Financial Data and Key Metrics Changes - First quarter sales declined 2% year-over-year on a reported basis but rose 2% at constant currency, exceeding original outlook [6][18] - Adjusted earnings per share for the first quarter were $0.59, above guidance of $0.46 to $0.50, driven by operational performance [7][19] - Adjusted gross margin decreased to 41.2%, down 380 basis points year-over-year due to inflationary pressures [25][27] - Adjusted operating margin for the quarter was 13.8%, a decrease of 420 basis points compared to the prior year [27] Business Line Data and Key Metrics Changes - Renal Care sales were $892 million, increasing 4% on a constant currency basis, driven by growth in the PD business [21] - Medication Delivery sales were flat at $687 million year-over-year at constant currency rates [22] - Pharmaceutical sales increased 5% to $523 million, reflecting strong demand for drug compounding and U.S. injectables [22] - Patient Support Systems sales decreased 8% to $348 million, impacted by capital spending slowdowns [24] Market Data and Key Metrics Changes - Sales in the Americas declined 1% on a constant currency basis, while Europe, Middle East, and Africa grew 9% [20] - APAC sales increased 3% on a constant currency basis, with strength across the region offset by declines in China [20] Company Strategy and Development Direction - The company plans to spin off its Renal Care and Acute Therapies business into a stand-alone entity by July 2024 [10][11] - A new operating model is being implemented, realigning the portfolio into four global business segments [12][14] - Focus on enhancing long-term shareholder value through strategic initiatives and innovation [10][17] Management's Comments on Operating Environment and Future Outlook - Management noted improvements in the macroeconomic environment and supply chain stability, contributing to positive demand [8][9] - Cautious optimism for the second half of 2023, with expectations for improved performance despite some anticipated headwinds [29][30] - Management emphasized the importance of innovation and operational efficiency for sustained growth [15][17] Other Important Information - The company is experiencing a recovery in hospital admissions and procedural volumes, positively impacting demand [8][9] - New product launches, such as Progressa Plus ICU beds, are expected to contribute positively to future performance [9][10] Q&A Session Summary Question: Insights on Q1 performance and Q2 guidance - Management acknowledged a strong start to the year but indicated conservatism in guidance due to specific headwinds in the renal business [32][34] Question: Hillrom integration and performance - Management expressed satisfaction with Hillrom's integration and noted strong performance in Front Line Care, despite challenges in Patient Support Systems [36][38] Question: Pricing strategy and inflationary pressures - Management confirmed that pricing was a contributor to performance, with expectations for positive pricing in various segments moving forward [59][61] Question: Update on bioprocessing unit sale - Significant interest in the bioprocessing unit was noted, with potential sale proceeds primarily directed towards debt repayment [62][63] Question: Capital spending and supply chain recovery - Management indicated that while supply chain issues are improving, they remain cautious and focused on enhancing supplier relationships [71][72]

Financial Performance - In Q1 2023, net sales from Renal Care and Acute Therapies reached $1.1 billion, accounting for approximately 29% of total consolidated net sales[134]. - Net income attributable to Baxter stockholders for Q1 2023 was $44 million, or $0.09 per diluted share, down from $71 million, or $0.14 per diluted share in Q1 2022[143]. - Total net sales for Q1 2023 were $3.649 billion, a decrease of 2% compared to $3.707 billion in Q1 2022[149]. - The BioPharma Solutions product category generated $139 million in net sales, representing approximately 4% of consolidated net sales[134]. - Medication Delivery net sales decreased by 3% in Q1 2023, impacted by lower sales of infusion pumps and a 3% negative impact from foreign exchange rates[154]. - Pharmaceuticals net sales were flat in Q1 2023, with a 5% negative impact from foreign exchange rates, despite increased demand for international pharmacy compounding services[155]. - Clinical Nutrition net sales decreased by 1% in Q1 2023, primarily due to a 4% negative impact from foreign exchange rates[156]. - Advanced Surgery net sales increased by 8% in Q1 2023, driven by recovery in surgical procedures, partially offset by a 3% negative impact from foreign exchange rates[157]. - BioPharma Solutions net sales decreased by 11% in Q1 2023, primarily due to lower sales of manufacturing services related to COVID-19 vaccines[159]. - Patient Support Systems net sales decreased by 9% in Q1 2023, reflecting lower demand for hospital beds and a 1% negative impact from foreign exchange rates[160]. - Total segment net sales were $3.649 billion in Q1 2023, a decrease from $3.707 billion in Q1 2022[178]. Currency and Foreign Exchange Impact - Foreign currency fluctuations negatively impacted net sales by 4 percentage points in Q1 2023 compared to the prior year[149]. - Renal Care net sales were flat year-over-year, with a 4% negative impact from foreign exchange rates[153]. - The company is primarily exposed to foreign exchange risk with revenues generated outside the U.S. in multiple currencies including Euro, British Pound, and Chinese Renminbi[209]. - As of March 31, 2023, the company has cash flow hedge contracts in place for foreign exchange risk with a maximum term of 12 months[210]. - A sensitivity analysis indicated that if the U.S. Dollar weakened by 10% against all currencies, the net pre-tax balance of foreign exchange contracts would change by $61 million[212]. Operational Changes and Strategic Initiatives - The proposed spinoff of Renal Care and Acute Therapies is expected to be completed by July 2024 or earlier, subject to customary conditions[134]. - The company incurred significant separation and transaction-related costs in Q1 2023, which are expected to adversely affect earnings and operating cash flows[135]. - The new operating model aimed at simplifying operations is expected to be fully implemented in the second half of 2023[136]. - The company is pursuing strategic alternatives for its BioPharma Solutions product category, including a potential sale[133]. - The company is evaluating strategic alternatives, including a potential spinoff of its Renal Care and Acute Therapies product categories[204]. Cash Flow and Debt Management - Cash provided by operating activities increased to $479 million in Q1 2023, compared to $208 million in Q1 2022, an increase of $271 million[187]. - As of March 31, 2023, the company had $1.7 billion in cash and cash equivalents, with a long-term debt of approximately $16.4 billion[194]. - The company amended its credit agreements to increase the maximum net leverage ratio for the four fiscal quarters ending March 31, 2023, to December 31, 2023, and had a capacity to draw approximately $2.2 billion under its credit facilities[192]. - The company had no outstanding borrowings under its credit facilities as of March 31, 2023, and outstanding commercial paper borrowings were $50 million[192]. - The company plans to fund obligations through cash on hand, future cash flows, or by issuing additional debt, maintaining adequate cash to meet operating requirements[194]. Tax and Regulatory Considerations - The effective income tax rate increased to 35.7% in Q1 2023 from 22.3% in Q1 2022, primarily due to tax shortfalls on stock compensation awards[174]. - The company has implemented corrective actions in response to FDA observations at Claris facilities and is working with other manufacturing locations to support new product distribution in the U.S.[203]. - Fitch revised the company's senior debt credit rating outlook from negative to rating watch negative in January 2023, with no changes to its investment grade credit ratings[195]. Risk Management - The company is closely monitoring its Patient Support Systems reporting unit due to lower customer orders and expects capital spending constraints to continue throughout much of 2023[198]. - The subsidiary in Turkey reported net monetary assets of $29 million as of March 31, 2023, following the adoption of highly inflationary accounting[214]. - There were no significant changes in interest rate and other risks during the quarter ended March 31, 2023[215]. - The company has not performed a trigger-based quantitative goodwill impairment test during the first quarter of 2023, as it believes the goodwill of its reporting unit is not impaired[199].

Baxter International Inc. (NYSE:BAX) Q4 2022 Earnings Conference Call February 9, 2023 8:30 AM ET Company Participants Clare Trachtman - Vice President of Investor Relations José Almeida - Chairman, President & Chief Executive Officer James Saccaro - Executive Vice President & Chief Financial Officer Conference Call Participants Pito Chickering - Deutsche Bank Robbie Marcus - JPMorgan Vijay Kumar - Evercore ISI Matthew Mishan - KeyBanc Matt Miksic - Barclays Lawrence Biegelsen - Wells Fargo Operator Good mo ...

Acquisition and Integration Challenges - The Hillrom acquisition completed in 2021 is expected to yield cost and revenue synergies, but integration challenges may hinder realization of these benefits [69]. - Significant debt was incurred in connection with the Hillrom acquisition, which may impact financial performance and leverage targets [61]. - The company incurred approximately $11.8 billion in acquisition-related debt for the Hillrom acquisition, impacting financial flexibility and increasing borrowing costs [76]. - The acquisition of Hillrom was completed for $10.5 billion, with the segment generating net sales of $2.9 billion in 2022 [146][148]. - The company incurred $213 million in acquisition and integration-related costs in 2022, primarily associated with the Hillrom acquisition [159]. Financial Performance and Market Conditions - Global economic conditions, including inflation and supply chain disruptions, have adversely affected operations and may continue to do so, with inflation rates expected to remain elevated [72]. - Future financial performance is contingent on the successful introduction of new products and adaptation to changing consumer preferences [83]. - The company expects continued fluctuations in operating results and financial condition due to evolving global macroeconomic conditions [74]. - The company’s stock price has experienced significant fluctuations, influenced by market perceptions and operational performance [78]. - Total net sales for the year ended December 31, 2022, were $15,113 million, an increase of 18% compared to $12,784 million in 2021 [169]. Supply Chain and Operational Challenges - Supply chain challenges have negatively impacted sales, with certain product categories unable to meet demand due to raw material shortages [73]. - The company has faced significant supply chain challenges, including increased costs for raw materials and freight due to inflation and geopolitical issues, which may continue to impact operations [84]. - Increased operational challenges and expenses are anticipated due to ongoing COVID-19 impacts, including supply chain disruptions and staffing shortages [81]. - The company has faced difficulties in obtaining key materials due to supply chain disruptions, which could adversely affect manufacturing and distribution capabilities [91]. - Supply chain challenges and inflationary pressures are anticipated to continue affecting operations and sales in the future [140][142]. Regulatory and Legal Risks - The company is subject to various legal and regulatory risks, including potential fines and changes in reimbursement policies that could adversely affect business [65]. - The company is subject to extensive healthcare regulations, including the Healthcare Reform Act, which may result in pricing pressure and impact product demand [99]. - Non-compliance with regulatory requirements could lead to severe penalties, product recalls, and loss of customer confidence, adversely impacting sales [99]. - The company faces increased scrutiny from federal, state, and foreign government agencies regarding compliance with healthcare-related laws, which could adversely affect its operations and financial condition [100]. - The company is subject to stringent data privacy laws, including GDPR and CCPA, which could result in substantial fines for noncompliance [102]. Competition and Market Dynamics - The company faces substantial competition in its product markets, which could lead to declining demand and pricing pressures [62]. - The company is experiencing intense competition in the healthcare market, which may lead to pricing pressures and loss of market share if it fails to innovate or respond to customer demands [86]. - Pharmaceuticals net sales fell by 7% in 2022, primarily due to a 6% negative impact from foreign exchange rates and increased competition from new market entrants [175]. - Renal Care net sales decreased by 4% in 2022, impacted by a 6% negative effect from foreign exchange rates and lower in-center HD sales, partially offset by $28 million in incremental revenue from a customer [172]. Financial Obligations and Debt Management - As of December 31, 2022, the company had $1.7 billion in cash and cash equivalents, with approximately $16.6 billion in long-term debt and finance lease obligations [218]. - Long-term debt and finance lease obligations total $16,702 million, with $1,404 million due within one year and $15,298 million due after one year [224]. - Interest on short- and long-term debt and finance lease obligations amounts to $3,015 million, with $387 million due within one year and $2,628 million due after one year [224]. - The company's senior debt credit ratings are BBB from Standard & Poor's and Fitch, with a negative outlook from both agencies [220]. - A 100 basis point change in interest rates would impact pre-tax earnings and cash flows by approximately $42 million over a one-year period [239]. Goodwill and Impairment Issues - A $2.8 billion goodwill impairment was recorded in Q3 2022 due to macroeconomic conditions, including rising interest rates and supply chain costs [79]. - Goodwill impairments in 2022 amounted to $2,812 million, significantly affecting overall financial performance [156]. - The company recorded $2.8 billion in goodwill impairment charges during 2022 across three reporting units [258]. - The effective income tax rate was (2.9)% in 2022, significantly impacted by non-deductible impairments of goodwill from the Hillrom acquisition [195]. Strategic Initiatives and Future Outlook - The company is undertaking strategic actions, including a review of alternatives for the BPS product category and plans for a simplified operating model, which may incur significant expenses [68]. - The proposed spinoff of the Renal Care and Acute Therapies product categories may face delays or challenges, impacting the anticipated timeline and terms [66]. - Significant separation and transaction-related costs are expected in 2023 and early 2024 due to the proposed spinoff and strategic alternatives for the BPS product category [137]. - The company is designing a new operating model to simplify and streamline operations, which may change its reportable segments [126]. - Key employee retention is critical for the company's success, and competition for talent in the healthcare industry is intense, which could impact operational effectiveness [87].

Baxter International Inc. (NYSE:BAX) Q3 2022 Earnings Conference Call October 27, 2022 8:30 AM ET Company Participants José Almeida - Chairman, President and CEO James Saccaro - EVP and CFO Clare Trachtman - VP, IR Conference Call Participants Travis Steed - Bank of America Securities Robbie Marcus - JPMorgan Rick Wise - Stifel Pito Chickering - Deutsche Bank Joanne Wuensch - Citigroup Joshua Jennings - Cowen and Company Operator Good morning, ladies and gentlemen, and welcome to Baxter International's Thir ...

Financial Data and Key Metrics Changes - Baxter reported second quarter 2022 sales of $3.7 billion, a 21% increase on a reported basis and a 26% increase at constant currency rates. Adjusted earnings per share were $0.87, up 9% year-over-year [12][20][28] - The company adjusted its full-year 2022 guidance, now expecting global sales growth of high teens on a reported basis and mid-20s at constant currency, with operational growth of 2% to 3% [30][31] Business Line Data and Key Metrics Changes - Renal care sales were $931 million, increasing 2% at constant currency, driven by growth in peritoneal dialysis (PD) [22] - Medication delivery sales reached $710 million, up 4% at constant currency, reflecting strong global demand despite lower sales in APAC due to COVID-related lockdowns [22] - Pharmaceutical sales grew 3% to $528 million, with international sales for inhaled anesthetics offsetting competition in the US [23] - Advanced surgery sales increased 8% to $263 million, supported by a recovery in elective procedures [24] - Acute therapies and biopharma solutions saw declines of 4% and 5% respectively, reflecting challenging comparisons to the previous year [24] Market Data and Key Metrics Changes - Sales in the Americas increased 2%, while Europe, the Middle East, and Africa grew 6%, and the APAC region saw a 1% increase, impacted by COVID resurgence in China [21] - The company faced significant back orders and backlogs due to supply chain challenges, particularly for electromechanical components [9][25] Company Strategy and Development Direction - The acquisition of Hillrom is seen as a key driver for Baxter's transformation, enhancing connected care innovation and expanding the global reach of its portfolio [8][18] - The company is committed to optimizing its cost structure and is preparing to pass through some of the increased costs to customers in the second half of 2022 [12][19] Management's Comments on Operating Environment and Future Outlook - Management acknowledged ongoing supply chain challenges, inflationary pressures, and increased freight costs impacting operations [10][19] - Despite these challenges, management expressed confidence in long-term growth prospects, citing a resilient portfolio and strong demand for products [17][19] Other Important Information - Baxter's adjusted gross margin decreased to 42.5%, and adjusted operating margin was 16.2%, reflecting increased expenses [26][27] - The company is preparing for a second wave of price increases to offset rising costs from suppliers [59][60] Q&A Session Summary Question: What are the biggest changes impacting guidance since January? - The company cited constraints related to electromechanical components and raw materials, impacting sales by over $100 million, along with challenges in pharmaceutical pricing [33][34] Question: Is the capital spending slowdown due to demand issues? - Management clarified that the slowdown is primarily due to staffing shortages affecting installations, not a decrease in demand [46][50] Question: Can you quantify the backlog? - The backlog has reached unprecedented levels, particularly in frontline care, with back orders at an all-time high, approximately sevenfold what is considered normal [67][68]