Baxter International Inc 10-Q for FY2022 Q2

Baxter International Inc (BAX)

10-Q 2022-07-28 For: 2022-06-30

Added on April 11, 2026

About this 10-Q

Baxter International Inc filed this 10-Q on July 28, 2022, covering the quarter ended June 30, 2022 (FY2022 Q2).

Headline figures

Quarter ended June 30, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $3.75B; up 20.9% from $3.1B a year earlier
Net income: $252M; down 15.4% from net income of $298M a year earlier
Diluted EPS: $0.50; down 15.3% from $0.59 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 (Loss)	4
	Condensed Consolidated Statements of Changes in Equity	5
	Condensed Consolidated Statements of Cash Flows	7
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	31
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	46
Item 4.	Controls and Procedures	47

PART II.	OTHER INFORMATION	48
Item 1.	Legal Proceedings	48
Item 1A.	Risk Factors	48
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	48
Item 6.	Exhibits	49
Signature		50


	June 30, 2022		December 31, 2021
Current assets:
Cash and cash equivalents	$	1,852	$	2,951
Accounts receivable, net of allowances of $125 in 2022 and $122 in 2021	2,473		2,629
Inventories	2,663		2,453
Prepaid expenses and other current assets	894		839
Total current assets	7,882		8,872
Property, plant and equipment, net	4,976		5,178
Goodwill	9,644		9,836
Other intangible assets, net	7,459		7,792
Operating lease right-of-use assets	566		630
Other non-current assets	1,304		1,213
Total assets	$	31,831	$	33,521
Current liabilities:
Short-term debt	$	200	$	301
Current maturities of long-term debt and finance lease obligations	208		210
Accounts payable	1,282		1,246
Accrued expenses and other current liabilities	2,226		2,479
Total current liabilities	3,916		4,236
Long-term debt and finance lease obligations, less current portion	16,278		17,149
Operating lease liabilities	470		522
Other non-current liabilities	2,264		2,493
Total liabilities	22,928		24,400
Commitments and contingencies
Equity:
Common stock, $1 par value, authorized 2,000,000,000 shares, issued 683,494,944 shares in 2022 and 2021	683		683
Common stock in treasury, at cost,179,687,824 shares in 2022 and 181,879,516 shares in 2021	(11,409)		(11,488)
Additional contributed capital	6,253		6,197
Retained earnings	17,099		17,065
Accumulated other comprehensive (loss) income	(3,767)		(3,380)
Total Baxter stockholders’ equity	8,859		9,077
Noncontrolling interests	44		44
Total equity	8,903		9,121
Total liabilities and equity	$	31,831	$	33,521


	Three months ended June 30,				Six months ended June 30,
	2022		2021		2022		2021
Net sales	$	3,746	$	3,098	$	7,453	$	6,044
Cost of sales	2,293		1,865		4,652		3,666
Gross margin	1,453		1,233		2,801		2,378
Selling, general and administrative expenses	976		675		2,028		1,302
Research and development expenses	148		139		298		267
Other operating income, net	(11)		(5)		(28)		(5)
Operating income	340		424		503		814
Interest expense, net	89		34		174		68
Other (income) expense, net	(44)		(2)		(60)		3
Income before income taxes	295		392		389		743
Income tax expense	40		91		61		142
Net income	255		301		328		601
Net income attributable to noncontrolling interests	3		3		5		5
Net income attributable to Baxter stockholders	$	252	$	298	$	323	$	596
Earnings per share
Basic	$	0.50	$	0.59	$	0.64	$	1.18
Diluted	$	0.50	$	0.59	$	0.64	$	1.17
Weighted-average number of shares outstanding
Basic	504		503		503		504
Diluted	508		509		508		510


	Three months ended June 30,				Six months ended June 30,
	2022		2021		2022		2021
Net income	$	255	$	301	$	328	$	601
Other comprehensive income (loss), net of tax:
Currency translation adjustments, net of tax expense (benefit) of $2 and $(4) for the three months ended June 30, 2022 and 2021, respectively, and ($9) and $13 for the six months ended June 30, 2022 and 2021, respectively.	(417)		88		(432)		(120)
Pension and other postretirement benefits, net of tax expense of $5 and $3 for the three months ended June 30, 2022 and 2021, respectively, and $8 and $11 for the six months ended June 30, 2022 and 2021, respectively.	23		11		32		41
Hedging activities, net of tax expense of $4 and $2 for the three months ended June 30, 2022 and 2021, respectively, and $3 and $5 for the six months ended June 30, 2022 and 2021, respectively.	13		5		11		17
Available-for-sale debt securities, net of tax expense of zero for the three months ended June 30, 2022 and 2021, respectively, and $1 and zero for the six months ended June 30, 2022 and 2021, respectively.	1		—		2		—
Total other comprehensive income (loss), net of tax	(380)		104		(387)		(62)
Comprehensive income (loss)	(125)		405		(59)		539
Less: Comprehensive income attributable to noncontrolling interests	3		3		5		5
Comprehensive income (loss) attributable to Baxter stockholders	$	(128)	$	402	$	(64)	$	534


	For the three months ended June 30, 2022
	Baxter International Inc. stockholders' equity
	Common stock shares	Common stock		Common stock shares in treasury	Common stock in treasury		Additional contributed capital		Retained earnings		Accumulated other comprehensive income (loss)		Total Baxter stockholders' equity		Noncontrolling interests		Total equity
Balance as of April 1, 2022	683	$	683	180	$	(11,422)	$	6,207	$	16,994	$	(3,387)	$	9,075	$	44	$	9,119

Net income	—	—		—	—		—		252		—		252		3		255
Other comprehensive income (loss)	—	—		—	—		—		—		(380)		(380)		—		(380)
Purchases of treasury stock	—	—		—	(8)		—		—		—		(8)		—		(8)
Stock issued under employee benefit plans and other	—	—		—	21		46		—		—		67		—		67
Dividends declared on common stock	—	—		—	—		—		(147)		—		(147)		—		(147)
Change in noncontrolling interests	—	—		—	—		—		—		—		—		(3)		(3)
Balance as of June 30, 2022	683	$	683	180	$	(11,409)	$	6,253	$	17,099	$	(3,767)	$	8,859	$	44	$	8,903


☒			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


	For the six months ended June 30, 2022
	Baxter International Inc. stockholders' equity
	Common stock shares	Common stock		Common stock shares in treasury	Common stock in treasury		Additional contributed capital		Retained earnings		Accumulated other comprehensive income (loss)		Total Baxter stockholders' equity		Noncontrolling interests		Total equity
Balance as of January 1, 2022	683	$	683	182	$	(11,488)	$	6,197	$	17,065	$	(3,380)	$	9,077	$	44	$	9,121

Net income	—	—		—	—		—		323		—		323		5		328
Other comprehensive income (loss)	—	—		—	—		—		—		(387)		(387)		—		(387)
Purchases of treasury stock	—	—		—	(8)		—		—		—		(8)		—		(8)
Stock issued under employee benefit plans and other	—	—		(2)	87		56		—		—		143		—		143
Dividends declared on common stock	—	—		—	—		—		(289)		—		(289)		—		(289)
Change in noncontrolling interests	—	—		—	—		—		—		—		—		(5)		(5)
Balance as of June 30, 2022	683	$	683	180	$	(11,409)	$	6,253	$	17,099	$	(3,767)	$	8,859	$	44	$	8,903


	For the three months ended June 30, 2021
	Baxter International Inc. stockholders' equity
	Common stock shares	Common stock		Common stock shares in treasury	Common stock in treasury		Additional contributed capital		Retained earnings		Accumulated other comprehensive income (loss)		Total Baxter stockholders' equity		Noncontrolling interests		Total equity
Balance as of April 1, 2021	683	$	683	181	$	(11,296)	$	6,043	$	16,502	$	(3,480)	$	8,452	$	38	$	8,490

Net income	—	—		—	—		—		298		—		298		3		301
Other comprehensive income (loss)	—	—		—	—		—		—		104		104		—		104
Purchases of treasury stock	—	—		3	(300)		—		—		—		(300)		—		(300)
Stock issued under employee benefit plans and other	—	—		—	35		47		—		—		82		—		82
Dividends declared on common stock	—	—		—	—		—		(142)		—		(142)		—		(142)

Balance as of June 30, 2021	683	$	683	184	$	(11,561)	$	6,090	$	16,658	$	(3,376)	$	8,494	$	41	$	8,535


	For the six months ended June 30, 2021
	Baxter International Inc. stockholders' equity
	Common stock shares	Common stock		Common stock shares in treasury	Common stock in treasury		Additional contributed capital		Retained earnings		Accumulated other comprehensive income (loss)		Total Baxter stockholders' equity		Noncontrolling interests		Total equity
Balance as of January 1, 2021	683	$	683	179	$	(11,051)	$	6,043	$	16,328	$	(3,314)	$	8,689	$	37	$	8,726

Net income	—	—		—	—		—		596		—		596		5		601
Other comprehensive income (loss)	—	—		—	—		—		—		(62)		(62)		—		(62)
Purchases of treasury stock	—	—		7	(600)		—		—		—		(600)		—		(600)
Stock issued under employee benefit plans and other	—	—		(2)	90		47		—		—		137		—		137
Dividends declared on common stock	—	—		—	—		—		(266)		—		(266)		—		(266)
Change in noncontrolling interests	—	—		—	—		—		—		—		—		(1)		(1)
Balance as of June 30, 2021	683	$	683	184	$	(11,561)	$	6,090	$	16,658	$	(3,376)	$	8,494	$	41	$	8,535


	June 30, 2022		December 31, 2021		June 30, 2021
Cash and cash equivalents	$	1,852	$	2,951	$	3,136
Restricted cash included in prepaid expenses and other current assets	4		5		4
Cash, cash equivalents and restricted cash	$	1,856	$	2,956	$	3,140


(in millions)
Cash consideration paid to Hillrom shareholders(a)	$	10,474
Fair value of equity awards issued to Hillrom equity award holders(b)	2
Total Consideration	$	10,476


(in millions)
Assets acquired and liabilities assumed
Cash and cash equivalents	$	399
Accounts receivable	562
Inventories	557
Prepaid expenses and other current assets	49
Property, plant and equipment	502
Goodwill	6,820
Other intangible assets	6,029
Operating lease right-of-use assets	74
Other non-current assets	132
Short-term debt	(250)
Accounts payable	(140)
Accrued expenses and other current liabilities	(557)
Long-term debt and finance lease obligations	(2,118)
Operating lease liabilities	(57)
Other non-current liabilities	(1,526)
Total assets acquired and liabilities assumed	$	10,476


(in millions)	Americas		EMEA		APAC		Hillrom		Total
Balance as of December 31, 2021	$	2,517	$	309	$	224	$	6,786	$	9,836


Acquisition accounting adjustments	—		—		—		35		35
Currency translation	(150)		(17)		(14)		(46)		(227)
Balance as of June 30, 2022	$	2,367	$	292	$	210	$	6,775	$	9,644


							Indefinite-lived intangible assets
(in millions)	Customer relationships		Developed technology, including patents		Other amortized intangible assets		Trade names		In process Research and Development		Total
June 30, 2022
Gross other intangible assets	$	3,452	$	3,802	$	319	$	1,910	$	230	$	9,713
Accumulated amortization	(347)		(1,685)		(222)		—		—		(2,254)
Other intangible assets, net	$	3,105	$	2,117	$	97	$	1,910	$	230	$	7,459
December 31, 2021
Gross other intangible assets	$	3,437	$	3,801	$	344	$	1,910	$	230	$	9,722
Accumulated amortization	(162)		(1,556)		(212)		—		—		(1,930)
Other intangible assets, net	$	3,275	$	2,245	$	132	$	1,910	$	230	$	7,792


(in millions)	June 30, 2022		December 31, 2021
Contract manufacturing services	$	62	$	50
Software sales	41		45
Bundled equipment and consumable medical products contracts	120		100
Contract assets	$	223	$	195


	Six months ended June 30, 2022
Balance at beginning of period	$	246
New revenue deferrals	282
Revenue recognized upon satisfaction of performance obligations	(290)
Currency translation	(5)
Balance at end of period	$	233


	Three Months Ended June 30,
	2022						2021
(in millions)	U.S.		International		Total		U.S.		International		Total
Renal Care 1	$	225	$	706	$	931	$	217	$	747	$	964
Medication Delivery 2	459		251		710		444		253		697
Pharmaceuticals 3	164		364		528		162		384		546
Clinical Nutrition 4	90		140		230		84		153		237
Advanced Surgery 5	151		112		263		144		112		256
Acute Therapies 6	58		115		173		61		127		188
BioPharma Solutions 7	75		88		163		65		118		183
Patient Support Systems 8	284		80		364		—		—		—
Front Line Care 9	202		80		282		—		—		—
Surgical Solutions 10	36		33		69		—		—		—
Other 11	20		13		33		21		6		27
Total Baxter	$	1,764	$	1,982	$	3,746	$	1,198	$	1,900	$	3,098


	Six Months Ended June 30,
	2022						2021
(in millions)	U.S.		International		Total		U.S.		International		Total
Renal Care 1	$	450	$	1,375	$	1,825	$	433	$	1,453	$	1,886
Medication Delivery 2	931		485		1,416		855		494		1,349
Pharmaceuticals 3	321		728		1,049		362		736		1,098
Clinical Nutrition 4	174		283		457		167		304		471
Advanced Surgery 5	287		204		491		270		203		473
Acute Therapies 6	126		235		361		142		253		395
BioPharma Solutions 7	127		192		319		109		209		318
Patient Support Systems 8	579		168		747		—		—		—
Front Line Care 9	409		167		576		—		—		—
Surgical Solutions 10	73		74		147		—		—		—
Other 11	44		21		65		40		14		54
Total Baxter	$	3,521	$	3,932	$	7,453	$	2,378	$	3,666	$	6,044


(in millions)	CTA		Pension and OPEB plans		Hedging activities		Available-for-sale Debt securities		Total
Gains (losses)
Balance as of December 31, 2021	$	(2,907)	$	(347)	$	(126)	$	—	$	(3,380)
Other comprehensive income (loss) before reclassifications	(432)		19		13		2		(398)
Amounts reclassified from AOCI (a)	—		13		(2)		—		11
Net other comprehensive income (loss)	(432)		32		11		2		(387)
Balance as of June 30, 2022	$	(3,339)	$	(315)	$	(115)	$	2	$	(3,767)


	Amounts reclassified from AOCI (a)
(in millions)	Three months ended June 30, 2022		Six months ended June 30, 2022		Location of impact in income statement
Pension and OPEB items
Amortization of net losses and prior service costs or credits	$	(8)	$	(17)	Other (income) expense, net
Less: Tax effect	2		4		Income tax expense
	$	(6)	$	(13)	Net of tax
Gains (losses) on hedging activities
Foreign exchange contracts	$	3	$	5	Cost of sales
Interest rate contracts	(2)		(3)		Interest expense, net
	1		2		Total before tax
Less: Tax effect	—		—		Income tax expense
	$	1	$	2	Net of tax
Total reclassifications for the period	$	(5)	$	(11)	Total net of tax



	Amounts reclassified from AOCI (a)
(in millions)	Three months ended June 30, 2021		Six months ended June 30, 2021		Location of impact in income statement
Amortization of pension and OPEB items
Amortization of net losses and prior service costs or credits	$	(20)	$	(41)	Other expense, net
Less: Tax effect	4		8		Income tax expense
	$	(16)	$	(33)	Net of tax
Gains on hedging activities
Foreign exchange contracts	$	(8)	$	(18)	Cost of sales
Interest rate contracts	(2)		(3)		Interest expense, net
	(10)		(21)		Total before tax
Less: Tax effect	3		5		Income tax expense
	$	(7)	$	(16)	Net of tax
Total reclassifications for the period	$	(23)	$	(49)	Total net of tax


(in millions)	Three months ended June 30, 2022		Six months ended June 30, 2022
Sales-type lease revenue	$	5	$	8
Operating lease revenue	113		235
Variable lease revenue	12		32
Total lease revenue	$	130	$	275


	Three months ended June 30, 2022
(in millions)	COGS		SG&A		Total
Employee termination costs	$	4	$	16	$	20
Contract termination and other costs	—		5		5
Asset impairments	—		1		1
Total restructuring charges	$	4	$	22	$	26


(in millions)
Liability balance as of December 31, 2021	$	109
Charges	92
Payments	(70)
Reserve adjustments	(6)
Currency translation	(9)
Liability balance as of June 30, 2022	$	116


	Gain (loss) recognized in OCI				Location of gain (loss) in income statement	Gain (loss) reclassified from AOCI into income
(in millions)	2022		2021			2022		2021
Cash flow hedges
Interest rate contracts	$	—	$	—	Interest expense, net	$	(2)	$	(2)
Foreign exchange contracts	19		(3)		Cost of sales	3		(8)
Net investment hedges	143		(31)		Other (income) expense, net	—		—
Total	$	162	$	(34)		$	1	$	(10)


	Location of gain (loss) in income statement	Gain (loss) recognized in income
(in millions)		2022		2021
Undesignated derivative instruments
Foreign exchange contracts	Other (income) expense, net	$	(26)	$	3


	Gain (loss) recognized in OCI				Location of gain (loss) in income statement	Gain (loss) reclassified from AOCI into income
(in millions)	2022		2021			2022		2021
Cash flow hedges
Interest rate contracts	$	—	$	—	Interest expense, net	$	(3)	$	(3)
Foreign exchange contracts	16		1		Cost of sales	5		(18)
Net investment hedges	185		83		Other (income) expense, net	—		—
Total	$	201	$	84		$	2	$	(21)


	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	$	14	Accrued expenses and other current liabilities	$	—

Total derivative instruments designated as hedges		14			—
Undesignated derivative instruments
Foreign exchange contracts	Prepaid expenses and other current assets	—		Accrued expenses and other current liabilities	9
Total derivative instruments		$	14		$	9


	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 June 30, 2022		Balance as of December 31, 2021		Balance as of June 30, 2022		Balance as of December 31, 2021
Long-term debt	$	101	$	101	$	4	$	4


			Basis of fair value measurement
(in millions)	Balance as of June 30, 2022		Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Assets
Foreign exchange contracts	$	14	$	—	$	14	$	—

Available-for-sale debt securities	44		—		—		44
Marketable equity securities	30		30		—		—
Total	$	88	$	30	$	14	$	44
Liabilities
Foreign exchange contracts	$	9	$	—	$	9	$	—

Contingent payments related to acquisitions	113		—		—		113
Total	$	122	$	—	$	9	$	113


	Book values				Fair values(a)
(in millions)	2022		2021		2022		2021
Liabilities
Short-term debt	$	200	$	301	$	200	$	301
Current maturities of long-term debt and finance lease obligations	208		210		207		212
Long-term debt and finance lease obligations	16,278		17,149		14,996		17,568


	Three Months Ended June 30,				Percent change
(in millions)	2022		2021		At actual currency rates		At constant currency rates
United States	$	1,764	$	1,198	47	%	47	%
International	$	1,982	1,900		4	%	13	%
Total net sales	$	3,746	$	3,098	21	%	26	%


	Three months ended June 30,
	2022		% of net sales		2021		% of net sales		$ change		% change
Gross margin	$	1,453	38.8	%	$	1,233	39.8	%	$	220	17.8	%
SG&A	$	976	26.1	%	$	675	21.8	%	$	301	44.6	%
R&D	$	148	4.0	%	$	139	4.5	%	$	9	6.5	%


	Net sales								Operating income (loss)
	Three months ended June 30,				Six months ended June 30,				Three months ended June 30,				Six months ended June 30,
(in millions)	2022		2021		2022		2021		2022		2021		2022		2021
Americas	$	1,646	$	1,624	$	3,272	$	3,184	$	567	$	632	$	1,177	$	1,231
EMEA	738		783		1,437		1,521		169		159		288		294
APAC	647		691		1,274		1,339		156		152		307		290
Hillrom	715		—		1,470		—		149		—		349		—
Total segments	3,746		3,098		7,453		6,044		1,041		943		2,121		1,815
Corporate and other	—		—		—		—		(701)		(519)		(1,618)		(1,001)
Total	$	3,746	$	3,098	$	7,453	$	6,044	$	340	$	424	$	503	$	814


			•			demand for and market acceptance risks for and competitive pressures related to new and existing products (including challenges with our ability to accurately predict changing customer preferences (which has led to and may continue to lead to increased inventory levels) and needs and advances in technology and the resulting impact on customer inventory levels and the impact of reduced hospital admission rates and elective surgery volumes), and the impact of those products on quality and patient safety concerns;


			•			the continuity, availability and pricing of acceptable raw materials and component parts (and our ability to pass some or all of these costs on to our customers), and the related continuity of our manufacturing and distribution (including impacts from COVID-19) and those of our suppliers;

			•			inability to create additional production capacity in a timely manner or the occurrence of other manufacturing, sterilization or supply difficulties (including as a result of natural disaster, public health crises and epidemics/pandemics, regulatory actions or otherwise);

			•			product development risks, including satisfactory clinical performance and obtaining required regulatory approvals, 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;


			•			the impact of global economic conditions (including, among other things, the ongoing war in Ukraine, the related economic sanctions being imposed globally in response to the conflict and potential trade wars and global inflationary pressures) and continuing public health crises, pandemics and epidemics, such as the ongoing COVID-19 pandemic, on us and our employees, customers and suppliers, including foreign governments in countries in which we operate;