Attached files
| file | filename |
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| 8-K - 8-K - BAXTER INTERNATIONAL INC | d612965d8k.htm |
Exhibit 99.1
FOR IMMEDIATE RELEASE
Media Contact:
Deborah Spak, (224) 948-2349
Investor Contacts:
Mary Kay Ladone, (224) 948-3371
BAXTER MEETS EXPECTATIONS WITH SOLID FINANCIAL RESULTS
FOR THE THIRD QUARTER 2013
Company Further Advances Its Portfolio With Acquisitions and Collaborations, While Achieving New Product Pipeline Milestones
DEERFIELD, Ill., October 17, 2013 — Baxter International Inc. (NYSE:BAX) today posted solid financial results for the third quarter which met expectations as the company further augmented its portfolio with the acquisition of Gambro AB, and continued to advance its new product pipeline by launching new products, achieving multiple regulatory milestones, and establishing new collaborations. The company also provided guidance for the fourth quarter and confirmed its full-year 2013 financial outlook.
For the third quarter, Baxter reported net income of $544 million and earnings per diluted share of $0.99, compared to net income of $583 million and earnings per diluted share of $1.06 in the same period last year. These results include after-tax special items totaling $111 million (or $0.20 per diluted share), for costs associated with Baxter’s acquisition of Gambro, which was completed in the quarter, increased litigation reserves and payments associated with previously announced collaborations. Third quarter 2012 results included after-tax special items of $45 million (or $0.08 per diluted share).
On an adjusted basis, excluding special items in both periods, Baxter’s net income and earnings per diluted share advanced 4 percent to $655 million, or $1.19 per diluted share, which was in line with the company’s previously-issued earnings guidance.
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BAXTER REPORTS 3rd QUARTER FINANCIAL RESULTS — Page 2
Worldwide sales totaled $3.8 billion and increased 9 percent from prior-year levels. Excluding the contribution of Gambro revenues, which totaled $100 million, Baxter’s sales increased 6 percent. Foreign currency did not have a material impact on sales growth in the quarter. Sales within the United States exceeded $1.6 billion and advanced 9 percent, and international sales of $2.1 billion also increased 9 percent.
BioScience revenues of $1.6 billion rose 6 percent from the prior-year period driven primarily by improved demand for the company’s hemophilia therapies, including ADVATE [Antihemophilic Factor (Recombinant), Plasma/Albumin-Free Method] and FEIBA (an inhibitor therapy), as well as the benefit from government collaborations and the timing of international tenders.
Medical Products sales of $2.2 billion increased 10 percent from the prior-year period, and includes revenues associated with the Gambro acquisition. Excluding foreign currency and the contribution from the acquisition, Medical Products sales grew 6 percent. This performance was driven by gains in peritoneal dialysis patients, as well as growth of anesthetics and certain injectable therapies, specifically cyclophosphamide, a generic oncology drug.
Nine-Month Results
For the first nine months of 2013, Baxter reported net income of $1.7 billion, or $3.06 per diluted share. Excluding special items in both periods, Baxter’s adjusted net income for the nine-month period increased 3 percent to $1.9 billion, and earnings per diluted share of $3.41 grew 4 percent from $3.27 per diluted share reported in the comparable prior-year period.
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BAXTER REPORTS 3rd QUARTER FINANCIAL RESULTS — Page 3
Baxter’s worldwide sales for the nine-month period totaled $10.9 billion and rose 4 percent. Excluding the impact of foreign currency and revenues associated with the Gambro acquisition, Baxter’s revenues also increased 4 percent. BioScience sales of $4.8 billion advanced 5 percent (and excluding foreign currency sales increased 6 percent), while Medical Products sales of $6.1 billion grew 4 percent from the prior-year period (and excluding foreign currency sales also increased 4 percent). Excluding foreign currency and revenues associated with the Gambro acquisition, Medical Products sales increased 2 percent on a year-to-date basis.
During the first three quarters of 2013, Baxter generated cash flows from operations of approximately $2.1 billion and returned significant value to shareholders. On a year-to-date basis, Baxter has returned over $1.6 billion to shareholders through share repurchases of $863 million (or approximately 12.4 million shares) and dividends totaling $757 million, reflecting more than a 35 percent increase in dividend payments versus the prior-year period.
“Our global presence and diversified healthcare model, together with the advancements we’ve made to our business portfolio and new product pipeline are focused on driving improved access to care, better outcomes for patients and enhanced value for our shareholders,” said Robert L. Parkinson, Jr., chairman and chief executive officer.
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BAXTER REPORTS 3rd QUARTER FINANCIAL RESULTS — Page 4
Recent Highlights
Baxter continued to advance its product pipeline and expand its business portfolio with the achievement of several milestones during the quarter, including:
| • | Launch of HyQvia as a replacement therapy for adults with primary and secondary immunodeficiencies in Germany. Additional EU market launches are scheduled for the coming months and U.S. regulatory activities remain on track. |
| • | U.S. launch of RIXUBIS [Coagulation Factor IX (Recombinant)] for routine prophylactic treatment, control of bleeding episodes, and perioperative management in adults with hemophilia B. RIXUBIS is the first new recombinant factor IX (rFIX) approved for hemophilia B in more than 15 years and is the only rFIX indicated for both routine prophylaxis and control of bleeding episodes for adult patients living with this chronic condition. |
| • | Continued global expansion of the company’s parenteral nutrition portfolio with the launch of CLINOMEL in China and OLIMEL in Brazil. Baxter also received U.S. Food and Drug Administration approval for its CLINOLIPID, (20% Lipid Injectable Emulsion), an olive oil-based lipid emulsion used in parenteral nutrition, indicated for adults. |
| • | Approval from the EMA to include PK-guided dosing information in ADVATE’s EU label. This information is based on a Phase IV prophylaxis clinical study and offers some patients the option of a dosing schedule of every three days. In the study, PK-guided and standard prophylactic dosing regimens were comparably effective in reducing annual bleeding rates. |
| • | Execution of an exclusive distribution and license agreement between Baxter and JW Holdings for parenteral nutritional products containing a novel formulation of omega 3 lipids. With this collaboration, Baxter will complement its leading global parenteral nutrition portfolio, and provide global commercial capabilities and clinical development. |
| • | Announcement of an exclusive collaboration with Coherus Biosciences to develop and commercialize a biosimilar to etanercept in Europe, Canada, Brazil and other markets. |
Outlook for Fourth Quarter and Full-Year 2013
Baxter also announced today its financial outlook for the fourth quarter and confirmed earnings guidance within its previously stated range for the full-year 2013. The company’s guidance for the quarter and the full-year includes the impact of the Gambro acquisition.
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BAXTER REPORTS 3rd QUARTER FINANCIAL RESULTS — Page 5
For the fourth quarter of 2013, Baxter expects sales growth, excluding the impact of foreign currency, of approximately 14 to 15 percent (or approximately 12 to 13 percent including the impact of foreign currency). This includes Gambro revenues of approximately $400 million. The company projects earnings per diluted share in the fourth quarter of $1.24 to $1.26, before any special items.
For the full-year 2013, Baxter expects sales growth, excluding the impact of currency, of approximately 7 percent (or approximately 6 percent including the impact of foreign currency). Excluding the impact of foreign currency and the Gambro acquisition, Baxter continues to expect sales growth of approximately 4 percent (or approximately 3 percent including the impact of foreign currency). The company expects to generate revenues associated with the Gambro acquisition of approximately $500 million for the full year 2013. In addition, the company expects earnings of $4.65 to $4.67 per diluted share, before any special items, and cash flows from operations of approximately $3.3 billion.
A webcast of Baxter’s third quarter conference call for investors can be accessed live from a link on the company’s website at www.baxter.com beginning at 7:30 a.m. CDT on October 17, 2013. Please visit Baxter’s website for more information regarding this and future investor events and webcasts.
Baxter International Inc., through its subsidiaries, develops, manufactures and markets products that save and sustain the lives of people with hemophilia, immune disorders, infectious diseases, kidney disease, trauma, and other chronic and acute medical conditions. As a global, diversified healthcare company, Baxter applies a unique combination of expertise in medical devices, pharmaceuticals and biotechnology to create products that advance patient care worldwide.
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BAXTER REPORTS 3rd QUARTER FINANCIAL RESULTS — Page 6
This release includes forward-looking statements concerning the company’s financial results, business development activities, R&D pipeline and outlook for 2013, including as impacted by the Gambro AB acquisition. The statements are based on assumptions about many important factors, including the following, which could cause actual results to differ materially from those in the forward-looking statements: demand for and market acceptance of risks for new and existing products, such as ADVATE, and other technologies; future actions of regulatory bodies and other governmental authorities that could delay, limit or suspend product development, manufacturing or sales or result in sanctions; product quality or patient safety concerns leading to product recalls, withdrawals, launch delays, litigation, or declining sales; future actions of governmental authorities and other third parties as U.S. healthcare reform legislation and other austerity measures are implemented globally; additional legislation, regulation and other governmental pressures, which may affect pricing, taxation, reimbursement and rebate policies of government agencies and private payers or other elements of the company’s business; product development risks, including satisfactory clinical performance; the company’s ability to realize the anticipated benefits from its business development and R&D activities, including the ability to successfully integrate the Gambro acquisition; inventory reductions or fluctuations in buying patterns by wholesalers or distributors; the impact of geographic and product mix on the company’s sales; the impact of competitive products and pricing, including generic competition, drug reimportation and disruptive technologies; the availability of acceptable raw materials and component supply; fluctuations in supply and demand and the pricing of plasma-based therapies; the ability to enforce company patents; patents of third parties preventing or restricting the company’s manufacture, sale or use of affected products or technology; the impact of global economic conditions on Baxter and its customers, including foreign governments in certain countries in which the company operates; foreign currency fluctuations and other risks identified in the company’s most recent filing on Form 10-K and other Securities and Exchange Commission filings, all of which are available on the company’s website. The company does not undertake to update its forward-looking statements. Financial schedules are attached to this release and available on the company’s website.
# # #
BAXTER — PAGE 7
BAXTER INTERNATIONAL INC.
Consolidated Statements of Income
Three Months Ended September 30, 2013 and 2012
(unaudited)
(in millions, except per share and percentage data)
| Three Months Ended September 30, |
||||||||||||
| 2013 | 2012 | Change | ||||||||||
| NET SALES |
$ 3,774 | $ 3,477 | 9% | |||||||||
| COST OF SALES |
1,828 | 1,667 | 10% | |||||||||
|
|
||||||||||||
| GROSS MARGIN |
1,946 | 1,810 | 8% | |||||||||
|
|
||||||||||||
| % of Net Sales |
51.6% | 52.1% | (0.5 pts | ) | ||||||||
| MARKETING AND ADMINISTRATIVE EXPENSES |
984 | 743 | 32% | |||||||||
| % of Net Sales |
26.1% | 21.4% | 4.7 pts | |||||||||
| RESEARCH AND DEVELOPMENT EXPENSES |
290 | 290 | 0% | |||||||||
| % of Net Sales |
7.7% | 8.3% | (0.6 pts | ) | ||||||||
| NET INTEREST EXPENSE |
45 | 25 | 80% | |||||||||
| OTHER INCOME, NET |
(55 | ) | (14 | ) | N/M | |||||||
|
|
||||||||||||
| PRE-TAX INCOME |
682 | 766 | (11% | ) | ||||||||
|
|
||||||||||||
| INCOME TAX EXPENSE |
138 | 183 | (25% | ) | ||||||||
|
|
||||||||||||
| % of Pre-Tax Income |
20.2% | 23.9% | (3.7 pts | ) | ||||||||
| NET INCOME |
$ 544 | $ 583 | (7% | ) | ||||||||
|
|
||||||||||||
| BASIC EPS |
$ 1.00 | $ 1.07 | (7% | ) | ||||||||
|
|
||||||||||||
| DILUTED EPS |
$ 0.99 | $ 1.06 | (7% | ) | ||||||||
|
|
||||||||||||
| WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING |
||||||||||||
| Basic |
543 | 548 | ||||||||||
| Diluted |
549 | 552 | ||||||||||
|
|
||||||||||||
| ADJUSTED PRE-TAX INCOME (excluding special items) |
$ 834 | A | $ 816 | A | 2% | |||||||
| ADJUSTED NET INCOME (excluding special items) |
$ 655 | A | $ 628 | A | 4% | |||||||
| ADJUSTED DILUTED EPS (excluding special items) |
$ 1.19 | A | $ 1.14 | A | 4% | |||||||
| A | Refer to page 8 for a description of the adjustments and a reconciliation to generally accepted accounting principles (GAAP) measures. |
BAXTER — PAGE 8
BAXTER INTERNATIONAL INC.
Note to Consolidated Statements of Income
Three Months Ended September 30, 2013 and 2012
Description of Adjustments and Reconciliation of GAAP to Non-GAAP Measures
(unaudited)
(in millions, except per share and percentage data)
The company’s GAAP results for the three months ended September 30, 2013 and 2012 included special items which impacted the GAAP measures as follows:
| Three Months Ended | ||||||||||||
| September 30, | ||||||||||||
| 2013 | 2012 | Change | ||||||||||
| Gross Margin |
$ 1,946 | $ 1,810 | 8% | |||||||||
| Gambro acquisition and integration items 1 |
15 | — | ||||||||||
|
|
|
|||||||||||
| Adjusted Gross Margin |
$ 1,961 | $ 1,810 | 8% | |||||||||
|
|
|
|||||||||||
| % of Net Sales |
52.0% | 52.1% | (0.1 pts | ) | ||||||||
| Marketing and Administrative Expenses |
$ 984 | $ 743 | 32% | |||||||||
| Gambro acquisition and integration items 1 |
(33 | ) | — | |||||||||
| Tax and legal reserves 2 |
(124 | ) | — | |||||||||
|
|
|
|||||||||||
| Adjusted Marketing and Administrative Expenses |
$ 827 | $ 743 | 11% | |||||||||
|
|
|
|||||||||||
| % of Net Sales |
21.9% | 21.4% | 0.5 pts | |||||||||
| Research and Development Expenses |
$ 290 | $ 290 | 0% | |||||||||
| Business development items 3 |
(25 | ) | (50 | ) | ||||||||
|
|
|
|||||||||||
| Adjusted Research and Development Expenses |
$ 265 | $ 240 | 10% | |||||||||
|
|
|
|||||||||||
| % of Net Sales |
7.0% | 6.9% | 0.1 pts | |||||||||
| Other Income, Net |
$ (55 | ) | $ (14 | ) | N/M | |||||||
| Gambro acquisition and integration items 1 |
(10 | ) | — | |||||||||
| Tax and legal reserves 2 |
35 | — | ||||||||||
| Currency-related items 4 |
20 | — | ||||||||||
|
|
|
|||||||||||
| Adjusted Other Income, Net |
$ (10 | ) | $ (14 | ) | N/M | |||||||
|
|
|
|||||||||||
| Pre-Tax Income |
$ 682 | $ 766 | (11% | ) | ||||||||
| Impact of special items |
152 | 50 | ||||||||||
|
|
|
|||||||||||
| Adjusted Pre-Tax Income |
$ 834 | $ 816 | 2% | |||||||||
|
|
|
|||||||||||
| Income Tax Expense |
$ 138 | $ 183 | (25% | ) | ||||||||
| Impact of special items |
41 | 5 | ||||||||||
|
|
|
|||||||||||
| Adjusted Income Tax Expense |
$ 179 | $ 188 | (5% | ) | ||||||||
|
|
|
|||||||||||
| % of Adjusted Pre-Tax Income |
21.5% | 23.0% | (1.5 pts | ) | ||||||||
| Net Income |
$ 544 | $ 583 | (7% | ) | ||||||||
| Impact of special items |
111 | 45 | ||||||||||
|
|
|
|||||||||||
| Adjusted Net Income |
$ 655 | $ 628 | 4% | |||||||||
|
|
|
|||||||||||
| Diluted EPS |
$ 0.99 | $ 1.06 | (7% | ) | ||||||||
| Impact of special items |
0.20 | 0.08 | ||||||||||
|
|
|
|||||||||||
| Adjusted Diluted EPS |
$ 1.19 | $ 1.14 | 4% | |||||||||
|
|
|
|||||||||||
| WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING |
||||||||||||
| Diluted |
549 | 552 | ||||||||||
|
|
||||||||||||
| 1 | Cost of sales, marketing and administrative expenses and other income, net in 2013 included total charges of $58 million ($53 million, or $0.09 per diluted share, on an after-tax basis) principally related to the acquisition and integration of Gambro AB (Gambro), including post-acquisition restructuring activities. |
| 2 | Marketing and administrative expenses in 2013 included charges totaling $124 million ($95 million, or $0.17 per diluted share, on an after-tax basis) related to tax and legal reserves associated with VAT matters in Turkey and existing class-action and other related litigation, including litigation fees. Income tax expense in 2013 included a net benefit of $6 million ($0.01 per diluted share) related to uncertain tax positions in Switzerland and Turkey. Other income, net in 2013 included the offsetting impact of $35 million ($0.06 per diluted share) in noncontrolling interest for the VAT and tax items above associated with the company’s non-wholly owned subsidiary in Turkey. |
| 3 | Research and development (R&D) expenses in 2013 included an R&D charge of $25 million ($17 million, or $0.03 per diluted share, on an after-tax basis) related to the company’s collaboration agreement with JW Holdings. R&D expenses in 2012 included an R&D charge of $50 million ($45 million, or $0.08 per diluted share, on an after-tax basis) related to the company’s licensing agreement with Onconova Therapeutics, Inc. (Onconova). |
| 4 | Other income, net in 2013 included a net gain of $20 million ($13 million, or $0.02 per diluted share, on an after-tax basis) principally related to the company’s derivative instruments used to hedge the anticipated foreign currency cash outflows for the Gambro acquisition. |
For more information on the company’s use of non-GAAP financial measures in this press release, please see the company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on the date of this press release.
BAXTER — PAGE 9
BAXTER INTERNATIONAL INC.
Consolidated Statements of Income
Nine Months Ended September 30, 2013 and 2012
(unaudited)
(in millions, except per share and percentage data)
| Nine Months Ended September 30, |
||||||||||||
| 2013 | 2012 | Change | ||||||||||
| NET SALES |
$ 10,891 | $ 10,437 | 4% | |||||||||
| COST OF SALES |
5,250 | 5,041 | 4% | |||||||||
|
|
||||||||||||
| GROSS MARGIN |
5,641 | 5,396 | 5% | |||||||||
|
|
||||||||||||
| % of Net Sales |
51.8% | 51.7% | 0.1 pts | |||||||||
| MARKETING AND ADMINISTRATIVE EXPENSES |
2,617 | 2,284 | 15% | |||||||||
| % of Net Sales |
24.0% | 21.9% | 2.1 pts | |||||||||
| RESEARCH AND DEVELOPMENT EXPENSES |
809 | 865 | (6% | ) | ||||||||
| % of Net Sales |
7.4% | 8.3% | (0.9 pts | ) | ||||||||
| NET INTEREST EXPENSE |
87 | 65 | 34% | |||||||||
| OTHER EXPENSE (INCOME), NET |
10 | (133 | ) | N/M | ||||||||
|
|
||||||||||||
| PRE-TAX INCOME |
2,118 | 2,315 | (9% | ) | ||||||||
|
|
||||||||||||
| INCOME TAX EXPENSE |
432 | 483 | (11% | ) | ||||||||
|
|
||||||||||||
| % of Pre-Tax Income |
20.4% | 20.9% | (0.5 pts | ) | ||||||||
| NET INCOME |
$ 1,686 | $ 1,832 | (8% | ) | ||||||||
|
|
||||||||||||
| BASIC EPS |
$ 3.10 | $ 3.32 | (7% | ) | ||||||||
|
|
||||||||||||
| DILUTED EPS |
$ 3.06 | $ 3.29 | (7% | ) | ||||||||
|
|
||||||||||||
| WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING |
||||||||||||
| Basic |
543 | 552 | ||||||||||
| Diluted |
550 | 556 | ||||||||||
|
|
||||||||||||
| ADJUSTED PRE-TAX INCOME (excluding special items) |
$ 2,391 | A | $ 2,329 | A | 3% | |||||||
| ADJUSTED NET INCOME (excluding special items) |
$ 1,875 | A | $ 1,816 | A | 3% | |||||||
| ADJUSTED DILUTED EPS (excluding special items) |
$ 3.41 | A | $ 3.27 | A | 4% | |||||||
| A | Refer to page 10 for a description of the adjustments and a reconciliation to GAAP measures. |
BAXTER — PAGE 10
BAXTER INTERNATIONAL INC.
Note to Consolidated Statements of Income
Nine Months Ended September 30, 2013 and 2012
Description of Adjustments and Reconciliation of GAAP to Non-GAAP Measures
(unaudited)
(in millions, except per share and percentage data)
The company’s GAAP results for the nine months ended September 30, 2013 and 2012 included special items which impacted the GAAP measures as follows:
| Nine Months Ended | ||||||||||||
| September 30, | ||||||||||||
| 2013 | 2012 | Change | ||||||||||
| Gross Margin |
$ 5,641 | $ 5,396 | 5% | |||||||||
| Gambro acquisition and integration items 1 |
15 | — | ||||||||||
| Currency-related items 2 |
1 | — | ||||||||||
| Business optimization items 3 |
(20 | ) | — | |||||||||
| Business development items 5 |
— | 6 | ||||||||||
| Reserve adjustments 6 |
— | (23 | ) | |||||||||
|
|
|
|||||||||||
| Adjusted Gross Margin |
$ 5,637 | $ 5,379 | 5% | |||||||||
|
|
|
|||||||||||
| % of Net Sales |
51.8% | 51.5% | 0.3 pts | |||||||||
| Marketing and Administrative Expenses |
$ 2,617 | $ 2,284 | 15% | |||||||||
| Gambro acquisition and integration items 1 |
(73 | ) | — | |||||||||
| Tax and legal reserves 4 |
(124 | ) | — | |||||||||
| Business development items 5 |
— | (9 | ) | |||||||||
|
|
|
|||||||||||
| Adjusted Marketing and Administrative Expenses |
$ 2,420 | $ 2,275 | 6% | |||||||||
|
|
|
|||||||||||
| % of Net Sales |
22.2% | 21.8% | 0.4 pts | |||||||||
| Research and Development Expenses |
$ 809 | $ 865 | (6% | ) | ||||||||
| Business optimization items 3 |
(18 | ) | — | |||||||||
| Business development items 5 |
(25 | ) | (113 | ) | ||||||||
|
|
|
|||||||||||
| Adjusted Research and Development Expenses |
$ 766 | $ 752 | 2% | |||||||||
|
|
|
|||||||||||
| % of Net Sales |
7.0% | 7.2% | (0.2 pts | ) | ||||||||
| Other Expense (Income), Net |
$ 10 | $ (133 | ) | N/M | ||||||||
| Gambro acquisition and integration items 1 |
(10 | ) | — | |||||||||
| Currency-related items 2 |
(62 | ) | — | |||||||||
| Tax and legal reserves 4 |
35 | — | ||||||||||
| Reserve adjustments 6 |
— | 91 | ||||||||||
|
|
|
|||||||||||
| Adjusted Other Expense (Income), Net |
$ (27 | ) | $ (42 | ) | N/M | |||||||
|
|
|
|||||||||||
| Pre-Tax Income |
$ 2,118 | $ 2,315 | (9% | ) | ||||||||
| Impact of special items |
273 | 14 | ||||||||||
|
|
|
|||||||||||
| Adjusted Pre-Tax Income |
$ 2,391 | $ 2,329 | 3% | |||||||||
|
|
|
|||||||||||
| Income Tax Expense |
$ 432 | $ 483 | (11% | ) | ||||||||
| Impact of special items |
84 | 30 | ||||||||||
|
|
|
|||||||||||
| Adjusted Income Tax Expense |
$ 516 | $ 513 | 1% | |||||||||
|
|
|
|||||||||||
| % of Adjusted Pre-Tax Income |
21.6% | 22.0% | (0.4 pts | ) | ||||||||
| Net Income |
$ 1,686 | $ 1,832 | (8% | ) | ||||||||
| Impact of special items |
189 | (16 | ) | |||||||||
|
|
|
|||||||||||
| Adjusted Net Income |
$ 1,875 | $ 1,816 | 3% | |||||||||
|
|
|
|||||||||||
| Diluted EPS |
$ 3.06 | $ 3.29 | (7% | ) | ||||||||
| Impact of special items |
0.35 | (0.02 | ) | |||||||||
|
|
|
|||||||||||
| Adjusted Diluted EPS |
$ 3.41 | $ 3.27 | 4% | |||||||||
|
|
|
|||||||||||
| WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING |
||||||||||||
| Diluted |
550 | 556 | ||||||||||
|
|
||||||||||||
| 1 | Cost of sales, marketing and administrative expenses and other expense (income), net in 2013 included total charges of $98 million ($78 million, or $0.15 per diluted share, on an after-tax basis) principally related to the acquisition and integration of Gambro, including post-acquisition restructuring activities. |
| 2 | Cost of sales and other expense (income), net in 2013 included a charge of $11 million ($7 million, or $0.01 per diluted share, on an after-tax basis) related to the Venezuelan currency devaluation announced by the government of Venezuela in February 2013. Additionally, other expense (income), net in 2013 included a net loss of $52 million ($33 million, or $0.06 per diluted share, on an after-tax basis) principally related to the company’s derivative instruments used to hedge the anticipated foreign currency cash outflows for the Gambro acquisition. |
| 3 | Cost of sales in 2013 included a benefit of $20 million ($14 million, or $0.03 per diluted share, on an after-tax basis) related to an adjustment to a previous business optimization reserve that is no longer probable of being utilized. R&D expenses in 2013 included charges of $18 million ($14 million, or $0.03 per diluted share, on an after-tax basis) primarily related to contract termination costs associated with the discontinuation of the company’s Alzheimer’s disease program. |
| 4 | Marketing and administrative expenses in 2013 included charges totaling $124 million ($95 million, or $0.17 per diluted share, on an after-tax basis) related to tax and legal reserves associated with VAT matters in Turkey and existing class-action and other related litigation, including litigation fees. Income tax expense in 2013 included a net benefit of $6 million ($0.01 per diluted share) related to uncertain tax positions in Switzerland and Turkey. Other expense (income), net in 2013 included the offsetting impact of $35 million ($0.06 per diluted share) in noncontrolling interest for the VAT and tax items above associated with the company’s non-wholly owned subsidiary in Turkey. |
| 5 | R&D expenses in 2013 included an R&D charge of $25 million ($17 million, or $0.03 per diluted share, on an after-tax basis) related to the company’s collaboration agreement with JW Holdings. Cost of sales, marketing and administrative expenses and R&D expenses in 2012 included business development charges totaling $128 million ($102 million, or $0.19 per diluted share, on an after-tax basis) which principally related to R&D charges of $33 million associated with the company’s global collaboration with Momenta Pharmaceuticals, Inc. (Momenta), $30 million associated with the company’s global collaboration with Chatham Therapeutics, LLC (Chatham), and $50 million associated with the company’s licensing agreement with Onconova. |
| 6 | Cost of sales in 2012 included a net benefit of $23 million ($27 million, or $0.05 per diluted share, on an after-tax basis) primarily related to an adjustment to the COLLEAGUE infusion pump reserves as the company substantially completed its recall activities in the United States. Other expense (income), net in 2012 included a benefit of $91 million, or $0.16 per diluted share, consisting of gains of $53 million and $38 million for the reduction of certain contingent payment liabilities related to the prior acquisitions of Prism Pharmaceuticals, Inc. and ApaTech Limited, respectively, for which there was no tax expense recognized. |
For more information on the company’s use of non-GAAP financial measures in this press release, please see the company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on the date of this press release.
BAXTER — PAGE 11
BAXTER INTERNATIONAL INC.
Cash Flows from Operations and Changes in Net Debt
(unaudited)
($ in millions)
|
Cash Flows from Operations |
| |||||||||||||||
| (Brackets denote cash outflows) | Three Months Ended September 30, |
Nine Months Ended September 30, |
||||||||||||||
| 2013 | 2012 | 2013 | 2012 | |||||||||||||
| Net income |
$ 544 | $ 583 | $1,686 | $1,832 | ||||||||||||
| Adjustments |
||||||||||||||||
| Depreciation and amortization |
207 | 179 | 573 | 534 | ||||||||||||
| Deferred income taxes |
148 | 78 | 85 | 197 | ||||||||||||
| Stock compensation |
39 | 34 | 111 | 97 | ||||||||||||
| Realized excess tax benefits from stock issued under employee benefit plans |
(13 | ) | (6 | ) | (32 | ) | (14 | ) | ||||||||
| Other |
(52 | ) | 37 | 2 | (47 | ) | ||||||||||
| Changes in balance sheet items |
||||||||||||||||
| Accounts and other current receivables, net |
58 | (42 | ) | 70 | 72 | |||||||||||
| Inventories |
(106 | ) | (36 | ) | (412 | ) | (136 | ) | ||||||||
| Accounts payable and accrued liabilities |
115 | (53 | ) | (56 | ) | (282 | ) | |||||||||
| Business optimization and infusion pump payments |
(29 | ) | (63 | ) | (81 | ) | (226 | ) | ||||||||
| Other |
55 | 36 | 169 | 134 | ||||||||||||
|
|
||||||||||||||||
| Cash flows from operations |
$ 966 | $ 747 | $2,115 | $2,161 | ||||||||||||
|
|
||||||||||||||||
|
Changes in Net Debt |
| |||||||||||||||
| Increase (decrease) | Three Months Ended September 30, |
Nine Months Ended September 30, |
||||||||||||||
| 2013 | 2012 | 2013 | 2012 | |||||||||||||
| Net debt, beginning of period A |
$3,046 | $2,961 | $2,660 | $ 2,290 | ||||||||||||
| Cash flows from operations |
(966 | ) | (747 | ) | (2,115 | ) | (2,161 | ) | ||||||||
| Capital expenditures |
398 | 259 | 1,037 | 762 | ||||||||||||
| Dividends |
267 | 184 | 757 | 558 | ||||||||||||
| Proceeds from stock issued under employee benefit plans |
(114 | ) | (121 | ) | (436 | ) | (293 | ) | ||||||||
| Purchases of treasury stock |
146 | 105 | 863 | 1,065 | ||||||||||||
| Acquisitions and investments |
3,685 | B | 116 | B | 3,772 | B | 585 | B | ||||||||
| Sales of investments and other investing activities |
(4 | ) | (12 | ) | (14 | ) | (86 | ) | ||||||||
| Payment of assumed Gambro debt |
221 | — | 221 | — | ||||||||||||
| Other, including the effect of exchange rate changes |
11 | 11 | (55 | ) | 36 | |||||||||||
|
Increase (decrease) in net debt |
3,644 | (205 | ) | 4,030 | 466 | |||||||||||
| Net debt, September 30 A |
$6,690 | $2,756 | $6,690 | $ 2,756 | ||||||||||||
|
|
||||||||||||||||
| Key statistics, September 30: |
||||||||||||||||
| Days sales outstanding |
59.4 | C | 57.0 | 59.4 | C | 57.0 | ||||||||||
| Inventory turns |
2.1 | 2.3 | 2.1 | 2.3 | ||||||||||||
| A | Net debt is a non-GAAP measure, refer to page 12 for a description of net debt and a reconciliation to GAAP measures. |
| B | Acquisitions and investments in 2013 included $3.6 billion for the third quarter 2013 acquisition of Gambro (net of cash acquired) and $51 million for the first quarter 2013 acquisition of the investigational hemophilia compound OBI-1 and related assets from Inspiration BioPharmaceuticals, Inc. and Ipsen Pharma S.A.S. Acquisitions and investments in 2012 included $100 million for the third quarter 2012 investment in Onconova preferred stock and execution of a licensing agreement, $90 million for the second quarter 2012 exercise of the company’s option to acquire the remaining equity interest in Sigma International General Medical Apparatus, LLC, $25 million for the second quarter 2012 payment to execute the Chatham collaboration, $304 million for the first quarter 2012 acquisition of Synovis Life Technologies, Inc., and $33 million for the first quarter 2012 payment to execute the Momenta collaboration. |
| C | Includes the impact from the acquisition of Gambro in September 2013. Excluding Gambro, the company’s days sales outstanding was 55.1 days as of September 30, 2013. |
BAXTER — PAGE 12
BAXTER INTERNATIONAL INC.
Total Debt to Net Debt Reconciliation
(unaudited)
($ in millions)
|
Total Debt to Net Debt Reconciliation A |
| |||||||||||||||||||||||||||||||
| September 30, 2013 |
June 30, 2013 |
March 31, 2013 |
December 31, 2012 |
September 30, 2012 |
June 30, 2012 |
March 31, 2012 |
December 31, 2011 |
|||||||||||||||||||||||||
| Short-term debt |
$ 42 | $ 33 | $ 333 | $ 27 | $ 16 | $ 385 | $ 313 | $ 256 | ||||||||||||||||||||||||
| Current maturities of long-term debt and lease obligations |
372 | 378 | 377 | 323 | 317 | 497 | 485 | 190 | ||||||||||||||||||||||||
| Long-term debt and lease obligations |
8,652 | 8,624 | 5,157 | 5,580 | 5,614 | 4,432 | 4,411 | 4,749 | ||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
| Total debt |
9,066 | 9,035 | 5,867 | 5,930 | 5,947 | 5,314 | 5,209 | 5,195 | ||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
| Less: Cash and equivalents |
(2,376 | ) | (5,989 | ) | (2,689 | ) | (3,270 | ) | (3,191 | ) | (2,353 | ) | (2,272 | ) | (2,905 | ) | ||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
| Total net debt |
$ 6,690 | $ 3,046 | $ 3,178 | $ 2,660 | $ 2,756 | $ 2,961 | $ 2,937 | $ 2,290 | ||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
| A | Net debt represents the difference between total debt (defined as short-term debt, current maturities of long-term debt and lease obligations, and long-term debt and lease obligations as presented on the company’s consolidated balance sheets) and cash and equivalents. |
For more information on the company’s use of non-GAAP financial measures in this press release, please see the company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on the date of this press release.
BAXTER — PAGE 13
BAXTER INTERNATIONAL INC.
Net Sales
Periods Ending September 30, 2013 and 2012
(unaudited)
($ in millions)
| Q3 2013 |
Q3 2012 |
% Growth @ Actual Rates |
% Growth @ Constant Rates |
YTD 2013 |
YTD 2012 |
% Growth @ Actual Rates |
% Growth @ Constant Rates |
|||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
| BioScience |
||||||||||||||||||||||||||||||||
| United States |
$ 831 | $ 790 | 5% | 5% | $ 2,386 | $ 2,262 | 5% | 5% | ||||||||||||||||||||||||
|
International |
789 | 732 | 8% | 7% | 2,402 | 2,288 | 5% | 6% | ||||||||||||||||||||||||
| Total BioScience |
$1,620 | $1,522 | 6% | 6% | $ 4,788 | $ 4,550 | 5% | 6% | ||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Medical Products |
||||||||||||||||||||||||||||||||
| United States |
$ 811 | $ 723 | 12% | 12% | $ 2,284 | $ 2,222 | 3% | 3% | ||||||||||||||||||||||||
|
International |
1,343 | 1,232 | 9% | 10% | 3,819 | 3,665 | 4% | 5% | ||||||||||||||||||||||||
|
Total Medical Products 1 |
$2,154 | $1,955 | 10% | 11% | $ 6,103 | $ 5,887 | 4% | 4% | ||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Baxter International Inc. |
||||||||||||||||||||||||||||||||
| United States |
$1,642 | $1,513 | 9% | 9% | $ 4,670 | $ 4,484 | 4% | 4% | ||||||||||||||||||||||||
|
International |
2,132 | 1,964 | 9% | 9% | 6,221 | 5,953 | 5% | 5% | ||||||||||||||||||||||||
| Total Baxter 1 |
$3,774 | $3,477 | 9% | 9% | $10,891 | $10,437 | 4% | 5% | ||||||||||||||||||||||||
| 1 | Includes net sales of $100 million from Gambro following the acquisition in September 2013. Medical Products net sales excluding Gambro grew 5% at actual rates and 6% at constant rates during the third quarter of 2013, and grew 2% at both actual and constant rates during the first nine months of 2013. Total Baxter net sales excluding Gambro grew 6% at both actual and constant rates during the third quarter of 2013, and grew 3% at actual rates and 4% at constant rates during the first nine months of 2013. |
BAXTER — PAGE 14
BAXTER INTERNATIONAL INC.
Sales by Franchise 1
Periods Ending September 30, 2013 and 2012
(unaudited)
($ in millions)
| Q3 2013 |
Q3 2012 |
% Growth @ Actual Rates |
% Growth @ Constant Rates |
YTD 2013 |
YTD 2012 |
% Growth @ Actual Rates |
% Growth @ Constant Rates |
|||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
| BioScience |
||||||||||||||||||||||||||||||||
| Hemophilia 2 |
$ 851 | $ 782 | 9% | 9% | $ 2,465 | $ 2,354 | 5% | 6% | ||||||||||||||||||||||||
| BioTherapeutics 3 |
532 | 516 | 3% | 2% | 1,554 | 1,498 | 4% | 3% | ||||||||||||||||||||||||
| BioSurgery 4 |
173 | 165 | 5% | 5% | 523 | 493 | 6% | 6% | ||||||||||||||||||||||||
| Vaccines 5 |
64 | 59 | 8% | 5% | 246 | 205 | 20% | 22% | ||||||||||||||||||||||||
| Total BioScience |
$1,620 | $1,522 | 6% | 6% | $ 4,788 | $ 4,550 | 5% | 6% | ||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
| Medical Products |
||||||||||||||||||||||||||||||||
| Fluid Systems 6 |
$ 792 | $ 702 | 13% | 13% | $ 2,287 | $ 2,162 | 6% | 6% | ||||||||||||||||||||||||
| Renal 7 |
746 | 629 | 19% | 21% | 1,990 | 1,852 | 7% | 9% | ||||||||||||||||||||||||
|
Specialty Pharmaceuticals 8 |
372 | 367 | 1% | 1% | 1,101 | 1,099 | —% | —% | ||||||||||||||||||||||||
|
BioPharma Solutions 9 |
244 | 257 | (5% | ) | (4% | ) | 725 | 774 | (6% | ) | (6% | ) | ||||||||||||||||||||
|
Total Medical Products |
$2,154 | $1,955 | 10% | 11% | $ 6,103 | $ 5,887 | 4% | 4% | ||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
| Total Baxter |
$3,774 | $3,477 | 9% | 9% | $10,891 | $10,437 | 4% | 5% | ||||||||||||||||||||||||
| 1 | Effective January 1, 2013, Baxter has transitioned to a commercial franchise structure for reporting net sales. Prior period net sales have been reclassified to reflect the new commercial franchise structure. See Notes 2 - 9 below for a description of each commercial franchise. |
| 2 | Includes sales of recombinant FVIII products (ADVATE and RECOMBINATE) and plasma-derived hemophilia products (primarily FVII, FVIII and FEIBA). Recombinant and plasma-based products were previously reported separately. |
| 3 | Includes sales of the company’s liquid formulation of the antibody-replacement therapy immunoglobulin product (GAMMAGARD LIQUID) and other plasma-based therapies such as albumin and alpha-1 antitrypsin products. Antibody therapies and plasma-based products were previously reported separately. |
| 4 | Consists of biological products and delivery devices used for hemostasis, tissue sealing, adhesion reduction and hard tissue regeneration, as well as soft tissue repair and microsurgery products. |
| 5 | Consists of vaccines for seasonal and pandemic influenza, as well as meningitis C and tick-borne encephalitis. |
| 6 | Principally includes IV therapies, infusion pumps, administration sets and premixed drugs platforms. IV therapies were previously reported with nutrition products in IV Therapies, and Infusion Systems and Global Injectables were previously reported separately. |
| 7 | Consists of PD and HD therapies, and includes net sales of $100 million from Gambro following the acquisition in September 2013. Renal sales excluding Gambro grew 3% at actual rates and 5% at constant rates during the third quarter of 2013, and grew 2% at actual rates and 4% at constant rates during the first nine months of 2013. |
| 8 | Principally includes nutrition and anesthesia products. Nutrition products were previously reported with IV therapies in IV Therapies and anesthesia products were previously reported separately. |
| 9 | Principally includes sales from the pharmaceutical partnering business and pharmacy compounding services, which were previously reported with Global Injectables. Also includes revenues associated with manufacturing, distribution and other services provided by the company to the buyer of the Transfusion Therapies business after the February 2007 divestiture. |
BAXTER — PAGE 15
BAXTER INTERNATIONAL INC.
Franchise Sales by U.S. and International 1
Three-Month Periods Ending September 30, 2013 and 2012
(unaudited)
($ in millions)
| Q3 2013 | Q3 2012 | % Growth | ||||||||||||||||||||||||||||||||||
| U.S. | International | Total | U.S. | International | Total | U.S. | International | Total | ||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||
| BioScience |
||||||||||||||||||||||||||||||||||||
| Hemophilia |
$ 350 | $ 501 | $ 851 | $ 346 | $ 436 | $ 782 | 1% | 15% | 9% | |||||||||||||||||||||||||||
| BioTherapeutics |
374 | 158 | 532 | 347 | 169 | 516 | 8% | (7% | ) | 3% | ||||||||||||||||||||||||||
| BioSurgery |
100 | 73 | 173 | 97 | 68 | 165 | 3% | 7% | 5% | |||||||||||||||||||||||||||
|
Vaccines |
7 | 57 | 64 | 0 | 59 | 59 | —% | (3% | ) | 8% | ||||||||||||||||||||||||||
| Total BioScience |
$ 831 | $ 789 | $1,620 | $ 790 | $ 732 | $1,522 | 5% | 8% | 6% | |||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||
| Medical Products |
||||||||||||||||||||||||||||||||||||
| Fluid Systems |
$ 427 | $ 365 | $ 792 | $ 354 | $ 348 | $ 702 | 21% | 5% | 13% | |||||||||||||||||||||||||||
| Renal 2 |
130 | 616 | 746 | 100 | 529 | 629 | 30% | 16% | 19% | |||||||||||||||||||||||||||
|
Specialty Pharmaceuticals |
159 | 213 | 372 | 169 | 198 | 367 | (6% | ) | 8% | 1% | ||||||||||||||||||||||||||
|
BioPharma Solutions |
95 | 149 | 244 | 100 | 157 | 257 | (5% | ) | (5% | ) | (5% | ) | ||||||||||||||||||||||||
|
Total Medical Products 2 |
$ 811 | $1,343 | $2,154 | $ 723 | $1,232 | $1,955 | 12% | 9% | 10% | |||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||
| Total Baxter 2 |
$1,642 | $2,132 | $3,774 | $1,513 | $1,964 | $3,477 | 9% | 9% | 9% | |||||||||||||||||||||||||||
| 1 | Effective January 1, 2013, Baxter has transitioned to a commercial franchise structure for reporting net sales. Prior period net sales have been reclassified to reflect the new commercial franchise structure. Refer to page 14 for additional details. |
| 2 | Includes net sales of $100 million from Gambro following the acquisition in September 2013. Renal sales excluding Gambro grew 3% at actual rates and 5% at constant rates during the third quarter of 2013. Medical Products net sales excluding Gambro grew 5% at actual rates and 6% at constant rates during the third quarter of 2013. Total Baxter net sales excluding Gambro grew 6% at both actual and constant rates during the third quarter of 2013. |