Baxter(US:BAX)2025-08-05 20:48PART I. FINANCIAL INFORMATION This section presents the company's financial statements, management's analysis, market risk disclosures, and internal controls Financial Statements (unaudited) This section presents Baxter International Inc.'s unaudited condensed consolidated financial statements, reflecting the Kidney Care business sale and debt repayments Condensed Consolidated Financial Statements The consolidated financial statements reflect significant changes from the Kidney Care divestiture, showing decreased assets and liabilities, and a shift to net income Condensed Consolidated Balance Sheet Highlights (in millions) | Account | June 30, 2025 | December 31, 2024 | Change | | :--- | :--- | :--- | :--- | | Total current assets | $6,749 | $8,853 | ($2,104) | | Total assets | $21,046 | $25,782 | ($4,736) | | Short-term debt | $6 | $2,126 | ($2,120) | | Total current liabilities | $2,939 | $6,511 | ($3,572) | | Total liabilities | $13,753 | $18,758 | ($5,005) | | Total equity | $7,293 | $7,024 | $269 | Condensed Consolidated Statement of Income Highlights (in millions) | Account | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net sales | $5,435 | $5,184 | | Gross margin | $1,852 | $1,992 | | Operating income | $249 | $294 | | Income from continuing operations | $186 | $101 | | Income (loss) from discontinued operations, net of tax | $31 | $(373) | | Net income (loss) attributable to Baxter | $217 | $(277) | Condensed Consolidated Statement of Cash Flows Highlights (in millions) | Account | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Cash flows from operations | $24 | $278 | | Cash flows from investing activities | $3,150 | $(257) | | Cash flows from financing activities | $(3,988) | $(1,076) | Notes to Condensed Consolidated Financial Statements These notes detail major corporate actions, including the Kidney Care business sale, Hurricane Helene charges, debt repayments, and the Novum LVP recall - Completed the sale of the Kidney Care business to Carlyle on January 31, 2025, for ~$3.71 billion in pre-tax cash proceeds, recognizing a pre-tax gain of $191 million The business is now reported as discontinued operations2124 - In H1 2025, recorded $115 million in pre-tax net charges for remediation, air freight, and other costs resulting from damage caused by Hurricane Helene to the North Cove, NC facility22 - In H1 2025, used proceeds from the Kidney Care sale to repay approximately $3.81 billion in debt, including a $1.83 billion bridge facility, $1.0 billion of a term loan, and $680 million of senior notes494550 - Initiated a voluntary correction for the Novum IQ Large Volume Pump (LVP), which the FDA classified as a Class I recall Distribution in the U.S. and Canada was temporarily halted55 Segment Net Sales - Six Months Ended June 30 (in millions) | Segment | 2025 | 2024 | | :--- | :--- | :--- | | Medical Products & Therapies | $2,582 | $2,551 | | Healthcare Systems & Technologies | $1,471 | $1,415 | | Pharmaceuticals | $1,193 | $1,180 | | Total Baxter | $5,435 | $5,184 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses strategic actions, including the Kidney Care sale and debt reduction, alongside operational results, liquidity, and key challenges Overview and Strategic Actions The company completed its Kidney Care business sale for ~$3.3 billion net after-tax proceeds, primarily used for $3.81 billion debt repayment, and is now restructuring costs - Completed the sale of the Kidney Care business on January 31, 2025, receiving approximately $3.3 billion in net after-tax proceeds162 - As of June 30, 2025, the company had repaid $3.81 billion of debt, primarily using the proceeds from the Kidney Care sale162 - The company is undertaking restructuring actions to manage dis-synergies and align its cost structure with the remaining business after the Kidney Care sale164 Results of Operations H1 2025 consolidated net sales increased 5% to $5.4 billion, driven by Healthcare Systems & Technologies and Pharmaceuticals, though gross margin declined Net Sales Growth by Geography - Six Months Ended June 30, 2025 | Region | At Actual Rates | At Operational Sales Growth | | :--- | :--- | :--- | | United States | 7% | 3% | | Emerging markets | (2)% | 3% | | Rest of world | 5% | 3% | | Total net sales | 5% | 3% | - Medical Products & Therapies sales were up 1% in H1 2025, with growth in Advanced Surgery offset by challenges in Infusion Therapies due to Hurricane Helene's after-effects and the exit from IV solutions in China187188189 - Healthcare Systems & Technologies sales grew 4% in H1 2025, driven by a 6% increase in Care & Connectivity Solutions from higher U.S. capital spending193194 - Pharmaceuticals sales increased 1% in H1 2025, with Drug Compounding growth of 3% offsetting flat performance in Injectables & Anesthesia198199200 - Gross margin ratio for H1 2025 was 34.1%, a decrease from 38.4% in H1 2024 Excluding special items, the margin declined by 1.6 percentage points, primarily due to the Kidney Care MSA and manufacturing variances206207 Liquidity and Capital Resources The Kidney Care divestiture significantly strengthened liquidity, with $3.15 billion net inflow from investing activities used for $3.99 billion debt repayment - Cash flows from continuing operations were $118 million for H1 2025, compared to $30 million for H1 2024238 - In H1 2025, cash used in financing activities was $3.99 billion, which included debt repayments of $3.51 billion and commercial paper repayments of $300 million240 - In June 2025, the company entered into an amended and restated $2.20 billion multicurrency revolving credit facility maturing in 2030 and an amended term loan facility with $645 million outstanding maturing in 2027243244 - No shares were repurchased in H1 2025 The company has $1.30 billion remaining available under its share repurchase authorization as of June 30, 2025241 Quantitative and Qualitative Disclosures About Market Risk The company manages foreign currency and interest rate risks using derivatives, with a hypothetical 10% U.S. dollar weakening having an immaterial impact - The company's primary foreign exchange risk is from operations denominated in the Euro, British Pound, Canadian Dollar, Australian Dollar, and other major currencies263 - A sensitivity analysis showed that a 10% adverse move in the U.S. Dollar against all currencies would result in a change of less than $1 million to the net pre-tax asset balance of its foreign exchange contracts266 - The company continues to apply highly inflationary accounting for its subsidiary in Turkey, which had net monetary assets of $30 million as of June 30, 2025268 Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal controls - Management, including the Interim CEO and CFO, concluded that disclosure controls and procedures were effective as of June 30, 2025271 - No material changes to internal control over financial reporting were identified during the second quarter of 2025272 PART II. OTHER INFORMATION This section provides details on legal proceedings, risk factors, equity sales, other corporate information, and filed exhibits Legal Proceedings This section incorporates by reference detailed discussions of legal contingencies from Note 6 of the financial statements - Information on legal proceedings is incorporated by reference from Note 6 of the financial statements274 Risk Factors The company reports no material changes to the risk factors previously disclosed in its 2024 Annual Report on Form 10-K - There have been no material changes to the risk factors previously disclosed in the 2024 Annual Report275 Unregistered Sales of Equity Securities and Use of Proceeds During Q2 2025, Baxter did not repurchase any common stock, with $1.30 billion remaining under its share repurchase authorization - No shares were repurchased during the second quarter of 2025275 - As of June 30, 2025, $1.30 billion remained available under the company's share repurchase program275 Other Information This section discloses an amended compensation agreement for Interim CEO Brent Shafer and notes officer/director participation in non-Rule 10b5-1 trading arrangements - On August 2, 2025, the company amended the compensation agreement with Interim CEO/Chair Brent Shafer, modifying his bonus eligibility and outlining his transition to non-executive Chair276277278 - Certain officers and directors participate in trading arrangements, such as for tax withholding on equity awards, which may constitute non-Rule 10b5-1 plans280 Exhibits This section provides an index of all exhibits filed with the Form 10-Q, including amended credit agreements and CEO/CFO certifications - Lists exhibits filed with the report, including amended credit facilities, executive compensation agreements, and required CEO/CFO certifications281