143 |
|
|
|
|
|
| Basis of fair value measurement |
| |||||||||
(in millions) |
| Balance as of December 31, 2016 |
|
| Quoted prices in active markets for identical assets (Level 1) |
|
| Significant other observable inputs (Level 2) |
|
| Significant unobservable inputs (Level 3) |
| ||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency hedges |
| $ | 23 |
|
| $ | — |
|
| $ | 23 |
|
| $ | — |
|
Interest rate hedges |
|
| 7 |
|
|
| — |
|
|
| 7 |
|
|
| — |
|
Available-for-sale securities |
|
| 9 |
|
|
| 9 |
|
|
| — |
|
|
| — |
|
Total assets |
| $ | 39 |
|
| $ | 9 |
|
| $ | 30 |
|
| $ | — |
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency hedges |
| $ | 3 |
|
| $ | — |
|
| $ | 3 |
|
| $ | — |
|
Contingent payments related to acquisitions |
|
| 19 |
|
|
| — |
|
|
| — |
|
|
| 19 |
|
Total liabilities |
| $ | 22 |
|
| $ | — |
|
| $ | 3 |
|
| $ | 19 |
|
As of September 30, 2017,2022 and December 31, 2021, cash and cash equivalents of $3.5$1.6 billion and $3.0 billion, respectively, included money market and other short-term funds of approximately $1 billion,$161 million and as of December 31, 2016, cash and equivalents of $2.8 billion included money market funds of approximately $1 billion. Money market funds would be$816 million, respectively, which are considered Level 2 in the fair value hierarchy.
Three months ended September 30, | ||||||||||||||
2022 | 2021 | |||||||||||||
(in millions) | Contingent payments related to acquisitions | Available-for-sale debt securities | Contingent payments related to acquisitions | |||||||||||
Fair value at beginning of period | $ | 113 | $ | 44 | $ | 34 | ||||||||
Additions | — | — | 28 | |||||||||||
Change in fair value recognized in earnings | (6) | — | (1) | |||||||||||
Payments | (17) | — | — | |||||||||||
Fair value at end of period | $ | 90 | $ | 44 | $ | 61 |
Nine months ended September 30, | ||||||||||||||
2022 | 2021 | |||||||||||||
(in millions) | Contingent payments related to acquisitions | Available-for-sale debt securities | Contingent payments related to acquisitions | |||||||||||
Fair value at beginning of period | $ | 143 | $ | 30 | $ | 30 | ||||||||
Additions | — | 21 | 52 | |||||||||||
Change in fair value recognized in earnings | (34) | — | (6) | |||||||||||
Change in fair value recognized in AOCI | — | 3 | — | |||||||||||
Payments | (19) | — | (16) | |||||||||||
Transfers out of Level 3 | — | (10) | — | |||||||||||
Currency translation | — | — | 1 | |||||||||||
Fair value at end of period | $ | 90 | $ | 44 | $ | 61 |
The following table provides information relating to the company’s investments in available-for-sale equity securities.
(in millions) |
| Amortized cost |
|
| Unrealized gains |
|
| Unrealized losses |
|
| Fair value |
| ||||
September 30, 2017 |
| $ | 9 |
|
| $ | 3 |
|
| $ | 1 |
|
| $ | 11 |
|
December 31, 2016 |
| $ | 13 |
|
| $ | — |
|
| $ | 4 |
|
| $ | 9 |
|
In the first quarter of 2017, the company recorded a $4 million other-than-temporary impairment charge within other (income) expense, net based on the duration of losses related to oneinitial public offering of the company’s investments. In the first nine months of 2016, the company recorded $4.4 billion of net realized gains within other (income) expense, net related to exchanges of available-for-sale equity securities, which represented gains from the Retained Share transactions.
Book Values andinvestee.
Value
|
| Book values |
|
| Approximate fair values |
| ||||||||||
(in millions) |
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| ||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments |
| $ | 42 |
|
| $ | 31 |
|
| $ | 42 |
|
| $ | 31 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current maturities of long-term debt and lease obligations |
| $ | 3 |
|
| $ | 3 |
|
| $ | 3 |
|
| $ | 3 |
|
Long-term debt and lease obligations |
|
| 3,495 |
|
|
| 2,779 |
|
|
| 3,568 |
|
|
| 2,756 |
|
Book values | Fair values(a) | ||||||||||||||||
(in millions) | 2022 | 2021 | 2022 | 2021 | |||||||||||||
Liabilities | |||||||||||||||||
Short-term debt | $ | 275 | $ | 301 | $ | 275 | $ | 301 | |||||||||
Current maturities of long-term debt and finance lease obligations | 4 | 210 | 4 | 212 | |||||||||||||
Long-term debt and finance lease obligations | 16,153 | 17,149 | 14,402 | 17,568 |
The following tables summarize the bases used to measure the approximate
|
|
|
|
|
| Basis of fair value measurement |
| |||||||||
(in millions) |
| Balance as of September 30, 2017 |
|
| Quoted prices in active markets for identical assets (Level 1) |
|
| Significant other observable inputs (Level 2) |
|
| Significant unobservable inputs (Level 3) |
| ||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments |
| $ | 42 |
|
| $ | — |
|
| $ | — |
|
| $ | 42 |
|
Total assets |
| $ | 42 |
|
| $ | — |
|
| $ | — |
|
| $ | 42 |
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current maturities of long-term debt and lease obligations |
| $ | 3 |
|
|
|
|
|
| $ | 3 |
|
|
|
|
|
Long-term debt and lease obligations |
|
| 3,568 |
|
|
|
|
|
|
| 3,568 |
|
|
|
|
|
Total liabilities |
| $ | 3,571 |
|
| $ | — |
|
| $ | 3,571 |
|
| $ | — |
|
|
|
|
|
|
| Basis of fair value measurement |
| |||||||||
(in millions) |
| Balance as of December 31, 2016 |
|
| Quoted prices in active markets for identical assets (Level 1) |
|
| Significant other observable inputs (Level 2) |
|
| Significant unobservable inputs (Level 3) |
| ||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments |
| $ | 31 |
|
| $ | — |
|
| $ | — |
|
| $ | 31 |
|
Total assets |
| $ | 31 |
|
| $ | — |
|
| $ | — |
|
| $ | 31 |
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current maturities of long-term debt and lease obligations |
| $ | 3 |
|
| $ | — |
|
| $ | 3 |
|
| $ | — |
|
Long-term debt and lease obligations |
|
| 2,756 |
|
|
| — |
|
|
| 2,756 |
|
|
| — |
|
Total liabilities |
| $ | 2,759 |
|
| $ | — |
|
| $ | 2,759 |
|
| $ | — |
|
Investments in 2017 and 2016 included certain cost method investments.
In determiningLevel 2 within the fair value hierarchy as they are estimated based on observable inputs.
obligations. The estimated fair values of current and long-term debt were computed by multiplying price by the notional amount of the respective debt instrument.instruments. Price is calculated using the stated terms of the respective debt instrument and yield curves commensurate with the
company’sour credit risk. The carrying values of the other financial instruments, such as accounts receivable and accounts payable, approximate their fair values due to the short-term maturities of most of thesethose assets and liabilities.
9. STOCK COMPENSATION
Stock compensation expense totaled $31
In March 2017, the company awarded its annual stock compensation grants which consisted of 5.4 million stock options, 0.7 million RSUs and 0.6 million PSUs.
10. RETIREMENT AND OTHER BENEFIT PROGRAMS
The following is a summary of net periodic benefit cost relating to the company’s pension and other postemployment benefit (OPEB) plans.
|
| Three months ended |
|
| Nine months ended |
| ||||||||||
|
| September 30, |
|
| September 30, |
| ||||||||||
(in millions) |
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| ||||
Pension benefits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost |
| $ | 23 |
|
| $ | 23 |
|
| $ | 68 |
|
| $ | 70 |
|
Interest cost |
|
| 46 |
|
|
| 46 |
|
|
| 136 |
|
|
| 138 |
|
Expected return on plan assets |
|
| (75 | ) |
|
| (76 | ) |
|
| (220 | ) |
|
| (227 | ) |
Amortization of net losses and other deferred amounts |
|
| 42 |
|
|
| 38 |
|
|
| 123 |
|
|
| 113 |
|
Net periodic pension benefit cost |
| $ | 36 |
|
| $ | 31 |
|
| $ | 107 |
|
| $ | 94 |
|
OPEB |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost |
| $ | — |
|
| $ | 1 |
|
| $ | — |
|
| $ | 3 |
|
Interest cost |
|
| 2 |
|
|
| 4 |
|
|
| 6 |
|
|
| 8 |
|
Amortization of net loss and prior service credit |
|
| (7 | ) |
|
| (7 | ) |
|
| (20 | ) |
|
| (15 | ) |
Net periodic OPEB cost |
| $ | (5 | ) |
| $ | (2 | ) |
| $ | (14 | ) |
| $ | (4 | ) |
11. ACCUMULATED OTHER COMPREHENSIVE INCOME
Comprehensive income includes all changes in shareholders’ equity that do not arise from transactions with shareholders, and consists of net income, CTA, pension and other employee benefits, unrealized gains and losses on cash flow hedges and unrealized gains and losses on available-for-sale equity securities. The following table is a net-of-tax summary of the changes in AOCI by component for the nine months ended September 30, 2017 and 2016.
(in millions) |
| CTA |
|
| Pension and other employee benefits |
|
| Hedging activities |
|
| Available- for-sale securities |
|
| Total |
| |||||
Gains (losses) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2016 |
| $ | (3,438 | ) |
| $ | (1,161 | ) |
| $ | 3 |
|
| $ | 40 |
|
| $ | (4,556 | ) |
Other comprehensive income before reclassifications |
|
| 501 |
|
|
| (25 | ) |
|
| (19 | ) |
|
| 1 |
|
|
| 458 |
|
Amounts reclassified from AOCI (a) |
|
| 29 |
|
|
| 69 |
|
|
| 3 |
|
|
| 3 |
|
|
| 104 |
|
Net other comprehensive income (loss) |
|
| 530 |
|
|
| 44 |
|
|
| (16 | ) |
|
| 4 |
|
|
| 562 |
|
Balance as of September 30, 2017 |
| $ | (2,908 | ) |
| $ | (1,117 | ) |
| $ | (13 | ) |
| $ | 44 |
|
| $ | (3,994 | ) |
(in millions) |
| CTA |
|
| Pension and other employee benefits |
|
| Hedging activities |
|
| Available- for-sale- securities |
|
| Total |
| |||||
Gains (losses) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2015 |
| $ | (3,191 | ) |
| $ | (1,064 | ) |
| $ | 7 |
|
| $ | 4,472 |
|
| $ | 224 |
|
Other comprehensive income before reclassifications |
|
| (16 | ) |
|
| (6 | ) |
|
| (6 | ) |
|
| 105 |
|
|
| 77 |
|
Amounts reclassified from AOCI (a) |
|
| — |
|
|
| 67 |
|
|
| (4 | ) |
|
| (4,536 | ) |
|
| (4,473 | ) |
Net other comprehensive income (loss) |
|
| (16 | ) |
|
| 61 |
|
|
| (10 | ) |
|
| (4,431 | ) |
|
| (4,396 | ) |
Balance as of September 30, 2016 |
| $ | (3,207 | ) |
| $ | (1,003 | ) |
| $ | (3 | ) |
| $ | 41 |
|
| $ | (4,172 | ) |
|
|
The following is a summary of the amounts reclassified from AOCI to net income during the three and nine months ended September 30, 2017 and 2016.
|
| Amounts reclassified from AOCI (a) |
|
|
| |||||
(in millions) |
| Three months ended September 30, 2017 |
|
| Nine months ended September 30, 2017 |
|
| Location of impact in income statement | ||
Translation adjustments |
|
|
|
|
|
|
|
|
|
|
Loss on Venezuela deconsolidation |
| $ | — |
|
| $ | (29 | ) |
| Other (income) expense, net |
|
|
| — |
|
|
| (29 | ) |
| Total before tax |
|
|
| — |
|
|
| — |
|
| Income tax expense (benefit) |
|
| $ | — |
|
| $ | (29 | ) |
| Net of tax |
Amortization of pension and other employee benefits items |
|
|
|
|
|
|
|
|
|
|
Actuarial losses and other (b) |
| $ | (35 | ) |
| $ | (103 | ) |
|
|
|
|
| (35 | ) |
|
| (103 | ) |
| Total before tax |
|
|
| 12 |
|
|
| 34 |
|
| Income tax expense (benefit) |
|
| $ | (23 | ) |
| $ | (69 | ) |
| Net of tax |
Losses on hedging activities |
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts |
| $ | (3 | ) |
| $ | (4 | ) |
| Cost of sales |
|
|
| (3 | ) |
|
| (4 | ) |
| Total before tax |
|
|
| 1 |
|
|
| 1 |
|
| Income tax expense (benefit) |
|
| $ | (2 | ) |
| $ | (3 | ) |
| Net of tax |
Available-for-sale-securities |
|
|
|
|
|
|
|
|
|
|
Other-than-temporary impairment of equity securities |
| $ | — |
|
| $ | (4 | ) |
| Other (income) expense, net |
|
|
| — |
|
|
| (4 | ) |
| Total before tax |
|
|
| — |
|
|
| 1 |
|
| Income tax expense (benefit) |
|
|
| — |
|
|
| (3 | ) |
| Net of tax |
Total reclassification for the period |
| $ | (25 | ) |
| $ | (104 | ) |
| Total net of tax |
|
| Amounts reclassified from AOCI (a) |
|
|
| |||||
(in millions) |
| Three months ended September 30, 2016 |
|
| Nine months ended September 30, 2016 |
|
| Location of impact in income statement | ||
Amortization of pension and other employee benefits items |
|
|
|
|
|
|
|
|
|
|
Actuarial losses and other (b) |
| $ | (31 | ) |
| $ | (98 | ) |
|
|
|
|
| (31 | ) |
|
| (98 | ) |
| Total before tax |
|
|
| 11 |
|
|
| 31 |
|
| Income tax expense (benefit) |
|
| $ | (20 | ) |
| $ | (67 | ) |
| Net of tax |
Gains (losses) on hedging activities |
|
|
|
|
|
|
|
|
|
|
Interest rate contracts |
| $ | 5 |
|
| $ | 9 |
|
| Other (income) expense, net |
Foreign exchange contracts |
|
| (2 | ) |
|
| (3 | ) |
| Cost of sales |
|
|
| 3 |
|
|
| 6 |
|
| Total before tax |
|
|
| (1 | ) |
|
| (2 | ) |
| Income tax expense (benefit) |
|
| $ | 2 |
|
| $ | 4 |
|
| Net of tax |
Available-for-sale-securities |
|
|
|
|
|
|
|
|
|
|
Gains on sale of equity securities |
| $ | — |
|
| $ | 4,536 |
|
| Other (income) expense, net |
|
|
| — |
|
|
| 4,536 |
|
| Total before tax |
|
|
| — |
|
|
| — |
|
| Income tax expense (benefit) |
|
|
| — |
|
|
| 4,536 |
|
| Net of tax |
Total reclassification for the period |
| $ | (18 | ) |
| $ | 4,473 |
|
| Total net of tax |
|
|
|
|
Refer to Note 8 for additional information regarding hedging activity and Note 10 for additional information regarding the amortization of pension and other employee benefits items.
12. INCOME TAXES
Effective tax rate
The company’s effective income tax rate for continuing operations was 14.5% and 0.8% in the third quarters of 2017 and 2016, respectively, and 15.0% and (1.1%) in the nine months ended September 30, 2017 and 2016, respectively. The company’s effective income tax rate differs from the U.S. federal statutory rate each year due to certain operations that are subject to tax incentives, state and local taxes, and foreign taxes that are different than the U.S. federal statutory rate. In addition, the effective tax rate can be impacted each period by discrete factors and events.
The effective income tax rate for continuing operations during the three months ended September 30, 2017 increased from the three months ended September 30, 2016, due to the inclusion in 2016 of restructuring and other charges incurred in higher tax rate jurisdictions as well as the favorable impact of discrete items including the partial settlement of an on-going income tax matter related to the company’s Turkish operations and the settlement of a transfer pricing audit related to the company’s Italian operations. Windfall benefits realized from stock option exercises and vesting of RSUs and PSUs associated with the company’s stock compensation programs partially offset the increase from the prior period as such benefits are now reflected as a tax benefit as a result of the company’s adoption of ASU 2016-09 in 2017.
The effective income tax rate for continuing operations increased during the nine months ended September 30, 2017 due to the items noted above as well as the absence in the current year of the tax-free net realized gains associated with the Baxalta Retained Share transactions, which included debt-for-equity exchanges, the contribution of Baxalta Retained Shares to the company’s U.S. pension plan and the exchange of Baxalta Retained Shares for shares of the company, as well as benefits attributable to closing an IRS and German income tax audit that were all reflected during the nine months ended September 30, 2016. The effective income tax rate for continuing operations during the nine months ended September 30, 2017 was favorably impacted by approximately 5.2 percentage points due to tax windfall benefits realized from stock option exercises and vesting of RSUs and PSUs associated with the company’s stock compensation programs.
13. LEGAL PROCEEDINGS
Baxter is involved in product liability, patent, commercial, and other legal matters that arise in the normal course of the company’s business. The company records a liability when a loss is considered probable and the amount can be reasonably estimated. If the reasonable estimate of a probable loss is a range, and no amount within the range is a better estimate, the minimum amount in the range is recorded. If a loss is not probable or a probable loss cannot be reasonably estimated, no liability is recorded. As of September 30, 2017, the company’s total recorded reserves with respect to legal matters were $152022 and $114 million and there were no related receivables.
Baxter has established reserves for certainas of December 31, 2021. Those investments are included in Other non-current assets on our condensed consolidated balance sheets.
In addition to the matters described below, the company remains subject to the risk of future administrative and legal actions. With respect to governmental and regulatory matters, these actions may lead to product recalls, injunctions, and other restrictions on the company’s operations and monetary sanctions, including significant civil or criminal penalties. With respect to intellectual property, the company may be exposed to significant litigation concerning the scope of the company’s and others’ rights. Such litigation could result in a loss of patent protection or the ability to market products, which could lead to a significant loss of sales, or otherwise materially affect future results of operations.
General litigation
On July 31, 2015, Davita Healthcare Partners, Inc. filed suit against Baxter Healthcare Corporation in the District Court of the State of Colorado regarding an ongoing commercial dispute relating to the provision of peritoneal dialysis products. A bench trial concluded in third quarter 2016 and the parties were awaiting the court’s decision. In October, 2017, the parties jointly requested a stay in the matter while they work to resolve the matter. The court has granted the stay.
In November 2016, a purported antitrust class action complaint seeking monetary and injunctive relief was filed in the United States District Courtnew global segment for the Northern Districtacquired Hillrom business. The Americas, EMEA and APAC segments provide a broad portfolio of Illinois.essential healthcare products, including acute and chronic dialysis therapies; sterile IV solutions; infusion systems and devices; parenteral nutrition therapies; inhaled anesthetics; generic injectable pharmaceuticals; and surgical hemostat and sealant products. The complaint alleges a conspiracy among manufacturers of IVHillrom segment provides digital and connected care solutions to restrict output and affect pricing in connection with a shortage of such solutions. Similar parallel actions subsequently were filed. In January 2017, a single consolidated complaint covering these matters was filed in the Northern District of Illinois. The company filed a motion to dismiss the consolidated complaint in February 2017.
In April 2017, the company became aware of a criminal investigation by the U.S. Department of Justice, Antitrust Divisioncollaboration tools, including smart bed systems, patient monitoring and a federal grand jury in the United States District Courtdiagnostic technologies, respiratory health devices, and advanced equipment for the Eastern District of Pennsylvania. The company and an employee received subpoenas seeking production of documents and testimony regarding the manufacturing, selling, pricing and shortages of IV solutions and containers (including saline solutions and certain other injectable medicines sold by the company) and communications with competitors regarding the same. The company is cooperating with the investigation. As previously disclosed, the New York Attorney General has requested that Baxter provide information regarding business practices in the IV saline industry. The company is cooperating with the New York Attorney General.
Other
In December 2016, the company received a civil investigative demand from the Commercial Litigation Branch of the United States Department of Justice primarily relating to contingent discount arrangements for, and other promotion of, the company’s TISSEEL and ARTIS products. The company is cooperating in this matter.
14 SEGMENT INFORMATION
Baxter’s two segments are strategic businesses that are managed separately because each business develops, manufactures and markets distinct products and services. The segments and a description of their products and services are as follows:
The Renal business provides products and services to treat end-stage renal disease, or irreversible kidney failure, along with other renal therapies. The Renal business offers a comprehensive portfolio to meet the needs of patients across the treatment continuum, including technologies and therapies for peritoneal dialysis (PD), hemodialysis (HD), continuous renal replacement therapy (CRRT) and additional dialysis services.
The Hospital Products business manufactures intravenous (IV) solutions and administration sets, premixed drugs and drug-reconstitution systems, oncology injectable drugs, IV nutrition products, infusion pumps, inhalation anesthetics, and biosurgery products. The business also provides products and services related to pharmacy compounding, drug formulation and packaging technologies.
The company usesWe use operating income from continuing operations before net interest expense, income tax expense, depreciation and amortization expense (Segment EBITDA), on a segment basis to make resource allocation decisions and assess the ongoing performance of the company’sour business segments. Intersegment sales are eliminated in consolidation.
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||
(in millions) | 2022 | 2021 | 2022 | 2021 | |||||||||||||
Net sales: | |||||||||||||||||
Americas | $ | 1,703 | $ | 1,727 | $ | 4,975 | $ | 4,911 | |||||||||
EMEA | 692 | 779 | 2,129 | 2,300 | |||||||||||||
APAC | 643 | 720 | 1,917 | 2,059 | |||||||||||||
Hillrom | 735 | — | 2,205 | — | |||||||||||||
Total net sales | $ | 3,773 | $ | 3,226 | $ | 11,226 | $ | 9,270 | |||||||||
Operating income: | |||||||||||||||||
Americas | $ | 588 | $ | 676 | $ | 1,765 | $ | 1,907 | |||||||||
EMEA | 145 | 167 | 433 | 461 | |||||||||||||
APAC | 152 | 166 | 459 | 456 | |||||||||||||
Hillrom | 215 | — | 564 | — | |||||||||||||
Total segment operating income | $ | 1,100 | $ | 1,009 | $ | 3,221 | $ | 2,824 |
|
| Three months ended |
|
| Nine months ended |
| ||||||||||
|
| September 30, |
|
| September 30, |
| ||||||||||
(in millions) |
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| ||||
Net sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Renal |
| $ | 1,010 |
|
| $ | 977 |
|
| $ | 2,874 |
|
| $ | 2,840 |
|
Hospital Products |
|
| 1,697 |
|
|
| 1,581 |
|
|
| 4,913 |
|
|
| 4,678 |
|
Total net sales |
| $ | 2,707 |
|
| $ | 2,558 |
|
| $ | 7,787 |
|
| $ | 7,518 |
|
EBITDA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Renal |
| $ | 226 |
|
| $ | 214 |
|
| $ | 649 |
|
| $ | 494 |
|
Hospital Products |
|
| 653 |
|
|
| 588 |
|
|
| 1,821 |
|
|
| 1,673 |
|
Total segment EBITDA |
| $ | 879 |
|
| $ | 802 |
|
| $ | 2,470 |
|
| $ | 2,167 |
|
The following is a reconciliation of segment EBITDAoperating income to income from continuing operations before income taxes per the condensed consolidated statements of income.
|
| Three months ended |
|
| Nine months ended |
| ||||||||||
|
| September 30, |
|
| September 30, |
| ||||||||||
(in millions) |
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| ||||
Total segment EBITDA |
| $ | 879 |
|
| $ | 802 |
|
| $ | 2,470 |
|
| $ | 2,167 |
|
Reconciling items |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
| (184 | ) |
|
| (204 | ) |
|
| (562 | ) |
|
| (599 | ) |
Stock compensation |
|
| (31 | ) |
|
| (30 | ) |
|
| (77 | ) |
|
| (84 | ) |
Net interest expense |
|
| (14 | ) |
|
| (14 | ) |
|
| (41 | ) |
|
| (53 | ) |
Restructuring charges, net |
|
| (31 | ) |
|
| (130 | ) |
|
| (50 | ) |
|
| (237 | ) |
Venezuela deconsolidation |
|
| — |
|
|
| — |
|
|
| (33 | ) |
|
| — |
|
Net realized gains on Baxalta Retained Shares transactions |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 4,387 |
|
Net loss on debt extinguishment |
|
| — |
|
|
| (52 | ) |
|
| — |
|
|
| (153 | ) |
Other Corporate items |
|
| (329 | ) |
|
| (244 | ) |
|
| (783 | ) |
|
| (753 | ) |
Income from continuing operations before income taxes |
| $ | 290 |
|
| $ | 128 |
|
| $ | 924 |
|
| $ | 4,675 |
|
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||
(in millions) | 2022 | 2021 | 2022 | 2021 | |||||||||||||
Total segment operating income | $ | 1,100 | $ | 1,009 | $ | 3,221 | $ | 2,824 | |||||||||
Corporate and other | (3,899) | (496) | (5,517) | (1,497) | |||||||||||||
Total operating income (loss) | (2,799) | 513 | (2,296) | 1,327 | |||||||||||||
Interest expense, net | 104 | 50 | 278 | 118 | |||||||||||||
Other (income) expense, net | 63 | 12 | 3 | 15 | |||||||||||||
Income (loss) before income taxes | $ | (2,966) | $ | 451 | $ | (2,577) | $ | 1,194 |
Refer to the company’sNote 9 for additional information on Net Sales by product category.
RESULTS OF OPERATIONS
Baxter’s income from continuing operations for the three and nine months ended September 30, 20172022 and 2021.
2021 included special items which decreased net income by $66 million and $265 million, respectively, or $0.13 and $0.52 per diluted share, respectively, as further discussed below.
|
| Three months ended September 30, |
|
| Nine months ended September 30, |
| ||||||||||
(in millions) |
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| ||||
Gross Margin |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible asset amortization expense |
| $ | (38 | ) |
| $ | (42 | ) |
| $ | (112 | ) |
| $ | (124 | ) |
Business optimization items 1 |
|
| (12 | ) |
|
| (35 | ) |
|
| (42 | ) |
|
| (113 | ) |
Product-related items 2 |
|
| (21 | ) |
|
| — |
|
|
| (17 | ) |
|
| 12 |
|
Separation-related costs 4 |
|
| — |
|
|
| (1 | ) |
|
| (1 | ) |
|
| (1 | ) |
Claris acquisition and integration expenses 8 |
|
| (4 | ) |
|
|
|
|
|
| (4 | ) |
|
|
|
|
Hurricane Maria costs 10 |
|
| (21 | ) |
|
|
|
|
|
| (21 | ) |
|
|
|
|
Intangible asset impairment 3 |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (51 | ) |
Total Special Items |
| $ | (96 | ) |
| $ | (78 | ) |
| $ | (197 | ) |
| $ | (277 | ) |
Impact on Gross Margin Ratio |
| (3.5 pts) |
|
| (3.0 pts) |
|
| (2.5 pts) |
|
| (3.7 pts) |
| ||||
Marketing and Administrative Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Business optimization items 1 |
| $ | 39 |
|
| $ | 106 |
|
| $ | 74 |
|
| $ | 137 |
|
Separation-related costs 4 |
|
| 2 |
|
|
| 9 |
|
|
| 16 |
|
|
| 45 |
|
Claris acquisition and integration expenses 8 |
|
| 11 |
|
|
| — |
|
|
| 16 |
|
|
| — |
|
Historical reserve adjustments 5 |
|
| — |
|
|
| — |
|
|
| (12 | ) |
|
| — |
|
Total Special Items |
| $ | 52 |
|
| $ | 115 |
|
| $ | 94 |
|
| $ | 182 |
|
Impact on Marketing and Administrative Expense Ratio |
| 1.9 pts |
|
| 4.5 pts |
|
| 1.2 pts |
|
| 2.4 pts |
| ||||
Research and Development Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Business optimization items 1 |
| $ | 1 |
|
| $ | 30 |
|
| $ | — |
|
| $ | 75 |
|
Total Special Items |
| $ | 1 |
|
| $ | 30 |
|
| $ | — |
|
| $ | 75 |
|
Other Expense (Income), Net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on debt extinguishment 6 |
| $ | — |
|
| $ | 48 |
|
| $ | — |
|
| $ | 149 |
|
Net realized gains on Baxalta Retained Share transactions 7 |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (4,391 | ) |
Venezuela deconsolidation 9 |
|
| — |
|
|
| — |
|
|
| 33 |
|
|
| — |
|
Total Special Items |
| $ | — |
|
| $ | 48 |
|
| $ | 33 |
|
| $ | (4,242 | ) |
Income Tax Expense (Benefit) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impact of special items |
| $ | (41 | ) |
| $ | (87 | ) |
| $ | (87 | ) |
| $ | (252 | ) |
Total Special Items |
| $ | (41 | ) |
| $ | (87 | ) |
| $ | (87 | ) |
| $ | (252 | ) |
Impact on Effective Tax Rate |
| 4.4 pts |
|
| 21.3 pts |
|
| 3.1 pts |
|
| 21.9 pts |
|
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||
(in millions) | 2022 | 2021 | 2022 | 2021 | |||||||||||||
Gross Margin | |||||||||||||||||
Intangible asset amortization expense | $ | (110) | $ | (68) | $ | (344) | $ | (199) | |||||||||
Business optimization items1 | (13) | (20) | (21) | (51) | |||||||||||||
Acquisition and integration expenses2 | 2 | (1) | (171) | (1) | |||||||||||||
European medical devices regulation3 | (12) | (11) | (35) | (30) | |||||||||||||
Product-related items5 | (20) | — | (43) | — | |||||||||||||
Intangible asset impairments6 | (332) | — | (332) | — | |||||||||||||
Total Special Items | $ | (485) | $ | (100) | $ | (946) | $ | (281) | |||||||||
Impact on Gross Margin Ratio | (12.9 pts) | (3.1 pts) | (8.5 pts) | (3.0 pts) | |||||||||||||
Selling, General and Administrative (SG&A) Expenses | |||||||||||||||||
Intangible asset amortization expense | $ | 58 | $ | — | $ | 234 | $ | — | |||||||||
Business optimization items1 | 57 | 16 | 171 | 30 | |||||||||||||
Acquisition and integration expenses2 | 11 | 21 | 55 | 23 | |||||||||||||
Investigation and related costs4 | — | 3 | — | 31 | |||||||||||||
Total Special Items | $ | 126 | $ | 40 | $ | 460 | $ | 84 | |||||||||
Impact on SG&A Ratio | 3.3 pts | 1.3 pts | 4.1 pts | 0.9 pts | |||||||||||||
Research and Development (R&D) Expenses | |||||||||||||||||
Business optimization items1 | $ | 3 | $ | — | $ | 4 | $ | — | |||||||||
Acquisition and integration expenses2 | 1 | — | 1 | — | |||||||||||||
Total Special Items | $ | 4 | $ | — | $ | 5 | $ | — | |||||||||
Impact on R&D Ratio | 0.1 pts | 0.0 pts | 0.0 pts | 0.0 pts | |||||||||||||
Goodwill Impairments | |||||||||||||||||
Goodwill impairments6 | $ | 2,785 | $ | — | $ | 2,785 | $ | — | |||||||||
Total Special Items | $ | 2,785 | $ | — | $ | 2,785 | $ | — | |||||||||
Other Operating Expense (Income), net | |||||||||||||||||
Loss on product divestiture arrangement7 | $ | 54 | $ | — | $ | 54 | $ | — | |||||||||
Acquisition and integration expenses2 | (6) | (1) | (34) | (6) | |||||||||||||
Total Special Items | $ | 48 | $ | (1) | $ | 20 | $ | (6) | |||||||||
Interest Expense, net | |||||||||||||||||
Acquisition and integration expenses2 | $ | — | $ | 18 | $ | — | $ | 18 | |||||||||
Total Special Items | $ | — | $ | 18 | $ | — | $ | 18 | |||||||||
Other Income (Expense), net | |||||||||||||||||
Pension curtailment8 | $ | — | $ | — | $ | (11) | $ | — | |||||||||
Reclassification of cumulative translation loss to earnings9 | 65 | — | 65 | — | |||||||||||||
Total Special Items | $ | 65 | $ | — | $ | 54 | $ | — | |||||||||
Income Tax Expense | |||||||||||||||||
Tax matters10 | $ | — | $ | (58) | $ | — | $ | (36) | |||||||||
Tax effects of special items11 | (162) | (33) | (328) | (76) | |||||||||||||
Total Special Items | $ | (162) | $ | (91) | $ | (328) | $ | (112) | |||||||||
Impact on Effective Tax Rate | (22.7 pts) | (15.0 pts) | (22.2 pts) | (4.3 pts) |
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NET SALES
|
| Three months ended September 30, |
|
| Percent change |
| ||||||||||||||||||||||
(in millions) |
| 2017 |
|
| 2016 |
|
| At actual currency rates |
|
| At constant currency rates |
|
| U.S. Cyclophosphamide |
|
| Claris |
|
| Strategic Product Exits |
| |||||||
Renal |
| $ | 1,010 |
|
| $ | 977 |
|
|
| 3 | % |
|
| 3 | % |
|
| 0 | % |
|
| 0 | % |
|
| (3 | )% |
Hospital Products |
|
| 1,697 |
|
|
| 1,581 |
|
|
| 7 | % |
|
| 7 | % |
|
| 0 | % |
|
| 2 | % |
|
| (1 | )% |
Total net sales |
| $ | 2,707 |
|
| $ | 2,558 |
|
|
| 6 | % |
|
| 6 | % |
|
| 0 | % |
|
| 1 | % |
|
| (1 | )% |
|
| Three months ended |
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|
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| |||||
|
| September 30, |
|
| Percent change |
| ||||||||||||||||||||||
(in millions) |
| 2017 |
|
| 2016 |
|
| At actual currency rates |
|
| At constant currency rates |
|
| U.S. Cyclophosphamide |
|
| Claris |
|
| Strategic Product Exits |
| |||||||
International |
| $ | 1,559 |
|
| $ | 1,491 |
|
|
| 5 | % |
|
| 4 | % |
|
| 0 | % |
|
| 1 | % |
|
| (3 | )% |
United States |
|
| 1,148 |
|
|
| 1,067 |
|
|
| 8 | % |
|
| 8 | % |
|
| 0 | % |
|
| 1 | % |
|
| 0 | % |
Total net sales |
| $ | 2,707 |
|
| $ | 2,558 |
|
|
| 6 | % |
|
| 6 | % |
|
| 0 | % |
|
| 1 | % |
|
| (1 | )% |
|
| Nine months ended September 30, |
|
| Percent change |
| ||||||||||||||||||||||
(in millions) |
| 2017 |
|
| 2016 |
|
| At actual currency rates |
|
| At constant currency rates |
|
| U.S. Cyclophosphamide |
|
| Claris |
|
| Strategic Product Exits |
| |||||||
Renal |
| $ | 2,874 |
|
| $ | 2,840 |
|
|
| 1 | % |
|
| 2 | % |
|
| 0 | % |
|
| 0 | % |
|
| (2 | )% |
Hospital Products |
|
| 4,913 |
|
|
| 4,678 |
|
|
| 5 | % |
|
| 5 | % |
|
| 0 | % |
|
| 0 | % |
|
| (1 | )% |
Total net sales |
| $ | 7,787 |
|
| $ | 7,518 |
|
|
| 4 | % |
|
| 4 | % |
|
| 0 | % |
|
| 0 | % |
|
| (1 | )% |
|
| Nine months ended |
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| |||||
|
| September 30, |
|
| Percent change |
| ||||||||||||||||||||||
(in millions) |
| 2017 |
|
| 2016 |
|
| At actual currency rates |
|
| At constant currency rates |
|
| U.S. Cyclophosphamide |
|
| Claris |
|
| Strategic Product Exits |
| |||||||
International |
| $ | 4,405 |
|
| $ | 4,376 |
|
|
| 1 | % |
|
| 2 | % |
|
| 0 | % |
|
| 0 | % |
|
| (2 | )% |
United States |
|
| 3,382 |
|
|
| 3,142 |
|
|
| 8 | % |
|
| 8 | % |
|
| (1 | )% |
|
| 1 | % |
|
| 0 | % |
Total net sales |
| $ | 7,787 |
|
| $ | 7,518 |
|
|
| 4 | % |
|
| 4 | % |
|
| 0 | % |
|
| 0 | % |
|
| (1 | )% |
Foreign currency did not have an impact on consolidated net sales during the third quarter orand $196 million in the first nine months. Our results in 2021 included business optimization charges of $36 million in the third quarter and $81 million in the first nine months. Refer to Note 10 in Item 1 of this Quarterly Report on Form 10-Q for further information regarding these charges and related liabilities.
Three Months Ended September 30, | Percent change | ||||||||||||||||
(in millions) | 2022 | 2021 | At actual currency rates | At constant currency rates | |||||||||||||
United States | $ | 1,849 | $ | 1,319 | 40 | % | 40 | % | |||||||||
International | $ | 1,924 | 1,907 | 1 | % | 12 | % | ||||||||||
Total net sales | $ | 3,773 | $ | 3,226 | 17 | % | 23 | % |
Nine Months Ended September 30, | Percent change | ||||||||||||||||
(in millions) | 2022 | 2021 | At actual currency rates | At constant currency rates | |||||||||||||
United States | $ | 5,370 | $ | 3,697 | 45 | % | 45 | % | |||||||||
International | $ | 5,856 | 5,573 | 5 | % | 13 | % | ||||||||||
Total net sales | $ | 11,226 | $ | 9,270 | 21 | % | 26 | % |
Foreign currency unfavorably impacted net sales by 6 and 5 percentage points during the third quarter and first nine months of 2022, respectively, compared to the prior-year periods, principally due to the strengthening of the U.S. Dollar relative to the Euro, British Pound, Turkish Lira, Australian Dollar and Japanese Yen.
During 2016, the company made a strategic decision to exit select products in certain markets including Venezuela, India and Turkey. Overall, these items had a negative impact to the company’s net sales growth rate of 1 percentage point during the third quarter and first nine months of 2017, respectively. The company is also presenting the impact of generic competition for U.S. cyclophosphamide to enhance comparability between periods and better identify operating trends.
On July 27, 2017, Baxter completed the
In September 2017, the company’s three Puerto Rico manufacturing sites sustained minimal structural damage from the impact of Hurricane Maria and limited production activities resumed soon thereafter. Given the temporary disruptions to the company’s manufacturing facilities as a result of the storm, the company expects net sales in the fourth quarter of 2017 to be negatively impacted by approximately $70 million. The company does not expect any material impact to net sales in 2018 or thereafter.
Franchise Net Sales Reporting
The • Renal segment Care includes sales of the company’sour peritoneal dialysis (PD), hemodialysis (HD) and continuous renal replacement therapies (CRRT) and additional dialysis services.
The Hospital Products segment includes four commercial franchises: Fluid Systems, Integrated Pharmacy Solutions, Surgical Caretherapies and Other.
Fluid Systems• Medication Delivery includes sales of the company’sour intravenous (IV) therapies, infusion pumps, administration sets and IV administration sets.
Integrated Pharmacy Solutions• Pharmaceuticals includes sales of the company’sour premixed and oncology drug platforms, nutritioninhaled anesthesia and critical care products pharmaceutical reconstitution devices and pharmacy compounding services.
Surgical Care• Clinical Nutrition includes sales of the company’s inhaled anesthesia productsour parenteral nutrition (PN) therapies and critical care products as well asrelated products.
Other• Acute Therapies includes sales primarily fromof our continuous renal replacement therapies (CRRT) and other organ support therapies focused in the company’sintensive care unit (ICU).
Three Months Ended September 30, | Percent change | ||||||||||||||||
(in millions) | 2022 | 2021 | At actual currency rates | At constant currency rates | |||||||||||||
Renal Care | $ | 942 | $ | 981 | (4) | % | 4 | % | |||||||||
Medication Delivery | 725 | 747 | (3) | % | (0) | % | |||||||||||
Pharmaceuticals | 525 | 589 | (11) | % | (3) | % | |||||||||||
Clinical Nutrition | 231 | 244 | (5) | % | 4 | % | |||||||||||
Advanced Surgery | 247 | 249 | (1) | % | 6 | % | |||||||||||
Acute Therapies | 158 | 185 | (15) | % | (9) | % | |||||||||||
BioPharma Solutions | 172 | 206 | (17) | % | (10) | % | |||||||||||
Patient Support Systems | 380 | — | N/A | N/A | |||||||||||||
Front Line Care | 279 | — | N/A | N/A | |||||||||||||
Surgical Solutions | 76 | — | N/A | N/A | |||||||||||||
Other | 38 | 25 | 52 | % | 56 | % | |||||||||||
Total Baxter | $ | 3,773 | $ | 3,226 | 17 | % | 23 | % |
|
| Three months ended |
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| |||||
|
| September 30, |
|
| Percent change |
| ||||||||||||||||||||||
(in millions) |
| 2017 |
|
| 2016 |
|
| At actual currency rates |
|
| At constant currency rates |
|
| U.S. Cyclo- phosphamide |
|
| Claris |
|
| Strategic Product Exits |
| |||||||
Total Renal net sales |
| $ | 1,010 |
|
| $ | 977 |
|
|
| 3 | % |
|
| 3 | % |
|
| 0 | % |
|
| 0 | % |
|
| (3 | )% |
Fluid Systems |
| $ | 610 |
|
| $ | 576 |
|
|
| 6 | % |
|
| 6 | % |
|
| 0 | % |
|
| 0 | % |
|
| (1 | )% |
Integrated Pharmacy Solutions |
|
| 627 |
|
|
| 563 |
|
|
| 11 | % |
|
| 11 | % |
|
| (2 | )% |
|
| 5 | % |
|
| 0 | % |
Surgical Care |
|
| 338 |
|
|
| 320 |
|
|
| 6 | % |
|
| 5 | % |
|
| 0 | % |
|
| 0 | % |
|
| (1 | )% |
Other |
|
| 122 |
|
|
| 122 |
|
|
| — |
|
|
| (2 | )% |
|
| 0 | % |
|
| 0 | % |
|
| 0 | % |
Total Hospital Products net sales |
| $ | 1,697 |
|
| $ | 1,581 |
|
|
| 7 | % |
|
| 7 | % |
|
| 0 | % |
|
| 2 | % |
|
| (1 | )% |
|
| Nine months ended |
|
|
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| |||||
|
| September 30, |
|
| Percent change |
| ||||||||||||||||||||||
(in millions) |
| 2017 |
|
| 2016 |
|
| At actual currency rates |
|
| At constant currency rates |
|
| U.S. Cyclo- phosphamide |
|
| Claris |
|
| Strategic Product Exits |
| |||||||
Total Renal net sales |
| $ | 2,874 |
|
| $ | 2,840 |
|
|
| 1 | % |
|
| 2 | % |
|
| 0 | % |
|
| 0 | % |
|
| (2 | )% |
Fluid Systems |
| $ | 1,802 |
|
| $ | 1,686 |
|
|
| 7 | % |
|
| 7 | % |
|
| 0 | % |
|
| 0 | % |
|
| (2 | )% |
Integrated Pharmacy Solutions |
|
| 1,747 |
|
|
| 1,682 |
|
|
| 4 | % |
|
| 5 | % |
|
| (1 | )% |
|
| 1 | % |
|
| 0 | % |
Surgical Care |
|
| 1,024 |
|
|
| 972 |
|
|
| 5 | % |
|
| 6 | % |
|
| 0 | % |
|
| 0 | % |
|
| 0 | % |
Other |
|
| 340 |
|
|
| 338 |
|
|
| 1 | % |
|
| 1 | % |
|
| 0 | % |
|
| 0 | % |
|
| 0 | % |
Total Hospital Products net sales |
| $ | 4,913 |
|
| $ | 4,678 |
|
|
| 5 | % |
|
| 5 | % |
|
| 0 | % |
|
| 0 | % |
|
| (1 | )% |
Nine months ended September 30, | Percent change | ||||||||||||||||
(in millions) | 2022 | 2021 | At actual currency rates | At constant currency rates | |||||||||||||
Renal Care | $ | 2,767 | $ | 2,867 | (3) | % | 2 | % | |||||||||
Medication Delivery | 2,141 | 2,096 | 2 | % | 4 | % | |||||||||||
Pharmaceuticals | 1,574 | 1,687 | (7) | % | (1) | % | |||||||||||
Clinical Nutrition | 688 | 715 | (4) | % | 3 | % | |||||||||||
Advanced Surgery | 738 | 722 | 2 | % | 7 | % | |||||||||||
Acute Therapies | 519 | 580 | (11) | % | (7) | % | |||||||||||
BioPharma Solutions | 491 | 524 | (6) | % | (0) | % | |||||||||||
Patient Support Systems | 1,127 | — | N/A | N/A | |||||||||||||
Front Line Care | 855 | — | N/A | N/A | |||||||||||||
Surgical Solutions | 223 | — | N/A | N/A | |||||||||||||
Other | 103 | 79 | 30 | % | 33 | % | |||||||||||
Total Baxter | $ | 11,226 | $ | 9,270 | 21 | % | 26 | % |
Net
Netthe prior-year period and sales headwinds in China driven by COVID-related lockdowns. Supply chain constraints, including constraints related to the availability of semiconductor components and other components used in the Hospital Products segment increased 7%production of our infusion pumps, and 5%, respectively, during the third quarter and first nine monthsfact that our new infusion pump platform has not yet received FDA clearance in the U.S. have contributed to lower sales of 2017 compared toinfusion pumps in the prior period on both a reported basis and constant currency basis. Certain international strategic market exits negatively impacted the Hospital Products segmentcurrent year periods.
In the Fluid Systems franchise, sales increased 6%decreased 11% in the third quarter and 7% in the first nine months of 2017 on a constant currency basis driven by select pricing and improved volumes for U.S. IV solutions. This increase was also positively impacted by increased sales of2022, as compared to the company’s IV access administrative sets, reflecting the on-going pull through from the company’s growing SPECTRUM infusion pump base.
In the Integrated Pharmacy Solutions franchise, sales increased 11%prior-year periods. The decrease in the third quarter and first nine months was primarily driven by a 8% and 6%, respectively, negative impact from foreign exchange rates, as compared to the prior-year periods. Additionally, pharmaceuticals net sales were adversely impacted by new market entrants increasing competition and supply constraints for certain molecules. Those items were partially offset by increased sales internationally for inhaled anesthesia products.
Indemand for our CRRT systems and a 6% and 4%, respectively, negative impact from foreign exchange rate changes, as compared to the Surgical Care franchise,prior-year periods.
In the Other franchise, sales decreased 2%decrease in the third quarter and increased 1% in the first nine months of 2017 on a constant currency basiswas also driven by unfavorable volumes inlower sales from manufacturing services and supply packaging related to the third quarter and favorable volumes in the first nine monthsproduction of 2017 for products manufactured by BaxterCOVID-19 vaccines on behalf of itsmultiple pharmaceutical partners. In addition, revenuescompanies, reflecting a challenging comparison against a strong prior-year period.
Three months ended September 30, | ||||||||||||||||||||
2022 | % of net sales | 2021 | % of net sales | $ change | % change | |||||||||||||||
Gross margin | $ | 1,133 | 30.0 | % | $ | 1,321 | 40.9 | % | $ | (188) | (14.2) | % | ||||||||
SG&A | $ | 947 | 25.1 | % | $ | 680 | 21.1 | % | $ | 267 | 39.3 | % | ||||||||
R&D | $ | 152 | 4.0 | % | $ | 129 | 4.0 | % | $ | 23 | 17.8 | % |
Nine months ended September 30, | ||||||||||||||||||||
2022 | % of net sales | 2021 | % of net sales | $ change | % change | |||||||||||||||
Gross margin | $ | 3,934 | 35.0 | % | $ | 3,699 | 39.9 | % | $ | 235 | 6.4 | % | ||||||||
SG&A | $ | 2,975 | 26.5 | % | $ | 1,982 | 21.4 | % | $ | 993 | 50.1 | % | ||||||||
R&D | $ | 450 | 4.0 | % | $ | 396 | 4.3 | % | $ | 54 | 13.6 | % |
Gross Margin and Expense Ratios
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| September 30, |
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| September 30, |
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(as a percentage of net sales) |
| 2017 |
|
| 2016 |
|
| Change |
| 2017 |
|
| 2016 |
|
| Change | ||||
Gross margin |
|
| 41.7 | % |
|
| 41.9 | % |
| (0.2 pts) |
|
| 42.4 | % |
|
| 40.0 | % |
| 2.4 pts |
Marketing and administrative expenses |
|
| 25.3 | % |
|
| 28.4 | % |
| (3.1 pts) |
|
| 24.3 | % |
|
| 27.6 | % |
| (3.3 pts) |
Gross Margin
2022, respectively. The special items identified above had an unfavorable impact of approximately 3.512.9 and 2.58.5 percentage points on the gross margin ratio in the third quarter and first nine months of 2017,2022, respectively. The unfavorable impactgross margin ratio was 3.040.9% and 3.7 percentage points39.9% in the third quarter and first nine months of 2016,2021, respectively. The special items identified above had an unfavorable impact of approximately 3.1 and 3.0 percentage points on the gross margin ratio in the third quarter and first nine months of 2021, respectively. Refer to the Special Items caption above for additional detail.
Excluding the impact of the special items, the gross margin ratio decreased in the third quarter and increased duein the first nine months of 2022 compared to select price increases,the prior-year periods. The decrease in the third quarter was primarily driven by raw materials inflation and increased supply chain costs, partially offset by a favorable manufacturing performanceproduct mix that was primarily driven by our acquisition of Hillrom and lower bonus accruals under our annual employee incentive compensation plans. The increase in the first nine months resulted from a benefit fromfavorable product mix that was that was primarily driven by our acquisition of Hillrom and lower bonus accruals under our annual employee incentive compensation plans, which exceeded the company’s business transformation initiatives aimed at simplifyingadverse impacts of raw materials inflation and increased supply chain costs for the portfolio to drive efficiencyyear-to-date period.
Marketing26.5% in the third quarter and Administrative Expenses
first nine months of 2022, respectively. The special items identified above had an unfavorable impact of approximately 1.93.3 and 1.24.1 percentage points on the marketing and administrative expense ratio in the third quarter and first nine months of 2017, respectively. The unfavorable impact was 4.5 and 2.4 percentage points in the third quarter and first nine months of 2016. Refer to the Special Items caption above for additional detail.
Excluding the impact of the special items, the marketing and administrativeSG&A expenses ratio in the third quarter and first nine months of 2017 declined due to the actions taken by the company to rebase its cost structure and focus on expense management. These savings were partially offset by decreased benefits to the marketing and administrative2022, respectively. The SG&A expenses ratio from lower transition service income aswas 21.1% and 21.4% in the agreement with Baxalta for these services continues to wind down.
Researchthird quarter and Development
|
| Three months ended September 30, |
|
| Percent |
|
| Nine months ended September 30, |
|
| Percent |
| ||||||||||||
(in millions) |
| 2017 |
|
| 2016 |
|
| change |
|
| 2017 |
|
| 2016 |
|
| change |
| ||||||
Research and development expenses |
| $ | 151 |
|
| $ | 159 |
|
|
| (5 | )% |
| $ | 435 |
|
| $ | 490 |
|
|
| (11 | )% |
As a percentage of net sales |
|
| 5.6 | % |
|
| 6.2 | % |
|
|
|
|
|
| 5.6 | % |
|
| 6.5 | % |
|
|
|
|
first nine months of 2021, respectively. The special items identified above had an unfavorable impact of approximately 1.21.3 and 1.00.9 percentage points on the SG&A expenses ratio in the third quarter and first nine months of 2016.2021, respectively. Refer to the Special Items caption above for additional detail.
the third quarter and first nine months of 2021, respectively.
Beginning in the second half of 2015, the company initiated
Refer to Note 7 in Item 1 for additional information regarding the company’s business optimization initiatives.
Net Interest Expense
Net interest expense was $14 million and $41$20 million in the third quarter and first nine months of 2017, respectively,2022, respectively. The current year periods include a loss of $54 million under an arrangement to divest certain product rights for an amount that is less than our cost of those product rights, which was triggered by U.S. and $14European Union regulatory approvals of the related products. Refer to Note 2 in Item 1 of this Quarterly Report on
Otheroperating expense (income) expense,, net was income of $12$1 million and expense of $10$6 million in the third quarter and first nine months of 2017,2021, respectively, andwhich consisted of gains from net decreases in the estimated fair values of contingent consideration liabilities.
the first nine months of 2016, the $101 million debt extinguishment loss in the first quarter of 2016, the $48 million debt extinguishment loss in the third quarter of 2016, and the $33 million loss on the deconsolidation of the company’s Venezuelan subsidiary in the second quarter of 2017. Excluding the impact of special items, other (income) expense, net had higher income in the third quarter of 2017 and lower income in the first nine months of 2017 as compared to 2016. Higher income in the third quarter of 2017 was the result of foreign currency fluctuations principally related to intercompany receivables, payables and monetary assets denominated in a foreign currency. Lower income for the first nine months of 2017 was attributable to the absence of dividends on the Retained Shares received from Baxalta in 2016 and recognized investment impairment losses in 2017.
Segment EBITDA
The company uses income from continuing operations before net interest expense, income tax expense, depreciation and amortization expense (Segment EBITDA), on a segment basis to make resource allocation decisions and assess the ongoing performance of the company’s business segments. Refer to Note 14 within Item 1 for a summary of financial results by segment. The following is a summary of significant factors impacting the segments’ financial results.
Renal
Segment EBITDA was $226 million and $649$278 million in the third quarter and first nine months of 2017,2022, respectively, and $214$50 million and $494$118 million in the third quarter and first nine months of 2016,2021, respectively. The increase in 2017 was driven by lower research and development costs as the company realigned allocations of research and development costs based on project spend attributable to segments, higher gross margins due to product mix and lower marketing and administrative expenses as the Renal segment benefited from the company’s business optimization programs and continued focus on reducing discretionary spending. This growth was partially offset by unfavorable foreign currency.
Hospital Products
Segment EBITDA was $653 million and $1.821 billionincreases in the third quarter and first nine months of 2017, respectively, and $5882022 were primarily driven by higher average debt outstanding in connection with the Hillrom acquisition.
Net sales | Operating income (loss) | ||||||||||||||||||||||||||||||||||
Three months ended September 30, | Nine months ended September 30, | Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||||||||||||
(in millions) | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||||||
Americas | $ | 1,703 | $ | 1,727 | $ | 4,975 | $ | 4,911 | $ | 588 | $ | 676 | $ | 1,765 | $ | 1,907 | |||||||||||||||||||
EMEA | 692 | 779 | 2,129 | 2,300 | 145 | 167 | 433 | 461 | |||||||||||||||||||||||||||
APAC | 643 | 720 | 1,917 | 2,059 | 152 | 166 | 459 | 456 | |||||||||||||||||||||||||||
Hillrom | 735 | — | 2,205 | — | 215 | — | 564 | — | |||||||||||||||||||||||||||
Total segments | 3,773 | 3,226 | 11,226 | 9,270 | 1,100 | 1,009 | 3,221 | 2,824 | |||||||||||||||||||||||||||
Corporate and other | — | — | — | — | (3,899) | (496) | (5,517) | (1,497) | |||||||||||||||||||||||||||
Total | $ | 3,773 | $ | 3,226 | $ | 11,226 | $ | 9,270 | $ | (2,799) | $ | 513 | $ | (2,296) | $ | 1,327 |
our acquisition of Hillrom in December 2021.
Other
Income Taxes
The company’s effective income tax rate for continuing operations was 14.5% and 0.8% For the period from our acquisition of Hillrom on December 13, 2021 through December 31, 2021, we previously included all costs incurred by the Hillrom business within that segment, including the types of costs described in the thirdpreceding sentence that are maintained at Corporate for our legacy Baxter segments. In connection with our ongoing integration activities, beginning in the first quarter 2022, we have updated the measure of profitability for our Hillrom segment by excluding such unallocated costs, consistent with our legacy Baxter segments. Those unallocated costs related to Hillrom, which totaled $3.0 billion and 15.0% and (1.1%)$3.3 billion for the first nine months of 2017three and 2016, respectively. The company’s effective income tax rate differs from the U.S. federal statutory rate each year due to certain operations that are subject to tax incentives, state and local taxes, and foreign taxes that are different than the U.S. federal statutory rate. In addition, the effective tax rate can be impacted each period by discrete factors and events.
The effective income tax rate for continuing operations during the three months ended September 30, 2017 increased from the three months ended September 30, 2016, due to the inclusion in 2016 of restructuring and other charges incurred in higher tax rate jurisdictions as well as the favorable impact of discrete items including the partial settlement of an on-going income tax matter related to the company’s Turkish operations and the settlement of a transfer pricing audit related to the company’s Italian operations. Windfall benefits realized from stock option exercises and vesting of RSUs and PSUs associated with the company’s stock compensation programs partially offset the increase from the prior period as such benefits are now reflected as a tax benefit as a result of the company’s adoption of ASU 2016-09 in 2017.
The effective income tax rate for continuing operations increased during the nine months ended September 30, 20172022, respectively, are now presented within Corporate as well.
transactions, which included debt-for-equity exchanges, the contribution of Baxalta Retained Shares to the company’s U.S. pension plangoodwill and the exchange of Baxalta Retained Shares for shares of the company, as well as benefits attributable to closing an IRSintangible asset impairments, higher intangible asset amortization expense, acquisition and German income tax audit that were all reflected during the nine months ended September 30, 2016. The effective income tax rate for continuing operations during the nine months ended September 30, 2017 was favorably impactedintegration-related expenses and business optimization charges and increased manufacturing variances and centrally managed supply chain costs, partially offset by approximately 5.2 percentage points due to tax windfall benefits realized from stock option exercises and vesting of RSUs and PSUs associated with the company’s stocklower bonus accruals under our annual employee incentive compensation programs.
Income from Continuing Operations and Earnings per Diluted Share
Income from continuing operations was $248 million and $127 million for the three months ended September 30, 2017 and 2016, respectively, and $785 million and $4.7 billion for the nine months ended September 30, 2017 and 2016, respectively. Income from continuing operations per diluted share was $0.45 and $0.23 for the three months ended September 30, 2017 and 2016, respectively, and $1.42 and $8.56 for the nine months ended September 30, 2017 and 2016, respectively. The significant factors and events contributing to the changes are discussed above.
Income (loss) from Discontinued Operations
Discontinued operations were insignificant for both periods presented. Refer to Note 2 within Item 1 for additional information regarding the separation of Baxalta.
plans.
Nine months ended September 30, | |||||||||||
(in millions) | 2022 | 2021 | |||||||||
Cash flows from operations | $ | 772 | $ | 1,529 | |||||||
Cash flows from investing activities | (675) | (933) | |||||||||
Cash flows from financing activities | (1,319) | (1,031) |
| Nine months ended |
| |||||
| September 30, |
| |||||
(in millions) | 2017 |
|
| 2016 |
| ||
Cash flows from operations - continuing operations | $ | 1,343 |
|
| $ | 938 |
|
Cash flows from investing activities - continuing operations |
| (1,088 | ) |
|
| (549 | ) |
Cash flows from financing activities |
| 391 |
|
|
| (44 | ) |
Cash Flows from Operations — Continuing Operations
Operating cash flows from continuing operations increased during
Net Income
Net income, as adjusted for certain non-cash items, such as depreciation and amortization, net periodic pension benefit and OPEB costs, stock compensation, deferred income taxes and other items increased in the nine months ended September 30, 2017 compared to 2016. Additionally, non-cash items in the nine months ended September 30, 2016 included net realized gainsoperating activities of $4.4$1.5 billion related to the debt-for-equity exchanges of Baxalta Retained Shares for certain company indebtedness and for the equity-for-equity exchange.
Accounts Receivable
Cash inflows from accounts receivable were $32 million in the first nine months of 2017 compared2021, a decrease of $757 million. The decrease was primarily due to an inflow of $22 milliona decrease in the prior year. Days sales outstandingour net income in 2022, increases in inventory levels and higher annual payouts under our employee incentive compensation plans in the current year were comparableperiod compared to the prior year.
Inventories
Cash outflows relating to inventories decreased in 2017 as compared to the prior-year period. The following is a summary of inventories as of September 30, 2017 and December 31, 2016, as well as annualized inventory turns forFlows from Investing Activities
|
| Inventories |
|
| Annualized inventory turns for the Nine |
| ||||||||||
|
| September 30, |
|
| December 31, |
|
| months ended September 30, |
| |||||||
(in millions, except inventory turn data) |
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| ||||
Renal |
| $ | 635 |
|
| $ | 544 |
|
|
| 3.77 |
|
|
| 3.58 |
|
Hospital Products |
|
| 915 |
|
|
| 885 |
|
|
| 3.97 |
|
|
| 3.61 |
|
Other |
|
| — |
|
|
| 1 |
|
| n/a |
|
| n/a |
| ||
Total company |
| $ | 1,550 |
|
| $ | 1,430 |
|
|
| 3.89 |
|
|
| 3.60 |
|
The increase in inventories was driveninvestments of $206 million, primarily by timingrelated to our payment to acquire the rights to Zosyn, and capital expenditures of purchases and longer sourcing lead times for certain products within the Renal segment portfolio, coupled with the acquisition of Claris in the Hospital Products segment.
Other
The changes in accounts payable and accrued liabilities were a $36 million outflow in$479 million. In the first nine months of 2017 compared2021, cash used for investing activities included payments for acquisitions and investments of $463 million, primarily related to a $326 million outflowCaelyx and Doxil, Transderm Scop and PerClot Polysaccharide Hemostatic System (PerClot), and capital expenditures of $508 million. See Note 2 in Item 1 of this Quarterly Report on Form 10-Q for further information regarding business development activities.
Payments related to the execution of the company’s business optimization initiatives increased from $98 million in the first nine months of 2016 to $114 million in the first nine months of 2017. The company madeand dividend payments of $21$427 million, in the first nine months of 2016 related to the execution of the COLLEAGUE infusion pump and SIGMA SPECTRUM infusion pump recalls. Refer to Note 7 within Item 1 for further information regarding the company’s business optimization initiatives.
Changes in other balance sheet items include an outflow of $93 million and an inflow of $121 million in the first nine months of 2017 and 2016, respectively, primarily driven by the collection of a tax receivable in the second quarter of 2016.
Cash Flows from Investing Activities — Continuing Operations
Capital Expenditures
Capital expenditures were $410 million and $519 million in the first nine months of 2017 and 2016, respectively. The company’s capital expenditures in 2017 were driven by targeted investments in projects to support production of PD and IV solutions.
Acquisitions and Investments
Cash outflows relating to acquisitions and investments of $680 million in the first nine months of 2017 were primarily driven by the $629 million acquisition of Claris, the acquisition of the rights to Clindamycin Saline and Clindamycin Dextrose from Celerity and the acquisition of Wound Care Technologies, Inc. Cash outflows relating to acquisitions and investments of $47 million in the first nine months of 2016 were driven primarily by the acquisition of the rights to Vancomycin from Celerity.
Divestitures and Other Investing Activities
Cash inflows from divestitures and other investing activities in 2017 and 2016 were not significant.
Cash Flows from Financing Activities
Debt Issuances, Net of Payments of Obligations
Net cash inflows related to debt and other financing obligations totaled $633 million for the first nine months of 2017 primarily related to the issuance of €600 million of senior notes at a fixed coupon rate of 1.30% due in May 2025.
Net cash outflows related to debt and other financing obligations totaled $58 million for the first nine months of 2016 primarily related to a $190 million repayment of the company’s 0.95% senior unsecured notes that matured in June 2016, a $130 million repayment of the company’s 5.9% senior unsecured notes that matured in September 2016, and the redemption of approximately $1 billion in
aggregate principal amount of senior notes in September 2016, as well as other short-term obligations. The company also had $300 million of net repayments related to its commercial paper program. This was partially offset by issuancesa net increase in commercial paper borrowings of debt totaling $1.6 billion of senior notes in August 2016. See Note 8 within Item 1 for additional details regarding the debt transactions in the first nine months of 2016.
Other Financing Activities
Cash dividend payments totaled $228$30 million and $197 million in the first nine months of 2017 and 2016, respectively. The increase in cash dividend payments was primarily due to an increase in the quarterly dividend rate from $0.115 to $0.13 per share for quarterly dividends declared between May 2016 and May 2017. In addition, the company increased the quarterly dividend rate from $0.13 to $0.16 per share for quarterly dividends declared beginning in May 2017. Proceedsproceeds from stock issued under employee benefit plans increased from $251 million inof $114 million. In the first nine months of 2016 to $2982021, cash used for financing activities included payments for treasury stock repurchases of $600 million, indebt repayments of $407 million and dividend payments of $390 million, partially offset by proceeds from stock issued under employee benefit plans of $135 million and the first nine monthsnet proceeds from commercial paper borrowings of 2017, primarily due to increased option exercises in the first nine months of 2017.
$300 million.
2022.
The company intends and Credit Ratings
The company’s As of September 30, 2022, we had approximately $16.4 billion of long-term debt and finance lease obligations, including current maturities, and short-term debt. Subject to market conditions, we regularly evaluate opportunities with respect to our capital structure.
The company continues Although our outlook was downgraded from stable to do business with foreign governmentsnegative by two of the rating agencies during the third quarter of 2022, there have been no changes to our investment grade credit ratings that we disclosed in certain countries, including Greece, Spain, Portugalour 2021 Annual Report.
While these economic conditions havecurrent basis was not significantly impacted the company’s ability to collect receivables, global economic conditions and liquidity issues in certain countries have resulted, and may continue to result, in delaysguaranteed after 2021. Regulators in the collectionU.S. and other jurisdictions have been working to replace these rates with alternative reference interest rates that are supported by transactions in liquid and observable markets, such as the Secured Overnight Financing Rate (SOFR). In 2020, it was announced that certain U.S. dollar LIBOR tenors would not cease until 2023. In September 2022, our $2.5 billion U.S. dollar-denominated revolving credit facility and our $4.0 billion Term Loan Credit Agreement were amended to reference SOFR-based rates. Currently, our €200 million Euro-denominated revolving credit facility references LIBOR-based rates. The discontinuation of receivables andLIBOR will require this arrangement to be modified in order to replace LIBOR with an alternative reference interest rate, which could impact our cost of funds. That credit losses.
Credit Ratings
The company’s credit ratings at September 30, 2017 were as follows.
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CRITICAL ACCOUNTING POLICIES
2022.
In January 2014, the company received a Warning Letter from FDA primarily directed to quality systemsproduction of new products for the company’s Round Lake, Illinois, facility, particularly in that facility’s capacity as a specification developer for certain of the company’s medical devices. This Warning Letter was lifted in February 2017.
The company received a Warning Letter in December 2013 that included observations related to the company’s ambulatory infuser business in Irvine, California, which previously had been subject to agency action. This Warning Letter was lifted in May 2017.
In June 2013, the company received a Warning Letter from FDA regarding operations and processes at its North Cove, North Carolina and Jayuya, Puerto Rico facilities. The company attended Regulatory Meetings with the FDA in November 2015 (concerning the Jayuya facility). The company also requested and participated in a Regulatory Meeting regarding both facilities in July 2017. The Warning Letter addresses observations related to Current Good Manufacturing Practice violations at the two facilities.
In June 2010, the company received a Warning Letter from FDA in connection with an inspection of its McGaw Park, Illinois facility, which previously supported the Renal franchise. The company’s Round Lake facility now provides the related capacity for the Renal franchise. The Warning Letter pertains to the processes by which the company analyzes and addresses product complaints through corrective and preventative action, and reports relevant information to FDA. This Warning Letter was lifted in February 2017.
On October 9, 2014, the company had a Regulatory Meeting with FDA to discuss the Warning Letters described above. At the meeting, the company agreed to work closely with FDA to provide regular updates on its progress to meet all requirements and resolve all matters identifieddistribution in the Warning Letters described above.
Please see Item 1A of the 2016 Annual Report and Item U.S.
FORWARD-LOOKING INFORMATION
This quarterly reporton Form 10-Q includes forward-looking statements. Use of the words “may,” “will,” “would,” “could,” “should,” “believes,” “estimates,” “projects,” “potential,” “expects,” “plans,” “seeks,” “intends,” “evaluates,” “pursues,” “anticipates,” “continues,” “designs,” “impacts,” “affects,” “forecasts,” “target,” “outlook,” “initiative,” “objective,” “designed,” “priorities,” “goal,” or the negative of those words or other similar expressions is intended to identify forward-looking statements that represent our current judgment about possible future events. These forward-looking statements may include statements with respect to accounting estimates and assumptions, impacts of the COVID-19 pandemic and global economic conditions, litigation-related matters including outcomes, impacts of the internal investigation related to foreign exchange gains and losses, future regulatory filings and the company’sour R&D pipeline, strategic objectives, sales from new product offerings, credit exposure to foreign governments, potential developments with respect to credit ratings, investment of foreign earnings, estimates of liabilities including those related to uncertain tax positions, contingent payments, future pension plan contributions, costs, discount rates and rates of return, the company’sour exposure to financial market volatility and foreign currency and interest rate risks, potential tax liability associated the separation of the company’s biopharmaceuticals and medical products businesses (including the 2016 disposition of the company’s Retained Shares in Baxalta), the impact of competition, future sales growth, business development activities (including the recent acquisitionacquisitions of Claris InjectablesCheetah, Seprafilm, certain outside of the U.S. (OUS) rights to Caelyx and Doxil, full U.S. and specific OUS rights to Transderm Scop, PerClot, Hillrom and certain rights to Zosyn in July 2017)the U.S. and Canada), business optimization and portfolio rationalization initiatives, cost saving initiatives, future capital and R&D expenditures, future debt issuances, manufacturing expansion, the sufficiency of the company’s facilities and financial flexibility, the adequacy of credit facilities, tax provisions and reserves, the effective tax rate and all other statements that do not relate to historical facts.
failure to achieve our long-term financial improvement goals;
demand for and market acceptance risks for and competitive pressures related to new and existing products (including challenges with our ability to accurately predict changing customer preferences, which has led to and may continue to lead to increased inventory levels, and needs and advances in technology and the resulting impact on customer inventory levels and the impact of reduced hospital admission rates and elective surgery volumes), and the impact of those products on quality and patient safety concerns;
• | the continuity, availability and pricing of acceptable raw materials and component parts (and our ability to pass some or all of these costs on to our customers), and the related continuity of our manufacturing and distribution (including impacts from COVID-19) and those of our suppliers; | |||||||
• | inability to create additional production capacity in a timely manner or the occurrence of other manufacturing, sterilization or supply difficulties (including as a result of natural disaster, public health crises and epidemics/pandemics, regulatory actions or otherwise); | |||||||
• | product development risks, including satisfactory clinical performance and obtaining required regulatory approvals (including as a result of evolving regulatory requirements), the ability to manufacture at appropriate scale, and the general unpredictability associated with the product development cycle; |
product development risks, including satisfactory clinical performance,
• | the impact of global economic conditions (including, among other things, the ongoing war in Ukraine, the related economic sanctions being imposed globally in response to the conflict and potential trade wars and global inflationary pressures) and continuing public health crises, pandemics and epidemics, such as the ongoing COVID-19 pandemic, on us and our employees, customers and suppliers, including foreign governments in countries in which we operate; |
product quality or patient safety issues, leading to product recalls, withdrawals, launch delays, warning letters, import bans, sanctions, seizures, litigation, or declining sales;
breaches or failures of our information technology systems or products, including by cyber-attack, data leakage, unauthorized access or theft (as a result of increased remote working arrangements or otherwise);
failures with respect to the company’sour quality, compliance andor ethics programs;
• | future actions of third parties, including third-party payers and our customers and distributors (including group purchasing organizations and formed integrated delivery networks), the impact of healthcare reform and its implementation, suspension, repeal, replacement, amendment, modification and other similar actions undertaken by the United States or foreign governments, including with respect to pricing, reimbursement, taxation and rebate policies; legislation, regulation and other governmental pressures in the United States or globally, including the cost of compliance and potential penalties for purported noncompliance thereof, all of which may affect pricing, reimbursement, taxation and rebate policies of government agencies and private payers or other elements of our business, including new or amended laws, rules and regulations (such as the California Consumer Privacy Act of 2018, the European Union’s General Data Protection Regulation and proposed regulatory changes of the U.S. Department of Health and Human Services in kidney health policy and reimbursement, which may substantially change the U.S. end stage renal disease market and demand for our peritoneal dialysis products, necessitating significant multi-year capital expenditures, which are difficult to estimate in advance); |
future actions of third parties, including third-party payers, as healthcare reform and other similar measures are implemented, modified or repealed in the United States and globally;
• | the outcome of pending or future litigation, including the opioid litigation and ethylene oxide litigation or other claims; | |||||||
• | failure to achieve our short- and long-term financial goals; |
the impact of ongoing U.S. healthcare reform and other similar actions undertaken by foreign governments with respect to pricing, reimbursement, taxation and rebate policies;
additional legislation, regulation and other governmental pressures in the United States or globally, which may affect pricing, reimbursement, taxation and rebate policies of government agencies and private payers or other elements of the company’s business;
the impact of competitive products and pricing, including generic competition, drug reimportation and disruptive technologies;
global regulatory, trade and tax policies;
the company’s ability to identify business development and growth opportunities and to successfully execute on business development strategies;
the company’s ability to finance and develop new products or enhancements, on commercially acceptable terms or at all;
the availability and pricing of acceptable raw materials and component supply;
inability to create additional production capacity in a timely manner or the occurrence of other manufacturing or supply difficultiespolicies (including as a result of natural disaster or otherwise);
the impact of any future tax liability with respect to the separationclimate change and distribution, including with respect to disposition of the Retained Shares;
any failure by Baxalta or Shire to satisfy its obligation under the separation agreements, including the tax matters agreement, or the company’s letter agreement with Shire and Baxalta;
the ability to protect or enforce the company’sour owned or in-licensed patent or other proprietary rights (including trademarks, copyrights, trade secrets and know-how) or patents of third parties preventing or restricting the company’sour manufacture, sale or use of affected products or technology;
the impact of global economic conditionsany goodwill or other intangible asset impairments on the company and its customers and suppliers, including foreign governments in certain countries in which the company operates;
fluctuations in foreign exchange and interest rates;
actions by tax authorities in connection with ongoing tax audits;
breaches or failures of the company’s information technology systems;
loss of key employees, the occurrence of labor disruptions or the inability to identify and recruit new employees;
the outcome of pending or future litigation;
the adequacy of the company’s cash flows from operations to meet its ongoing cash obligations and fund its investment program; and
other factors identified elsewhere in this report and other filings with the Securities and Exchange Commission,SEC, including those factors described in Item 1A of the company’sour Annual Report on Form 10-K for the year ended December 31, 2016,2021, all of which are available on the company’sour website.
The company is
The company may
$70 million.
Baxter carried out an evaluation, under the supervision and
Changes2022.
Withreporting in some cases. Additional transitions of accounting and finance activities to our global business service centers are planned over the exception ofcoming year.
Review by Independent Registered Public Accounting Firm
A review of the interim condensed consolidated financial information included in this Quarterly Report on Form 10-Q for the three and nine months ended September 30, 2017 and 2016 has been performed by PricewaterhouseCoopers LLP, the company’s independent registered public accounting firm. Its report on the interim condensed consolidated financial information follows. This report is not considered a report within the meaning of Sections 7 and 11 of the Securities Act of 1933 and therefore, the independent accountants’ liability under Section 11 does not extend to it.
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of Baxter International Inc.
We have reviewed the accompanying condensed consolidated balance sheet of Baxter International Inc. and its subsidiaries as of September 30, 2017, and the related condensed consolidated statements of income and of comprehensive income for the three-month and nine-month periods ended September 30, 2017 and 2016 and the condensed consolidated statements of cash flows for the nine-month periods ended September 30, 2017 and 2016. These interim financial statements are the responsibility of the Company’s management.
We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should be made to the accompanying condensed consolidated interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.
We previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet as of December 31, 2016, and the related consolidated statements of income, of comprehensive income, of cash flows and of changes in equity for the year then ended (not presented herein), and in our report dated February 23, 2017, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet information as of December 31, 2016 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.
/s/ PricewaterhouseCoopers LLP
Chicago, Illinois
November 2, 2017
| Item 1. Legal Proceedings |
The following table includes information about
Issuer Purchases of Equity Securities |
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|
Period |
| Total number of shares purchased (1) |
|
| Average price paid per share |
|
| Total number of shares purchased as part of publicly announced program(1) |
|
| Approximate dollar value of shares that may yet be purchased under the program(1) |
| ||||
July 1, 2017 through July 31, 2017 |
| — |
|
| $ | — |
|
| — |
|
|
|
|
| ||
August 1, 2017 through August 31, 2017 |
|
| 2,082,000 |
|
| $ | 61.05 |
|
|
| 2,082,000 |
|
|
|
|
|
September 1, 2017 through September 30, 2017 |
|
| 834,700 |
|
| $ | 62.78 |
|
|
| 834,700 |
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|
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|
|
Total |
|
| 2,916,700 |
|
| $ | 61.54 |
|
|
| 2,916,700 |
|
| $ | 1,408,670,768 |
|
Period | Total number of shares purchased (1) | Average price paid per share | Total number of shares purchased as part of publicly announced program(1) | Approximate dollar value of shares that may yet be purchased under the program(1) | ||||||||||
July 1, 2022 through July 31, 2022 | 375,000 | $ | 64.80 | 375,000 | ||||||||||
August 1, 2022 through August 31, 2022 | — | $ | — | — | ||||||||||
September 1, 2022 through September 30, 2022 | — | $ | — | — | ||||||||||
Total | 375,000 | $ | 64.80 | 375,000 | $ | 1,264,718,521 |
Exhibit Index:
|
| ||||||||||
Exhibit Number | Description | ||||||||||
10.1 | |||||||||||
10.2 | |||||||||||
10.3 | |||||||||||
10.4 | |||||||||||
10.5 | |||||||||||
31.1* | |||||||||||
101.INS* | XBRL Instance Document | ||||||||||
101.SCH* | XBRL Taxonomy Extension Schema Document | ||||||||||
101.CAL* | XBRL Taxonomy Extension Calculation Linkbase Document | ||||||||||
101.LAB* | |||||||||||
| XBRL Taxonomy Extension Label Linkbase Document | ||||||||||
101.PRE* | |||||||||||
| XBRL Taxonomy Extension Presentation Linkbase Document | ||||||||||
101.DEF* | |||||||||||
| XBRL Taxonomy Extension Definition Linkbase Document | ||||||||||
104* | Cover Page Interactive Data File (formatted as Inline XBRL and contained within the Inline XBRL Instance Document in Exhibit 101) |
| * Filed herewith. |
BAXTER INTERNATIONAL INC. | ||||||||||||
(Registrant) | ||||||||||||
Date: October 27, 2022 | ||||||||||||
| By: |
| /s/ James K. Saccaro | |||||||||
James K. Saccaro | ||||||||||||
| ||||||||||||
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45