- First-Quarter Revenue of $2.5
Billion Increased 4 Percent on a Reported Basis and 7 Percent on an
Operational Basis
- First-Quarter GAAP Earnings Per
Share of $0.50; Adjusted Earnings of $0.58 per Share Increased 61
Percent
- Company Increases Full-Year 2017
Sales Growth Outlook to 1 to 2 Percent on a Reported Basis and 4 to
5 Percent on an Operational Basis
- Raises Full-Year 2017 GAAP EPS to
$1.66 to $1.80; Adjusted EPS to $2.20 to $2.28
Baxter International Inc. (NYSE:BAX) today reported results for
the first quarter of 2017 and increased its full-year 2017
guidance.
“Encouraged by a solid start to 2017 and the on-going momentum
of our business transformation initiatives, we are raising our
full-year sales and earnings outlook,” said José (Joe) E. Almeida,
chairman and chief executive officer. “We are driving growth
through disciplined execution and particular strength across our
U.S. businesses. We will continue to invest in evolving our
portfolio through the introduction of innovative products and
technologies along with geographic expansion to deliver future
growth.”
First-Quarter Financial Results
In the first quarter, worldwide sales totaled $2.5 billion, an
increase of 4 percent on a reported basis and 5 percent on a
constant currency basis as compared to the prior-year period.
Operationally, Baxter’s sales rose 7 percent, which excludes the
impact of foreign exchange, generic competition for U.S.
cyclophosphamide and the previously communicated select strategic
product exits the company is undertaking.
Sales within the U.S. were $1.1 billion, advancing 11 percent on
a reported basis. International sales of $1.4 billion declined 1
percent on a reported basis and were comparable to the prior year
on a constant currency basis. Baxter’s operational sales increased
13 percent in the U.S. and 2 percent internationally.
Global sales for Hospital Products totaled $1.6 billion in the
first quarter, increasing 7 percent on both a reported and constant
currency basis and advancing 10 percent operationally as compared
to the prior-year period. Contributing to performance in the
quarter were strong U.S. sales of IV therapies, IV access sets, and
select anesthesia and critical care products along with favorable
demand for parenteral nutrition therapies and international
biosurgery products.
Baxter’s Renal sales totaled $896 million, comparable to the
prior year on a reported basis and grew 1 percent globally on a
constant currency basis. Operationally, global Renal sales advanced
2 percent benefitting from increased sales of peritoneal dialysis
therapies driven by the continued adoption of the company’s newest
Automated Peritoneal Dialysis (APD) cyclers - AMIA in the U.S. and
HOMECHOICE CLARIA in international markets. Additionally, sales of
Baxter’s acute renal care products advanced globally, reflecting
growing demand for continuous renal replacement therapies
(CRRT).
Baxter reported income from continuing operations of $273
million, or $0.50 per diluted share, on a GAAP (Generally Accepted
Accounting Principles) basis for the first quarter. These results
included special items totaling $62 million ($45 million net
after-tax), primarily related to business optimization and
intangible asset amortization.
On an adjusted basis, excluding special items, Baxter’s first
quarter income from continuing operations totaled $318 million, or
$0.58 per diluted share, exceeding the company’s previously issued
guidance of $0.50 to $0.52 per diluted share.
Business Highlights
Baxter has recently achieved a number of operational, pipeline
and commercial milestones in support of its strategy to drive
accelerated growth and deliver meaningful innovation for patients
and healthcare professionals around the world.
- In Surgical Care:
- Introduced customer-centric
enhancements to Baxter’s leading hemostatic agents, FLOSEAL and
TISSEEL, designed to enhance patient safety and ease of use for
clinicians.
- Published two health economic data
analyses in the Journal of Medical Economics supporting FLOSEAL as
a cost-effective hemostat that may contribute to broader cost
savings at hospitals as compared to other options.
- Acquired Wound Care Technologies
Incorporated, manufacturer of the DERMACLOSE Continuous Tissue
Expander, an innovative wound closure technology that is
complementary to Baxter’s surgical portfolio and directly leverages
its existing expertise and channel strength.
- In Integrated Pharmacy Solutions:
- Entered into an exclusive strategic
partnership with Scinopharm, one of the world’s leading active
pharmaceutical ingredient (API) manufacturers, to bring to market
five generic injectables used in cancer treatments, with an option
to add up to 15 additional injectable molecules.
- In Renal:
- Surpassed 500,000 patient treatments
administered globally utilizing Baxter’s SHARESOURCE Connectivity
Platform. SHARESOURCE is the first and only two-way remote patient
management system for home dialysis therapy and is available on
both AMIA and HOMECHOICE CLARIA APD cyclers.
- Successful deployment of PRISMAX,
Baxter’s next generation continuous renal replacement therapy
platform, in several European locations as part of an initial
limited distribution prior to the planned full-scale launch in
2018.
Financial Outlook
- For full-year
2017: Based on the company’s strong first quarter, Baxter is
raising its financial outlook for the year. The company now expects
sales growth of approximately 1 to 2 percent on a reported basis or
2 to 3 percent on a constant currency basis, and earnings from
continuing operations, before special items, of $2.20 to $2.28 per
diluted share for the full year. Adjusting for the impact of
generic cyclophosphamide competition (an estimated one percent) and
selected strategic product exits (an estimated one percent), Baxter
expects underlying constant currency sales growth of approximately
4 to 5 percent. This guidance does not include any impact from the
company’s proposed acquisition of Claris Injectables, which is
expected to close in the second half of 2017.
- For the second
quarter: The company expects flat sales growth on a reported
basis, or approximately 2 percent on a constant currency basis.
Adjusting for the impact of generic cyclophosphamide competition
(less than an estimated one-half percent) and selected strategic
product exits (less than an estimated 1 percent), Baxter expects
underlying constant currency sales growth of approximately 3
percent. The company expects earnings from continuing operations,
before special items, of $0.55 to $0.57 per diluted share.
Please see the schedules accompanying this press release for a
reconciliation between the projected 2017 adjusted earnings per
diluted share and projected GAAP earnings per diluted share.
A webcast of Baxter's first quarter conference call for
investors can be accessed live from a link on the company's website
at www.baxter.com beginning at 7:30 a.m. CT on April 26, 2017.
Please see www.baxter.com for more information regarding this and
future investor events and webcasts.
Baxter provides a broad portfolio of essential renal and
hospital products, including home, acute and in-center dialysis;
sterile IV solutions; infusion systems and devices; parenteral
nutrition; biosurgery products and anesthetics; and pharmacy
automation, software and services. The company’s global footprint
and the critical nature of its products and services play a key
role in expanding access to healthcare in emerging and developed
countries. Baxter’s employees worldwide are building upon the
company’s rich heritage of medical breakthroughs to advance the
next generation of healthcare innovations that enable patient
care.
This release includes forward-looking statements concerning the
company’s financial results, business development activities,
capital structure, cost savings initiatives, R&D pipeline
including results of clinical trials and planned product launches,
and outlook for 2017. The statements are based on assumptions about
many important factors, including the following, which could cause
actual results to differ materially from those in the
forward-looking statements: demand for and market acceptance of
risks for new and existing products, and the impact of those
products on quality or patient safety concerns; product development
risks; product quality or patient safety concerns; future actions
of regulatory bodies and other governmental authorities, including
the FDA, the Department of Justice, the New York Attorney General
and foreign counterparts; failures with respect to compliance
programs; future actions of third parties, including payers; U.S.
healthcare reform and other global austerity measures; pricing,
reimbursement, taxation and rebate policies of government agencies
and private payers; the impact of competitive products and pricing,
including generic competition, drug reimportation and disruptive
technologies; global, trade and tax policies; accurate
identification of and execution on business development and R&D
opportunities and realization of anticipated benefits (including
the proposed acquisition of Claris Injectables); fluctuations in
supply and demand; the availability of acceptable raw materials and
component supply; the inability to create timely production
capacity or other manufacturing supply difficulties; the ability to
achieve the intended results associated with the separation of the
biopharmaceutical and medical products businesses; the ability to
enforce owned or in-licensed patents or the patents of third
parties preventing or restricting manufacture, sale or use of
affected products or technology; the impact of global economic
conditions; fluctuations in foreign exchange and interest rates;
any change in law concerning the taxation of income, including
income earned outside the United States; actions taken by tax
authorities in connection with ongoing tax audits; breaches or
failures of the company’s information technology systems; loss of
key employees or 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 risks
identified in Baxter’s most recent filing on Form 10-K and other
Securities and Exchange Commission filings, all of which are
available on Baxter’s website. Baxter does not undertake to update
its forward-looking statements.
BAXTER INTERNATIONAL INC. Consolidated
Statements of Income Three Months Ended March 31, 2017 and
2016 (unaudited) (in millions, except per share and
percentage data) Three Months Ended
March 31, 2017 2016 Change
NET SALES $2,475 $2,375 4%
COST OF
SALES 1,433 1,410 2%
GROSS MARGIN 1,042 965
8%
% of Net Sales 42.1% 40.6% 1.5 pts
MARKETING AND ADMINISTRATIVE EXPENSES 570 641 (11%)
% of Net Sales 23.0% 27.0% (4 pts)
RESEARCH
AND DEVELOPMENT EXPENSES 128 136 (6%)
% of Net
Sales 5.2% 5.7% (0.5 pts)
OPERATING INCOME 344
188 83%
% of Net Sales 13.9% 7.9% 6 pts
NET INTEREST EXPENSE 14 28 (50%)
OTHER EXPENSE (INCOME), NET 2 (3,169) (100%)
INCOME FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES 328 3,329
(90%)
INCOME TAX EXPENSE (BENEFIT)
55 (58) (195%)
% of Income from Continuing
Operations before Income Taxes 16.8%
(1.7%)
18.5 pts
INCOME FROM CONTINUING OPERATIONS 273
3,387 (92%)
LOSS FROM DISCONTINUED OPERATIONS, NET OF
TAX A (1) (7) (86%)
NET INCOME
$272 $3,380 (92%)
INCOME FROM
CONTINUING OPERATIONS PER COMMON SHARE Basic
$0.50 $6.17 (92%)
Diluted
$0.50 $6.13 (92%)
LOSS FROM
DISCONTINUED OPERATIONS PER COMMON SHARE Basic
$0.00 ($0.01) (100%)
Diluted
($0.01)
($0.01) 0%
NET INCOME PER COMMON SHARE
Basic $0.50 $6.16 (92%)
Diluted $0.49 $6.12 (92%)
WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
Basic 541 549
Diluted 551
552
ADJUSTED OPERATING INCOME (excluding
special items) $406 B $249
B 63%
ADJUSTED PRE-TAX INCOME FROM CONTINUING OPERATIONS (excluding
special items) $390 B $248
B 57%
ADJUSTED INCOME FROM CONTINUING OPERATIONS (excluding special
items) $318 B $199
B 60%
ADJUSTED
DILUTED EPS FROM CONTINUING OPERATIONS (excluding special
items) $0.58 B $0.36
B 61%
A
Operating results from Baxalta Incorporated ("Baxalta") are
classified as discontinued operations for all periods presented.
B Refer to page 9 for a description
of the adjustments and a reconciliation to GAAP measures.
BAXTER INTERNATIONAL INC. Note to
Consolidated Statements of Income Three Months Ended March
31, 2017 and 2016 Description of Adjustments and
Reconciliation of GAAP to Non-GAAP Measures (unaudited)
(in millions, except per share and percentage data)
The company's GAAP results for the three
months ended March 31, 2017 and 2016 included special items which
impacted the GAAP measures as follows:
Three Months
Ended
March 31,
2017 2016 Change Gross Margin
$1,042 $965 8% Intangible asset amortization expense
1 38 40 Business optimization items
2
16 12 Product-related items
4 - (12)
Adjusted Gross Margin $1,096
$1,005 9%
% of Net Sales 44.3% 42.3% 2 pts
Marketing and Administrative Expenses $570
$641 (11%) Business optimization items
2 (15) (3)
Baxalta separation-related costs
3 (7) (18)
Historical rebate and discount adjustments
5 12
-
Adjusted Marketing and Administrative
Expenses $560 $620 (10%)
% of Net
Sales 22.6% 26.1% (3.5 pts)
Research and
Development Expenses $128 $136 (6%) Business
optimization items
2 2 -
Adjusted Research and Development Expenses $130
$136 (4%)
% of Net Sales 5.3% 5.7% (0.4
pts)
Operating Income $344 $188 83% Impact of
special items
62 61
Adjusted
Operating Income $406 $249 63%
% of Net
Sales 16.4% 10.5% 5.9 pts
Other Expense
(Income), Net $2 $(3,169) (100%) Net realized gains on
Retained Shares transactions
6 - 3,243 Loss on debt
extinguishment
7 - (101)
Adjusted Other Expense (Income), Net $2 $(27)
(107%)
Pre-Tax Income from Continuing
Operations $328 $3,329 (90%) Impact of special items
62 (3,081)
Adjusted Pre-Tax Income
from Continuing Operations $390 $248 57%
Income Tax Expense (Benefit) $55 $(58) (195%)
Impact of special items
17 107
Adjusted Income Tax Expense $72 $49 47%
% of Adjusted Pre-Tax Income from Continuing Operations
18.5% 19.8% (1.3 pts)
Income from Continuing
Operations $273 $3,387 (92%) Impact of special items
45 (3,188)
Adjusted Income from
Continuing Operations $318 $199 60%
Diluted EPS from Continuing Operations $0.50 $6.13
(92%) Impact of special items
0.08 (5.77)
Adjusted Diluted EPS from Continuing Operations
$0.58 $0.36 61%
WEIGHTED-AVERAGE
NUMBER OF COMMON SHARES OUTSTANDING Diluted
551 552
1 The company's
results in 2017 and 2016 included intangible asset amortization
expense of $38 million ($28 million, or $0.05 per diluted share, on
an after-tax basis) and $40 million ($29 million, or $0.05 per
diluted share, on an after-tax basis), respectively.
2 The company's results in 2017 included a net charge of $29
million ($21 million, or $0.04 per diluted share, on an after-tax
basis) related to business optimization initiatives. This included
a net charge of $3 million related to restructuring activities, $21
million of costs to implement business optimization programs which
primarily included external consulting and project employee costs,
and $5 million of accelerated depreciation associated with
facilities to be closed. The $3 million of net restructuring
charges ($2 million, or $0.00 per diluted share, on an after-tax
basis) included net $2 million of employee termination costs and $1
million related to contract termination costs. The company’s
results in 2016 included a net charge of $15 million ($10 million,
or $0.02 per diluted share, on an after-tax basis) related to
business optimization initiatives. This included a net charge of $4
million related to restructuring activities, $4 million of costs to
implement business optimization programs which primarily included
external consulting fees, and $7 million of Gambro integration
costs. The $4 million of net restructuring charges ($2 million, or
$0.00 per diluted share, on an after-tax basis) related to employee
termination costs.
3 The company's results in 2017
and 2016 included costs incurred related to the Baxalta separation
totaling $7 million ($5 million, or $0.01 per diluted share, on an
after-tax basis) and $18 million ($12 million, or $0.02 per diluted
share, on an after-tax basis), respectively.
4 The
company's results in 2016 included a benefit of $12 million ($7
million, or $0.01 per diluted share, on an after-tax basis) related
to an adjustment to the SIGMA SPECTRUM infusion pump reserves.
5 The company's results in 2017 included a benefit of
$12 million ($9 million, or $0.02 per diluted share, on an
after-tax basis) related to an adjustment to the company's
historical rebates and discount reserves.
6 The
company’s results in 2016 included net realized gains of $3.2
billion ($3.3 billion, or $5.97 per diluted share, on an after-tax
basis), related to the debt-for-equity exchanges of the company’s
retained shares in Baxalta for certain company indebtedness
(together the “Retained Shares transactions”). A tax benefit of $54
million was recognized as a result of the Retained Shares
transactions.
7
The company’s results in 2016 included a
net debt extinguishment loss totaling $101 million ($65 million, or
$0.12 per diluted share, on an after-tax basis) related to the
March 2016 debt-for-equity exchange for certain company
indebtedness in a Retained Shares transaction.
For more information on the company's use of non-GAAP
financial measures in this press release, please see the company's
Current Report on Form 8-K filed with the Securities and Exchange
Commission on the date of this press release.
BAXTER INTERNATIONAL INC. Net Sales Periods Ending
March 31, 2017 and 2016 (unaudited) ($ in
millions)
Q1
Q1 % Growth @ %
Growth @
2017 2016 Actual
Rates Constant Rates
Renal United States $216
$201 7% 7% International
680 697 (2%) (1%)
Total Renal
$896 $898 (0%)
1%
Hospital Products United States $887 $791 12%
12% International 692
686 1% 2%
Total
Hospital Products
$1,579 $1,477 7%
7%
Baxter International Inc. United States $1,103
$992 11% 11% International
1,372 1,383 (1%)
0%
Total Baxter
$2,475 $2,375 4%
5% BAXTER INTERNATIONAL
INC. Sales by Franchise Periods Ending March 31, 2017
and 2016 (unaudited) ($ in millions)
Q1 Q1
% Growth @ % Growth @
2017
2016 Actual Rates
Constant Rates
Total Renal 1
$896 $898
(0%) 1%
Hospital Products Fluid Systems
2 $585 $524 12% 12% Integrated Pharmacy Solutions
3
552 556 (1%) 0% Surgical Care
4 334 305 10% 10% Other
5 108 92
17% 18%
Total Hospital Products
$1,579
$1,477 7% 7%
Total
Baxter $2,475
$2,375 4%
5% 1 Includes sales of the company's
peritoneal dialysis, hemodialysis and continuous renal replacement
therapies.
2 Includes sales of the company's IV
therapies, infusion pumps and administration sets.
3
Includes sales of the company's premixed and oncology drug
platforms, nutrition products and pharmacy compounding services.
4 Includes sales of the company's inhaled anesthesia
products as well as biological products and medical devices used in
surgical procedures for hemostasis, tissue sealing and adhesion
prevention.
5 Includes sales primarily from the
company's pharmaceutical partnering business.
BAXTER INTERNATIONAL INC. Franchise Sales by U.S. and
International Periods Ending March 31, 2017 and 2016
(unaudited) ($ in millions)
Q1 2017
Q1 2016 %
Growth U.S.
International Total
U.S. International Total
U.S. International
Total
Total Renal $216
$680 $896 $201
$697 $898
7% (2%) 0%
Hospital Products
Fluid Systems $359 $226 $585 $298 $226 $524 20% 0% 12%
Integrated Pharmacy Solutions 266 286 552 264 292 556 1% (2%) (1%)
Surgical Care 202 132 334 181 124 305 12% 6% 10% Other
60 48 108 48
44 92 25% 9% 17%
Total Hospital Products $887
$692 $1,579
$791 $686 $1,477
12% 1% 7%
Total Baxter
$1,103 $1,372
$2,475 $992 $1,383
$2,375 11%
(1%) 4% BAXTER INTERNATIONAL
INC. Free Cash Flow Reconciliation (unaudited)
($ in millions)
Three Months Ended March 31,
2017
2016 Cash flows from operations - continuing
operations $206
($174) Capital expenditures
(123) (184)
Free cash flow -
continuing operations
$83 ($358) BAXTER
INTERNATIONAL INC. Reconciliation of Non-GAAP Financial
Measure Change in Net Sales As Reported to Operational
Sales From The Three Months Ended March 31, 2016 to The
Three Months Ended March 31, 2017 (unaudited)
Q1 2017 Net sales US Product
Operational As
Reported Cyclophosphamide Exits
FX Sales
Total Renal
0% 0%
1% 1% 2%
Hospital
Products Fluid Systems 12% 0% 1% 0% 13% Integrated Pharmacy
Solutions -1% 3% 1% 1% 4% Surgical Care 10% 0% 1% 0% 11% Other
17% 0% 0%
1% 18%
Total Hospital Products
7% 2%
1% 0% 10%
Baxter
International Inc. United States 11% 2% 0% 0% 13% International
-1% 0% 2% 1% 2%
Total Baxter
4% 1% 1%
1% 7% BAXTER
INTERNATIONAL INC. Reconciliation of Non-GAAP Financial
Measure Projected 2017 Adjusted Earnings Per Share and
Projected GAAP Earnings Per Share (unaudited)
2017 Earnings Per Share Guidance
Q2 2017
FY 2017 Earnings per Diluted Share –
Adjusted $0.55 -
$0.57 $2.20 - $2.28
Estimated intangible asset amortization
$0.05 $0.20 Estimated
business optimization charges
$0.15 - $0.18 $0.27 - $0.33
Estimated Baxalta separation-related expenses
$0.01 $0.02
Historical rebate and discount adjustments
- ($0.01)
Earnings per Diluted Share - GAAP
$0.31 - $0.36
$1.66 - $1.80
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170426005688/en/
Baxter International Inc.Media Contact:Bill Rader, (224)
948-5353media@baxter.comorInvestor Contact:Clare Trachtman,
(224) 948-3085
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