Baxter International Inc 10-Q for FY2021 Q1

Baxter International Inc (BAX)

10-Q 2021-04-29 For: 2021-03-31

Added on April 11, 2026

About this 10-Q

Baxter International Inc filed this 10-Q on April 29, 2021, covering the quarter ended March 31, 2021 (FY2021 Q1).

Headline figures

Quarter ended March 31, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $2.95B; up 5.1% from $2.8B a year earlier
Net income: $298M; down 10.2% from net income of $332M a year earlier
Diluted EPS: $0.58; down 9.4% from $0.64 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	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
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, 2021		December 31, 2020
Current assets:
Cash and cash equivalents	$	3,182	$	3,730
Accounts receivable, net of allowances of $120 in 2021 and $125 in 2020	1,915		2,007
Inventories	2,017		1,916
Prepaid expenses and other current assets	742		758
Total current assets	7,856		8,411
Property, plant and equipment, net	4,614		4,722
Goodwill	3,111		3,217
Other intangible assets, net	1,962		1,671
Operating lease right-of-use assets	567		603
Other non-current assets	1,356		1,395
Total assets	$	19,466	$	20,019
Current liabilities:

Current maturities of long-term debt and finance lease obligations	407		406
Accounts payable	1,023		1,043
Accrued expenses and other current liabilities	1,757		1,884
Total current liabilities	3,187		3,333
Long-term debt and finance lease obligations	5,681		5,786
Operating lease liabilities	472		501
Other non-current liabilities	1,636		1,673
Total liabilities	10,976		11,293
Commitments and contingencies
Equity:
Common stock, $1 par value, authorized 2,000,000,000 shares, issued 683,494,944 shares in 2021 and 2020	683		683
Common stock in treasury, at cost, 180,817,748 shares in 2021 and 178,580,208 shares in 2020	(11,296)		(11,051)
Additional contributed capital	6,043		6,043
Retained earnings	16,502		16,328
Accumulated other comprehensive (loss) income	(3,480)		(3,314)
Total Baxter stockholders’ equity	8,452		8,689
Noncontrolling interests	38		37
Total equity	8,490		8,726
Total liabilities and equity	$	19,466	$	20,019


	Three months ended March 31,
	2021		2020
Net sales	$	2,946	$	2,802
Cost of sales	1,801		1,639
Gross margin	1,145		1,163
Selling, general and administrative expenses	627		628
Research and development expenses	128		146
Other operating income, net	—		(20)
Operating income	390		409
Interest expense, net	34		21
Other expense, net	5		10
Income before income taxes	351		378
Income tax expense	51		45
Net income	300		333
Net income attributable to noncontrolling interests	2		1
Net income attributable to Baxter stockholders	$	298	$	332
Earnings per share
Basic	$	0.59	$	0.65
Diluted	$	0.58	$	0.64
Weighted-average number of shares outstanding
Basic	505		507
Diluted	511		516


	Three months ended March 31,
	2021		2020
Net income	$	300	$	333
Other comprehensive income (loss), net of tax:
Currency translation adjustments, net of tax expense (benefit) of $17 and $(8) for the three months ended March 31, 2021 and 2020, respectively	(208)		(359)
Pension and other postretirement benefits, net of tax expense of $8 and $6 for the three months ended March 31, 2021 and 2020, respectively	30		22
Hedging activities, net of tax expense (benefit) of $3 and ($39) for the three months ended March 31, 2021 and 2020, respectively	12		(130)
Total other comprehensive income (loss), net of tax	(166)		(467)
Comprehensive income (loss)	134		(134)
Less: Comprehensive income attributable to noncontrolling interests	2		1
Comprehensive income (loss) attributable to Baxter stockholders	$	132	$	(135)


	For the three months ended March 31, 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	—	—		—	—		—		298		—		298		2		300
Other comprehensive income (loss)	—	—		—	—		—		—		(166)		(166)		—		(166)
Purchases of treasury stock	—	—		4	(300)		—		—		—		(300)		—		(300)
Stock issued under employee benefit plans and other	—	—		(2)	55		—		—		—		55		—		55
Dividends declared on common stock	—	—		—	—		—		(124)		—		(124)		—		(124)
Change in noncontrolling interests	—	—		—	—		—		—		—		—		(1)		(1)
Balance as of March 31, 2021	683	$	683	181	$	(11,296)	$	6,043	$	16,502	$	(3,480)	$	8,452	$	38	$	8,490


☒			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, 2021		December 31, 2020
Cash and cash equivalents	$	3,182	$	3,730
Restricted cash included in prepaid expenses and other current assets	4		6
Cash, cash equivalents and restricted cash	$	3,186	$	3,736


(in millions)
Cash	$	60
Contingent Consideration	24
Total Consideration	$	84


(in millions)
Assets acquired
Inventory	$	14
Goodwill	3
Other intangible assets	67
Total assets required	$	84


(in millions)	Americas		EMEA		APAC		Total
Balance as of December 31, 2020	$	2,574	$	406	$	237	$	3,217
Reallocation of goodwill	81		(81)		—		—
Acquisitions	2		1		—		3

Currency translation	(90)		(11)		(8)		(109)
Balance as of March 31, 2021	$	2,567	$	315	$	229	$	3,111


(in millions)	Developed technology, including patents		Other amortized intangible assets		Indefinite-lived intangible assets		Total
March 31, 2021
Gross other intangible assets	$	3,023	$	491	$	169	$	3,683
Accumulated amortization	(1,394)		(327)		—		(1,721)
Other intangible assets, net	$	1,629	$	164	$	169	$	1,962
December 31, 2020
Gross other intangible assets	$	2,713	$	495	$	169	$	3,377
Accumulated amortization	(1,374)		(332)		—		(1,706)
Other intangible assets, net	$	1,339	$	163	$	169	$	1,671


(in millions)	CTA		Pension and OPEB plans		Hedging activities		Total
Gains (losses)
Balance as of December 31, 2020	$	(2,587)	$	(574)	$	(153)	$	(3,314)
Other comprehensive income (loss) before reclassifications	(208)		13		3		(192)
Amounts reclassified from AOCI (a)	—		17		9		26
Net other comprehensive income (loss)	(208)		30		12		(166)
Balance as of March 31, 2021	$	(2,795)	$	(544)	$	(141)	$	(3,480)


	Amounts reclassified from AOCI (a)
(in millions)	Three months ended March 31, 2021		Three Months Ended March 31, 2020		Location of impact in income statement
Amortization of pension and OPEB items
Amortization of net losses and prior service costs or credits	$	(21)	$	(15)	Other expense, net
Less: Tax effect	4		3		Income tax expense
	$	(17)	$	(12)	Net of tax
Gains (losses) on hedging activities
Foreign exchange contracts	$	(10)	$	(1)	Cost of sales
Interest rate contracts	$	(1)	—		Interest expense, net
	(11)		(1)		Total before tax
Less: Tax effect	2		—		Income tax expense
	$	(9)	$	(1)	Net of tax
Total reclassifications for the period	$	(26)	$	(13)	Total net of tax


	Three Months Ended March 31,
	2021						2020
(in millions)	U.S.		International		Total		U.S.		International		Total
Renal Care 1	$	216	$	706	$	922	$	204	$	666	$	870
Medication Delivery 2	411		241		652		449		229		678
Pharmaceuticals 3	200		352		552		220		296		516
Clinical Nutrition 4	83		151		234		79		138		217
Advanced Surgery 5	126		91		217		137		87		224
Acute Therapies 6	81		126		207		60		96		156
BioPharma Solutions 7	44		91		135		48		66		114
Other 8	19		8		27		20		7		27
Total Baxter	$	1,180	$	1,766	$	2,946	$	1,217	$	1,585	$	2,802


	Three months ended March 31,
	2021			2020
Expected volatility	25		%	26		%
Expected life (in years)	5.5			5.5
Risk-free interest rate	0.8		%	0.6		%
Dividend yield	1.3		%	1.2		%
Fair value per stock option	$	16		$	16


	Three Months Ended March 31,
(in millions)	2021		2020
Restructuring charges	$	25	$	25
Costs to implement business optimization programs	2		7

Total business optimization charges	$	27	$	32


	Three months ended March 31, 2021
(in millions)	COGS		SG&A		R&D		Total
Employee termination costs	$	16	$	5	$	—	$	21

Asset impairments	4		—		—		4
Total restructuring charges	$	20	$	5	$	—	$	25


(in millions)
Liability balance as of December 31, 2020	$	113
Charges	21
Payments	(24)

Currency translation	(3)
Liability balance as of March 31, 2021	$	107


	Gain (loss) recognized in OCI				Location of gain (loss) in income statement	Gain (loss) reclassified from AOCI into income
(in millions)	2021		2020			2021		2020
Cash flow hedges
Interest rate contracts	$	—	$	(184)	Interest expense, net	$	(1)	$	—
Foreign exchange contracts	4		14		Cost of sales	(10)		(1)
Net investment hedges	114		49		Other expense, net	—		—
Total	$	118	$	(121)		$	(11)	$	(1)


	Location of gain (loss) in income statement	Gain (loss) recognized in income
(in millions)		2021		2020
Undesignated derivative instruments
Foreign exchange contracts	Other expense, net	$	(22)	$	2


	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, 2021		Balance as of December 31, 2020		Balance as of March 31, 2021		Balance as of December 31, 2020
Long-term debt	$	102	$	102	$	5	$	5


			Basis of fair value measurement
(in millions)	Balance as of March 31, 2021		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	$	3	$	—	$	3	$	—

Debt securities	13		—		13		—
Marketable equity securities	2		2		—		—
Total	$	18	$	2	$	16	$	—
Liabilities
Foreign exchange contracts	$	15	$	—	$	15	$	—

Contingent payments related to acquisitions	38		—		—		38
Total	$	53	$	—	$	15	$	38


	Book values		Fair values(a)
(in millions)	2021	2020	2021	2020
Liabilities

Current maturities of long-term debt and finance lease obligations	407	406	409	409
Long-term debt and finance lease obligations	5,681	5,786	6,085	6,471


	Three Months Ended March 31,				Percent change
(in millions)	2021		2020		At actual currency rates		At constant currency rates
United States	$	1,180	$	1,217	(3)	%	(3)	%
International	$	1,766	1,585		11	%	5	%
Total net sales	$	2,946	$	2,802	5	%	1	%


	Three months ended March 31,
	2021		% of net sales		2020		% of net sales		$ change		% change
Gross margin	$	1,145	38.9	%	$	1,163	41.5	%	$	(18)	(1.5)	%
SG&A	$	627	21.3	%	$	628	22.4	%	$	(1)	(0.2)	%
R&D	$	128	4.3	%	$	146	5.2	%	$	(18)	(12.3)	%


	Net sales				Operating income (loss)
	Three months ended March 31,					Three months ended March 31,
(in millions)	2021		2020				2021		2020
Americas	$	1,560	$	1,565			$	599	$	588
EMEA	738		688				135		117
APAC	648		549				138		128
Total segments	2,946		2,802				872		833
Corporate and other	—		—				(482)		(424)
Total	$	2,946	$	2,802			$	390	$	409


			•			demand for and market acceptance risks for and competitive pressures related to new and existing products (including challenges with our ability to accurately predict these pressures 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;


			•			product development risks, including satisfactory clinical performance, 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;


			•			our ability to identify business development and growth opportunities and to successfully execute on business development strategies;


			•			product quality or patient safety issues, leading to product recalls, withdrawals, launch delays, warning letters, import bans, sanctions, seizures, litigation, or declining sales;

			•			the impact of global economic conditions (including potential trade wars) and continuing public health crises, pandemics and epidemics, such as the COVID-19 pandemic, including related resurgences, on us and our customers and suppliers, including foreign governments in countries in which we operate;


			•			the continuity, availability and pricing of acceptable raw materials and component supply, and the related continuity of our manufacturing and distribution;


			•			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);


			•			breaches or failures of our information technology systems or products, including by cyber-attack, data leakage, unauthorized access or theft (as a result of increased 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 or proceedings related to the misstatements in previously reported non-operating income related to foreign exchange gains and losses;


			•			developments that would require the correction of additional misstatements in our previously issued financial statements;