Baxter’s Q2 Sales Rise 4 Percent

It was a profitable spring at Baxter International Inc.

The company’s second quarter sales rose 4 percent to $2.6 billion compared to the prior-year period. ”Our second quarter results reflect the steady progress we are making on our strategy to drive performance through a disciplined focus on portfolio management and innovation, operational excellence, and capital allocation,” said José (Joe) E. Almeida, chairman and CEO.
 
During the quarter (ended June 30), Baxter reported income from continuing operations of $1.2 billion, or $2.19 per diluted share, on a GAAP (Generally Accepted Accounting Principles) basis. These results included an after-tax net gain of approximately $1.1 billion from the disposition of the company’s remaining shares of Baxalta Incorporated (Baxalta), which the company spun-off in July 2015. Partially offsetting these results were net after-tax special items totaling $192 million primarily related to business optimization initiatives, intangible asset amortization, asset impairment and Baxalta related spin-off costs.
 
On an adjusted basis, excluding special items, Baxter’s second-quarter income from continuing operations totaled $256 million, or 46 cents per diluted share, exceeding the company’s previously-issued guidance of 38 cents to 40 cents per diluted share.
 
 Sales within the United States were $1.1 billion, advancing 10 percent, while international sales totaled $1.5 billion, representing a 1 percent increase on a reported basis, and an increase of 3 percent on a constant currency basis. Adjusting for the impact of foreign exchange and a generic market entrant in the United States for the company’s oncology injectable, cyclophosphamide, Baxter’s sales increased 12 percent in the U.S. and globally rose 7 percent in the second quarter.
 
By business, Hospital Products sales of $1.6 billion increased 6 percent on a reported basis and 7 percent on a constant currency basis. Adjusting for the impact of foreign exchange and U.S. cyclophosphamide, Hospital Products sales jumped 9 percent from the prior year period. Hospital Products performance in the quarter benefited from strong sales across the portfolio, particularly within its U.S. Fluid Systems franchise, driven by solid demand for Baxter’s next-generation SIGMA SPECTRUM infusion pump as well as favorable demand and pricing for IV solutions. Strength internationally in anesthesia products and hospital pharmacy compounding services also contributed to growth in the quarter.
 
Baxter’s Renal sales totaled $965 million, representing a 2 percent increase on a reported basis, and a 4 percent increase on a constant currency basis. Increased demand globally for continuous renal replacement therapies along with strong sales of peritoneal dialysis products contributed to growth in the quarter. Baxter’s new AMIA Automated Peritoneal Dialysis (APD) System with the SHARESOURCE Connectivity Platform, which was launched in the United States in late 2015 and was recently approved by Health Canada, is contributing to growth with more than 500 patients now being treated with AMIA in the United States. The AMIA APD and SHARESOURCE system is the first APD device cleared in the United States and Canada to include patient-centric features such as voice guidance, a touchscreen control panel and two-way telemedicine capabilities for remote patient management.
 
During the second quarter, Baxter also completed the disposition of its retained stake in Baxalta, which included an equity contribution of approximately $700 million to the company’s U.S. pension plan. It also included completion of an equity-for-equity share exchange which resulted in a reduction of Baxter’s outstanding share count of approximately 11 million.
 
”The successful disposition of the retained equity stake in Baxalta allowed us to effectively restructure our balance sheet and provides us with significant flexibility to invest in both organic and inorganic growth initiatives while also returning value to shareholders through dividends and stock repurchases,” said Jay Saccaro, Baxter’s chief financial officer.
 
Based on the company’s strong performance in the first six months of the year, Baxter is raising its financial outlook for full-year 2016. Baxter now expects reported sales growth of 1 percent to 2 percent and on a constant currency basis, sales growth of 3 percent to 4 percent. In addition, the company now expects earnings from continuing operations, before special items, of $1.69 to $1.74 per diluted share for the full year as compared to previous guidance of $1.59 to $1.67 per diluted share.
 
For the third quarter, the company expects reported sales growth of 2 percent to 3 percent and on a constant currency basis, sales growth of 3 percent to 4 percent. Baxter expects earnings from continuing operations, before special items, of $0.43 to $0.45 per diluted share for the third quarter of 2016.
 
The earnings guidance for the third quarter and full-year 2016 excludes $0.05 and $0.22, respectively, per diluted share of intangible asset amortization expense; an estimated $0.02 and $0.08, respectively, per diluted share of Baxalta separation-related expense activities; an estimated $0.09 to $0.11 and $0.38 to $0.40, respectively, per diluted share of business optimization charges; and $7.88 per diluted share of asset impairment, debt extinguishment loss, product related reserve adjustments, and Baxalta retained stake gains for full-year 2016. These estimates are based on information reasonably available at the time of this release and future events or new information may result in different actual results. Reconciling for the inclusion of these items results in GAAP earnings of $0.25 to $0.29 per diluted share for the third quarter of 2016, and $8.87 to $8.94 per diluted share for full-year 2016.