Attached files
| file | filename |
|---|---|
| 8-K - 8-K - Baxalta Inc | d25585d8k.htm |
Exhibit 99.1
BAXALTA INCORPORATED
GAAP Product Category Sales by U.S. and International
Three and Six Months Ended June 30, 2015 and 2014 1
(unaudited)
($ in millions)
The below information presents Baxalta’s product category net sales on a GAAP basis by U.S. and International. Refer to the following page for product category net sales on a pro forma basis.
| Q2 2015 | Q2 2014 | % Growth @ Actual Rates | % Growth @ Constant Rates | |||||||||||||||||||||||||||||||||||||
| U.S. | International | Total | U.S. | International | Total | U.S. | International | Total | U.S. | International | Total | |||||||||||||||||||||||||||||
| Hemophilia | $ 322 | $ 350 | $ 672 | $ 323 | $ 397 | $ 720 | 0% | (12%) | (7%) | 0% | 7% | 4% | ||||||||||||||||||||||||||||
| Inhibitor Therapies | 69 | 114 | 183 | 52 | 132 | 184 | 33% | (14%) | (1%) | 33% | 4% | 12% | ||||||||||||||||||||||||||||
| Hematology | $ 391 | $ 464 | $ 855 | $ 375 | $ 529 | $ 904 | 4% | (12%) | (5%) | 4% | 6% | 6% | ||||||||||||||||||||||||||||
| Immunoglobulin Therapies | 318 | 104 | 422 | 294 | 99 | 393 | 8% | 5% | 7% | 8% | 27% | 13% | ||||||||||||||||||||||||||||
| BioTherapeutics | 66 | 86 | 152 | 64 | 91 | 155 | 3% | (5%) | (2%) | 3% | 3% | 3% | ||||||||||||||||||||||||||||
| Immunology | $ 384 | $ 190 | $ 574 | $ 358 | $ 190 | $ 548 | 7% | 0% | 5% | 7% | 16% | 10% | ||||||||||||||||||||||||||||
| Total Baxalta | $ 775 | $ 654 | $1,429 | $ 733 | $ 719 | $1,452 | 6% | (9%) | (2%) | 6% | 9% | 7% | ||||||||||||||||||||||||||||
| YTD 2015 | YTD 2014 | % Growth @ Actual Rates | % Growth @ Constant Rates | |||||||||||||||||||||||||||||||||||||
| U.S. | International | Total | U.S. | International | Total | U.S. | International | Total | U.S. | International | Total | |||||||||||||||||||||||||||||
| Hemophilia | $ 627 | $ 686 | $1,313 | $ 620 | $ 775 | $1,395 | 1% | (11%) | (6%) | 1% | 4% | 3% | ||||||||||||||||||||||||||||
| Inhibitor Therapies | 132 | 217 | 349 | 96 | 240 | 336 | 38% | (10%) | 4% | 38% | 6% | 15% | ||||||||||||||||||||||||||||
| Hematology | $ 759 | $ 903 | $1,662 | $ 716 | $1,015 | $1,731 | 6% | (11%) | (4%) | 6% | 5% | 5% | ||||||||||||||||||||||||||||
| Immunoglobulin Therapies | 646 | 196 | 842 | 601 | 190 | 791 | 7% | 3% | 6% | 7% | 22% | 11% | ||||||||||||||||||||||||||||
| BioTherapeutics | 125 | 161 | 286 | 122 | 137 | 259 | 2% | 18% | 10% | 2% | 28% | 16% | ||||||||||||||||||||||||||||
| Immunology | $ 771 | $ 357 | $1,128 | $ 723 | $ 327 | $1,050 | 7% | 9% | 7% | 7% | 24% | 12% | ||||||||||||||||||||||||||||
| Total Baxalta | $1,530 | $1,260 | $2,790 | $1,439 | $1,342 | $2,781 | 6% | (6%) | 0% | 6% | 9% | 8% | ||||||||||||||||||||||||||||
| 1 | Sales schedules presented on pages 1 and 2 are consistent with those included in the company’s Current Report on Form 8-K filed with the Securities and Exchange Commission (SEC) on July 30, 2015. |
BAXALTA — Page 1
BAXALTA INCORPORATED
Pro Forma Product Category Sales by U.S. and International
Three and Six Months Ended June 30, 2015 and 2014
(unaudited)
($ in millions)
The below information presents Baxalta’s product category net sales on a pro forma basis by U.S. and International. A reconciliation to GAAP net sales and a description of the pro forma adjustment is also included below.
| Q2 2015 | Q2 2014 | % Growth @ Actual Rates | % Growth @ Constant Rates | |||||||||||||||||||||||||||||||||||||
| U.S. | International | Total | U.S. | International | Total | U.S. | International | Total | U.S. | International | Total | |||||||||||||||||||||||||||||
| Hemophilia | $ 322 | $ 350 | $ 672 | $ 323 | $ 397 | $ 720 | 0% | (12%) | (7%) | 0% | 7% | 4% | ||||||||||||||||||||||||||||
| Inhibitor Therapies | 69 | 114 | 183 | 52 | 132 | 184 | 33% | (14%) | (1%) | 33% | 4% | 12% | ||||||||||||||||||||||||||||
| Hematology | $ 391 | $ 464 | $ 855 | $ 375 | $ 529 | $ 904 | 4% | (12%) | (5%) | 4% | 6% | 6% | ||||||||||||||||||||||||||||
| Immunoglobulin Therapies | 318 | 104 | 422 | 294 | 99 | 393 | 8% | 5% | 7% | 8% | 27% | 13% | ||||||||||||||||||||||||||||
| Pro Forma BioTherapeutics 1 | 66 | 126 | 192 | 64 | 128 | 192 | 3% | (2%) | 0% | 3% | 5% | 4% | ||||||||||||||||||||||||||||
| Pro Forma Immunology | $ 384 | $ 230 | $ 614 | $ 358 | $ 227 | $ 585 | 7% | 1% | 5% | 7% | 15% | 10% | ||||||||||||||||||||||||||||
| Pro Forma Total Baxalta | $ 775 | $ 694 | $1,469 | $ 733 | $ 756 | $1,489 | 6% | (8%) | (1%) | 6% | 9% | 7% | ||||||||||||||||||||||||||||
| YTD 2015 | YTD 2014 | % Growth @ Actual Rates | % Growth @ Constant Rates | |||||||||||||||||||||||||||||||||||||
| U.S. | International | Total | U.S. | International | Total | U.S. | International | Total | U.S. | International | Total | |||||||||||||||||||||||||||||
| Hemophilia | $ 627 | $ 686 | $1,313 | $ 620 | $ 775 | $1,395 | 1% | (11%) | (6%) | 1% | 4% | 3% | ||||||||||||||||||||||||||||
| Inhibitor Therapies | 132 | 217 | 349 | 96 | 240 | 336 | 38% | (10%) | 4% | 38% | 6% | 15% | ||||||||||||||||||||||||||||
| Hematology | $ 759 | $ 903 | $1,662 | $ 716 | $1,015 | $1,731 | 6% | (11%) | (4%) | 6% | 5% | 5% | ||||||||||||||||||||||||||||
| Immunoglobulin Therapies | 646 | 196 | 842 | 601 | 190 | 791 | 7% | 3% | 6% | 7% | 22% | 11% | ||||||||||||||||||||||||||||
| Pro Forma BioTherapeutics 1 | 125 | 243 | 368 | 122 | 218 | 340 | 2% | 11% | 8% | 2% | 18% | 13% | ||||||||||||||||||||||||||||
| Pro Forma Immunology | $ 771 | $ 439 | $1,210 | $ 723 | $ 408 | $1,131 | 7% | 8% | 7% | 7% | 20% | 11% | ||||||||||||||||||||||||||||
| Pro Forma Total Baxalta | $1,530 | $1,342 | $2,872 | $1,439 | $1,423 | $2,862 | 6% | (6%) | 0% | 6% | 9% | 8% | ||||||||||||||||||||||||||||
|
Pro Forma Net Sales Reconciliations
|
| |||||||||||||||||||||||||||||||||||||||
| Q2 2015 | Q2 2014 | % Growth @ Actual Rates | % Growth @ Constant Rates | |||||||||||||||||||||||||||||||||||||
| U.S. | International | Total | U.S. | International | Total | U.S. | International | Total | U.S. | International | Total | |||||||||||||||||||||||||||||
| BioTherapeutics | $ 66 | $ 86 | $ 152 | $ 64 | $ 91 | $155 | 3% | (5%) | (2%) | 3% | 3% | 3% | ||||||||||||||||||||||||||||
| Pro forma MSA revenue 1 | — | 40 | 40 | — | 37 | 37 | ||||||||||||||||||||||||||||||||||
| Pro Forma BioTherapeutics | $ 66 | $ 126 | $ 192 | $ 64 | $ 128 | $192 | 3% | (2%) | 0% | 3% | 5% | 4% | ||||||||||||||||||||||||||||
| YTD 2015 | YTD 2014 | % Growth @ Actual Rates | % Growth @ Constant Rates | |||||||||||||||||||||||||||||||||||||
| U.S. | International | Total | U.S. | International | Total | U.S. | International | Total | U.S. | International | Total | |||||||||||||||||||||||||||||
| BioTherapeutics | $ 125 | $ 161 | $ 286 | $ 122 | $ 137 | $259 | 2% | 18% | 10% | 2% | 28% | 16% | ||||||||||||||||||||||||||||
| Pro forma MSA revenue 1 | — | 82 | 82 | — | 81 | 81 | ||||||||||||||||||||||||||||||||||
| Pro Forma BioTherapeutics | $ 125 | $ 243 | $ 368 | $ 122 | $ 218 | $340 | 2% | 11% | 8% | 2% | 18% | 13% | ||||||||||||||||||||||||||||
| 1 | In connection with the separation, Baxalta and Baxter entered into a manufacturing and supply agreement whereby Baxalta will manufacture and sell certain products to Baxter. The pro forma net sales figures assume that the manufacturing and supply agreement was in effect in periods prior to the separation. Net sales related to the manufacturing and supply agreement will be reported in the company’s actual net sales figures in periods following the separation. |
BAXALTA — Page 2
BAXALTA INCORPORATED
Combined Statements of Income A
Three and Six Months Ended June 30, 2015 and 2014
(unaudited)
($ in millions)
| Three Months
Ended June 30, |
Six Months
Ended June 30, |
|||||||||||||||||||||||
| 2015 | 2014 | Change | 2015 | 2014 | Change | |||||||||||||||||||
| NET SALES |
$ 1,429 | $ 1,452 | (2% | ) | $ 2,790 | $ 2,781 | 0% | |||||||||||||||||
| COST OF SALES |
501 | 599 | (16% | ) | 1,072 | 1,158 | (7% | ) | ||||||||||||||||
|
|
||||||||||||||||||||||||
| GROSS MARGIN |
928 | 853 | 9% | 1,718 | 1,623 | 6% | ||||||||||||||||||
|
|
||||||||||||||||||||||||
| % of Net Sales |
64.9% | 58.7% | 6.2 pts | 61.6% | 58.4% | 3.2 pts | ||||||||||||||||||
| SELLING, GENERAL AND ADMINISTRATIVE EXPENSES |
323 | 242 | 33% | 606 | 464 | 31% | ||||||||||||||||||
| % of Net Sales |
22.6% | 16.7% | 5.9 pts | 21.7% | 16.7% | 5.0 pts | ||||||||||||||||||
| RESEARCH AND DEVELOPMENT EXPENSES |
240 | 166 | 45% | 396 | 329 | 20% | ||||||||||||||||||
| % of Net Sales |
16.8% | 11.4% | 5.4 pts | 14.2% | 11.8% | 2.4 pts | ||||||||||||||||||
| NET INTEREST EXPENSE |
3 | — | N/M | 3 | — | N/M | ||||||||||||||||||
| OTHER (INCOME) EXPENSE, NET |
(20 | ) | 30 | N/M | (8 | ) | 7 | N/M | ||||||||||||||||
|
|
||||||||||||||||||||||||
| PRE-TAX INCOME FROM CONTINUING OPERATIONS |
382 | 415 | (8% | ) | 721 | 823 | (12% | ) | ||||||||||||||||
|
|
||||||||||||||||||||||||
| INCOME TAX EXPENSE |
98 | 97 | 1% | 175 | 196 | (11% | ) | |||||||||||||||||
|
|
||||||||||||||||||||||||
| % of Pre-Tax Income from Continuing Operations |
25.7% | 23.4% | 2.3 pts | 24.3% | 23.8% | 0.5 pts | ||||||||||||||||||
|
|
||||||||||||||||||||||||
| NET INCOME FROM CONTINUING OPERATIONS |
284 | 318 | (11% | ) | 546 | 627 | (13% | ) | ||||||||||||||||
|
|
||||||||||||||||||||||||
| (LOSS) INCOME FROM DISCONTINUED OPERATIONS, NET OF TAXB |
(4 | ) | 52 | N/M | 6 | 101 | (94% | ) | ||||||||||||||||
|
|
||||||||||||||||||||||||
| NET INCOME |
$ 280 | $ 370 | (24% | ) | $ 552 | $ 728 | (24% | ) | ||||||||||||||||
|
|
||||||||||||||||||||||||
| BASIC EPS FROM CONTINUING OPERATIONS |
$ 0.42 | $ 0.47 | (11% | ) | $ 0.81 | $ 0.93 | (13% | ) | ||||||||||||||||
|
|
||||||||||||||||||||||||
| DILUTED EPS FROM CONTINUING OPERATIONS |
$ 0.42 | $ 0.47 | (11% | ) | $ 0.80 | $ 0.92 | (13% | ) | ||||||||||||||||
|
|
||||||||||||||||||||||||
| WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDINGC |
||||||||||||||||||||||||
| Basic |
676 | 676 | 676 | 676 | ||||||||||||||||||||
| Diluted |
681 | 681 | 681 | 681 | ||||||||||||||||||||
|
|
||||||||||||||||||||||||
| Pro Forma and Non-GAAP MeasuresD |
||||||||||||||||||||||||
| PRO FORMA NET SALES |
$ 1,469 | $ 1,489 | (1% | ) | $ 2,872 | $ 2,862 | 0% | |||||||||||||||||
| ADJUSTED PRO FORMA OPERATING INCOME |
$ 517 | $ 492 | 5% | $ 926 | $ 914 | 1% | ||||||||||||||||||
| ADJUSTED PRO FORMA EBITDA |
$ 568 | $ 542 | 5% | $ 1,029 | $ 1,010 | 2% | ||||||||||||||||||
| ADJUSTED PRO FORMA NET INCOME |
$ 374 | $ 361 | 4% | $ 649 | $ 674 | (4% | ) | |||||||||||||||||
| ADJUSTED PRO FORMA DILUTED EPS |
$ 0.55 | $ 0.53 | 4% | $ 0.95 | $ 0.99 | (4% | ) | |||||||||||||||||
| A | Combined statements of income presented in accordance with generally accepted accounting principles (GAAP) unless otherwise noted. Refer to the company’s Q2 2015 Form 10-Q filed with the SEC on August 13, 2015 for additional information. |
| B | Operating results from the company’s vaccines business are classified as discontinued operations for all periods presented. |
| C | On July 1, 2015 Baxter distributed approximately 544 million shares of Baxalta common stock and retained an additional 132 million shares. The computation of basic weighted-average shares outstanding for both periods presented was calculated using the shares distributed and the shares retained by Baxter on July 1, 2015. The diluted weighted-average number of shares outstanding for the periods presented include the dilutive effect of common share equivalents for employee equity awards outstanding as of July 1, 2015. |
| D | Refer to pages 4 through 6 for reconciliations of GAAP to pro forma and non-GAAP measures. |
BAXALTA — Page 3
BAXALTA INCORPORATED
Notes to Combined Statements of Income
Three and Six Months Ended June 30, 2015 and 2014
Reconciliation of GAAP to Pro Forma and Non-GAAP Measures
(unaudited)
($ in millions)
Below are reconciliations of Adjusted Pro Forma Operating Income, Adjusted Pro Forma EBITDA, Adjusted Pro Forma Net Income and Adjusted Pro Forma Diluted Earnings per Share to their most directly comparable GAAP financial measures.
| Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||||||||||
| 2015 | 2014 | Change | 2015 | 2014 | Change | |||||||||||||||||||
| Adjusted Pro Forma Operating Income and Adjusted Pro Forma EBITDA | ||||||||||||||||||||||||
| Pre-tax Income from Continuing Operations - GAAP |
$ 382 | $ 415 | (8% | ) | $ 721 | $ 823 | (12% | ) | ||||||||||||||||
| Pro forma adjustments1 |
(30 | ) | (35 | ) | (63 | ) | (71 | ) | ||||||||||||||||
| Special item adjustments1 |
138 | 79 | 182 | 105 | ||||||||||||||||||||
|
Adjusted Pro Forma Pre-tax Income |
$ 490 | $ 459 | 7% | $ 840 | $ 857 | (2% | ) | |||||||||||||||||
| Remove: Net interest expense |
47 | 47 | 94 | 94 | ||||||||||||||||||||
| Remove: Other income, net |
(20 | ) | (14 | ) | (8 | ) | (37 | ) | ||||||||||||||||
| Adjusted Pro Forma Operating Income |
$ 517 | $ 492 | 5% | $ 926 | $ 914 | 1% | ||||||||||||||||||
| % of Pro Forma Net Sales |
35.2% | 33.0% | 2.2pts | 32.2% | 31.9% | 0.3pts | ||||||||||||||||||
| Remove: Depreciation expense |
51 | 50 | 103 | 96 | ||||||||||||||||||||
|
Adjusted Pro Forma EBITDA |
$ 568 | $ 542 | 5% | $ 1,029 | $ 1,010 | 2% | ||||||||||||||||||
| % of Pro Forma Net Sales |
38.7% | 36.4% | 2.3pts | 35.8% | 35.3% | 0.5pts | ||||||||||||||||||
| Adjusted Pro Forma Net Income | ||||||||||||||||||||||||
| Net Income From Continuing Operations - GAAP |
$ 284 | $ 318 | (11% | ) | $ 546 | $ 627 | (13% | ) | ||||||||||||||||
| Pro Forma Adjustments |
||||||||||||||||||||||||
| Pre-tax pro forma adjustments1 |
(30 | ) | (35 | ) | (63 | ) | (71 | ) | ||||||||||||||||
| Impact of pro forma adjustments on income tax expense |
11 | 15 | 24 | 31 | ||||||||||||||||||||
| Special Item Adjustments |
||||||||||||||||||||||||
| Pre-tax special item adjustments1 |
138 | 79 | 182 | 105 | ||||||||||||||||||||
| Impact of special item adjustments on income tax expense |
(29 | ) | (16 | ) | (40 | ) | (18 | ) | ||||||||||||||||
|
Adjusted Pro Forma Net Income |
$ 374 | $ 361 | 4% | $ 649 | $ 674 | (4% | ) | |||||||||||||||||
| Adjusted Pro Forma Diluted EPS | ||||||||||||||||||||||||
| Diluted EPS From Continuing Operations - GAAP |
$ 0.42 | $ 0.47 | (11% | ) | $ 0.80 | $ 0.92 | (13% | ) | ||||||||||||||||
| Pro Forma Adjustments |
||||||||||||||||||||||||
| Impact of pro forma adjustments on diluted EPS |
(0.03 | ) | (0.03 | ) | (0.06 | ) | (0.06 | ) | ||||||||||||||||
| Special Item Adjustments |
||||||||||||||||||||||||
| Impact of special item adjustments on diluted EPS |
0.16 | 0.09 | 0.21 | 0.13 | ||||||||||||||||||||
|
Adjusted Pro Forma Diluted EPS |
$ 0.55 | $ 0.53 | 4% | $ 0.95 | $ 0.99 | (4% | ) | |||||||||||||||||
| 1 | Refer to pages 5 and 6 for descriptions of pro forma and special item adjustments and the impacted statement of income line items. |
BAXALTA — Page 4
BAXALTA INCORPORATED
Notes to Combined Statements of Income
Three and Six Months Ended June 30, 2015 and 2014
Reconciliation of GAAP to Pro Forma and Non-GAAP Measures (continued)
(unaudited)
($ in millions)
The company’s pro forma and special item adjustments by statement of income line item are listed below:
| Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||||||||||
| 2015 | 2014 | Change | 2015 | 2014 | Change | |||||||||||||||||||
| Net Sales - GAAP |
$ 1,429 | $ 1,452 | (2% | ) | $ 2,790 | $ 2,781 | 0% | |||||||||||||||||
| Pro forma adjustments |
||||||||||||||||||||||||
| Manufacturing and supply arrangements with Baxter1 |
40 | 37 | 82 | 81 | ||||||||||||||||||||
| Pro Forma Net Sales |
$ 1,469 | $ 1,489 | (1% | ) | $ 2,872 | $ 2,862 | 0% | |||||||||||||||||
| Gross Margin - GAAP |
$ 928 | $ 853 | 9% | $ 1,718 | $ 1,623 | 6% | ||||||||||||||||||
| Pro forma adjustments |
||||||||||||||||||||||||
| Depreciation expense4 |
— | (2 | ) | (1 | ) | (4 | ) | |||||||||||||||||
| Manufacturing and supply arrangements with Baxter1 |
(1 | ) | 1 | (1 | ) | 1 | ||||||||||||||||||
| Pension expense2 |
3 | 4 | 8 | 8 | ||||||||||||||||||||
| Pro Forma Gross Margin |
$ 930 | $ 856 | 9% | $ 1,724 | $ 1,628 | 6% | ||||||||||||||||||
| Special item adjustments |
||||||||||||||||||||||||
| Intangible asset amortization expense7 |
8 | 4 | 16 | 7 | ||||||||||||||||||||
| Separation costs9 |
1 | — | 1 | — | ||||||||||||||||||||
| Business optimization items6 |
— | (2 | ) | — | — | |||||||||||||||||||
|
Adjusted Pro Forma Gross Margin |
$ 939 | $ 858 | 9% | $ 1,741 | $ 1,635 | 6% | ||||||||||||||||||
| % of Pro Forma Net Sales |
63.9% | 57.6% | 6.3 pts | 60.6% | 57.1% | 3.5 pts | ||||||||||||||||||
|
Selling, General and Administrative Expenses - GAAP |
$ 323 | $ 242 | 33% | $ 606 | $ 464 | 31% | ||||||||||||||||||
| Pro forma adjustments |
||||||||||||||||||||||||
| Depreciation expense4 |
1 | — | 2 | 1 | ||||||||||||||||||||
| Supply chain TSA3 |
(5 | ) | (5 | ) | (10 | ) | (10 | ) | ||||||||||||||||
| Pension expense2 |
(7 | ) | (4 | ) | (12 | ) | (8 | ) | ||||||||||||||||
| Pro Forma Selling, General and Administrative Expenses |
$ 312 | $ 233 | 34% | $ 586 | $ 447 | 31% | ||||||||||||||||||
| Special item adjustments |
||||||||||||||||||||||||
| Business optimization items6 |
(3 | ) | 1 | (2 | ) | 1 | ||||||||||||||||||
| Separation costs9 |
(34 | ) | (1 | ) | (70 | ) | (1 | ) | ||||||||||||||||
| Plasma related litigation10 |
— | — | — | 10 | ||||||||||||||||||||
|
Adjusted Pro Forma Selling, General and Administrative Expenses |
$ 275 | $ 233 | 18% | $ 514 | $ 457 | 12% | ||||||||||||||||||
| % of Pro Forma Net Sales |
18.7% | 15.6% | 3.1 pts | 17.9% | 16.0% | 1.9 pts | ||||||||||||||||||
|
Research and Development Expenses - GAAP |
$ 240 | $ 166 | 45% | $ 396 | $ 329 | 20% | ||||||||||||||||||
| Pro forma adjustments |
||||||||||||||||||||||||
| Pension expense2 |
(1 | ) | — | (2 | ) | (1 | ) | |||||||||||||||||
| Pro Forma Research and Development Expenses |
$ 239 | $ 166 | 44% | $ 394 | $ 328 | 20% | ||||||||||||||||||
| Special item adjustments |
||||||||||||||||||||||||
| Separation costs9 |
(5 | ) | — | (12 | ) | — | ||||||||||||||||||
| Business optimization items6 |
— | 2 | 6 | (4 | ) | |||||||||||||||||||
| Upfront and milestone payments to collaboration partners8 |
(87 | ) | (35 | ) | (87 | ) | (60 | ) | ||||||||||||||||
|
Adjusted Pro Forma Research and Development Expenses |
$ 147 | $ 133 | 11% | $ 301 | $ 264 | 14% | ||||||||||||||||||
| % of Pro Forma Net Sales |
10.0% | 8.9% | 1.1 pts | 10.5% | 9.2% | 1.3 pts | ||||||||||||||||||
| Net Interest Expense - GAAP |
3 | — | N/M | 3 | — | N/M | ||||||||||||||||||
| Pro forma adjustments |
||||||||||||||||||||||||
| Interest expense5 |
44 | 47 | 91 | 94 | ||||||||||||||||||||
| Pro Forma Net Interest Expense |
$ 47 | $ 47 | 0% | $ 94 | $ 94 | 0% | ||||||||||||||||||
| Other (Income) Expense, Net - GAAP |
$ (20 | ) | $ 30 | N/M | $ (8 | ) | $ 7 | N/M | ||||||||||||||||
| Special item adjustments |
||||||||||||||||||||||||
| Change in fair value of contingent payment liabilities11 |
— | (44 | ) | — | (44 | ) | ||||||||||||||||||
|
Adjusted Other Income, Net |
$ (20 | ) | $ (14 | ) | 43% | $ (8 | ) | $ (37 | ) | N/M | ||||||||||||||
Refer to page 6 for tickmark explanations
BAXALTA — Page 5
BAXALTA INCORPORATED
Notes to Combined Statements of Income
Three and Six Months Ended June 30, 2015 and 2014
Reconciliation of GAAP to Pro Forma and Non-GAAP Measures (continued)
(unaudited)
($ in millions)
The company’s pro forma and special item adjustments by statement of income line item are listed below (continued):
| Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||||||||||
| 2015 | 2014 | Change | 2015 | 2014 | Change | |||||||||||||||||||
| Pre-Tax Income - GAAP |
$ 382 | $ 415 | (8% | ) | $ 721 | $ 823 | (12% | ) | ||||||||||||||||
| Impact of pro forma adjustments |
(30 | ) | (35 | ) | (63 | ) | (71 | ) | ||||||||||||||||
| Impact of special item adjustments |
138 | 79 | 182 | 105 | ||||||||||||||||||||
|
Adjusted Pro Forma Pre-Tax Income from Continuing Operations |
$ 490 | $ 459 | 7% | $ 840 | $ 857 | (2% | ) | |||||||||||||||||
| Income Tax Expense - GAAP |
$ 98 | $ 97 | 1% | $ 175 | $ 196 | (11% | ) | |||||||||||||||||
| Impact of pro forma adjustments |
(11 | ) | (15 | ) | (24 | ) | (31 | ) | ||||||||||||||||
| Impact of special item adjustments |
29 | 16 | 40 | 18 | ||||||||||||||||||||
|
Adjusted Pro Forma Income Tax Expense |
$ 116 | $ 98 | 18% | $ 191 | $ 183 | 4% | ||||||||||||||||||
| % of Adjusted Pro Forma Pre-tax Income from Continuing Operations |
23.7% | 21.4% | 2.3 pts | 22.7% | 21.4% | 1.3 pts | ||||||||||||||||||
Description of pro forma adjustments:
The pro forma adjustments illustrate the financial impacts of the separation of Baxalta from Baxter International Inc. and the related transactions described below. The pro forma statement of income adjustments give effect to the separation and related transactions described below as if they had occurred as of January 1, 2014. The pro forma adjustments are for informational purposes only and do not purport to represent what Baxalta’s results of operations actually would have been had the separation and related transactions occurred on the dates indicated, or to project Baxalta’s financial performance for any future period.
| (1) | Reflects the effect of the manufacturing and supply agreement that Baxalta and Baxter entered into in connection with the separation. The net sales adjustment reflects additional sales that Baxalta would have recorded for product manufactured and sold to Baxter. The cost of sales adjustment reflects the impact of costs incurred to manufacture these products as well as incremental costs that Baxalta would have recorded for purchases of other products from Baxter under the manufacturing and supply agreement. |
| (2) | Reflects a reduction in operating expenses related to the impact of net retirement obligations transferred to Baxalta as part of the separation. |
| (3) | Reflects a reduction in selling, general and administrative expenses for the difference in costs to be incurred by Baxalta for certain supply chain services to be provided by Baxter under terms of the transition services agreement. |
| (4) | Reflects a net increase in depreciation expense related to certain assets transferred to Baxalta pursuant to the separation agreement that were not included in the company’s historical financial statements. |
| (5) | Reflects interest expense associated with approximately $5 billion of debt issued by Baxalta in advance of the separation. The pro forma adjustment does not include an estimate of the portion that may have been capitalized. |
Description of special item adjustments
| (6) | The company’s GAAP results were impacted by costs, and favorable adjustments to previously estimated costs, associated with the company’s execution of certain strategies to optimize its organizational structure. The charges and adjustments impacted cost of sales, selling, general and administrative expenses and research and development (R&D) expenses in the periods presented. |
| (7) | The company’s GAAP results included intangible asset amortization expense for each period presented. |
| (8) | The company’s GAAP results included R&D charges associated with upfront payments to collaboration partners and payments to collaboration partners upon the achievement of development milestones. |
| (9) | The company’s GAAP results were impacted by separation costs incurred to prepare Baxalta to operate as an independent, standalone public company. |
| (10) | The company’s GAAP results included a benefit associated with the reversal of a portion of a legal charge following the settlement of class-action litigation associated with pricing of plasma-derived therapies. |
| (11) | The company’s GAAP results included losses resulting from increases in the fair value of contingent payment liabilities associated with previously completed business combinations. |
For more information on the company’s use of non-GAAP financial measures in this release, please see the company’s Current Report on Form 8-K filed with the SEC on August 13, 2015.
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