Baxter International Inc 10-Q for FY2023 Q1

Baxter International Inc (BAX)

10-Q 2023-04-27 For: 2023-03-31

Added on April 11, 2026

About this 10-Q

Baxter International Inc filed this 10-Q on April 27, 2023, covering the quarter ended March 31, 2023 (FY2023 Q1).

Headline figures

Quarter ended March 31, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $3.65B; down 1.6% from $3.71B a year earlier
Net income: $44M; down 38.0% from net income of $71M a year earlier
Diluted EPS: $0.09; down 35.7% from $0.14 a year earlier

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		Page Number
PART I.	FINANCIAL INFORMATION	2
Item 1.	Financial Statements (unaudited)	2
	Condensed Consolidated Balance Sheets	2
	Condensed Consolidated Statements of Income	3
	Condensed Consolidated Statements of Comprehensive Income	4
	Condensed Consolidated Statements of Changes in Equity	5
	Condensed Consolidated Statements of Cash Flows	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	38
Item 4.	Controls and Procedures	39

PART II.	OTHER INFORMATION	40
Item 1.	Legal Proceedings	40
Item 1A.	Risk Factors	40
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	40
Item 6.	Exhibits	41
Signature		42


	March 31, 2023		December 31, 2022
Current assets:
Cash and cash equivalents	$	1,673	$	1,718
Accounts receivable, net of allowances of $122 in 2023 and $114 in 2022	2,547		2,659
Inventories	2,922		2,718
Prepaid expenses and other current assets	957		916
Total current assets	8,099		8,011
Property, plant and equipment, net	5,000		4,979
Goodwill	6,868		6,843
Other intangible assets, net	6,640		6,793
Operating lease right-of-use assets	554		550
Other non-current assets	1,130		1,111
Total assets	$	28,291	$	28,287
Current liabilities:
Short-term debt	$	50	$	299
Current maturities of long-term debt and finance lease obligations	1,103		1,105
Accounts payable	1,290		1,139
Accrued expenses and other current liabilities	2,317		2,202
Total current liabilities	4,760		4,745
Long-term debt and finance lease obligations, less current portion	15,278		15,232
Operating lease liabilities	458		456
Other non-current liabilities	1,854		1,959
Total liabilities	22,350		22,392
Commitments and contingencies
Equity:
Common stock, $1 par value, authorized 2,000,000,000 shares, issued 683,494,944 shares in 2023 and 2022	683		683
Common stock in treasury, at cost,177,658,649 shares in 2023 and 179,062,594 shares in 2022	(11,324)		(11,389)
Additional contributed capital	6,312		6,322
Retained earnings	13,947		14,050
Accumulated other comprehensive income (loss)	(3,739)		(3,833)
Total Baxter stockholders’ equity	5,879		5,833
Noncontrolling interests	62		62
Total equity	5,941		5,895
Total liabilities and equity	$	28,291	$	28,287


	Three months ended March 31,
	2023		2022
Net sales	$	3,649	$	3,707
Cost of sales	2,302		2,359
Gross margin	1,347		1,348
Selling, general and administrative expenses	1,010		1,052
Research and development expenses	164		150

Other operating income, net	(13)		(17)
Operating income	186		163
Interest expense, net	117		85
Other income, net	(1)		(16)
Income before income taxes	70		94
Income tax expense	25		21
Net income	45		73
Net income attributable to noncontrolling interests	1		2
Net income attributable to Baxter stockholders	$	44	$	71
Earnings per share
Basic	$	0.09	$	0.14
Diluted	$	0.09	$	0.14
Weighted-average number of shares outstanding
Basic	505		503
Diluted	507		509


	Three months ended March 31,
	2023		2022
Net income	$	45	$	73
Other comprehensive income (loss), net of tax:
Currency translation adjustments, net of tax expense (benefit) of ($13) and $(11) for the three months ended March 31, 2023 and 2022, respectively.	102		(15)
Pension and other postretirement benefits, net of tax expense (benefit) of ($1) and $3 for the three months ended March 31, 2023 and 2022, respectively.	(6)		9
Hedging activities, net of tax expense (benefit) of ($1) for the three months ended March 31, 2023 and 2022.	(2)		(2)
Available-for-sale debt securities, net of tax expense of zero and $1 for the three months ended March 31, 2023 and 2022, respectively.	—		1
Total other comprehensive income (loss), net of tax	94		(7)
Comprehensive income	139		66
Less: Comprehensive income attributable to noncontrolling interests	1		2
Comprehensive income attributable to Baxter stockholders	$	138	$	64


	For the three months ended March 31, 2023
	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, 2023	683	$	683	179	$	(11,389)	$	6,322	$	14,050	$	(3,833)	$	5,833	$	62	$	5,895

Net income	—	—		—	—		—		44		—		44		1		45
Other comprehensive income	—	—		—	—		—		—		94		94		—		94

Stock issued under employee benefit plans and other	—	—		(1)	65		(10)		—		—		55		—		55
Dividends declared on common stock	—	—		—	—		—		(147)		—		(147)		—		(147)
Change in noncontrolling interests	—	—		—	—		—		—		—		—		(1)		(1)
Balance as of March 31, 2023	683	$	683	178	$	(11,324)	$	6,312	$	13,947	$	(3,739)	$	5,879	$	62	$	5,941


☒			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


	March 31, 2023		December 31, 2022		March 31, 2022
Cash and cash equivalents	$	1,673	$	1,718	$	2,294
Restricted cash included in prepaid expenses and other current assets	4		4		5
Cash, cash equivalents and restricted cash	$	1,677	$	1,722	$	2,299


	Three months ended March 31,
(in millions)	2023		2022
Balance at beginning of period	$	114	$	122

Charged to costs and expenses	7		6
Write-offs	(1)		(1)
Currency translation adjustments	2		2
Balance at end of period	$	122	$	129


(in millions)	Americas		EMEA		APAC		Hillrom		Total
Balance as of December 31, 2022	$	2,356	$	289	$	210	$	3,988	$	6,843




Currency translation	18		2		2		3		25
Balance as of March 31, 2023	$	2,374	$	291	$	212	$	3,991	$	6,868


							Indefinite-lived intangible assets
(in millions)	Customer relationships		Developed technology, including patents		Other amortized intangible assets		Trade names		In process Research and Development		Total
March 31, 2023
Gross other intangible assets	$	3,454	$	3,862	$	326	$	1,571	$	202	$	9,415
Accumulated amortization	(529)		(2,000)		(246)		—		—		(2,775)
Other intangible assets, net	$	2,925	$	1,862	$	80	$	1,571	$	202	$	6,640
December 31, 2022
Gross other intangible assets	$	3,452	$	3,836	$	325	$	1,571	$	202	$	9,386
Accumulated amortization	(470)		(1,888)		(235)		—		—		(2,593)
Other intangible assets, net	$	2,982	$	1,948	$	90	$	1,571	$	202	$	6,793


	Gains (losses)
(in millions)	CTA		Pension and OPEB plans		Hedging activities		Available-for-sale debt securities		Total

Balance as of December 31, 2022	$	(3,386)	$	(331)	$	(119)	$	3	$	(3,833)
Other comprehensive income (loss) before reclassifications	102		(3)		—		—		99
Amounts reclassified from AOCI (a)	—		(3)		(2)		—		(5)
Net other comprehensive income (loss)	102		(6)		(2)		—		94
Balance as of March 31, 2023	$	(3,284)	$	(337)	$	(121)	$	3	$	(3,739)


	Amounts reclassified from AOCI (a)
(in millions)	Three months ended March 31, 2023		Three months ended March 31, 2022		Location of impact in income statement




Pension and OPEB items
Amortization of net losses and prior service costs or credits	$	5	$	(9)	Other income, net
Less: Tax effect	(2)		2		Income tax expense
	$	3	$	(7)	Net of tax
Gains (losses) on hedging activities
Foreign exchange contracts	$	4	$	2	Cost of sales
Interest rate contracts	(1)		(1)		Interest expense, net
	3		1		Total before tax
Less: Tax effect	(1)		—		Income tax expense
	$	2	$	1	Net of tax
Total reclassifications for the period	$	5	$	(6)	Total net of tax


	Three Months Ended March 31,
(in millions)	2023		2022
Balance at beginning of period	$	244	$	246
New revenue deferrals	113		116
Revenue recognized upon satisfaction of performance obligations	(121)		(122)
Currency translation	1		—
Balance at end of period	$	237	$	240


	Three months ended March 31, 2023
(in millions)	COGS		SG&A		R&D		Total
Employee termination costs	$	17	$	63	$	7	$	87
Contract termination and other costs	3		—		—		3
Asset impairments	12		8		—		20
Total restructuring charges	$	32	$	71	$	7	$	110


	Three Months Ended March 31,
	2023						2022
(in millions)	U.S.		International		Total		U.S.		International		Total
Renal Care 1	$	232	$	660	$	892	$	225	$	669	$	894
Medication Delivery 2	436		251		687		472		234		706
Pharmaceuticals 3	173		350		523		157		364		521
Clinical Nutrition 4	78		146		224		84		143		227
Advanced Surgery 5	144		102		246		136		92		228
Acute Therapies 6	61		119		180		68		120		188
BioPharma Solutions 7	69		70		139		52		104		156
Patient Support Systems 8	260		88		348		295		88		383
Front Line Care 9	221		81		302		207		87		294
Global Surgical Solutions 10	38		43		81		37		41		78
Other 11	22		5		27		24		8		32
Total Baxter	$	1,734	$	1,915	$	3,649	$	1,757	$	1,950	$	3,707


(in millions)
Liability balance as of December 31, 2022	$	107
Charges	93
Payments	(23)
Reserve adjustments	(3)
Currency translation	1
Liability balance as of March 31, 2023	$	175


	Gain (loss) recognized in OCI				Location of gain (loss) in income statement	Gain (loss) reclassified from AOCI into income
(in millions)	2023		2022			2023		2022
Cash flow hedges
Interest rate contracts	$	—	$	—	Interest expense, net	$	(1)	$	(1)
Foreign exchange contracts	—		(3)		Cost of sales	4		2
Net investment hedges	(48)		42		Other income, net	—		—
Total	$	(48)	$	39		$	3	$	1


	Location of gain (loss) in income statement	Gain (loss) recognized in income
(in millions)		2023		2022
Undesignated derivative instruments
Foreign exchange contracts	Other income, net	$	(3)	$	3


	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	$	5	Accrued expenses and other current liabilities	$	5

Total derivative instruments designated as hedges		5			5
Undesignated derivative instruments
Foreign exchange contracts	Prepaid expenses and other current assets	3		Accrued expenses and other current liabilities	3
Total derivative instruments		$	8		$	8


	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 March 31, 2023		Balance as of December 31, 2022		Balance as of March 31, 2023		Balance as of December 31, 2022
Long-term debt	$	101	$	101	$	4	$	4


			Basis of fair value measurement
(in millions)	Balance as of March 31, 2023		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	42		—		—		42
Marketable equity securities	38		38		—		—
Total	$	88	$	38	$	8	$	42
Liabilities
Foreign exchange contracts	$	8	$	—	$	8	$	—

Contingent payments related to acquisitions	70		—		—		70
Total	$	78	$	—	$	8	$	70


	Book values				Fair values(a)
(in millions)	2023		2022		2023		2022
Liabilities
Short-term debt	$	50	$	299	$	50	$	299
Current maturities of long-term debt and finance lease obligations	1,103		1,105		1,084		1,079
Long-term debt and finance lease obligations	15,278		15,232		14,011		13,657


	Three Months Ended March 31,				Percent change
(in millions)	2023		2022		At actual currency rates		At constant currency rates
United States	$	1,734	$	1,757	(1)	%	(1)	%
International	$	1,915	1,950		(2)	%	4	%
Total net sales	$	3,649	$	3,707	(2)	%	2	%


	Three months ended March 31,
	2023		% of net sales		2022		% of net sales		$ change		% change
Gross margin	$	1,347	36.9	%	$	1,348	36.4	%	$	(1)	(0.1)	%
SG&A	$	1,010	27.7	%	$	1,052	28.4	%	$	(42)	(4.0)	%
R&D	$	164	4.5	%	$	150	4.0	%	$	14	9.3	%


	Net sales				Operating income (loss)
	Three months ended March 31,					Three months ended March 31,
(in millions)	2023		2022				2023		2022
Americas	$	1,602	$	1,626			$	481	$	610
EMEA	714		699				106		119
APAC	602		627				107		151
Hillrom	731		755				158		200
Total segments	3,649		3,707				852		1,080
Corporate and other	—		—				(666)		(917)
Total	$	3,649	$	3,707			$	186	$	163


			•			our ability to execute and complete strategic initiatives, asset dispositions and other transactions, including the proposed spinoff of our Renal Care and Acute Therapies product categories, our plans to simplify our operating model and manufacturing footprint and our evaluation of strategic alternatives for our BPS product category, the timing for such transactions, the ability to satisfy any applicable conditions and the expected proceeds, consideration and benefits;
			•			failure to accurately forecast or achieve our short-and long-term financial improvement performance and goals (including with respect to our strategic actions) and related impacts on our liquidity;
			•			our ability to execute on our capital allocation plans, including our debt repayment plans, the timing and amount of any dividends, share repurchases and divestiture proceeds and the capital structure of the public company that we expect to form as a result of the proposed spinoff (and the resulting capital structure for the remaining company);
			•			the impact of global economic conditions (including, among other things, inflation levels, interest rates, financial market volatility, banking crises, the potential for a recession, the ongoing war in Ukraine, the related economic sanctions being imposed globally in response to the conflict and potential trade wars) and continuing public health crises, pandemics and epidemics, such as the ongoing COVID-19 pandemic, or the anticipation of any of the foregoing, on our operations and our employees, customers and suppliers, including foreign governments in countries in which we operate;
			•			downgrades to our credit ratings or ratings outlooks, and the related impact on our funding costs and liquidity;
			•			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 and future expenditures, 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 to our customers through recent price increases), and the related continuity of our manufacturing and distribution 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 and maintaining 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;
			•			our ability to finance and develop new products or enhancements on commercially acceptable terms or at all;
			•			loss of key employees, the occurrence of labor disruptions or the inability to identify and recruit new employees;
			•			product quality or patient safety issues leading to product recalls, withdrawals, launch delays, warning letters, import bans, sanctions, seizures, litigation, or declining sales, including the focus on evaluating product portfolios for the potential presence or formation of nitrosamines;
			•			breaches or failures of our information technology systems or products, including by cyber-attack, data leakage, unauthorized access or theft (as a result of remote working arrangements or otherwise);


			•			future actions of (or failures to act or delays in acting by) FDA, the European Medicines Agency or any other regulatory body or government authority (including the SEC, DOJ or the Attorney General of any State) that could delay, limit or suspend product development, manufacturing or sale or result in seizures, recalls, injunctions, monetary sanctions or criminal or civil liabilities, including the continued delay in lifting the warning letter at our Ahmedabad facility;
			•			failures with respect to our quality, compliance or ethics programs;
			•			future actions of third parties, including third-party payers and our customers and distributors (including GPOs and IDNs), 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 annual 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);
			•			the outcome of pending or future litigation, including the opioid litigation and ethylene oxide litigation or other claims;
			•			the impact of competitive products and pricing, including generic competition, drug reimportation and disruptive technologies;
			•			global regulatory, trade and tax policies (including with respect to climate change and other sustainability matters);
			•			the ability to protect or enforce our 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 our manufacture, sale or use of affected products or technology;
			•			the impact of any goodwill or other intangible asset impairments on our operating results;
			•			fluctuations in foreign exchange and interest rates;
			•			any changes in law concerning the taxation of income (whether with respect to current or future tax reform);
			•			actions by tax authorities in connection with ongoing tax audits;
			•			other factors identified elsewhere in this report and other filings with the SEC, including those factors described in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2022, all of which are available on our website.


Exhibit Number						Description

10.1						Baxter International Inc. Executive Officer Cash Severance Policy, effective February 13, 2023 (incorporated by reference to Exhibit 10.1 to Baxter In ternational Inc .'s Current Report on Form 8-K, filed on February 1 4 , 2023).

10.2						Third Amendment, dated as of March 13, 2023, to the Credit Agreement, dated as of September 30, 2021, as amended by that certain First Amendment, dated as of September 28, 2022, and that certain Second Amendment, dated as of September 28, 2022, among Baxter International Inc. as Borrower, JPMorgan Chase Bank, National Association, as Administrative Agent and certain other financial institutions named therein (in corporated by reference to Exhib it 10.1 to Baxter International Inc.'s Current Report on Form 8-K, filed on March 13, 2023).

10.3						Third Amendment, dated as of March 13, 2023, to the Five-Year Credit Agreement, dated as of September 30, 2021, as amended by that certain First Amendment, dated as of September 28, 2022, and that certain Second Amendment, dated as of September 28, 2022, among Baxter International Inc. as Borrower, JPMorgan Chase Bank, National Association, as Administrative Agent and certain other financial institutions named therein (incor porated by reference to Exhibit 10 .2 to Baxter International Inc.'s Current Report on Form 8-K, filed on March 13, 2023).

10.4						Second Guaranty Amendment, dated as of March 13, 2023, to the Amended and Restated Guaranty, dated as of October 1, 2021, as amended by that certain Second Amendment, dated as of September 28, 2022, among Baxter Healthcare SA and Baxter World Trade SRL, as Borrowers, J.P. Morgan SE, as Administrative Agent and certain other financial institutions named therein (incorporated by refer ence to Exhibit 10.3 to Baxter I nternational Inc.'s C urrent Report on Form 8-K, filed on March 13, 2023).

31.1*						Certification of Chief Executive Officer Pursuant to Rules 13a-14 (a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended.

31.2*						Certification of Chief Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended.

32.1**						Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2**						Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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)


		BAXTER INTERNATIONAL INC.
		(Registrant)
Date: April 27, 2023
	By:	/s/ James K. Saccaro
		James K. Saccaro Executive Vice President and Chief Financial Officer (duly authorized officer and principal financial officer)


/s/ José E. Almeida
José E. Almeida
Chairman of the Board and
Chief Executive Officer


/s/ James K. Saccaro
James K. Saccaro
Executive Vice President and Chief Financial Officer