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Baxter Reports First-Quarter 2023 Results

DEERFIELD, Ill.–(BUSINESS WIRE)–Baxter International Inc. (NYSE:BAX), a global medtech leader, today reported results for the first quarter of 2023.

“Baxter’s performance in the first quarter reflects sustained demand for our medically essential products amid a stabilizing macroeconomic climate and healthcare marketplace,” said José (Joe) E. Almeida, chairman, president and chief executive officer. “I am confident that the transformational actions announced earlier this year, and currently underway, will help us advance our performance, fueling enhanced agility, efficiency, and resilience as we navigate an evolving landscape. Our goal, as always, is to drive increasing impact and value for the patients, clinicians, investors and numerous other stakeholder communities that depend on us.”

First-Quarter Financial Results

Worldwide sales in the first quarter totaled approximately $3.65 billion, a decrease of 2% on a reported basis and an increase of 2% on a constant currency basis, exceeding the company’s previously issued guidance.

Sales in the U.S. totaled $1.73 billion, decreasing 1% on a reported basis. International sales of $1.92 billion decreased 2% on a reported basis and increased 4% at constant currency rates.

Sales performance at constant currency rates reflects overall positive demand across the portfolio, supported by a continued recovery in patient and procedure volumes following the height of the COVID-19 pandemic, in combination with generally stabilizing macroeconomic conditions and an improvement in recent supply chain challenges. Sales growth in the quarter was primarily driven by strength in Advanced Surgery, Front Line Care, Pharmaceuticals and Renal Care. First-quarter performance was partially offset by expected declines in Acute Therapies and BioPharma Solutions as well as in Patient Support Systems, which reflected a slowdown in capital spending for certain healthcare products.

Please see the attached schedules accompanying this press release for additional details on sales performance in the quarter, including breakouts by Baxter’s product categories and segments.

For the first quarter, net income attributable to Baxter was $44 million, or $0.09 per diluted share, a decline of 36% on a U.S. GAAP (Generally Accepted Accounting Principles) basis. These results include special items totaling $253 million after tax, which were primarily related to intangible asset amortization, business optimization and separation costs. On an adjusted basis, net income attributable to Baxter totaled $297 million, or $0.59 per diluted share, a 37% decrease. Results in the quarter exceeded the company’s previously issued guidance, driven primarily by better-than-expected sales performance.

Advancing Strategic Transformation Initiatives

Baxter continues to execute against a range of strategic objectives announced in early 2023, focused on enhancing patient outcomes, innovation, efficiency and long-term shareholder value:

Business Highlights2

Baxter continues to advance its strategic priorities in pursuit of its Mission to Save and Sustain Lives. Among recent highlights, the company:

Among recent corporate responsibility highlights, Baxter and the Baxter International Foundation advanced support for disaster relief in response to February’s devastating earthquake in Turkey and Syria. Support included cash grants and product donations managed through humanitarian partners Direct Relief and Americares.

2023 Financial Outlook

For full-year 2023: Baxter now expects U.S. GAAP earnings of $1.16 to $1.31 per diluted share and adjusted earnings, before special items, of $2.85 to $3.00 per diluted share. The company expects sales growth of 1% to 2% on a reported basis and approximately 1% on a constant currency basis.

For second-quarter 2023: The company expects sales growth of approximately 1% to 2% on a reported basis and 2% to 3% on a constant currency basis. The company expects U.S. GAAP earnings of $0.18 to $0.20 per diluted share and adjusted earnings, before special items, of $0.59 to $0.61 per diluted share.

First-Quarter 2023 Earnings Conference Call

A webcast of Baxter’s first-quarter 2023 conference call for investors can be accessed live from a link in the Investor Relations section of the company’s website at www.baxter.com beginning at 7:30 a.m. CDT on April 27, 2023. Please see www.baxter.com for more information regarding this and future investor events and webcasts.

About Baxter

Every day, millions of patients, caregivers and healthcare providers rely on Baxter’s leading portfolio of diagnostic, critical care, kidney care, nutrition, hospital and surgical products used across patient homes, hospitals, physician offices and other sites of care. For more than 90 years, we’ve been operating at the critical intersection where innovations that save and sustain lives meet the healthcare providers who make it happen. With products, digital health solutions and therapies available in more than 100 countries, Baxter’s employees worldwide are now building upon the company’s rich heritage of medical breakthroughs to advance the next generation of transformative healthcare innovations. To learn more, visit www.baxter.com and follow us on Twitter, LinkedIn and Facebook.

Non-GAAP Financial Measures

Net sales growth rates are presented on a constant currency basis. These non-GAAP financial measures provide information on the percentage change in net sales growth as if foreign currency exchange rates had remained constant between the prior and current periods.

Other non-GAAP financial measures included in this release and the accompanying tables (including within the tables that provide the company’s detailed reconciliations to the corresponding U.S. GAAP financial measures) are: adjusted gross margin, adjusted selling, general, and administrative expenses, adjusted research and development expenses, adjusted other operating income, net, adjusted operating income, adjusted income before income taxes, adjusted income tax expense, adjusted net income, adjusted net income attributable to Baxter stockholders and adjusted diluted earnings per share. Those non-GAAP financial measures exclude the impact of special items. For the quarters ended March 31, 2023 and 2022, special items for one or more periods included intangible asset amortization, business optimization items, acquisition and integration items, divestiture-related costs, expenses related to European medical devices regulation and product-related items. These items are excluded because they are highly variable or unusual and of a size that may substantially impact the company’s reported operations for a period. Additionally, intangible asset amortization is excluded as a special item to facilitate an evaluation of current and past operating performance and is consistent with how management and the company’s Board of Directors assess performance.

This release and the accompanying tables also include free cash flow, a non-GAAP financial measure that Baxter defines as operating cash flow less capital expenditures. Free cash flow is used by management and the company’s Board of Directors to evaluate the cash generated from Baxter’s operating activities each period after deducting its capital spending.

This release also includes forecasts of certain of the aforementioned non-GAAP measures on a forward-looking basis as part of the company’s financial outlook for upcoming periods.

Non-GAAP financial measures may enhance an understanding of the company’s operations and may facilitate an analysis of those operations, particularly in evaluating performance from one period to another. Management believes that non-GAAP financial measures, when used in conjunction with the results presented in accordance with U.S. GAAP and the company’s reconciliations to corresponding U.S. GAAP financial measures (which are included in the tables accompanying this release), may enhance an investor’s overall understanding of the company’s past financial performance and prospects for the future. Accordingly, management uses these non-GAAP measures internally in financial planning, to monitor business unit performance, and, in some cases, for purposes of determining incentive compensation. This information should be considered in addition to, and not as substitutes for, information prepared in accordance with U.S. GAAP.

Forward-Looking Statements

This release includes forward-looking statements concerning the company’s financial results (including the outlook for second quarter and full-year 2023) and business development and regulatory activities (including anticipated cost savings). These forward-looking 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: the company’s ability to execute and complete strategic initiatives, asset dispositions and other transactions, including the proposed spinoff of the company’s Renal Care and Acute Therapies product categories; the company’s plans to simplify the company’s operating model and manufacturing footprint and the company’s review of strategic alternatives (including a potential sale) for the company’s BioPharma Solutions 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 the company’s short- and long-term financial improvement performance and goals (including with respect to the company’s strategic actions); the company’s ability to execute on its capital allocation plans, including the company’s debt repayment plans, the timing and amount of any dividends, share repurchases and acquisition proceeds and the capital structure of the public company that the company expects 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 the company’s operations and on the company’s employees, customers and suppliers, including foreign governments in countries in which the company operates; downgrades to the company’s credit ratings or ratings outlooks, and the related impact on the company’s funding costs and liquidity; demand for and market acceptance risks for and competitive pressures related to new and existing products (including challenges with the company’s ability to accurately predict changing consumer 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 the company’s ability to pass some or all of these costs to the company’s customers through recent price increases or otherwise), and the related continuity of the company’s manufacturing and distribution and those of the company’s 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; the company’s 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 the company’s 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, Department of Justice, the Federal Trade Commission, Centers for Medicare & Medicaid Services or the Attorney General of any State) that could delay, limit or suspend product development, manufacturing, sale or reimbursement or result in seizures, recalls, injunctions, monetary sanctions or criminal or civil liabilities, including the continued delay in lifting the warning letter at the company’s Ahmedabad facility; failures with respect to the company’s quality, compliance or ethics programs; future actions of third parties, including third-party payers and the company’s customers and distributors (including group purchasing organizations and integrated delivery networks), 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; the outcome of pending or future litigation, including the opioid, ethylene oxide and Linet antitrust 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 the company’s 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 the company’s manufacture, sale or use of affected products or technology; the impact of any goodwill or other intangible asset impairments on the company’s 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; and other risks identified in Baxter’s most recent filings on Form 10-K and Form 10-Q and other SEC filings, all of which are available on Baxter’s website. Baxter does not undertake to update its forward-looking statements unless otherwise required by the federal securities laws.

Baxter, Centrella, Dose IQ, ExactaMix, ExactaMix Pro, Floseal, Galaxy, IQ Enterprise, Novum IQ, PrisMax, ReadyConnect, Recothrom and Zosyn are registered trademarks of Baxter International Inc. or its subsidiaries.

Miroliver and miroliverELAP are registered trademarks of Miromatrix Medical, Inc.

Any other trademarks or product brands appearing herein are the property of their respective owners.

____________________

1 See tables to the press release for reconciliations of non-GAAP measures used in this press release to the corresponding U.S. GAAP measures.

2 See links to original press releases for additional product information.

BAXTER INTERNATIONAL INC.

Consolidated Statements of Income

(unaudited)

(in millions, except per share and percentage data)

 

 

Three Months Ended
March 31,

 

 

 

 

2023

 

 

 

2022

 

 

Change

NET SALES

$

3,649

 

 

$

3,707

 

 

(2)%

COST OF SALES

 

2,302

 

 

 

2,359

 

 

(2)%

GROSS MARGIN

 

1,347

 

 

 

1,348

 

 

(0)%

% of Net Sales

 

36.9

%

 

 

36.4

%

 

0.5 pts

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

 

1,010

 

 

 

1,052

 

 

(4)%

% of Net Sales

 

27.7

%

 

 

28.4

%

 

(0.7 pts)

RESEARCH AND DEVELOPMENT EXPENSES

 

164

 

 

 

150

 

 

9%

% of Net Sales

 

4.5

%

 

 

4.0

%

 

0.5 pts

OTHER OPERATING INCOME, NET

 

(13

)

 

 

(17

)

 

(24)%

OPERATING INCOME

 

186

 

 

 

163

 

 

14%

% of Net Sales

 

5.1

%

 

 

4.4

%

 

0.7 pts

INTEREST EXPENSE, NET

 

117

 

 

 

85

 

 

38%

OTHER INCOME, NET

 

(1

)

 

 

(16

)

 

(94)%

INCOME BEFORE INCOME TAXES

 

70

 

 

 

94

 

 

(26)%

INCOME TAX EXPENSE

 

25

 

 

 

21

 

 

19%

% of Income Before Income Taxes

 

35.7

%

 

 

22.3

%

 

13.4 pts

NET INCOME

 

45

 

 

 

73

 

 

(38)%

NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS

 

1

 

 

 

2

 

 

(50)%

NET INCOME ATTRIBUTABLE TO BAXTER STOCKHOLDERS

$

44

 

 

$

71

 

 

(38)%

 

 

 

 

 

 

EARNINGS PER SHARE

 

 

 

 

 

Basic

$

0.09

 

 

$

0.14

 

 

(36)%

Diluted

$

0.09

 

 

$

0.14

 

 

(36)%

 

 

 

 

 

 

WEIGHTED-AVERAGE NUMBER OF SHARES OUTSTANDING

 

 

 

 

 

Basic

 

505

 

 

 

503

 

 

 

Diluted

 

507

 

 

 

509

 

 

 

 

 

 

 

 

 

ADJUSTED OPERATING INCOME (excluding special items)¹

$

503

 

 

$

666

 

 

(24)%

ADJUSTED INCOME BEFORE INCOME TAXES (excluding special items)¹

$

387

 

 

$

597

 

 

(35)%

ADJUSTED NET INCOME ATTRIBUTABLE TO BAXTER STOCKHOLDERS (excluding special items)¹

$

297

 

 

$

471

 

 

(37)%

ADJUSTED DILUTED EPS (excluding special items)¹

$

0.59

 

 

$

0.93

 

 

(37)%

1

Refer to page 10 for a description of the adjustments and a reconciliation to U.S. GAAP measures.

BAXTER INTERNATIONAL INC.

Description of Adjustments and Reconciliation of U.S. GAAP to Non-GAAP Measures

(unaudited, in millions)

 

The company’s U.S. GAAP results for the three months ended March 31, 2023 included special items which impacted the U.S. GAAP measures as follows:

 

 

Gross

Margin

Selling,

General and

Administrative

Expenses

Research

and

Development

Expenses

Other

Operating

Income,

Net

Operating

Income

Income

Before

Income

Taxes

Income

Tax

Expense

Net

Income

Net Income

Attributable

to Baxter

Stockholders

Diluted

Earnings

Per Share

Reported

$

1,347

 

$

1,010

 

$

164

 

$

(13

)

$

186

 

$

70

 

$

25

 

$

45

 

$

44

 

$

0.09

 

Reported percent of net sales (or percent of income before income taxes for income tax expense)

 

36.9

%

 

27.7

%

 

4.5

%

 

(0.4

)%

 

5.1

%

 

1.9

%

 

35.7

%

 

1.2

%

 

1.2

%

 

Intangible asset amortization1

 

110

 

 

(52

)

 

 

 

 

 

162

 

 

162

 

 

36

 

 

126

 

 

126

 

 

0.25

 

Business optimization items2

 

35

 

 

(92

)

 

(7

)

 

 

 

134

 

 

134

 

 

27

 

 

107

 

 

107

 

 

0.21

 

Acquisition and integration items3

 

 

 

(6

)

 

 

 

13

 

 

(7

)

 

(7

)

 

(2

)

 

(5

)

 

(5

)

 

(0.01

)

Divestiture-related costs4

 

1

 

 

(15

)

 

 

 

 

 

16

 

 

16

 

 

 

 

16

 

 

16

 

 

0.03

 

European medical devices regulation5

 

12

 

 

 

 

 

 

 

 

12

 

 

12

 

 

3

 

 

9

 

 

9

 

 

0.02

 

Adjusted

$

1,505

 

$

845

 

$

157

 

$

 

$

503

 

$

387

 

$

89

 

$

298

 

$

297

 

$

0.59

 

Adjusted percent of net sales (or adjusted percent of income before income taxes for income tax expense)

 

41.2

%

 

23.2

%

 

4.3

%

 

0.0

%

 

13.8

%

 

10.6

%

 

23.0

%

 

8.2

%

 

8.1

%

 

Contacts

Media Contact

Steve Brett, (224) 948-5353

media@baxter.com

Investor Contact

Clare Trachtman, (224) 948-3020

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