Document_and_Entity_Informatio
Document and Entity Information | 9 Months Ended | |
Sep. 30, 2013 | Oct. 28, 2013 | |
Document Information [Line Items] | ||
Document Type | 10-Q | |
Amendment Flag | FALSE | |
Document Period End Date | 30-Sep-13 | |
Document Fiscal Year Focus | 2013 | |
Document Fiscal Period Focus | Q3 | |
Trading Symbol | BAX | |
Entity Registrant Name | BAXTER INTERNATIONAL INC | |
Entity Central Index Key | 10456 | |
Current Fiscal Year End Date | -19 | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 542,697,603 |
Condensed_Consolidated_Stateme
Condensed Consolidated Statements of Income (USD $) | 3 Months Ended | 9 Months Ended | ||
In Millions, except Per Share data, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 |
Net sales | $3,774 | $3,477 | $10,891 | $10,437 |
Cost of sales | 1,828 | 1,667 | 5,250 | 5,041 |
Gross margin | 1,946 | 1,810 | 5,641 | 5,396 |
Marketing and administrative expenses | 984 | 743 | 2,617 | 2,284 |
Research and development expenses | 290 | 290 | 809 | 865 |
Net interest expense | 45 | 25 | 87 | 65 |
Other (income) expense, net | -55 | -14 | 10 | -133 |
Income before income taxes | 682 | 766 | 2,118 | 2,315 |
Income tax expense | 138 | 183 | 432 | 483 |
Net income | $544 | $583 | $1,686 | $1,832 |
Net income per common share | ||||
Basic | $1 | $1.07 | $3.10 | $3.32 |
Diluted | $0.99 | $1.06 | $3.06 | $3.29 |
Weighted-average number of common shares outstanding | ||||
Basic | 543 | 548 | 543 | 552 |
Diluted | 549 | 552 | 550 | 556 |
Cash dividends declared per common share | $0.49 | $0.45 | $1.43 | $1.12 |
Condensed_Consolidated_Stateme1
Condensed Consolidated Statements of Comprehensive Income (USD $) | 3 Months Ended | 9 Months Ended | ||
In Millions, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 |
Net income | $544 | $583 | $1,686 | $1,832 |
Other comprehensive income, net of tax: | ||||
Currency translation adjustments, net of tax expense of $19 and $18 for the three months ended September 30, 2013 and 2012, respectively, and $15 and $20 for the nine months ended September 30, 2013 and 2012, respectively | 112 | 180 | 58 | -41 |
Pension and other employee benefits, net of tax expense of $23 and $18 for the three months ended September 30, 2013 and 2012, respectively, and $67 and $57 for the nine months ended September 30, 2013 and 2012, respectively | 42 | 28 | 119 | 101 |
Hedging activities, net of tax expense (benefit) of $0 and ($10) for the three months ended September 30, 2013 and 2012, respectively, and $11 and ($10) for the nine months ended September 30, 2013 and 2012, respectively | -2 | -18 | 21 | -17 |
Other, net of tax expense (benefit) of $5 and ($1) for the three months ended September 30, 2013 and 2012, respectively, and $5 and ($1) for the nine months ended September 30, 2013 and 2012, respectively | 13 | -2 | 12 | -1 |
Total other comprehensive income, net of tax | 165 | 188 | 210 | 42 |
Comprehensive income | $709 | $771 | $1,896 | $1,874 |
Condensed_Consolidated_Stateme2
Condensed Consolidated Statements of Comprehensive Income (Parenthetical) (USD $) | 3 Months Ended | 9 Months Ended | ||
In Millions, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 |
Tax expense on currency translation adjustments | $19 | $18 | $15 | $20 |
Tax expense on pension and other employee benefits | 23 | 18 | 67 | 57 |
Tax expense (benefit) on hedging activities | 0 | -10 | 11 | -10 |
Tax expense (benefit) on other | $5 | ($1) | $5 | ($1) |
Condensed_Consolidated_Balance
Condensed Consolidated Balance Sheets (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
In Millions, unless otherwise specified | ||
Current assets | ||
Cash and equivalents | $2,376 | $3,270 |
Accounts and other current receivables, net | 2,766 | 2,425 |
Inventories | 3,581 | 2,803 |
Prepaid expenses and other | 874 | 762 |
Total current assets | 9,597 | 9,260 |
Property, plant and equipment, net | 7,518 | 6,098 |
Other assets | ||
Goodwill | 3,780 | 2,502 |
Other intangible assets, net | 2,682 | 814 |
Other | 1,673 | 1,716 |
Total other assets | 8,135 | 5,032 |
Total assets | 25,250 | 20,390 |
Current liabilities | ||
Short-term debt | 42 | 27 |
Current maturities of long-term debt and lease obligations | 372 | 323 |
Accounts payable and accrued liabilities | 4,582 | 4,409 |
Total current liabilities | 4,996 | 4,759 |
Long-term debt and lease obligations | 8,652 | 5,580 |
Other long-term liabilities | 3,856 | 3,073 |
Commitments and contingencies | ||
Equity | ||
Common stock, $1 par value, authorized 2,000,000,000 shares, issued 683,494,944 shares in 2013 and 2012 | 683 | 683 |
Common stock in treasury, at cost, 140,445,862 shares in 2013 and 137,281,399 shares in 2012 | -7,911 | -7,592 |
Additional contributed capital | 5,785 | 5,769 |
Retained earnings | 11,792 | 10,888 |
Accumulated other comprehensive loss | -2,600 | -2,810 |
Total Baxter shareholders' equity | 7,749 | 6,938 |
Noncontrolling interests | -3 | 40 |
Total equity | 7,746 | 6,978 |
Total liabilities and equity | $25,250 | $20,390 |
Condensed_Consolidated_Balance1
Condensed Consolidated Balance Sheets (Parenthetical) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
Common stock, par value | $1 | $1 |
Common stock, authorized | 2,000,000,000 | 2,000,000,000 |
Common stock, issued | 683,494,944 | 683,494,944 |
Treasury stock, shares | 140,445,862 | 137,281,399 |
Condensed_Consolidated_Stateme3
Condensed Consolidated Statements of Cash Flows (USD $) | 9 Months Ended | |
In Millions, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 |
Cash flows from operations | ||
Net income | $1,686 | $1,832 |
Adjustments | ||
Depreciation and amortization | 573 | 534 |
Deferred income taxes | 85 | 197 |
Stock compensation | 111 | 97 |
Realized excess tax benefits from stock issued under employee benefit plans | -32 | -14 |
Other | 2 | -47 |
Changes in balance sheet items | ||
Accounts and other current receivables, net | 70 | 72 |
Inventories | -412 | -136 |
Accounts payable and accrued liabilities | -56 | -282 |
Business optimization and infusion pump payments | -81 | -226 |
Other | 169 | 134 |
Cash flows from operations | 2,115 | 2,161 |
Cash flows from investing activities | ||
Capital expenditures | -1,037 | -762 |
Acquisitions and investments | -3,772 | -495 |
Other investing activities | 14 | 86 |
Cash flows from investing activities | -4,795 | -1,171 |
Cash flows from financing activities | ||
Issuances of debt, net of issuance costs | 3,498 | 1,022 |
Payments of obligations | -526 | -18 |
Decrease in debt with original maturities of three months or less, net | -250 | |
Cash dividends on common stock | -757 | -558 |
Proceeds and realized excess tax benefits from stock issued under employee benefit plans | 468 | 307 |
Purchases of treasury stock | -863 | -1,065 |
Other | -25 | -102 |
Cash flows from financing activities | 1,795 | -664 |
Effect of currency exchange rate changes on cash and equivalents | -9 | -40 |
(Decrease) increase in cash and equivalents | -894 | 286 |
Cash and equivalents at beginning of period | 3,270 | 2,905 |
Cash and equivalents at end of period | $2,376 | $3,191 |
Basis_of_Presentation
Basis of Presentation | 9 Months Ended |
Sep. 30, 2013 | |
Basis of Presentation | 1. BASIS OF PRESENTATION |
The unaudited interim condensed consolidated financial statements of Baxter International Inc. and its subsidiaries (the company or Baxter) have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles (GAAP) in the United States have been condensed or omitted. These unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the company’s Annual Report on Form 10-K for the year ended December 31, 2012 (2012 Annual Report). | |
On September 6, 2013, Baxter completed the acquisition of Gambro AB (Gambro) for cash consideration of $3.7 billion, as reduced by $221 million of assumed debt. Beginning September 6, 2013, Baxter’s financial statements include the assets, liabilities and operating results of Gambro. Refer to Note 4 for additional information. | |
In the opinion of management, the unaudited interim condensed consolidated financial statements reflect all adjustments necessary for a fair statement of the interim periods. All such adjustments, unless otherwise noted herein, are of a normal, recurring nature. The results of operations for the interim period are not necessarily indicative of the results of operations to be expected for the full year. | |
Changes in accounting standards | |
Effective January 1, 2013, the company prospectively adopted new accounting guidance that requires an entity to report the effect of significant reclassifications out of accumulated other comprehensive income on the respective line items in the condensed consolidated statement of income. Refer to Note 2 for related disclosures. |
Supplemental_Financial_Informa
Supplemental Financial Information | 9 Months Ended | ||||||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||||||
Supplemental Financial Information | 2. SUPPLEMENTAL FINANCIAL INFORMATION | ||||||||||||||||||||
Net interest expense | |||||||||||||||||||||
Three months ended | Nine months ended | ||||||||||||||||||||
September 30, | September 30, | ||||||||||||||||||||
(in millions) | 2013 | 2012 | 2013 | 2012 | |||||||||||||||||
Interest expense, net of capitalized interest | $51 | $31 | $106 | $85 | |||||||||||||||||
Interest income | (6 | ) | (6 | ) | (19 | ) | (20 | ) | |||||||||||||
Net interest expense | $45 | $25 | $ 87 | $65 | |||||||||||||||||
Inventories | |||||||||||||||||||||
(in millions) | September 30, | December 31, | |||||||||||||||||||
2013 | 2012 | ||||||||||||||||||||
Raw materials | $ 967 | $ 765 | |||||||||||||||||||
Work in process | 1,009 | 898 | |||||||||||||||||||
Finished goods | 1,605 | 1,140 | |||||||||||||||||||
Inventories | $3,581 | $2,803 | |||||||||||||||||||
Property, plant and equipment, net | |||||||||||||||||||||
(in millions) | September 30, | December 31, | |||||||||||||||||||
2013 | 2012 | ||||||||||||||||||||
Property, plant and equipment, at cost | $13,324 | $11,869 | |||||||||||||||||||
Accumulated depreciation and amortization | (5,806 | ) | (5,771 | ) | |||||||||||||||||
Property, plant and equipment (PP&E), net | $ 7,518 | $ 6,098 | |||||||||||||||||||
Accumulated other comprehensive income (AOCI) | |||||||||||||||||||||
Comprehensive income includes all changes in shareholders’ equity that do not arise from transactions with shareholders, and consists of net income, currency translation adjustments (CTA), pension and other employee benefits, unrealized gains and losses on cash flow hedges and unrealized gains and losses on unrestricted available-for-sale marketable equity securities. The following is a net-of-tax summary of the changes in AOCI by component for the nine months ended September 30, 2013. | |||||||||||||||||||||
(in millions) | Currency | Pension and | Hedging | Other | Total | ||||||||||||||||
translation | other employee | activities | |||||||||||||||||||
adjustments | benefits | ||||||||||||||||||||
Gains (losses) | |||||||||||||||||||||
Balance as of December 31, 2012 | ($1,227 | ) | ($1,619 | ) | ($ 5 | ) | $41 | ($2,810 | ) | ||||||||||||
Other comprehensive income before reclassifications | 58 | (5 | ) | 44 | 12 | 109 | |||||||||||||||
Amounts reclassified from AOCI (a) | — | 124 | (23 | ) | — | 101 | |||||||||||||||
Net other comprehensive income | 58 | 119 | 21 | 12 | 210 | ||||||||||||||||
Balance as of September 30, 2013 | ($1,169 | ) | ($1,500 | ) | $16 | $53 | ($2,600 | ) | |||||||||||||
(a) | See table below for details about the reclassifications for the nine months ended September 30, 2013. | ||||||||||||||||||||
The following is a summary of the amounts reclassified from AOCI to net income during the three and nine months ended September 30, 2013. | |||||||||||||||||||||
Amounts reclassified from AOCI (a) | |||||||||||||||||||||
(in millions) | Three months ended | Nine months ended | Location of impact in income statement | ||||||||||||||||||
September 30, 2013 | September 30, 2013 | ||||||||||||||||||||
Amortization of pension and other employee benefits items | |||||||||||||||||||||
Actuarial losses and other | ($64 | ) (b) | ($191 | ) (b) | |||||||||||||||||
(64 | ) | (191 | ) | Total before tax | |||||||||||||||||
23 | 67 | Tax benefit | |||||||||||||||||||
($41 | ) | ($124 | ) | Net of tax | |||||||||||||||||
Gains (losses) on hedging activities | |||||||||||||||||||||
Interest rate contracts | $ (1 | ) | $ 10 | Net interest expense | |||||||||||||||||
Foreign exchange contracts | — | (1 | ) | Net sales | |||||||||||||||||
Foreign exchange contracts | 9 | 27 | Cost of sales | ||||||||||||||||||
8 | 36 | Total before tax | |||||||||||||||||||
(3 | ) | (13 | ) | Tax expense | |||||||||||||||||
$ 5 | $ 23 | Net of tax | |||||||||||||||||||
Total reclassification for the period | ($36 | ) | ($101 | ) | Total net of tax | ||||||||||||||||
(a) | Amounts in parentheses indicate reductions to net income. | ||||||||||||||||||||
(b) | These AOCI components are included in the computation of net periodic benefit cost disclosed in Note 9. | ||||||||||||||||||||
Refer to Note 9 for additional information regarding the amortization of pension and other employee benefits items and Note 7 for additional information regarding hedging activity. | |||||||||||||||||||||
Asset impairments | |||||||||||||||||||||
Baxter has made and continues to make significant investments in assets, including inventory and PP&E, which relate to potential new products or modifications to existing products. Additionally, Baxter has made and continues to make significant investments related to business development activities, which result in the acquisition of certain intangible assets and other long-lived assets. The company’s ability to realize value from these investments is contingent on, among other things, regulatory approvals, technical success, market acceptance of new or modified products, and realization of synergies associated with business acquisitions. The company may not be able to realize the expected returns from these investments, potentially resulting in asset impairments in the future. |
Earnings_Per_Share
Earnings Per Share | 9 Months Ended | ||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||
Earnings Per Share | 3. EARNINGS PER SHARE | ||||||||||||||||
The numerator for both basic and diluted earnings per share (EPS) is net income. The denominator for basic EPS is the weighted-average number of common shares outstanding during the period. The dilutive effect of outstanding stock options, restricted stock units (RSUs) and performance share units (PSUs) is reflected in the denominator for diluted EPS using the treasury stock method. | |||||||||||||||||
The following is a reconciliation of basic shares to diluted shares. | |||||||||||||||||
Three months ended | Nine months ended | ||||||||||||||||
September 30, | September 30, | ||||||||||||||||
(in millions) | 2013 | 2012 | 2013 | 2012 | |||||||||||||
Basic shares | 543 | 548 | 543 | 552 | |||||||||||||
Effect of dilutive securities | 6 | 4 | 7 | 4 | |||||||||||||
Diluted shares | 549 | 552 | 550 | 556 | |||||||||||||
The effect of dilutive securities included unexercised stock options, unvested RSUs and contingently issuable shares related to granted, unvested PSUs. The computation of diluted EPS excluded stock options to purchase 6 million and 17 million shares for the third quarters of 2013 and 2012, respectively, and 5 million and 22 million shares for the nine months ended September 30, 2013 and 2012, respectively, because their inclusion would have had an anti-dilutive effect on diluted EPS. |
Acquisitions_and_Collaboration
Acquisitions and Collaborations | 9 Months Ended | ||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||
Acquisitions and Collaborations | 4. ACQUISITIONS AND COLLABORATIONS | ||||||||||||||||
Gambro AB Acquisition | |||||||||||||||||
Description of transaction | |||||||||||||||||
On September 6, 2013, Baxter acquired 100 percent of the voting equity interests in Indap Holding AB, the holding company for Gambro AB (Gambro), a privately held dialysis product company based in Lund, Sweden. Gambro is a global medical technology company focused on developing, manufacturing and supplying dialysis products and therapies for patients with acute or chronic kidney disease. The transaction provides Baxter with a broad and complementary dialysis product portfolio, while further advancing the company’s geographic footprint in the dialysis business. In addition, the company has augmented its pipeline with Gambro’s next-generation monitors, dialyzers, devices and dialysis solutions. | |||||||||||||||||
Fair value of consideration transferred and net assets acquired | |||||||||||||||||
Baxter provided total cash consideration of $3.7 billion for the acquisition, as reduced by assumed debt of $221 million. The valuation of assets acquired and liabilities assumed in the transaction has not yet been completed as of September 30, 2013. As a result, Baxter has recorded preliminary estimates for the fair value of assets acquired and liabilities assumed as of the acquisition date. The completion of the valuation will occur no later than one year from the acquisition date and may result in significant changes to the recognized assets and liabilities. | |||||||||||||||||
The following table summarizes the fair value of the consideration transferred and the preliminary amounts recognized for assets acquired and liabilities assumed as of the acquisition date. | |||||||||||||||||
(in millions) | |||||||||||||||||
Consideration transferred | |||||||||||||||||
Cash | $ | 3,704 | |||||||||||||||
Fair value of consideration transferred | $ | 3,704 | |||||||||||||||
Assets acquired and liabilities assumed | |||||||||||||||||
Cash | $ | 88 | |||||||||||||||
Accounts receivable | 483 | ||||||||||||||||
Inventories | 367 | ||||||||||||||||
Prepaid expenses and other | 54 | ||||||||||||||||
Property, plant, and equipment | 854 | ||||||||||||||||
Other intangible assets | 1,650 | ||||||||||||||||
Other assets | 11 | ||||||||||||||||
Current-maturities of long-term debt and lease obligations | (2 | ) | |||||||||||||||
Accounts payable and accrued liabilities | (334 | ) | |||||||||||||||
Long-term debt and lease obligations | (261 | ) | |||||||||||||||
Other long-term liabilities (including pension obligations of $214) | (458 | ) | |||||||||||||||
Total identifiable net assets | 2,452 | ||||||||||||||||
Goodwill | 1,252 | ||||||||||||||||
Total assets acquired and liabilities assumed | $ | 3,704 | |||||||||||||||
The results of operations, assets and liabilities of Gambro are included in the Medical Products segment, and the goodwill is also included in this reporting unit. Goodwill includes expected synergies, as well as an expanded dialysis product portfolio and global footprint for the company’s Medical Products business, particularly the Renal franchise. The goodwill is not deductible for tax purposes. Other intangible assets primarily relate to developed technology and are currently being amortized on a straight-line basis over an estimated average useful life of 12.5 years. | |||||||||||||||||
Long-term debt and lease obligations included $221 million of Gambro’s pre-existing Euro-denominated debt assumed by Baxter on the date of closing, which was subsequently paid off in September 2013. The debt settlement has been classified as a financing activity in the consolidated statement of cash flows. | |||||||||||||||||
Acquisition-related costs | |||||||||||||||||
The company incurred acquisition-related costs of $18 million and $58 million during the third quarter and first nine months of 2013, respectively, which were recorded in marketing and administrative expenses. | |||||||||||||||||
Actual and pro forma impact of acquisition | |||||||||||||||||
The following table presents information for Gambro that is included in Baxter’s consolidated statement of income from the acquisition date through September 30, 2013. | |||||||||||||||||
(in millions) | Gambro’s operations | ||||||||||||||||
included in Baxter’s | |||||||||||||||||
results | |||||||||||||||||
Net sales | $100 | ||||||||||||||||
Net loss | $ (17 | ) | |||||||||||||||
Net loss related to Gambro includes purchase accounting impacts related to fair value adjustments associated with acquisition-date inventory that was sold during the third quarter of 2013 (approximately $15 million on a pre-tax basis). | |||||||||||||||||
The following table presents supplemental pro forma information as if the acquisition of Gambro had occurred on January 1, 2012 for the three and nine months ended September 30, 2013 and 2012. | |||||||||||||||||
Unaudited Pro Forma Consolidated Results | |||||||||||||||||
Three months ended | Nine months ended | ||||||||||||||||
September 30, | September 30, | ||||||||||||||||
(in millions, except per share information) | 2013 | 2012 | 2013 | 2012 | |||||||||||||
Net sales | $ | 4,038 | $ | 3,855 | $ | 11,933 | $ | 11,594 | |||||||||
Net income | 547 | 568 | 1,713 | 1,613 | |||||||||||||
Basic earnings per share | $ | 1.01 | $ | 1.04 | $ | 3.16 | $ | 2.92 | |||||||||
Diluted earnings per share | $ | 1 | $ | 1.03 | $ | 3.11 | $ | 2.9 | |||||||||
The unaudited pro forma consolidated results were prepared using the acquisition method of accounting and are based on the historical information of Baxter and Gambro. The unaudited pro forma consolidated results are not necessarily indicative of what the consolidated results of operations would have been had we completed the acquisition on January 1, 2012. In addition, the unaudited pro forma consolidated results are not projections of future results of operations of the combined company nor do they reflect the expected realization of any cost savings or synergies associated with the acquisition. The unaudited pro forma consolidated results reflect primarily the following pro forma pre-tax adjustments: | |||||||||||||||||
• | Conversion of Gambro’s historical results of operations from International Financial Reporting Standards (IFRS) to GAAP. | ||||||||||||||||
• | Elimination of Gambro’s historical intangible asset amortization expense and property, plant and equipment depreciation expense. | ||||||||||||||||
• | Addition of amortization expense related to the fair value of identifiable intangible assets acquired. | ||||||||||||||||
• | Addition of depreciation expense related to the fair value of property, plant and equipment acquired. | ||||||||||||||||
• | Elimination of a $15 million charge related to the fair value of acquisition-date inventory from the three- and nine-month periods ended September 30, 2013. | ||||||||||||||||
• | Addition of a $60 million charge related to the fair value of acquisition-date inventory to the nine-month period ended September 30, 2012. | ||||||||||||||||
• | Elimination of Gambro’s historical interest expense and addition of interest expense associated with debt that was issued in 2013 to partially finance the acquisition. | ||||||||||||||||
• | Elimination of $135 million of acquisition, integration and currency-related charges from the first nine months of 2013 and addition of these costs to the first nine months of 2012. These costs were directly attributable to the acquisition and non-recurring in nature, and included acquisition and integration related charges incurred by Baxter, in addition to post-acquisition restructuring costs and losses from foreign currency hedging activity related to the acquisition. | ||||||||||||||||
Other Acquisitions | |||||||||||||||||
Inspiration / Ipsen OBI-1 business | |||||||||||||||||
In March 2013, Baxter acquired the investigational hemophilia compound OBI-1 and related assets from Inspiration BioPharmaceuticals, Inc. (Inspiration), as well as certain other OBI-1 related assets, including manufacturing operations, from Ipsen Pharma S.A.S. (Ipsen) in conjunction with Inspiration’s bankruptcy proceedings. OBI-1 is a recombinant porcine factor VIII (rpFVIII) being investigated for treatment of bleeding in people with acquired hemophilia A and congenital hemophilia A patients with inhibitors. Ipsen was Inspiration’s senior secured creditor and had been providing Inspiration with debtor-in-possession financing to fund Inspiration’s operations and the sales process. Additionally, Ipsen was the owner of certain assets acquired by Baxter in the transaction. | |||||||||||||||||
The acquired net assets comprised a business based on the acquired inputs, processes and outputs and, as a result, the transaction has been accounted for as an acquisition of a business. In March 2013, Baxter made an upfront payment of $51 million for the Inspiration / Ipsen OBI-1 business. The terms of the acquisition also included contingent consideration, including up to $135 million in payments related to the achievement of certain regulatory and sales milestones. Additionally, Baxter will be responsible for specified sales-based payments. | |||||||||||||||||
The company substantially completed its valuation of consideration transferred and intangible assets during the second quarter of 2013. As a result, Baxter adjusted its preliminary estimates of the fair value of consideration transferred and assets acquired and liabilities assumed as of the acquisition date. The measurement period adjustments resulted in a reduction to consideration transferred of $58 million, and reductions of $55 million and $3 million to other intangible assets and goodwill, respectively. In the third quarter of 2013, the company recorded an additional measurement period adjustment to increase consideration transferred by $2 million with a corresponding increase in goodwill. | |||||||||||||||||
The following table summarizes the updated estimated fair value of consideration transferred and the recognized amounts of the assets acquired and liabilities assumed as of the acquisition date for the Inspiration / Ipsen OBI-1 business. | |||||||||||||||||
(in millions) | |||||||||||||||||
Consideration transferred | |||||||||||||||||
Cash | $ 51 | ||||||||||||||||
Contingent payments | 269 | ||||||||||||||||
Fair value of consideration transferred | $320 | ||||||||||||||||
Assets acquired and liabilities assumed | |||||||||||||||||
Other intangible assets | $288 | ||||||||||||||||
Other assets, net | 25 | ||||||||||||||||
Goodwill | 7 | ||||||||||||||||
Total assets acquired and liabilities assumed | $320 | ||||||||||||||||
The estimated fair value of contingent payment liabilities at the acquisition date was $269 million, based on the probability of achieving the specified milestones and sales-based payments and the discounting of expected future cash flows, and was recorded in other long-term liabilities as part of the consideration transferred. The fair value of the contingent payment liabilities will be re-measured in future periods with changes in the estimated fair value recognized in earnings. | |||||||||||||||||
Goodwill of $7 million principally includes the value associated with the assembled workforce at the acquired manufacturing facility. The goodwill is deductible for tax purposes. Other intangible assets of $288 million related to acquired in-process research and development (IPR&D) activities associated with OBI-1 and were accounted for as an indefinite-lived intangible asset. If regulatory approvals are obtained, the IPR&D assets will be amortized over the estimated economic life of the product, and the amortization expense will be recorded in cost of sales. | |||||||||||||||||
The results of operations, assets and liabilities of the Inspiration / Ipsen OBI-1 business are included in the BioScience segment, and the goodwill is also included in this reporting unit. Pro forma financial information has not been presented because the results of the acquired business are not material to the company’s results of operations. | |||||||||||||||||
Collaborations | |||||||||||||||||
Coherus Biosciences, Inc. | |||||||||||||||||
In August 2013, Baxter and Coherus Biosciences, Inc. (Coherus) entered into an exclusive collaboration to develop and commercialize a biosimilar to etanercept for Europe, Canada, Brazil and certain other markets. Baxter also has specified rights to include additional products in the collaboration. Baxter’s upfront payment of $30 million was recorded as a deposit asset, with disposition dependent on future Baxter decisions. Development and manufacturing activities will principally be conducted by Coherus, and Baxter will perform the commercialization function. Baxter may make additional payments of up to $216 million relating to the achievement of development and regulatory milestones, as well as royalties based on net sales. | |||||||||||||||||
JW Holdings Corporation | |||||||||||||||||
In July 2013, Baxter and JW Holdings Corporation (JW Holdings) entered into an exclusive collaboration agreement for parenteral nutritional products containing a novel formulation of omega 3 lipids. Baxter has exclusive rights to co-develop and distribute the products globally, with the exception of Korea. In the third quarter of 2013, Baxter recognized an R&D charge of $25 million related to an upfront cash payment associated with the execution of the agreement. Baxter may make additional payments of up to $10 million relating to the achievement of regulatory milestones, in addition to future royalties. |
Goodwill_and_Other_Intangible_
Goodwill and Other Intangible Assets, Net | 9 Months Ended | ||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||
Goodwill and Other Intangible Assets, Net | 5. GOODWILL AND OTHER INTANGIBLE ASSETS, NET | ||||||||||||||||
Impairment tests for goodwill and intangible assets not subject to amortization are performed annually in the fourth quarter, or sooner if indicators of impairment exist. Intangible assets subject to amortization are tested for impairment when indicators of impairment exist. | |||||||||||||||||
Goodwill | |||||||||||||||||
The following is a reconciliation of goodwill by business segment. | |||||||||||||||||
(in millions) | BioScience | Medical | Total | ||||||||||||||
Products | |||||||||||||||||
Balance as of December 31, 2012 | $975 | $1,527 | $2,502 | ||||||||||||||
Additions | 7 | 1,254 | 1,261 | ||||||||||||||
Currency translation and other adjustments | 4 | 13 | 17 | ||||||||||||||
Balance as of September 30, 2013 | $986 | $2,794 | $3,780 | ||||||||||||||
Goodwill additions principally related to the third quarter 2013 acquisition of Gambro and the first quarter 2013 acquisition of the Inspiration / Ipsen OBI-1 business. Refer to Note 4 for additional information regarding these acquisitions. As of September 30, 2013, there were no accumulated goodwill impairment losses. | |||||||||||||||||
Other intangible assets, net | |||||||||||||||||
Intangible assets with finite useful lives are amortized on a straight-line basis over their estimated useful lives. Intangible assets not subject to amortization include a trademark with an indefinite life and acquired IPR&D associated with products that have not yet received regulatory approval. | |||||||||||||||||
The following is a summary of the company’s other intangible assets. | |||||||||||||||||
(in millions) | Developed technology, | Other amortized | Indefinite-lived | Total | |||||||||||||
including patents | intangible assets | intangible assets | |||||||||||||||
September 30, 2013 | |||||||||||||||||
Gross other intangible assets | $2,850 | $281 | $309 | $3,440 | |||||||||||||
Accumulated amortization | (630 | ) | (128 | ) | — | (758 | ) | ||||||||||
Other intangible assets, net | $2,220 | $153 | $309 | $2,682 | |||||||||||||
December 31, 2012 | |||||||||||||||||
Gross other intangible assets | $1,192 | $280 | $ 22 | $1,494 | |||||||||||||
Accumulated amortization | (578 | ) | (102 | ) | — | (680 | ) | ||||||||||
Other intangible assets, net | $ 614 | $178 | $ 22 | $ 814 | |||||||||||||
The intangible asset amortization expense was $34 million and $26 million in the three months ended September 30, 2013 and 2012, respectively, and $84 million and $76 million in the nine months ended September 30, 2013 and 2012, respectively. The anticipated annual amortization expense for intangible assets currently subject to amortization as of September 30, 2013 is $142 million in 2013, $227 million in 2014, $225 million in 2015, $222 million in 2016, $204 million in 2017 and $199 million in 2018. | |||||||||||||||||
The increase in developed technology intangible assets during 2013 was primarily driven by the acquisition of Gambro in the third quarter of 2013. The increase in indefinite-lived intangible assets during 2013 was primarily related to the acquisition of the Inspiration / Ipsen OBI-1 business in the first quarter of 2013. Refer to Note 4 for additional information regarding these acquisitions. |
Infusion_Pump_and_Business_Opt
Infusion Pump and Business Optimization Charges | 9 Months Ended | ||||
Sep. 30, 2013 | |||||
Infusion Pump and Business Optimization Charges | 6. INFUSION PUMP AND BUSINESS OPTIMIZATION CHARGES | ||||
Infusion pump charges | |||||
From 2005 through 2012, the company recorded total charges and adjustments of $888 million related to COLLEAGUE and SYNDEO infusion pumps, including $742 million of cash costs and $146 million principally related to asset impairments. The company had $127 million of the cash reserves remaining as of December 31, 2012. Refer to Note 6 to the company’s consolidated financial statements in the 2012 Annual Report for further information about the COLLEAGUE and SYNDEO charges and adjustments. | |||||
The following table summarizes cash activity in the company’s COLLEAGUE infusion pump reserves through September 30, 2013. | |||||
(in millions) | |||||
Reserves as of December 31, 2012 | $127 | ||||
Utilization | (20 | ) | |||
Reserves as of September 30, 2013 | $107 | ||||
The reserve for remediation activities in the United States has been substantially utilized, with remaining reserves primarily related to remediation activities outside of the United States continuing to be utilized through 2014. In January 2013, Baxter received license approvals in Canada for a replacement infusion pump that will allow the company to complete remediation activities in Canada. The company believes that the remaining infusion pump reserves are adequate. However, additional adjustments may be recorded in the future as the programs are completed. | |||||
It is possible that substantial additional cash and non-cash charges may be required in future periods based on new information, changes in estimates, and actions the company may be required to undertake in markets outside the United States. | |||||
Business optimization charges | |||||
From 2009 through 2012 the company recorded total charges of $678 million primarily related to costs associated with optimizing the company’s overall cost structure on a global basis, as the company streamlined its international operations, rationalized its manufacturing facilities, enhanced its general and administrative infrastructure and, in 2012, re-aligned certain R&D activities. The total charges included cash costs of $507 million, principally pertaining to severance and other employee-related costs, and $171 million related to asset impairments. The company had $220 million of the cash reserves remaining as of December 31, 2012. Refer to the 2012 Annual Report for further information about these charges. | |||||
In the third quarter of 2013, in connection with the Gambro acquisition, the company recorded a charge of $14 million related to post-acquisition restructuring activities. | |||||
In the second quarter of 2013, the company recorded a charge of $18 million related to contract termination and other exit costs associated with the discontinuation of the company’s Alzheimer’s program. Additionally, in the second quarter of 2013, the company recorded adjustments of $20 million to previous business optimization reserves that are no longer probable of being utilized. | |||||
The following table summarizes cash activity in the reserves related to the company’s business optimization initiatives. | |||||
(in millions) | |||||
Reserves as of December 31, 2012 | $220 | ||||
Charges | 32 | ||||
Reserve adjustments | (20 | ) | |||
Utilization | (61 | ) | |||
CTA | 3 | ||||
Reserves as of September 30, 2013 | $174 | ||||
The reserves are expected to be substantially utilized by the end of 2014. The company believes that these reserves are adequate. However, adjustments may be recorded in the future as the programs are completed. |
Debt_Financial_Instruments_and
Debt, Financial Instruments and Fair Value Measurements | 9 Months Ended | ||||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||||
Debt, Financial Instruments and Fair Value Measurements | 7. DEBT, FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS | ||||||||||||||||||
Securitization arrangement | |||||||||||||||||||
The following is a summary of the activity relating to the company’s securitization arrangement in Japan. | |||||||||||||||||||
Three months ended | Nine months ended | ||||||||||||||||||
September 30, | September 30, | ||||||||||||||||||
(in millions) | 2013 | 2012 | 2013 | 2012 | |||||||||||||||
Sold receivables at beginning of period | $ 129 | $ 154 | $ 157 | $ 160 | |||||||||||||||
Proceeds from sales of receivables | 125 | 161 | 380 | 461 | |||||||||||||||
Cash collections (remitted to the owners of the receivables) | (130 | ) | (161 | ) | (394 | ) | (465 | ) | |||||||||||
Effect of currency exchange rate changes | (6 | ) | — | (25 | ) | (2 | ) | ||||||||||||
Sold receivables at end of period | $ 118 | $ 154 | $ 118 | $ 154 | |||||||||||||||
The net losses relating to the sales of receivables were immaterial for each period. Refer to the 2012 Annual Report for further information regarding the company’s securitization agreements. | |||||||||||||||||||
Significant debt issuances | |||||||||||||||||||
In June 2013, the company issued $500 million of floating rate senior notes maturing in December 2014, $500 million of senior notes bearing a coupon rate of 0.95% and maturing in June 2016, $750 million of senior notes bearing a coupon rate of 1.85% and maturing in June 2018, $1.25 billion of senior notes bearing a coupon rate of 3.2% and maturing in June 2023, and $500 million of senior notes bearing a coupon rate of 4.5% and maturing in June 2043. The interest rate on the floating rate senior notes was 0.4259% as of September 30, 2013. | |||||||||||||||||||
Approximately $3.0 billion of the net proceeds of these debt issuances was used to finance the acquisition of Gambro and the remainder has been and will be used for general corporate purposes, including the repayment of commercial paper. | |||||||||||||||||||
Credit facilities and commercial paper | |||||||||||||||||||
As of September 30, 2013 and December 31, 2012, there were no outstanding borrowings under the company’s primary and Euro-denominated revolving credit facilities. In October 2013, the company’s Euro-denominated credit revolving facility, which was set to mature in October 2013, was amended and extended to December 2014. The terms of the new Euro-denominated revolving credit facility did not substantially change, however certain provisions were amended to more closely align with the company’s primary credit facility. Refer to Note 7 to the company’s consolidated financial statements in the 2012 Annual Report for further discussion of the company’s credit facilities. | |||||||||||||||||||
During the first nine months of 2013, the company issued and redeemed commercial paper, and there was no balance outstanding as of both September 30, 2013 and December 31, 2012. | |||||||||||||||||||
In January 2013, Baxter entered into an agreement related to a 364-day bridge loan facility with a maximum capacity of $3.1 billion in support of the planned acquisition of Gambro. This facility was terminated in the second quarter of 2013 as a result of the company’s June 2013 issuance of debt. The company recognized a $13 million expense related to bridge loan facility structuring and commitment fees in other (income) expense, net during the second quarter of 2013. | |||||||||||||||||||
Concentrations of credit risk | |||||||||||||||||||
The company invests excess cash in certificates of deposit or money market funds and diversifies the concentration of cash among different financial institutions. With respect to financial instruments, where appropriate, the company has diversified its selection of counterparties, and has arranged collateralization and master-netting agreements to minimize the risk of loss. | |||||||||||||||||||
The company continues to do business with foreign governments in certain countries, including Greece, Spain, Portugal and Italy, that have experienced a deterioration in credit and economic conditions. As of September 30, 2013, the company’s net accounts receivable from the public sector in Greece, Spain, Portugal and Italy totaled $559 million (of which $43 million related to Greece) and includes $141 million of Gambro-related receivables. | |||||||||||||||||||
Global economic conditions and liquidity issues in certain countries have resulted, and may continue to result, in delays in the collection of receivables and credit losses. Governmental actions and customer-specific factors may also require the company to re-evaluate the collectibility of its receivables and the company could potentially incur additional credit losses. These conditions may also impact the stability of the Euro. | |||||||||||||||||||
Derivatives and hedging activities | |||||||||||||||||||
The company operates on a global basis and is exposed to the risk that its earnings, cash flows and equity could be adversely impacted by fluctuations in foreign exchange and interest rates. The company’s hedging policy attempts to manage these risks to an acceptable level based on the company’s judgment of the appropriate trade-off between risk, opportunity and costs. | |||||||||||||||||||
The company is primarily exposed to foreign exchange risk with respect to recognized assets and liabilities, forecasted transactions and net assets denominated in the Euro, Japanese Yen, British Pound, Australian Dollar, Canadian Dollar, Brazilian Real, Colombian Peso, and Swedish Krona. The company manages its foreign currency exposures on a consolidated basis, which allows the company to net exposures and take advantage of any natural offsets. In addition, the company uses derivative and nonderivative instruments to further reduce the net exposure to foreign exchange. Gains and losses on the hedging instruments offset losses and gains on the hedged transactions and reduce the earnings and equity volatility resulting from foreign exchange. Financial market and currency volatility may limit the company’s ability to cost-effectively hedge these exposures. | |||||||||||||||||||
The company is also exposed to the risk that its earnings and cash flows could be adversely impacted by fluctuations in interest rates. The company’s policy is to manage interest costs using a mix of fixed- and floating-rate debt that the company believes is appropriate. To manage this mix in a cost-efficient manner, the company periodically enters into interest rate swaps in which the company agrees to exchange, at specified intervals, the difference between fixed and floating interest amounts calculated by reference to an agreed-upon notional amount. | |||||||||||||||||||
The company does not hold any instruments for trading purposes and none of the company’s outstanding derivative instruments contain credit-risk-related contingent features. | |||||||||||||||||||
All derivative instruments are recognized as either assets or liabilities at fair value in the condensed consolidated balance sheets and are classified as short-term or long-term based on the scheduled maturity of the instrument. Based upon the exposure being hedged, the company designates its hedging instruments as cash flow or fair value hedges. | |||||||||||||||||||
Cash Flow Hedges | |||||||||||||||||||
The company may use options, including collars and purchased options, forwards and cross-currency swaps to hedge the foreign exchange risk to earnings relating to forecasted transactions and recognized assets and liabilities. The company periodically uses forward-starting interest rate swaps and treasury rate locks to hedge the risk to earnings associated with movements in interest rates relating to anticipated issuances of debt. Certain other firm commitments and forecasted transactions are also periodically hedged. | |||||||||||||||||||
For each derivative instrument that is designated and effective as a cash flow hedge, the gain or loss on the derivative is accumulated in AOCI and then recognized in earnings consistent with the underlying hedged item. Option premiums or net premiums paid are initially recorded as assets and reclassified to other comprehensive income (OCI) over the life of the option, and then recognized in earnings consistent with the underlying hedged item. Cash flow hedges are classified in net sales, cost of sales, and net interest expense, and primarily relate to forecasted third-party sales denominated in foreign currencies, forecasted intercompany sales denominated in foreign currencies, and anticipated issuances of debt, respectively. | |||||||||||||||||||
The notional amounts of foreign exchange contracts were $2.2 billion and $1.5 billion as of September 30, 2013 and December 31, 2012, respectively. The notional amount of interest rate contracts designated as cash flow hedges outstanding as of December 31, 2012 was $250 million. There were no interest rate contracts designated as cash flow hedges outstanding as of September 30, 2013. The maximum term over which the company has cash flow hedge contracts in place related to forecasted transactions as of September 30, 2013 is 15 months. | |||||||||||||||||||
Fair Value Hedges | |||||||||||||||||||
The company uses interest rate swaps to convert a portion of its fixed-rate debt into variable-rate debt. These instruments hedge the company’s earnings from changes in the fair value of debt due to fluctuations in the designated benchmark interest rate. For each derivative instrument that is designated and effective as a fair value hedge, the gain or loss on the derivative is recognized immediately to earnings, and offsets the loss or gain on the underlying hedged item. Fair value hedges are classified in net interest expense, as they hedge the interest rate risk associated with certain of the company’s fixed-rate debt. | |||||||||||||||||||
The total notional amount of interest rate contracts designated as fair value hedges was $500 million as of both September 30, 2013 and December 31, 2012. | |||||||||||||||||||
Dedesignations | |||||||||||||||||||
If it is determined that a derivative or nonderivative hedging instrument is no longer highly effective as a hedge, the company discontinues hedge accounting prospectively. If the company removes the cash flow hedge designation because the hedged forecasted transactions are no longer probable of occurring, any gains or losses are immediately reclassified from AOCI to earnings. Gains or losses relating to terminations of effective cash flow hedges in which the forecasted transactions are still probable of occurring are deferred and recognized consistent with the loss or income recognition of the underlying hedged items. | |||||||||||||||||||
In the first nine months of 2013, the company had $1 billion of interest rate contracts designated as cash flow hedges that matured or were terminated, resulting in a net gain of $5 million that was deferred in AOCI. In the second quarter of 2013, the company determined that certain forecasted transactions associated with these contracts were no longer probable of occurring and therefore dedesignated the hedge relationship, which, together with ineffectiveness, resulted in the immediate reclassification of a net gain of $11 million from AOCI to net interest expense. The remaining deferred net loss of $6 million from the matured or terminated interest rate contracts is amortized to net interest expense against the related accrued interest payments. There were no hedge dedesignations in the first nine months of 2012 resulting from changes in the company’s assessment of the probability that the hedged forecasted transactions would occur. | |||||||||||||||||||
If the company terminates a fair value hedge, an amount equal to the cumulative fair value adjustment to the hedged items at the date of termination is amortized to earnings over the remaining term of the hedged item. In the first nine months of 2012, the company terminated $175 million of interest rate contracts that had been designated as fair value hedges, which resulted in a net gain of $21 million that was deferred and is being amortized as a reduction of net interest expense over the remaining term of the underlying debt. There were no fair value hedges terminated during the first nine months of 2013. | |||||||||||||||||||
Undesignated Derivative Instruments | |||||||||||||||||||
The company uses forward contracts to hedge earnings from the effects of foreign exchange relating to certain of the company’s intercompany and third-party receivables and payables denominated in a foreign currency. These derivative instruments are generally not formally designated as hedges, and the change in fair value, which substantially offsets the change in book value of the hedged items, is recorded directly to other (income) expense, net. The terms of these instruments generally do not exceed one month. | |||||||||||||||||||
The total notional amount of undesignated derivative instruments was $318 million as of September 30, 2013 and $3.2 billion as of December 31, 2012. In the fourth quarter of 2012 and the first quarter of 2013, the company entered into option contracts with a total notional amount of $3.7 billion to hedge anticipated foreign currency cash outflows associated with the acquisition of Gambro. These contracts matured in June 2013, and in the second quarter of 2013, the company entered into undesignated forward contracts with a total notional amount of $1.5 billion also to hedge anticipated foreign currency cash outflows associated with the acquisition of Gambro, which matured in the third quarter of 2013. The company recorded gains of $49 million and losses of $23 million in the three and nine months ended September 30, 2013, respectively, associated with the Gambro-related option and forward contracts. | |||||||||||||||||||
Gains and Losses on Derivative Instruments | |||||||||||||||||||
The following table summarizes the income statement locations and gains and losses on the company’s derivative instruments for the three months ended September 30, 2013 and 2012. | |||||||||||||||||||
Gain (loss) recognized in OCI | Location of gain (loss) in | Gain (loss) reclassified from AOCI | |||||||||||||||||
income statement | into income | ||||||||||||||||||
(in millions) | 2013 | 2012 | 2013 | 2012 | |||||||||||||||
Cash flow hedges | |||||||||||||||||||
Interest rate contracts | $— | $ (3 | ) | Net interest expense | $ (1 | ) | $— | ||||||||||||
Foreign exchange contracts | (1 | ) | (1 | ) | Net sales | — | (1 | ) | |||||||||||
Foreign exchange contracts | 7 | (20 | ) | Cost of sales | 9 | 5 | |||||||||||||
Total | $ 6 | $(24 | ) | $ 8 | $ 4 | ||||||||||||||
Gain (loss) recognized in income | |||||||||||||||||||
(in millions) | Location of gain (loss) in | 2013 | 2012 | ||||||||||||||||
income statement | |||||||||||||||||||
Fair value hedges | |||||||||||||||||||
Interest rate contracts | Net interest expense | $ 1 | $ 5 | ||||||||||||||||
Undesignated derivative instruments | |||||||||||||||||||
Foreign exchange contracts | Other (income) expense, net | $51 | $ (2 | ) | |||||||||||||||
The following table summarizes the income statement locations and gains and losses on the company’s derivative instruments for the nine months ended September 30, 2013 and 2012. | |||||||||||||||||||
Gain (loss) recognized in OCI | Location of gain (loss) in | Gain (loss) reclassified from | |||||||||||||||||
income statement | AOCI into income | ||||||||||||||||||
(in millions) | 2013 | 2012 | 2013 | 2012 | |||||||||||||||
Cash flow hedges | |||||||||||||||||||
Interest rate contracts | $26 | $(12 | ) | Net interest expense | $10 | $ — | |||||||||||||
Foreign exchange contracts | (1 | ) | (2 | ) | Net sales | (1 | ) | (2 | ) | ||||||||||
Foreign exchange contracts | 43 | (11 | ) | Cost of sales | 27 | 4 | |||||||||||||
Total | $68 | $(25 | ) | $36 | $ 2 | ||||||||||||||
Gain (loss) recognized in income | |||||||||||||||||||
(in millions) | Location of gain (loss) in | 2013 | 2012 | ||||||||||||||||
income statement | |||||||||||||||||||
Fair value hedges | |||||||||||||||||||
Interest rate contracts | Net interest expense | $(25 | ) | $ 15 | |||||||||||||||
Undesignated derivative instruments | |||||||||||||||||||
Foreign exchange contracts | Other (income) expense, net | $ 6 | $(13 | ) | |||||||||||||||
For the company’s fair value hedges, equal and offsetting losses of $1 million and gains of $25 million were recognized in net interest expense in the third quarter and first nine months of 2013, respectively, and equal and offsetting losses of $5 million and $15 million were recognized in net interest expense in the third quarter and first nine months of 2012, respectively, as adjustments to the underlying hedged item, fixed-rate debt. Ineffectiveness related to the company’s cash flow and fair value hedges for the nine months ended September 30, 2013 was not material. | |||||||||||||||||||
As of September 30, 2013, $9 million of deferred, net after-tax gains on derivative instruments included in AOCI are expected to be recognized in earnings during the next 12 months, coinciding with when the hedged items are expected to impact earnings. | |||||||||||||||||||
Fair Values of Derivative Instruments | |||||||||||||||||||
The following table summarizes the classification and fair values of derivative instruments reported in the condensed consolidated balance sheet as of September 30, 2013. | |||||||||||||||||||
Derivatives in asset positions | Derivatives in liability positions | ||||||||||||||||||
(in millions) | Balance sheet location | Fair value | Balance sheet location | Fair value | |||||||||||||||
Derivative instruments designated as hedges | |||||||||||||||||||
Interest rate contracts | Other long-term assets | $ 42 | Other long-term liabilities | $— | |||||||||||||||
Foreign exchange contracts | Prepaid expenses and other | 46 | Accounts payable | 6 | |||||||||||||||
and accrued liabilities | |||||||||||||||||||
Foreign exchange contracts | Other long-term assets | 8 | Other long-term liabilities | 1 | |||||||||||||||
Total derivative instruments designated as hedges | $ 96 | $ 7 | |||||||||||||||||
Undesignated derivative instruments | |||||||||||||||||||
Foreign exchange contracts | Prepaid expenses and other | $ — | Accounts payable | $ 1 | |||||||||||||||
and accrued liabilities | |||||||||||||||||||
Total derivative instruments | $ 96 | $ 8 | |||||||||||||||||
The following table summarizes the classification and fair values of derivative instruments reported in the condensed consolidated balance sheet as of December 31, 2012. | |||||||||||||||||||
Derivatives in asset positions | Derivatives in liability positions | ||||||||||||||||||
(in millions) | Balance sheet location | Fair value | Balance sheet location | Fair value | |||||||||||||||
Derivative instruments designated as hedges | |||||||||||||||||||
Interest rate contracts | Other long-term assets | $ 67 | Accounts payable | $21 | |||||||||||||||
and accrued liabilities | |||||||||||||||||||
Foreign exchange contracts | Prepaid expenses and other | 28 | Accounts payable | 5 | |||||||||||||||
and accrued liabilities | |||||||||||||||||||
Total derivative instruments designated as hedges | $ 95 | $26 | |||||||||||||||||
Undesignated derivative instruments | |||||||||||||||||||
Foreign exchange contracts | Prepaid expenses and other | $ 47 | Accounts payable | $11 | |||||||||||||||
and accrued liabilities | |||||||||||||||||||
Total derivative instruments | $142 | $37 | |||||||||||||||||
While the company’s derivatives are all subject to master netting arrangements, the company presents its assets and liabilities related to derivative instruments on a gross basis within the condensed consolidated balance sheets. Additionally, the company is not required to post collateral for any of its outstanding derivatives. | |||||||||||||||||||
The following table provides information on the company’s derivative positions as if they were presented on a net basis, allowing for the right of offset by counterparty. | |||||||||||||||||||
September 30, 2013 | December 31, 2012 | ||||||||||||||||||
(in millions) | Asset | Liability | Asset | Liability | |||||||||||||||
Gross amounts recognized in the consolidated balance sheet | $96 | $ 8 | $142 | $37 | |||||||||||||||
Gross amount subject to offset in master netting arrangements not offset in the consolidated balance sheet | (8 | ) | (8 | ) | (37 | ) | (37 | ) | |||||||||||
Total | $88 | $— | $105 | $— | |||||||||||||||
Fair value measurements | |||||||||||||||||||
The following tables summarize the bases used to measure financial assets and liabilities that are carried at fair value on a recurring basis in the condensed consolidated balance sheets. | |||||||||||||||||||
Basis of fair value measurement | |||||||||||||||||||
(in millions) | Balance as of | Quoted prices in | Significant other | Significant | |||||||||||||||
September 30, 2013 | active markets for | observable inputs | unobservable | ||||||||||||||||
identical assets | (Level 2) | inputs | |||||||||||||||||
(Level 1) | (Level 3) | ||||||||||||||||||
Assets | |||||||||||||||||||
Foreign currency hedges | $ 54 | $ — | $ 54 | $ — | |||||||||||||||
Interest rate hedges | 42 | — | 42 | — | |||||||||||||||
Available-for-sale securities | |||||||||||||||||||
Equity securities | 110 | 110 | — | — | |||||||||||||||
Foreign government debt securities | 17 | — | 17 | — | |||||||||||||||
Total assets | $223 | $110 | $113 | $ — | |||||||||||||||
Liabilities | |||||||||||||||||||
Foreign currency hedges | $ 8 | $ — | $ 8 | $ — | |||||||||||||||
Contingent payments related to acquisitions | 344 | — | — | 344 | |||||||||||||||
Total liabilities | $352 | $ — | $ 8 | $344 | |||||||||||||||
Basis of fair value measurement | |||||||||||||||||||
(in millions) | Balance as of | Quoted prices in | Significant other | Significant | |||||||||||||||
December 31, 2012 | active markets for | observable inputs | unobservable | ||||||||||||||||
identical assets | (Level 2) | inputs | |||||||||||||||||
(Level 1) | (Level 3) | ||||||||||||||||||
Assets | |||||||||||||||||||
Foreign currency hedges | $ 75 | $— | $ 75 | $— | |||||||||||||||
Interest rate hedges | 67 | — | 67 | — | |||||||||||||||
Available-for-sale securities | |||||||||||||||||||
Equity securities | 15 | 15 | — | — | |||||||||||||||
Preferred stock | 51 | — | — | 51 | |||||||||||||||
Foreign government debt securities | 16 | — | 16 | — | |||||||||||||||
Total assets | $224 | $15 | $158 | $51 | |||||||||||||||
Liabilities | |||||||||||||||||||
Foreign currency hedges | $ 16 | $— | $ 16 | $— | |||||||||||||||
Interest rate hedges | 21 | — | 21 | — | |||||||||||||||
Contingent payments related to acquisitions | 86 | — | — | 86 | |||||||||||||||
Total liabilities | $123 | $— | $ 37 | $86 | |||||||||||||||
As of September 30, 2013, cash and equivalents of $2.4 billion included money market funds of approximately $1.1 billion, which would be considered Level 2 in the fair value hierarchy. | |||||||||||||||||||
For assets that are measured using quoted prices in active markets, the fair value is the published market price per unit multiplied by the number of units held, without consideration of transaction costs. The majority of the derivatives entered into by the company are valued using internal valuation techniques as no quoted market prices exist for such instruments. The principal techniques used to value these instruments are discounted cash flow and Black-Scholes models. The key inputs are considered observable and vary depending on the type of derivative, and include contractual terms, interest rate yield curves, foreign exchange rates and volatility. The fair values of foreign government debt securities are obtained from pricing services or broker/dealers who use proprietary pricing applications, which include observable market information for like or same securities. The preferred stock was valued based upon recent transactions, as well as the financial information of the investee. | |||||||||||||||||||
Contingent payments related to acquisitions consist of development and commercial milestone payments, in addition to sales-based payments, and are valued using discounted cash flow techniques. The fair value of development and commercial milestone payments reflects management’s expectations of probability of payment, and increases as the probability of payment increases or expectation of timing of payments is accelerated. As of September 30, 2013, management’s expected weighted-average probability of payment for development and commercial milestone payments was approximately 55%. The fair value of sales-based payments is based upon probability-weighted future revenue estimates, and increases as revenue estimates increase, probability weighting of higher revenue scenarios increase or expectation of timing of payment is accelerated. | |||||||||||||||||||
At September 30, 2013, the company held available-for-sale equity securities that had an amortized cost basis and fair value of $91 million and $110 million, respectively, with $19 million of cumulative net unrealized gains. At December 31, 2012, the amortized cost basis and fair value of the available-for-sale equity securities was $13 million and $15 million, respectively, with $2 million in cumulative unrealized gains. | |||||||||||||||||||
As of September 30, 2013 and December 31, 2012, the cumulative unrealized gains for the company’s available-for-sale debt securities were less than $1 million. The company recognized losses totaling $8 million in 2012 related to unrealized and realized losses associated with the company’s Greek government and European Financial Stability Facility bonds, which Baxter sold in the second quarter of 2012. Refer to the 2012 Annual Report for more information on the company’s Greek debt holdings. | |||||||||||||||||||
The following table is a reconciliation of the fair value measurements that use significant unobservable inputs (Level 3), which consist of contingent payments related to acquisitions and preferred stock. | |||||||||||||||||||
(in millions) | Contingent | Preferred | |||||||||||||||||
payments | stock | ||||||||||||||||||
Fair value as of December 31, 2012 | $ 86 | $51 | |||||||||||||||||
Additions | 269 | — | |||||||||||||||||
Payments | (2 | ) | — | ||||||||||||||||
Gains recognized in earnings | (9 | ) | — | ||||||||||||||||
Conversion to a publicly traded equity security | — | (51 | ) | ||||||||||||||||
Fair value as of September 30, 2013 | $344 | $— | |||||||||||||||||
Additions were related to contingent payment liabilities associated with the acquisition of the Inspiration / Ipsen OBI-1 business in the first quarter of 2013, and were updated to reflect the measurement period adjustments recorded in the second and third quarters of 2013, as discussed in Note 4. | |||||||||||||||||||
Book Values and Fair Values of Financial Instruments | |||||||||||||||||||
In addition to the financial instruments that the company is required to recognize at fair value in the condensed consolidated balance sheets, the company has certain financial instruments that are recognized at historical cost or some basis other than fair value. For these financial instruments, the following table provides the values recognized in the condensed consolidated balance sheets and the approximate fair values as of September 30, 2013 and December 31, 2012. | |||||||||||||||||||
Book values | Approximate fair | ||||||||||||||||||
values | |||||||||||||||||||
(in millions) | 2013 | 2012 | 2013 | 2012 | |||||||||||||||
Assets | |||||||||||||||||||
Long-term insurance receivables | $ | 2 | $ | 2 | $ | 2 | $ | 2 | |||||||||||
Investments | 52 | 46 | 53 | 49 | |||||||||||||||
Liabilities | |||||||||||||||||||
Short-term debt | 42 | 27 | 42 | 27 | |||||||||||||||
Current maturities of long-term debt and lease obligations | 372 | 323 | 377 | 324 | |||||||||||||||
Long-term debt and lease obligations | 8,652 | 5,580 | 8,930 | 6,201 | |||||||||||||||
Long-term litigation liabilities | 53 | 32 | 52 | 31 | |||||||||||||||
The following tables summarize the bases used to measure the approximate fair value of the financial instruments as of September 30, 2013 and December 31, 2012. | |||||||||||||||||||
Basis of fair value measurement | |||||||||||||||||||
(in millions) | Fair value as of | Quoted prices in | Significant other | Significant | |||||||||||||||
September 30, 2013 | active markets for | observable inputs | unobservable | ||||||||||||||||
identical assets | (Level 2) | inputs | |||||||||||||||||
(Level 1) | (Level 3) | ||||||||||||||||||
Assets | |||||||||||||||||||
Long-term insurance receivables | $ 2 | $— | $ 2 | $— | |||||||||||||||
Investments | 53 | — | 18 | 35 | |||||||||||||||
Total assets | $ 55 | $— | $ 20 | $35 | |||||||||||||||
Liabilities | |||||||||||||||||||
Short-term debt | $ 42 | $— | $ 42 | $— | |||||||||||||||
Current maturities of long-term debt and lease obligations | 377 | — | 377 | — | |||||||||||||||
Long-term debt and lease obligations | 8,930 | — | 8,930 | — | |||||||||||||||
Long-term litigation liabilities | 52 | — | 52 | — | |||||||||||||||
Total liabilities | $ 9,401 | $— | $ 9,401 | $— | |||||||||||||||
Basis of fair value measurement | |||||||||||||||||||
(in millions) | Fair value as of | Quoted prices in | Significant other | Significant | |||||||||||||||
December 31, 2012 | active markets for | observable inputs | unobservable | ||||||||||||||||
identical assets | (Level 2) | inputs | |||||||||||||||||
(Level 1) | (Level 3) | ||||||||||||||||||
Assets | |||||||||||||||||||
Long-term insurance receivables | $ 2 | $— | $ 2 | $— | |||||||||||||||
Investments | 49 | — | 19 | 30 | |||||||||||||||
Total assets | $ 51 | $— | $ 21 | $30 | |||||||||||||||
Liabilities | |||||||||||||||||||
Short-term debt | $ 27 | $— | $ 27 | $— | |||||||||||||||
Current maturities of long-term debt and lease obligations | 324 | — | 324 | — | |||||||||||||||
Long-term debt and lease obligations | 6,201 | — | 6,201 | — | |||||||||||||||
Long-term litigation liabilities | 31 | — | 31 | — | |||||||||||||||
Total liabilities | $ 6,583 | $— | $ 6,583 | $— | |||||||||||||||
The estimated fair values of long-term insurance receivables and long-term litigation liabilities were computed by discounting the expected cash flows based on currently available information, which in many cases does not include final orders or settlement agreements. The discount factors used in the calculations reflect the non-performance risk of the insurance providers and the company, respectively. | |||||||||||||||||||
Investments in 2013 and 2012 included certain cost method investments and held-to-maturity debt securities. | |||||||||||||||||||
The fair value of held-to-maturity debt securities is calculated using a discounted cash flow model that incorporates observable inputs, including interest rate yields, which represents a Level 2 basis of fair value measurement. | |||||||||||||||||||
In determining the fair value of cost method investments, the company takes into consideration recent transactions, as well as the financial information of the investee, which represents a Level 3 basis of fair value measurement. | |||||||||||||||||||
The estimated fair values of current and long-term debt were computed by multiplying price by the notional amount of the respective debt instrument. Price is calculated using the stated terms of the respective debt instrument and yield curves commensurate with the company’s credit risk. |
Shareholders_Equity
Shareholders' Equity | 9 Months Ended | ||||||||
Sep. 30, 2013 | |||||||||
Shareholders' Equity | 8. SHAREHOLDERS’ EQUITY | ||||||||
Stock-based compensation | |||||||||
Stock compensation expense totaled $39 million and $34 million for the three months ended September 30, 2013 and 2012, respectively, and $111 million and $97 million for the nine months ended September 30, 2013 and 2012, respectively. Over 70% of stock compensation expense is classified in marketing and administrative expenses with the remainder classified in cost of sales and R&D expenses. | |||||||||
In March 2013, the company awarded its annual stock compensation grants, which consisted of 6.2 million stock options, 852,000 RSUs and 376,000 PSUs. Stock compensation grants made in the second and third quarters of 2013 were not material. | |||||||||
Stock Options | |||||||||
The fair value of stock options is determined using the Black-Scholes model. The company’s expected volatility assumption is based on a weighted-average of the historical volatility of Baxter’s stock and the implied volatility from traded options on Baxter’s stock, with historical volatility more heavily weighted. | |||||||||
The weighted-average assumptions used in estimating the fair value of stock options granted during the period, along with the weighted-average grant-date fair values, were as follows. | |||||||||
Nine months ended | |||||||||
September 30, | |||||||||
2013 | 2012 | ||||||||
Expected volatility | 25% | 25% | |||||||
Expected life (in years) | 5.5 | 5.5 | |||||||
Risk-free interest rate | 0.90% | 1.00% | |||||||
Dividend yield | 2.60% | 2.30% | |||||||
Fair value per stock option | $12 | $10 | |||||||
The total intrinsic value of stock options exercised was $60 million and $34 million during the third quarters of 2013 and 2012, respectively, and $167 million and $67 million during the nine months ended September 30, 2013 and 2012, respectively. | |||||||||
As of September 30, 2013, the unrecognized compensation cost related to all unvested stock options of $74 million is expected to be recognized as expense over a weighted-average period of 1.6 years. | |||||||||
Restricted Stock Units | |||||||||
The fair value of RSUs is determined based on the quoted price of the company’s common stock on the date of the grant. As of September 30, 2013, the unrecognized compensation cost related to all unvested RSUs of $82 million is expected to be recognized as expense over a weighted-average period of 1.9 years. | |||||||||
Performance Share Units | |||||||||
As part of an overall periodic evaluation of the company’s stock compensation programs, the company changed the vesting condition for 50% of the PSUs granted to senior management beginning with its 2013 annual equity awards. The vesting condition for the new PSUs is based on return on invested capital, with annual performance targets set at the beginning of the year for each tranche of the award during the three-year service period. The remaining 50% of the PSUs continued to include conditions for vesting based on Baxter stock performance relative to the company’s peer group, similar to previous years. | |||||||||
Compensation cost for the new PSUs is measured based on the fair value of the awards on the date that the specific vesting terms for each tranche of the award are established. The fair value of the awards is determined based on the quoted price of the company’s stock on the grant date for each tranche of the award. The compensation cost for these PSUs is adjusted at each reporting date to reflect the estimated probability of achieving the vesting condition. The probability of achieving the vesting condition has not materially changed during the second and the third quarter of 2013. | |||||||||
The fair value of the remaining PSUs continues to be determined using a Monte Carlo model. The assumptions used in estimating the fair value of these PSUs granted during the period, along with the grant-date fair values, were as follows. | |||||||||
Nine months ended | |||||||||
September 30, | |||||||||
2013 | 2012 | ||||||||
Baxter volatility | 21% | 24% | |||||||
Peer group volatility | 13% – 38% | 14% – 50% | |||||||
Correlation of returns | 0.37 – 0.62 | 0.26 – 0.54 | |||||||
Risk-free interest rate | 0.30% | 0.40% | |||||||
Fair value per PSU | $67 | $72 | |||||||
As of September 30, 2013, the unrecognized compensation cost related to all granted unvested PSUs of $20 million is expected to be recognized as expense over a weighted-average period of 1.3 years. | |||||||||
Dividends | |||||||||
Cash dividend payments totaled $757 million and $558 million in the first nine months 2013 and 2012, respectively. The increase in cash dividend payments was primarily due to an increase in the quarterly dividend rate of approximately 9% to $0.49 per share, as announced in May 2013, and the July 2012 quarterly dividend rate increase of approximately 34% to $0.45 per share, partially offset by the impact of fewer common shares outstanding as a result of the company’s stock repurchase program. In July 2013, the board of directors declared a quarterly dividend of $0.49 per share, consistent with the May 2013 increase, which was paid on October 1, 2013 to shareholders of record as of September 6, 2013. | |||||||||
Stock repurchases | |||||||||
As authorized by the board of directors, the company repurchases its stock depending upon the company’s cash flows, net debt level and market conditions. During the three- and nine-month periods ended September 30, 2013, the company repurchased 2.0 million shares and 12.4 million shares for $145 million and $863 million, respectively, under the board of directors’ July 2012 $2.0 billion share repurchase authorization. As of September 30, 2013, $1.1 billion remained available under the July 2012 authorization. |
Retirement_and_Other_Benefit_P
Retirement and Other Benefit Programs | 9 Months Ended | ||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||
Retirement and Other Benefit Programs | 9. RETIREMENT AND OTHER BENEFIT PROGRAMS | ||||||||||||||||
The following is a summary of net periodic benefit cost relating to the company’s pension and other postemployment benefit (OPEB) plans. | |||||||||||||||||
Three months ended | Nine months ended | ||||||||||||||||
September 30, | September 30, | ||||||||||||||||
(in millions) | 2013 | 2012 | 2013 | 2012 | |||||||||||||
Pension benefits | |||||||||||||||||
Service cost | $34 | $28 | $101 | $ 83 | |||||||||||||
Interest cost | 52 | 58 | 154 | 176 | |||||||||||||
Expected return on plan assets | (63 | ) | (72 | ) | (190 | ) | (216 | ) | |||||||||
Amortization of net losses and other deferred amounts | 61 | 52 | 184 | 156 | |||||||||||||
Net periodic pension benefit cost | $84 | $66 | $249 | $199 | |||||||||||||
OPEB | |||||||||||||||||
Service cost | $ 2 | $ 2 | $ 7 | $ 5 | |||||||||||||
Interest cost | 6 | 8 | 19 | 22 | |||||||||||||
Amortization of net loss and prior service credit | 3 | 1 | 7 | 5 | |||||||||||||
Net periodic OPEB cost | $11 | $11 | $ 33 | $ 32 | |||||||||||||
Income_Taxes
Income Taxes | 9 Months Ended |
Sep. 30, 2013 | |
Income Taxes | 10. INCOME TAXES |
Effective tax rate | |
The company’s effective income tax rate was 20.2% and 23.9% in the three-month periods ended September 30, 2013 and 2012, respectively, and 20.4% and 20.9% in the nine-month periods ended September 30, 2013 and 2012, respectively. The company’s effective income tax rate differs from the U.S. federal statutory rate each year due to certain operations that are subject to tax incentives, state and local taxes, and foreign taxes that are different than the U.S. federal statutory rate. In addition, the effective tax rate can be impacted each period by discrete factors and events. | |
The effective tax rate during the third quarter and first nine months of 2013 decreased primarily as a result of deductions and associated tax benefits at rates higher than the overall company’s effective tax rate. Specifically, the company recorded tax and legal reserves of $104 million, net of related benefits from noncontrolling interests, in the third quarter associated with VAT matters in Turkey and existing class action and other related litigation that had a favorable impact on the overall company’s effective tax rate. For the first nine months of 2013, the company also recorded a currency-related charge of $52 million primarily related to derivative instruments to hedge the anticipated foreign currency cash outflows for the acquisition of Gambro that had a favorable impact on the overall company’s effective tax rate. | |
The company’s effective tax rate in the first nine months of 2012 was favorably impacted by reductions of contingent payment liabilities for milestones associated with the prior acquisitions of Prism Pharmaceuticals, Inc. (Prism) and ApaTech Limited, for which there was no tax charge, and a cost of sales reduction of $37 million for an adjustment to the COLLEAGUE infusion pump reserves as the company substantially completed the recall in the United States, for which there was no tax charge. | |
Unrecognized tax benefits | |
The company reduced its gross unrecognized tax benefits by approximately $153 million during the period ended September 30, 2013, related primarily to the effective settlement of the bilateral Advance Pricing Agreements between the US government and the government of Switzerland related to intellectual property, product and service transfer pricing arrangements, which was partially offset by other tax items associated with the company’s joint venture in Turkey. |
Legal_Proceedings
Legal Proceedings | 9 Months Ended |
Sep. 30, 2013 | |
Legal Proceedings | 11. LEGAL PROCEEDINGS |
Baxter is involved in product liability, patent, commercial, and other legal matters that arise in the normal course of the company’s business. The company records a liability when a loss is considered probable and the amount can be reasonably estimated. If the reasonable estimate of a probable loss is a range, and no amount within the range is a better estimate, the minimum amount in the range is accrued. If a loss is not probable or a probable loss cannot be reasonably estimated, no liability is recorded. As of September 30, 2013, the company’s total recorded reserves with respect to legal matters were $160 million and the total related receivables were $9 million. | |
Baxter has established reserves for certain of the matters discussed below. The company is not able to estimate the amount or range of any loss for certain contingencies for which there is no reserve or additional loss for matters already reserved. While the liability of the company in connection with the claims cannot be estimated with any certainty and although the resolution in any reporting period of one or more of these matters could have a significant impact on the company’s results of operations and cash flows for that period, the outcome of these legal proceedings is not expected to have a material adverse effect on the company’s consolidated financial position. While the company believes that it has valid defenses in these matters, litigation is inherently uncertain, excessive verdicts do occur, and the company may incur material judgments or enter into material settlements of claims. | |
In addition to the matters described below, the company remains subject to other potential administrative and legal actions. With respect to governmental and regulatory matters, these actions may lead to product recalls, injunctions, and other restrictions on the company’s operations and monetary sanctions, including significant civil or criminal penalties. With respect to intellectual property, the company may be exposed to significant litigation concerning the scope of the company’s and others’ rights. Such litigation could result in a loss of patent protection or the ability to market products, which could lead to a significant loss of sales, or otherwise materially affect future results of operations. | |
Patent litigation | |
As further described in Note 13 to the company’s consolidated financial statements in the 2012 Annual Report, Baxter filed a patent infringement action against Fresenius Medical Care Holdings covering Fresenius’ 2008K hemodialysis instrument. Fresenius appealed to the Federal Circuit whether Baxter may collect an award of $9 million in royalties and past damages and interest of $20 million in light of a United States Patent and Trademark Office determination with respect to patent invalidity. On July 2, 2013, the Federal Circuit ruled in favor of Fresenius and ordered that Baxter’s claims be dismissed. On August 1, 2013, Baxter filed a petition for rehearing en banc. | |
Product liability litigation | |
In connection with the recall of heparin products in the United States, approximately 130 lawsuits remain pending alleging that plaintiffs suffered various reactions to a heparin contaminant, in some cases resulting in fatalities. The vast majority of these cases are subject to settlement agreements but remain pending while settlement documentation is being completed. | |
General litigation | |
Baxter is a defendant in a number of suits alleging that certain of the company’s current and former executive officers and its board of directors failed to adequately oversee the operations of the company and issued materially false and misleading statements regarding the company’s plasma-based therapies business, the company’s remediation of its COLLEAGUE infusion pumps, its heparin product, and other quality issues. Plaintiffs allege these actions damaged the company and its shareholders by resulting in a decline in stock price in the second quarter of 2010, payment of excess compensation to the board of directors and certain of the company’s current and former executive officers, and other damage to the company. In August 2013, the U.S. Court of Appeals for the Seventh Circuit reinstated a consolidated derivative suit filed in the U.S.D.C. for the Northern District of Illinois that had earlier been dismissed by the district court in September 2012. Baxter is petitioning the U.S. Supreme Court to consider an appeal of that decision. Two derivative actions have been filed in state court: one pending in the Circuit Court of Lake County, Illinois has been stayed pending the outcome of the federal action and another, in Delaware Chancery Court, that Baxter has moved to dismiss. In addition, a consolidated alleged class action is pending in the U.S.D.C. for the Northern District of Illinois against the company and certain of its current executive officers seeking to recover the lost value of investors’ stock. In April 2013, the company filed its opposition to the plaintiff’s motion to certify a class action. | |
The company is a defendant, along with others, in a number of lawsuits consolidated for pretrial proceedings in the U.S.D.C. for the Northern District of Illinois alleging that Baxter and certain of its competitors conspired to restrict output and artificially increase the price of plasma-derived therapies since 2003. Some of the complaints attempt to state a claim for class action relief and some cases demand treble damages. In February 2011, the court denied the company’s motion to dismiss certain of the claims and the parties are proceeding with discovery. In January 2012, the court granted the company’s motion to dismiss certain federal claims brought by indirect purchasers and returned the remaining indirect purchaser claims to the court of original jurisdiction (U.S.D.C. for the Northern District of California) in August 2012. The indirect purchaser complaint was amended to remove class action allegations in May 2013. The direct purchaser plaintiffs asked the court to certify a class action in September 2013. In October 2013, a co-defendant announced a $64 million dollar settlement of claims against itself and an industry association, the other remaining defendant in the case. | |
Other | |
The company has received an inquiry from the U.S. Department of Justice and the SEC requesting that the company provide information about its business activities in a number of countries. The company is cooperating with the agencies and understands that this inquiry is part of a broader review of industry practices for compliance with the U.S. Foreign Corrupt Practices Act. | |
In the fourth quarter of 2012, the company received two investigative demands from the United States Attorney for the Western District of North Carolina for information regarding its quality and manufacturing practices and procedures at its North Cove facility. The company is fully cooperating with this investigation. |
Segment_Information
Segment Information | 9 Months Ended | ||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||
Segment Information | 12. SEGMENT INFORMATION | ||||||||||||||||
Baxter’s two segments, BioScience and Medical Products, are strategic businesses that are managed separately because each business develops, manufactures and markets distinct products and services. The segments and a description of their products and services are as follows: | |||||||||||||||||
The BioScience business processes recombinant and plasma-based proteins to treat hemophilia and other bleeding disorders; plasma-based therapies to treat immune deficiencies, alpha-1 antitrypsin deficiency, burns and shock, and other chronic and acute blood-related conditions; biosurgery products; and select vaccines. | |||||||||||||||||
The Medical Products business manufactures intravenous (IV) solutions and administration sets, premixed and oncology drugs and drug-reconstitution systems, pre-filled vials and syringes for injectable drugs, infusion pumps, IV nutrition products and inhalation anesthetics. The business also provides products and services related to pharmacy compounding, drug formulation and packaging technologies. In addition, the Medical Products business provides products and services to treat end-stage renal disease, or irreversible kidney failure. The business manufactures solutions and other products for peritoneal dialysis, a home-based therapy, and also manufactures and distributes products for hemodialysis, which is generally conducted in a hospital or clinic. Effective September 2013, the Medical Products business includes the results of Gambro. | |||||||||||||||||
The company uses more than one measurement and multiple views of data to measure segment performance and to allocate resources to the segments. However, the dominant measurements are consistent with the company’s condensed consolidated financial statements and, accordingly, are reported on the same basis in this report. The company evaluates the performance of its segments and allocates resources to them primarily based on pre-tax income along with cash flows and overall economic returns. Intersegment sales are generally accounted for at amounts comparable to sales to unaffiliated customers, and are eliminated in consolidation. | |||||||||||||||||
Certain items are maintained at Corporate and are not allocated to a segment. They primarily include most of the company’s debt and cash and equivalents and related net interest expense, certain foreign exchange fluctuations (principally relating to intercompany receivables, payables and loans denominated in a foreign currency) and the majority of the foreign currency hedging activities, corporate headquarters costs, stock compensation expense, certain non-strategic investments and related income and expense, certain employee benefit plan costs, certain nonrecurring gains and losses, deferred income taxes, and certain litigation liabilities and related receivables. | |||||||||||||||||
Financial information for the company’s segments is as follows. | |||||||||||||||||
Three months ended | Nine months ended | ||||||||||||||||
September 30, | September 30, | ||||||||||||||||
(in millions) | 2013 | 2012 | 2013 | 2012 | |||||||||||||
Net sales | |||||||||||||||||
BioScience | $ | 1,620 | $ | 1,522 | $ | 4,788 | $ | 4,550 | |||||||||
Medical Products | 2,154 | 1,955 | 6,103 | 5,887 | |||||||||||||
Total net sales | $ | 3,774 | $ | 3,477 | $ | 10,891 | $ | 10,437 | |||||||||
Pre-tax income | |||||||||||||||||
BioScience | $ | 615 | $ | 537 | $ | 1,851 | $ | 1,605 | |||||||||
Medical Products | 343 | 388 | 1,038 | 1,214 | |||||||||||||
Total pre-tax income from segments | $ | 958 | $ | 925 | $ | 2,889 | $ | 2,819 | |||||||||
The following is a reconciliation of segment pre-tax income to income before income taxes per the condensed consolidated statements of income. | |||||||||||||||||
Three months ended | Nine months ended | ||||||||||||||||
September 30, | September 30, | ||||||||||||||||
(in millions) | 2013 | 2012 | 2013 | 2012 | |||||||||||||
Total pre-tax income from segments | $958 | $925 | $2,889 | $2,819 | |||||||||||||
Unallocated amounts | |||||||||||||||||
Stock compensation | (39 | ) | (34 | ) | (111 | ) | (97 | ) | |||||||||
Net interest expense | (45 | ) | (25 | ) | (87 | ) | (65 | ) | |||||||||
Certain foreign currency fluctuations and hedging activities | 21 | 13 | 63 | 33 | |||||||||||||
Certain tax and legal reserves | (104 | ) | — | (104 | ) | — | |||||||||||
Other Corporate items | (109 | ) | (113 | ) | (532 | ) | (375 | ) | |||||||||
Income before income taxes | $682 | $766 | $2,118 | $2,315 | |||||||||||||
Supplemental_Financial_Informa1
Supplemental Financial Information (Tables) | 9 Months Ended | ||||||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||||||
Net Interest Expense | Net interest expense | ||||||||||||||||||||
Three months ended | Nine months ended | ||||||||||||||||||||
September 30, | September 30, | ||||||||||||||||||||
(in millions) | 2013 | 2012 | 2013 | 2012 | |||||||||||||||||
Interest expense, net of capitalized interest | $51 | $31 | $106 | $85 | |||||||||||||||||
Interest income | (6 | ) | (6 | ) | (19 | ) | (20 | ) | |||||||||||||
Net interest expense | $45 | $25 | $ 87 | $65 | |||||||||||||||||
Inventories | Inventories | ||||||||||||||||||||
(in millions) | September 30, | December 31, | |||||||||||||||||||
2013 | 2012 | ||||||||||||||||||||
Raw materials | $ 967 | $ 765 | |||||||||||||||||||
Work in process | 1,009 | 898 | |||||||||||||||||||
Finished goods | 1,605 | 1,140 | |||||||||||||||||||
Inventories | $3,581 | $2,803 | |||||||||||||||||||
Property, Plant and Equipment, Net | Property, plant and equipment, net | ||||||||||||||||||||
(in millions) | September 30, | December 31, | |||||||||||||||||||
2013 | 2012 | ||||||||||||||||||||
Property, plant and equipment, at cost | $13,324 | $11,869 | |||||||||||||||||||
Accumulated depreciation and amortization | (5,806 | ) | (5,771 | ) | |||||||||||||||||
Property, plant and equipment (PP&E), net | $ 7,518 | $ 6,098 | |||||||||||||||||||
Summary of Changes in AOCI by Component | The following is a net-of-tax summary of the changes in AOCI by component for the nine months ended September 30, 2013. | ||||||||||||||||||||
(in millions) | Currency | Pension and | Hedging | Other | Total | ||||||||||||||||
translation | other employee | activities | |||||||||||||||||||
adjustments | benefits | ||||||||||||||||||||
Gains (losses) | |||||||||||||||||||||
Balance as of December 31, 2012 | ($1,227 | ) | ($1,619 | ) | ($ 5 | ) | $41 | ($2,810 | ) | ||||||||||||
Other comprehensive income before reclassifications | 58 | (5 | ) | 44 | 12 | 109 | |||||||||||||||
Amounts reclassified from AOCI (a) | — | 124 | (23 | ) | — | 101 | |||||||||||||||
Net other comprehensive income | 58 | 119 | 21 | 12 | 210 | ||||||||||||||||
Balance as of September 30, 2013 | ($1,169 | ) | ($1,500 | ) | $16 | $53 | ($2,600 | ) | |||||||||||||
(a) | See table below for details about the reclassifications for the nine months ended September 30, 2013. | ||||||||||||||||||||
Summary of Reclassification from AOCI to Net Income | The following is a summary of the amounts reclassified from AOCI to net income during the three and nine months ended September 30, 2013. | ||||||||||||||||||||
Amounts reclassified from AOCI (a) | |||||||||||||||||||||
(in millions) | Three months ended | Nine months ended | Location of impact in income statement | ||||||||||||||||||
September 30, 2013 | September 30, 2013 | ||||||||||||||||||||
Amortization of pension and other employee benefits items | |||||||||||||||||||||
Actuarial losses and other | ($64 | ) (b) | ($191 | ) (b) | |||||||||||||||||
(64 | ) | (191 | ) | Total before tax | |||||||||||||||||
23 | 67 | Tax benefit | |||||||||||||||||||
($41 | ) | ($124 | ) | Net of tax | |||||||||||||||||
Gains (losses) on hedging activities | |||||||||||||||||||||
Interest rate contracts | $ (1 | ) | $ 10 | Net interest expense | |||||||||||||||||
Foreign exchange contracts | — | (1 | ) | Net sales | |||||||||||||||||
Foreign exchange contracts | 9 | 27 | Cost of sales | ||||||||||||||||||
8 | 36 | Total before tax | |||||||||||||||||||
(3 | ) | (13 | ) | Tax expense | |||||||||||||||||
$ 5 | $ 23 | Net of tax | |||||||||||||||||||
Total reclassification for the period | ($36 | ) | ($101 | ) | Total net of tax | ||||||||||||||||
(a) | Amounts in parentheses indicate reductions to net income. | ||||||||||||||||||||
(b) | These AOCI components are included in the computation of net periodic benefit cost disclosed in Note 9. |
Earnings_Per_Share_Tables
Earnings Per Share (Tables) | 9 Months Ended | ||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||
Reconciliation of Basic Shares to Diluted Shares | The following is a reconciliation of basic shares to diluted shares. | ||||||||||||||||
Three months ended | Nine months ended | ||||||||||||||||
September 30, | September 30, | ||||||||||||||||
(in millions) | 2013 | 2012 | 2013 | 2012 | |||||||||||||
Basic shares | 543 | 548 | 543 | 552 | |||||||||||||
Effect of dilutive securities | 6 | 4 | 7 | 4 | |||||||||||||
Diluted shares | 549 | 552 | 550 | 556 | |||||||||||||
Acquisitions_and_Collaboration1
Acquisitions and Collaborations (Tables) | 9 Months Ended | ||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||
Summary of Fair Value of Consideration Transferred and Preliminary Amounts Recognized for Assets Acquired and Liabilities Assumed | The following table summarizes the fair value of the consideration transferred and the preliminary amounts recognized for assets acquired and liabilities assumed as of the acquisition date. | ||||||||||||||||
(in millions) | |||||||||||||||||
Consideration transferred | |||||||||||||||||
Cash | $ | 3,704 | |||||||||||||||
Fair value of consideration transferred | $ | 3,704 | |||||||||||||||
Assets acquired and liabilities assumed | |||||||||||||||||
Cash | $ | 88 | |||||||||||||||
Accounts receivable | 483 | ||||||||||||||||
Inventories | 367 | ||||||||||||||||
Prepaid expenses and other | 54 | ||||||||||||||||
Property, plant, and equipment | 854 | ||||||||||||||||
Other intangible assets | 1,650 | ||||||||||||||||
Other assets | 11 | ||||||||||||||||
Current-maturities of long-term debt and lease obligations | (2 | ) | |||||||||||||||
Accounts payable and accrued liabilities | (334 | ) | |||||||||||||||
Long-term debt and lease obligations | (261 | ) | |||||||||||||||
Other long-term liabilities (including pension obligations of $214) | (458 | ) | |||||||||||||||
Total identifiable net assets | 2,452 | ||||||||||||||||
Goodwill | 1,252 | ||||||||||||||||
Total assets acquired and liabilities assumed | $ | 3,704 | |||||||||||||||
Subsidiary Information in Consolidated Statement of Income from Acquisition | The following table presents information for Gambro that is included in Baxter’s consolidated statement of income from the acquisition date through September 30, 2013. | ||||||||||||||||
(in millions) | Gambro’s operations | ||||||||||||||||
included in Baxter’s | |||||||||||||||||
results | |||||||||||||||||
Net sales | $100 | ||||||||||||||||
Net loss | $ (17 | ) | |||||||||||||||
Supplemental Pro Forma Information | The following table presents supplemental pro forma information as if the acquisition of Gambro had occurred on January 1, 2012 for the three and nine months ended September 30, 2013 and 2012. | ||||||||||||||||
Unaudited Pro Forma Consolidated Results | |||||||||||||||||
Three months ended | Nine months ended | ||||||||||||||||
September 30, | September 30, | ||||||||||||||||
(in millions, except per share information) | 2013 | 2012 | 2013 | 2012 | |||||||||||||
Net sales | $ | 4,038 | $ | 3,855 | $ | 11,933 | $ | 11,594 | |||||||||
Net income | 547 | 568 | 1,713 | 1,613 | |||||||||||||
Basic earnings per share | $ | 1.01 | $ | 1.04 | $ | 3.16 | $ | 2.92 | |||||||||
Diluted earnings per share | $ | 1 | $ | 1.03 | $ | 3.11 | $ | 2.9 | |||||||||
Summary of Fair Value of Consideration Transferred and Recognized Amounts of Assets Acquired and Liabilities Assumed | The following table summarizes the updated estimated fair value of consideration transferred and the recognized amounts of the assets acquired and liabilities assumed as of the acquisition date for the Inspiration / Ipsen OBI-1 business. | ||||||||||||||||
(in millions) | |||||||||||||||||
Consideration transferred | |||||||||||||||||
Cash | $ 51 | ||||||||||||||||
Contingent payments | 269 | ||||||||||||||||
Fair value of consideration transferred | $320 | ||||||||||||||||
Assets acquired and liabilities assumed | |||||||||||||||||
Other intangible assets | $288 | ||||||||||||||||
Other assets, net | 25 | ||||||||||||||||
Goodwill | 7 | ||||||||||||||||
Total assets acquired and liabilities assumed | $320 | ||||||||||||||||
Goodwill_and_Other_Intangible_1
Goodwill and Other Intangible Assets, Net (Tables) | 9 Months Ended | ||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||
Goodwill | The following is a reconciliation of goodwill by business segment. | ||||||||||||||||
(in millions) | BioScience | Medical | Total | ||||||||||||||
Products | |||||||||||||||||
Balance as of December 31, 2012 | $975 | $1,527 | $2,502 | ||||||||||||||
Additions | 7 | 1,254 | 1,261 | ||||||||||||||
Currency translation and other adjustments | 4 | 13 | 17 | ||||||||||||||
Balance as of September 30, 2013 | $986 | $2,794 | $3,780 | ||||||||||||||
Other Intangible Assets, Net | The following is a summary of the company’s other intangible assets. | ||||||||||||||||
(in millions) | Developed technology, | Other amortized | Indefinite-lived | Total | |||||||||||||
including patents | intangible assets | intangible assets | |||||||||||||||
September 30, 2013 | |||||||||||||||||
Gross other intangible assets | $2,850 | $281 | $309 | $3,440 | |||||||||||||
Accumulated amortization | (630 | ) | (128 | ) | — | (758 | ) | ||||||||||
Other intangible assets, net | $2,220 | $153 | $309 | $2,682 | |||||||||||||
December 31, 2012 | |||||||||||||||||
Gross other intangible assets | $1,192 | $280 | $ 22 | $1,494 | |||||||||||||
Accumulated amortization | (578 | ) | (102 | ) | — | (680 | ) | ||||||||||
Other intangible assets, net | $ 614 | $178 | $ 22 | $ 814 | |||||||||||||
Infusion_Pump_and_Business_Opt1
Infusion Pump and Business Optimization Charges (Tables) | 9 Months Ended | ||||
Sep. 30, 2013 | |||||
Infusion Pump Charges | The following table summarizes cash activity in the company’s COLLEAGUE infusion pump reserves through September 30, 2013. | ||||
(in millions) | |||||
Reserves as of December 31, 2012 | $127 | ||||
Utilization | (20 | ) | |||
Reserves as of September 30, 2013 | $107 | ||||
Business Optimization Charge | The following table summarizes cash activity in the reserves related to the company’s business optimization initiatives. | ||||
(in millions) | |||||
Reserves as of December 31, 2012 | $220 | ||||
Charges | 32 | ||||
Reserve adjustments | (20 | ) | |||
Utilization | (61 | ) | |||
CTA | 3 | ||||
Reserves as of September 30, 2013 | $174 | ||||
Debt_Financial_Instruments_and1
Debt, Financial Instruments and Fair Value Measurements (Tables) | 9 Months Ended | ||||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||||
Summary of Activity Relating to Securitization Arrangement | The following is a summary of the activity relating to the company’s securitization arrangement in Japan. | ||||||||||||||||||
Three months ended | Nine months ended | ||||||||||||||||||
September 30, | September 30, | ||||||||||||||||||
(in millions) | 2013 | 2012 | 2013 | 2012 | |||||||||||||||
Sold receivables at beginning of period | $ 129 | $ 154 | $ 157 | $ 160 | |||||||||||||||
Proceeds from sales of receivables | 125 | 161 | 380 | 461 | |||||||||||||||
Cash collections (remitted to the owners of the receivables) | (130 | ) | (161 | ) | (394 | ) | (465 | ) | |||||||||||
Effect of currency exchange rate changes | (6 | ) | — | (25 | ) | (2 | ) | ||||||||||||
Sold receivables at end of period | $ 118 | $ 154 | $ 118 | $ 154 | |||||||||||||||
Summary of Gains and Losses on Derivative Instruments | The following table summarizes the income statement locations and gains and losses on the company’s derivative instruments for the three months ended September 30, 2013 and 2012. | ||||||||||||||||||
Gain (loss) recognized in OCI | Location of gain (loss) in | Gain (loss) reclassified from AOCI | |||||||||||||||||
income statement | into income | ||||||||||||||||||
(in millions) | 2013 | 2012 | 2013 | 2012 | |||||||||||||||
Cash flow hedges | |||||||||||||||||||
Interest rate contracts | $— | $ (3 | ) | Net interest expense | $ (1 | ) | $— | ||||||||||||
Foreign exchange contracts | (1 | ) | (1 | ) | Net sales | — | (1 | ) | |||||||||||
Foreign exchange contracts | 7 | (20 | ) | Cost of sales | 9 | 5 | |||||||||||||
Total | $ 6 | $(24 | ) | $ 8 | $ 4 | ||||||||||||||
Gain (loss) recognized in income | |||||||||||||||||||
(in millions) | Location of gain (loss) in | 2013 | 2012 | ||||||||||||||||
income statement | |||||||||||||||||||
Fair value hedges | |||||||||||||||||||
Interest rate contracts | Net interest expense | $ 1 | $ 5 | ||||||||||||||||
Undesignated derivative instruments | |||||||||||||||||||
Foreign exchange contracts | Other (income) expense, net | $51 | $ (2 | ) | |||||||||||||||
The following table summarizes the income statement locations and gains and losses on the company’s derivative instruments for the nine months ended September 30, 2013 and 2012. | |||||||||||||||||||
Gain (loss) recognized in OCI | Location of gain (loss) in | Gain (loss) reclassified from | |||||||||||||||||
income statement | AOCI into income | ||||||||||||||||||
(in millions) | 2013 | 2012 | 2013 | 2012 | |||||||||||||||
Cash flow hedges | |||||||||||||||||||
Interest rate contracts | $26 | $(12 | ) | Net interest expense | $10 | $ — | |||||||||||||
Foreign exchange contracts | (1 | ) | (2 | ) | Net sales | (1 | ) | (2 | ) | ||||||||||
Foreign exchange contracts | 43 | (11 | ) | Cost of sales | 27 | 4 | |||||||||||||
Total | $68 | $(25 | ) | $36 | $ 2 | ||||||||||||||
Gain (loss) recognized in income | |||||||||||||||||||
(in millions) | Location of gain (loss) in | 2013 | 2012 | ||||||||||||||||
income statement | |||||||||||||||||||
Fair value hedges | |||||||||||||||||||
Interest rate contracts | Net interest expense | $(25 | ) | $ 15 | |||||||||||||||
Undesignated derivative instruments | |||||||||||||||||||
Foreign exchange contracts | Other (income) expense, net | $ 6 | $(13 | ) | |||||||||||||||
Classification and Fair Value Amounts of Derivative Instruments | The following table summarizes the classification and fair values of derivative instruments reported in the condensed consolidated balance sheet as of September 30, 2013. | ||||||||||||||||||
Derivatives in asset positions | Derivatives in liability positions | ||||||||||||||||||
(in millions) | Balance sheet location | Fair value | Balance sheet location | Fair value | |||||||||||||||
Derivative instruments designated as hedges | |||||||||||||||||||
Interest rate contracts | Other long-term assets | $ 42 | Other long-term liabilities | $— | |||||||||||||||
Foreign exchange contracts | Prepaid expenses and other | 46 | Accounts payable | 6 | |||||||||||||||
and accrued liabilities | |||||||||||||||||||
Foreign exchange contracts | Other long-term assets | 8 | Other long-term liabilities | 1 | |||||||||||||||
Total derivative instruments designated as hedges | $ 96 | $ 7 | |||||||||||||||||
Undesignated derivative instruments | |||||||||||||||||||
Foreign exchange contracts | Prepaid expenses and other | $ — | Accounts payable | $ 1 | |||||||||||||||
and accrued liabilities | |||||||||||||||||||
Total derivative instruments | $ 96 | $ 8 | |||||||||||||||||
The following table summarizes the classification and fair values of derivative instruments reported in the condensed consolidated balance sheet as of December 31, 2012. | |||||||||||||||||||
Derivatives in asset positions | Derivatives in liability positions | ||||||||||||||||||
(in millions) | Balance sheet location | Fair value | Balance sheet location | Fair value | |||||||||||||||
Derivative instruments designated as hedges | |||||||||||||||||||
Interest rate contracts | Other long-term assets | $ 67 | Accounts payable | $21 | |||||||||||||||
and accrued liabilities | |||||||||||||||||||
Foreign exchange contracts | Prepaid expenses and other | 28 | Accounts payable | 5 | |||||||||||||||
and accrued liabilities | |||||||||||||||||||
Total derivative instruments designated as hedges | $ 95 | $26 | |||||||||||||||||
Undesignated derivative instruments | |||||||||||||||||||
Foreign exchange contracts | Prepaid expenses and other | $ 47 | Accounts payable | $11 | |||||||||||||||
and accrued liabilities | |||||||||||||||||||
Total derivative instruments | $142 | $37 | |||||||||||||||||
Derivative Positions Presented on Net Basis | The following table provides information on the company’s derivative positions as if they were presented on a net basis, allowing for the right of offset by counterparty. | ||||||||||||||||||
September 30, 2013 | December 31, 2012 | ||||||||||||||||||
(in millions) | Asset | Liability | Asset | Liability | |||||||||||||||
Gross amounts recognized in the consolidated balance sheet | $96 | $ 8 | $142 | $37 | |||||||||||||||
Gross amount subject to offset in master netting arrangements not offset in the consolidated balance sheet | (8 | ) | (8 | ) | (37 | ) | (37 | ) | |||||||||||
Total | $88 | $— | $105 | $— | |||||||||||||||
Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis | The following tables summarize the bases used to measure financial assets and liabilities that are carried at fair value on a recurring basis in the condensed consolidated balance sheets. | ||||||||||||||||||
Basis of fair value measurement | |||||||||||||||||||
(in millions) | Balance as of | Quoted prices in | Significant other | Significant | |||||||||||||||
September 30, 2013 | active markets for | observable inputs | unobservable | ||||||||||||||||
identical assets | (Level 2) | inputs | |||||||||||||||||
(Level 1) | (Level 3) | ||||||||||||||||||
Assets | |||||||||||||||||||
Foreign currency hedges | $ 54 | $ — | $ 54 | $ — | |||||||||||||||
Interest rate hedges | 42 | — | 42 | — | |||||||||||||||
Available-for-sale securities | |||||||||||||||||||
Equity securities | 110 | 110 | — | — | |||||||||||||||
Foreign government debt securities | 17 | — | 17 | — | |||||||||||||||
Total assets | $223 | $110 | $113 | $ — | |||||||||||||||
Liabilities | |||||||||||||||||||
Foreign currency hedges | $ 8 | $ — | $ 8 | $ — | |||||||||||||||
Contingent payments related to acquisitions | 344 | — | — | 344 | |||||||||||||||
Total liabilities | $352 | $ — | $ 8 | $344 | |||||||||||||||
Basis of fair value measurement | |||||||||||||||||||
(in millions) | Balance as of | Quoted prices in | Significant other | Significant | |||||||||||||||
December 31, 2012 | active markets for | observable inputs | unobservable | ||||||||||||||||
identical assets | (Level 2) | inputs | |||||||||||||||||
(Level 1) | (Level 3) | ||||||||||||||||||
Assets | |||||||||||||||||||
Foreign currency hedges | $ 75 | $— | $ 75 | $— | |||||||||||||||
Interest rate hedges | 67 | — | 67 | — | |||||||||||||||
Available-for-sale securities | |||||||||||||||||||
Equity securities | 15 | 15 | — | — | |||||||||||||||
Preferred stock | 51 | — | — | 51 | |||||||||||||||
Foreign government debt securities | 16 | — | 16 | — | |||||||||||||||
Total assets | $224 | $15 | $158 | $51 | |||||||||||||||
Liabilities | |||||||||||||||||||
Foreign currency hedges | $ 16 | $— | $ 16 | $— | |||||||||||||||
Interest rate hedges | 21 | — | 21 | — | |||||||||||||||
Contingent payments related to acquisitions | 86 | — | — | 86 | |||||||||||||||
Total liabilities | $123 | $— | $ 37 | $86 | |||||||||||||||
Reconciliation of Fair Value Measurements that use Significant Unobservable Inputs | The following table is a reconciliation of the fair value measurements that use significant unobservable inputs (Level 3), which consist of contingent payments related to acquisitions and preferred stock. | ||||||||||||||||||
(in millions) | Contingent | Preferred | |||||||||||||||||
payments | stock | ||||||||||||||||||
Fair value as of December 31, 2012 | $ 86 | $51 | |||||||||||||||||
Additions | 269 | — | |||||||||||||||||
Payments | (2 | ) | — | ||||||||||||||||
Gains recognized in earnings | (9 | ) | — | ||||||||||||||||
Conversion to a publicly traded equity security | — | (51 | ) | ||||||||||||||||
Fair value as of September 30, 2013 | $344 | $— | |||||||||||||||||
Book Values and Fair Values of Financial Instruments | For these financial instruments, the following table provides the values recognized in the condensed consolidated balance sheets and the approximate fair values as of September 30, 2013 and December 31, 2012. | ||||||||||||||||||
Book values | Approximate fair | ||||||||||||||||||
values | |||||||||||||||||||
(in millions) | 2013 | 2012 | 2013 | 2012 | |||||||||||||||
Assets | |||||||||||||||||||
Long-term insurance receivables | $ | 2 | $ | 2 | $ | 2 | $ | 2 | |||||||||||
Investments | 52 | 46 | 53 | 49 | |||||||||||||||
Liabilities | |||||||||||||||||||
Short-term debt | 42 | 27 | 42 | 27 | |||||||||||||||
Current maturities of long-term debt and lease obligations | 372 | 323 | 377 | 324 | |||||||||||||||
Long-term debt and lease obligations | 8,652 | 5,580 | 8,930 | 6,201 | |||||||||||||||
Long-term litigation liabilities | 53 | 32 | 52 | 31 | |||||||||||||||
Summarization of Bases Used to Measure Fair Value of Financial Instruments | The following tables summarize the bases used to measure the approximate fair value of the financial instruments as of September 30, 2013 and December 31, 2012. | ||||||||||||||||||
Basis of fair value measurement | |||||||||||||||||||
(in millions) | Fair value as of | Quoted prices in | Significant other | Significant | |||||||||||||||
September 30, 2013 | active markets for | observable inputs | unobservable | ||||||||||||||||
identical assets | (Level 2) | inputs | |||||||||||||||||
(Level 1) | (Level 3) | ||||||||||||||||||
Assets | |||||||||||||||||||
Long-term insurance receivables | $ 2 | $— | $ 2 | $— | |||||||||||||||
Investments | 53 | — | 18 | 35 | |||||||||||||||
Total assets | $ 55 | $— | $ 20 | $35 | |||||||||||||||
Liabilities | |||||||||||||||||||
Short-term debt | $ 42 | $— | $ 42 | $— | |||||||||||||||
Current maturities of long-term debt and lease obligations | 377 | — | 377 | — | |||||||||||||||
Long-term debt and lease obligations | 8,930 | — | 8,930 | — | |||||||||||||||
Long-term litigation liabilities | 52 | — | 52 | — | |||||||||||||||
Total liabilities | $ 9,401 | $— | $ 9,401 | $— | |||||||||||||||
Basis of fair value measurement | |||||||||||||||||||
(in millions) | Fair value as of | Quoted prices in | Significant other | Significant | |||||||||||||||
December 31, 2012 | active markets for | observable inputs | unobservable | ||||||||||||||||
identical assets | (Level 2) | inputs | |||||||||||||||||
(Level 1) | (Level 3) | ||||||||||||||||||
Assets | |||||||||||||||||||
Long-term insurance receivables | $ 2 | $— | $ 2 | $— | |||||||||||||||
Investments | 49 | — | 19 | 30 | |||||||||||||||
Total assets | $ 51 | $— | $ 21 | $30 | |||||||||||||||
Liabilities | |||||||||||||||||||
Short-term debt | $ 27 | $— | $ 27 | $— | |||||||||||||||
Current maturities of long-term debt and lease obligations | 324 | — | 324 | — | |||||||||||||||
Long-term debt and lease obligations | 6,201 | — | 6,201 | — | |||||||||||||||
Long-term litigation liabilities | 31 | — | 31 | — | |||||||||||||||
Total liabilities | $ 6,583 | $— | $ 6,583 | $— | |||||||||||||||
Shareholders_Equity_Tables
Shareholders' Equity (Tables) | 9 Months Ended | ||||||||
Sep. 30, 2013 | |||||||||
Stock Options Fair Value Assumptions | The weighted-average assumptions used in estimating the fair value of stock options granted during the period, along with the weighted-average grant-date fair values, were as follows. | ||||||||
Nine months ended | |||||||||
September 30, | |||||||||
2013 | 2012 | ||||||||
Expected volatility | 25% | 25% | |||||||
Expected life (in years) | 5.5 | 5.5 | |||||||
Risk-free interest rate | 0.90% | 1.00% | |||||||
Dividend yield | 2.60% | 2.30% | |||||||
Fair value per stock option | $12 | $10 | |||||||
Performance Stock Units Fair Value | The fair value of the remaining PSUs continues to be determined using a Monte Carlo model. The assumptions used in estimating the fair value of these PSUs granted during the period, along with the grant-date fair values, were as follows. | ||||||||
Nine months ended | |||||||||
September 30, | |||||||||
2013 | 2012 | ||||||||
Baxter volatility | 21% | 24% | |||||||
Peer group volatility | 13% – 38% | 14% – 50% | |||||||
Correlation of returns | 0.37 – 0.62 | 0.26 – 0.54 | |||||||
Risk-free interest rate | 0.30% | 0.40% | |||||||
Fair value per PSU | $67 | $72 |
Retirement_and_Other_Benefit_P1
Retirement and Other Benefit Programs (Tables) | 9 Months Ended | ||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||
Net Periodic Benefit Cost Relating to Pension and Other Postemployement Benefit | The following is a summary of net periodic benefit cost relating to the company’s pension and other postemployment benefit (OPEB) plans. | ||||||||||||||||
Three months ended | Nine months ended | ||||||||||||||||
September 30, | September 30, | ||||||||||||||||
(in millions) | 2013 | 2012 | 2013 | 2012 | |||||||||||||
Pension benefits | |||||||||||||||||
Service cost | $34 | $28 | $101 | $ 83 | |||||||||||||
Interest cost | 52 | 58 | 154 | 176 | |||||||||||||
Expected return on plan assets | (63 | ) | (72 | ) | (190 | ) | (216 | ) | |||||||||
Amortization of net losses and other deferred amounts | 61 | 52 | 184 | 156 | |||||||||||||
Net periodic pension benefit cost | $84 | $66 | $249 | $199 | |||||||||||||
OPEB | |||||||||||||||||
Service cost | $ 2 | $ 2 | $ 7 | $ 5 | |||||||||||||
Interest cost | 6 | 8 | 19 | 22 | |||||||||||||
Amortization of net loss and prior service credit | 3 | 1 | 7 | 5 | |||||||||||||
Net periodic OPEB cost | $11 | $11 | $ 33 | $ 32 | |||||||||||||
Segment_Information_Tables
Segment Information (Tables) | 9 Months Ended | ||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||
Segment Information | Financial information for the company’s segments is as follows. | ||||||||||||||||
Three months ended | Nine months ended | ||||||||||||||||
September 30, | September 30, | ||||||||||||||||
(in millions) | 2013 | 2012 | 2013 | 2012 | |||||||||||||
Net sales | |||||||||||||||||
BioScience | $ | 1,620 | $ | 1,522 | $ | 4,788 | $ | 4,550 | |||||||||
Medical Products | 2,154 | 1,955 | 6,103 | 5,887 | |||||||||||||
Total net sales | $ | 3,774 | $ | 3,477 | $ | 10,891 | $ | 10,437 | |||||||||
Pre-tax income | |||||||||||||||||
BioScience | $ | 615 | $ | 537 | $ | 1,851 | $ | 1,605 | |||||||||
Medical Products | 343 | 388 | 1,038 | 1,214 | |||||||||||||
Total pre-tax income from segments | $ | 958 | $ | 925 | $ | 2,889 | $ | 2,819 | |||||||||
Pre-Tax Income Reconciliation | The following is a reconciliation of segment pre-tax income to income before income taxes per the condensed consolidated statements of income. | ||||||||||||||||
Three months ended | Nine months ended | ||||||||||||||||
September 30, | September 30, | ||||||||||||||||
(in millions) | 2013 | 2012 | 2013 | 2012 | |||||||||||||
Total pre-tax income from segments | $958 | $925 | $2,889 | $2,819 | |||||||||||||
Unallocated amounts | |||||||||||||||||
Stock compensation | (39 | ) | (34 | ) | (111 | ) | (97 | ) | |||||||||
Net interest expense | (45 | ) | (25 | ) | (87 | ) | (65 | ) | |||||||||
Certain foreign currency fluctuations and hedging activities | 21 | 13 | 63 | 33 | |||||||||||||
Certain tax and legal reserves | (104 | ) | — | (104 | ) | — | |||||||||||
Other Corporate items | (109 | ) | (113 | ) | (532 | ) | (375 | ) | |||||||||
Income before income taxes | $682 | $766 | $2,118 | $2,315 | |||||||||||||
Basis_Of_Presentation_Addition
Basis Of Presentation - Additional Information (Detail) (Gambro, USD $) | Sep. 06, 2013 |
In Millions, unless otherwise specified | |
Gambro | |
Organization And Summary Of Significant Accounting Policies [Line Items] | |
Cash consideration for the acquisition | $3,704 |
Assumed debt | $221 |
Net_Interest_Expense_Detail
Net Interest Expense (Detail) (USD $) | 3 Months Ended | 9 Months Ended | ||
In Millions, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 |
Interest Income Expense Net | ||||
Interest expense, net of capitalized interest | $51 | $31 | $106 | $85 |
Interest income | -6 | -6 | -19 | -20 |
Net interest expense | $45 | $25 | $87 | $65 |
Inventories_Detail
Inventories (Detail) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
In Millions, unless otherwise specified | ||
Inventory | ||
Raw materials | $967 | $765 |
Work in process | 1,009 | 898 |
Finished goods | 1,605 | 1,140 |
Inventories | $3,581 | $2,803 |
Property_Plant_and_Equipment_N
Property, Plant and Equipment ,Net (Detail) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
In Millions, unless otherwise specified | ||
Property, Plant and Equipment, Net | ||
Property, plant and equipment, at cost | $13,324 | $11,869 |
Accumulated depreciation and amortization | -5,806 | -5,771 |
Property, plant and equipment (PP&E), net | $7,518 | $6,098 |
Summary_of_Changes_in_AOCI_by_
Summary of Changes in AOCI by Component (Detail) (USD $) | 3 Months Ended | 9 Months Ended | ||||
In Millions, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | ||
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | ||||||
Currency translation adjustment, Balance as of December 31, 2012 | ($1,227) | |||||
Currency translation adjustment, other comprehensive income before reclassifications | 58 | |||||
Currency translation adjustment, amounts reclassified from AOCI | [1] | |||||
Currency translation adjustment, net other comprehensive income | 112 | 180 | 58 | -41 | ||
Currency translation adjustment, Balance as of September 30, 2013 | -1,169 | -1,169 | ||||
Pension and other employee benefit Balance as of December 31, 2012 | -1,619 | |||||
Pension and other employee benefit, Other comprehensive income before reclassifications | -5 | |||||
Pension and other employee benefit, Amounts reclassified from AOCI | 124 | [1] | ||||
Pension and other employee benefit, Net other comprehensive income | 42 | 28 | 119 | 101 | ||
Pension and other employee benefit Balance as of Balance as of September 30, 2013 | -1,500 | -1,500 | ||||
Hedging activities, Balance as of December 31, 2012 | -5 | |||||
Hedging activities, Other comprehensive income before reclassifications | 44 | |||||
Hedging activities, Amounts reclassified from AOCI | -5 | [2] | -23 | [1],[2] | ||
Hedging activities, Net other comprehensive income | -2 | -18 | 21 | -17 | ||
Hedging activities, Balance as of September 30, 2013 | 16 | 16 | ||||
Other, Balance as of December 31, 2012 | 41 | |||||
Other, Other comprehensive income before reclassifications | 12 | |||||
Other, Amounts reclassified from AOCI | [1] | |||||
Other, Net other comprehensive income | 13 | -2 | 12 | -1 | ||
Other, Balance as of September 30, 2013 | 53 | 53 | ||||
Total, Balance as of December 31, 2012 | -2,810 | |||||
Total, Other comprehensive income before reclassifications | 109 | |||||
Total, Amounts reclassified from AOCI | 101 | [1] | ||||
Total, Net other comprehensive income | 165 | 188 | 210 | 42 | ||
Total, Balance as of September 30, 2013 | ($2,600) | ($2,600) | ||||
[1] | See table below for details about the reclassifications for the nine months ended September 30, 2013. | |||||
[2] | Amounts in parentheses indicate reductions to net income. |
Summary_of_Amounts_Reclassifie
Summary of Amounts Reclassified from AOCI to Net Income (Detail) (USD $) | 3 Months Ended | 9 Months Ended | ||
In Millions, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2013 | ||
Other Comprehensive Income (Loss) [Line Items] | ||||
Amortization of pension and other employee benefits items Actuarial losses and other reclassified from AOCI to net income, before tax | ($64) | [1] | ($191) | [1] |
Amortization of pension and other employee benefits items Actuarial losses and other reclassified from AOCI to net income, tax benefit | 23 | [1] | 67 | [1] |
Amortization of pension and other employee benefits items Actuarial losses and other reclassified from AOCI to net income, Net of tax | -41 | [1] | -124 | [1] |
Gain (Loss) on hedging activities reclassified from AOCI to net income, before tax | 8 | [1] | 36 | [1] |
Gain on hedging activities reclassified from AOCI to net income, tax expense | -3 | [1] | -13 | [1] |
Gain on hedging activities reclassified from AOCI to net income, Net of tax | 5 | [1] | 23 | [1],[2] |
Total reclassification for the period | -36 | [1] | -101 | [1] |
Interest Rate Contract | Interest Expense | ||||
Other Comprehensive Income (Loss) [Line Items] | ||||
Gain (Loss) on hedging activities reclassified from AOCI to net income, before tax | -1 | [1] | 10 | [1] |
Foreign Exchange Contract | Net Sales | ||||
Other Comprehensive Income (Loss) [Line Items] | ||||
Gain (Loss) on hedging activities reclassified from AOCI to net income, before tax | -1 | [1] | ||
Foreign Exchange Contract | Cost of Revenue | ||||
Other Comprehensive Income (Loss) [Line Items] | ||||
Gain (Loss) on hedging activities reclassified from AOCI to net income, before tax | 9 | [1] | 27 | [1] |
Actuarial losses and other | ||||
Other Comprehensive Income (Loss) [Line Items] | ||||
Amortization of pension and other employee benefits items Actuarial losses and other reclassified from AOCI to net income, before tax | ($64) | [1],[3] | ($191) | [1],[3] |
[1] | Amounts in parentheses indicate reductions to net income. | |||
[2] | See table below for details about the reclassifications for the nine months ended September 30, 2013. | |||
[3] | These AOCI components are included in the computation of net periodic benefit cost disclosed in Note 9. |
Reconciliation_of_Basis_Shares
Reconciliation of Basis Shares to Diluted Shares (Detail) | 3 Months Ended | 9 Months Ended | ||
In Millions, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 |
Computation of earnings per share | ||||
Basic shares | 543 | 548 | 543 | 552 |
Effect of dilutive securities | 6 | 4 | 7 | 4 |
Diluted shares | 549 | 552 | 550 | 556 |
Earnings_Per_Share_Additional_
Earnings Per Share - Additional Information (Detail) | 3 Months Ended | 9 Months Ended | ||
In Millions, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 |
Computation Of Earnings Per Share Line Items | ||||
Anti-dilutive securities excluded from computation of EPS | 6 | 17 | 5 | 22 |
Acquisitions_and_Collaboration2
Acquisitions and Collaborations - Additional Information (Detail) (USD $) | 3 Months Ended | 9 Months Ended | 3 Months Ended | 1 Months Ended | 3 Months Ended | 9 Months Ended | 3 Months Ended | 9 Months Ended | 3 Months Ended | ||||||||||||
In Millions, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Jun. 30, 2013 | Sep. 30, 2013 | Sep. 06, 2013 | Sep. 30, 2013 | Sep. 30, 2013 | Sep. 30, 2013 | Sep. 30, 2013 | Sep. 30, 2012 | Aug. 31, 2013 | Aug. 31, 2013 | Mar. 31, 2013 | Mar. 31, 2013 | Mar. 31, 2013 | Sep. 30, 2013 | Sep. 30, 2013 | Sep. 06, 2013 |
Purchase Price Allocation Adjustments | Purchase Price Allocation Adjustments | Gambro | Gambro | Gambro | Gambro | Gambro | Gambro | Gambro | Coherus Biosciences Collaboration | Coherus Development And Regulatory Milestones | Inspiration / Ipsen OBI-1 business | Inspiration / Ipsen OBI-1 business | Inspiration / Ipsen OBI-1 business | JW Holdings Regulatory Milestones and Royalties | JW Holdings Regulatory Milestones and Royalties | Indap Holding AB | |||||
Fair Value Adjustment to Inventory | Fair Value Adjustment to Inventory | Fair Value Adjustment to Inventory | Maximum | In-process research and development (IPR&D) | Regulatory and Sales Milestones | Maximum | |||||||||||||||
Acquisitions And Collaborations [Line Items] | |||||||||||||||||||||
Voting interest acquired, percent | 100.00% | ||||||||||||||||||||
Total cash payment for the acquisition | $3,704 | $320 | |||||||||||||||||||
Assumed debt | 221 | ||||||||||||||||||||
Intangible assets, weighted average useful life | 12 years 6 months | ||||||||||||||||||||
Repayment of assumed debt | 221 | ||||||||||||||||||||
Acquisition-related costs recorded in marketing and administrative expenses | 14 | 18 | 58 | ||||||||||||||||||
Fair value adjustments for acquisition-date inventory | 15 | ||||||||||||||||||||
Elimination of acquisition costs | 135 | 15 | 15 | ||||||||||||||||||
Additional acquisition costs | 60 | ||||||||||||||||||||
Business acquisition, cost of acquired entity, purchase price | 3,704 | 51 | |||||||||||||||||||
Business acquisition contingent consideration | 216 | 135 | 10 | ||||||||||||||||||
Change in consideration transferred | 2 | -58 | |||||||||||||||||||
Other intangible assets | -55 | 288 | 288 | ||||||||||||||||||
Goodwill | 2 | -3 | 1,252 | 7 | |||||||||||||||||
Estimated fair value of contingent payment liabilities at acquisition date | 269 | ||||||||||||||||||||
Upfront payment recorded as a deposit asset | 30 | ||||||||||||||||||||
Research and development expense | $290 | $290 | $809 | $865 | $25 |
Summary_of_Fair_Value_of_Consi
Summary of Fair Value of Consideration Transferred and Preliminary Amounts Recognized for Assets Acquired and Liabilities Assumed (Detail) (Gambro, USD $) | Sep. 06, 2013 |
In Millions, unless otherwise specified | |
Gambro | |
Consideration transferred | |
Cash | $3,704 |
Fair value of consideration transferred | 3,704 |
Assets acquired and liabilities assumed | |
Cash | 88 |
Accounts receivable | 483 |
Inventories | 367 |
Prepaid expenses and other | 54 |
Property, plant, and equipment | 854 |
Other intangible assets | 1,650 |
Other assets | 11 |
Current-maturities of long-term debt and lease obligations | -2 |
Accounts payable and accrued liabilities | -334 |
Long-term debt and lease obligations | -261 |
Other long-term liabilities (including pension obligations of $214) | -458 |
Total identifiable net assets | 2,452 |
Goodwill | 1,252 |
Total assets acquired and liabilities assumed | $3,704 |
Summary_of_Fair_Value_of_Consi1
Summary of Fair Value of Consideration Transferred and Preliminary Amounts Recognized for Assets Acquired and Liabilities Assumed (Parenthetical) (Detail) (Gambro, USD $) | Sep. 06, 2013 |
In Millions, unless otherwise specified | |
Gambro | |
Business Acquisition [Line Items] | |
Other long-term liabilities, pension obligations | $214 |
Subsidiary_Information_in_Cons
Subsidiary Information in Consolidated Statement of Income from Acquisition (Detail) (Gambro, USD $) | 1 Months Ended |
In Millions, unless otherwise specified | Sep. 30, 2013 |
Gambro | |
Business Acquisition, Impact on Operating Results [Line Items] | |
Net sales | $100 |
Net loss | ($17) |
Supplemental_Pro_Forma_Informa
Supplemental Pro Forma Information (Detail) (Gambro, USD $) | 3 Months Ended | 9 Months Ended | ||
In Millions, except Per Share data, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 |
Gambro | ||||
Business Acquisition, Pro Forma Information [Line Items] | ||||
Net sales | $4,038 | $3,855 | $11,933 | $11,594 |
Net income | $547 | $568 | $1,713 | $1,613 |
Basic earnings per share | $1.01 | $1.04 | $3.16 | $2.92 |
Diluted earnings per share | $1 | $1.03 | $3.11 | $2.90 |
Summary_of_Fair_Value_of_Consi2
Summary of Fair Value of Consideration Transferred and Recognized Amounts of Assets Acquired and Liabilities Assumed (Detail) (Inspiration / Ipsen OBI-1 business, USD $) | Mar. 31, 2013 |
In Millions, unless otherwise specified | |
Inspiration / Ipsen OBI-1 business | |
Consideration transferred | |
Cash | $51 |
Contingent payments | 269 |
Fair value of consideration transferred | 320 |
Assets acquired and liabilities assumed | |
Other intangible assets | 288 |
Other assets, net | 25 |
Goodwill | 7 |
Total assets acquired and liabilities assumed | $320 |
Goodwill_Detail
Goodwill (Detail) (USD $) | 9 Months Ended |
In Millions, unless otherwise specified | Sep. 30, 2013 |
Goodwill [Line Items] | |
Goodwill,beginning balance | $2,502 |
Additions | 1,261 |
Currency translation and other adjustments | 17 |
Goodwill,ending balance | 3,780 |
BioScience | |
Goodwill [Line Items] | |
Goodwill,beginning balance | 975 |
Additions | 7 |
Currency translation and other adjustments | 4 |
Goodwill,ending balance | 986 |
Medical Products | |
Goodwill [Line Items] | |
Goodwill,beginning balance | 1,527 |
Additions | 1,254 |
Currency translation and other adjustments | 13 |
Goodwill,ending balance | $2,794 |
Goodwill_and_Other_Intangible_2
Goodwill and Other Intangible Assets, Net - Additional Information (Detail) (USD $) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | |
Goodwill And Other Intangible Asset [Line Items] | ||||
Accumulated goodwill impairment losses | $0 | $0 | ||
Amortization expense | 34,000,000 | 26,000,000 | 84,000,000 | 76,000,000 |
Anticipated annual amortization expense of other intangible assets for 2013 | 142,000,000 | |||
Anticipated annual amortization expense of other intangible assets for 2014 | 227,000,000 | 227,000,000 | ||
Anticipated annual amortization expense of other intangible assets for 2015 | 225,000,000 | 225,000,000 | ||
Anticipated annual amortization expense of other intangible assets for 2016 | 222,000,000 | 222,000,000 | ||
Anticipated annual amortization expense of other intangible assets for 2017 | 204,000,000 | 204,000,000 | ||
Anticipated annual amortization expense of other intangible assets for 2018 | $199,000,000 | $199,000,000 |
Other_Intangible_Assets_Net_De
Other Intangible Assets, Net (Detail) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
In Millions, unless otherwise specified | ||
Intangible Asset Excluding Goodwill [Line Items] | ||
Gross other intangible assets | $3,440 | $1,494 |
Accumulated amortization | -758 | -680 |
Other intangible assets, net | 2,682 | 814 |
Developed technology, including patents | ||
Intangible Asset Excluding Goodwill [Line Items] | ||
Gross other intangible assets | 2,850 | 1,192 |
Accumulated amortization | -630 | -578 |
Other intangible assets, net | 2,220 | 614 |
Other amortized intangible assets | ||
Intangible Asset Excluding Goodwill [Line Items] | ||
Gross other intangible assets | 281 | 280 |
Accumulated amortization | -128 | -102 |
Other intangible assets, net | 153 | 178 |
Indefinite-lived intangible assets | ||
Intangible Asset Excluding Goodwill [Line Items] | ||
Gross other intangible assets | 309 | 22 |
Accumulated amortization | ||
Other intangible assets, net | $309 | $22 |
Infusion_Pump_and_Business_Opt2
Infusion Pump and Business Optimization Charges - Additional Information (Detail) (USD $) | 3 Months Ended | 9 Months Ended | 48 Months Ended | 96 Months Ended | |
In Millions, unless otherwise specified | Sep. 30, 2013 | Jun. 30, 2013 | Sep. 30, 2013 | Dec. 31, 2012 | Dec. 31, 2012 |
Restructuring Cost and Reserve [Line Items] | |||||
Total charges related to infusion pumps | $888 | ||||
Infusion pump charges related to cash | 742 | ||||
Infusion pump charges related asset impairments | 146 | ||||
Infusion pump cash reserves | 107 | 107 | 127 | 127 | |
Costs associated with optimizing the cost structure | 678 | ||||
Cash portion of charges | 32 | 507 | |||
Asset impairment charges | 171 | ||||
Cash reserves | 174 | 174 | 220 | 220 | |
Post-acquisition restructuring charge | 14 | ||||
Alzheimer's program Contract termination costs | -18 | ||||
Reserve adjustments | ($20) | ($20) |
Infusion_Pump_Charges_Detail
Infusion Pump Charges (Detail) (USD $) | 9 Months Ended |
In Millions, unless otherwise specified | Sep. 30, 2013 |
Infusion pump reserves | |
Reserves, beginning balance | $127 |
Utilization | -20 |
Reserves, ending balance | $107 |
Business_Optimization_Charges_
Business Optimization Charges (Detail) (USD $) | 3 Months Ended | 9 Months Ended | 48 Months Ended |
In Millions, unless otherwise specified | Jun. 30, 2013 | Sep. 30, 2013 | Dec. 31, 2012 |
Business Optimization Initiatives | |||
Reserve, beginning balance | $220 | ||
Charges | 32 | 507 | |
Reserve adjustments | -20 | -20 | |
Utilization | -61 | ||
CTA | 3 | ||
Reserve, ending balance | $174 | $220 |
Summary_of_Activity_Relating_t
Summary of Activity Relating to Securitization Arrangement (Detail) (USD $) | 3 Months Ended | 9 Months Ended | ||
In Millions, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 |
Accounts Receivable Securitization [Line Items] | ||||
Sold receivables at beginning of period | $129 | $154 | $157 | $160 |
Proceeds from sales of receivables | 125 | 161 | 380 | 461 |
Cash collections (remitted to the owners of the receivables) | -130 | -161 | -394 | -465 |
Effect of currency exchange rate changes | -6 | -25 | -2 | |
Sold receivables at end of period | $118 | $154 | $118 | $154 |
Debt_Financial_Instruments_and2
Debt, Financial Instruments and Fair Value Measurements - Additional Information (Detail) (USD $) | 3 Months Ended | 9 Months Ended | 12 Months Ended | 1 Months Ended | 1 Months Ended | 3 Months Ended | 9 Months Ended | 1 Months Ended | 3 Months Ended | |||||||||||||||||
Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | Dec. 31, 2012 | Dec. 31, 2011 | Jun. 30, 2013 | Sep. 30, 2013 | Jun. 30, 2013 | Jun. 30, 2013 | Jun. 30, 2013 | Jun. 30, 2013 | Sep. 30, 2013 | Dec. 31, 2012 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2013 | Sep. 30, 2013 | Dec. 31, 2012 | Sep. 30, 2013 | Sep. 30, 2013 | Jun. 30, 2013 | Mar. 31, 2013 | Sep. 30, 2013 | Jan. 31, 2013 | Jun. 30, 2013 | |
Floating rate senior notes maturing in December 2014 | Floating rate senior notes maturing in December 2014 | Senior Notes Maturing in June Two Thousand Sixteen | Senior Notes Maturing in June Two Thousand Eighteen | Senior Notes Maturing in June Two Thousand Twenty Three | Senior Notes Due Two Thousand Forty Three | Primary and Euro-denominated | Primary and Euro-denominated | Terminated Fair Value Hedge | Countries With Liquidity Issues | Countries With Liquidity Issues | Maximum | Maximum | Gambro | Gambro | Gambro | Gambro | Gambro | Gambro | Gambro | |||||||
GREECE | Debt Securities | Debt Securities | Countries With Liquidity Issues | Bridge Loan Facility | Bridge Loan Facility | |||||||||||||||||||||
Debt Instrument [Line Items] | ||||||||||||||||||||||||||
Value of senior notes issued | $500,000,000 | $500,000,000 | $750,000,000 | $1,250,000,000 | $500,000,000 | |||||||||||||||||||||
Higher rate of debt maturity periods | Dec-14 | Jun-16 | Jun-18 | Jun-23 | Jun-43 | |||||||||||||||||||||
Senior notes, coupon rates | 0.95% | 1.85% | 3.20% | 4.50% | ||||||||||||||||||||||
Senior notes, floating rate | 0.43% | |||||||||||||||||||||||||
Net proceeds of debt to be used for acquisition | 3,000,000,000 | |||||||||||||||||||||||||
Outstanding borrowings under credit facility | 0 | 0 | ||||||||||||||||||||||||
Commercial paper outstanding | 0 | 0 | 0 | |||||||||||||||||||||||
Credit facility maximum capacity | 3,100,000,000 | |||||||||||||||||||||||||
Bridge loan facility term | 364 days | |||||||||||||||||||||||||
Expense related bridge loan facility | 13,000,000 | |||||||||||||||||||||||||
Total accounts receivable from certain countries with liquidity issues | 559,000,000 | 43,000,000 | 141,000,000 | |||||||||||||||||||||||
Notional amount of cash flow hedge foreign exchange contracts | 2,200,000,000 | 2,200,000,000 | 1,500,000,000 | |||||||||||||||||||||||
Interest rate contracts designated as cash flow hedge, Terminated amount | 1,000,000,000 | 1,000,000,000 | 250,000,000 | |||||||||||||||||||||||
Maximum length of time hedge in cash flow hedge | 15 months | 15 months | ||||||||||||||||||||||||
Notional amount of interest rate fair value hedge derivatives | 500,000,000 | 500,000,000 | 500,000,000 | 175,000,000 | ||||||||||||||||||||||
Gain on Cash Flow Hedge | 5,000,000 | |||||||||||||||||||||||||
Gain on Interest rate contracts designated as cash flow hedge | 11,000,000 | |||||||||||||||||||||||||
Remaining deferred net loss to be amortized to net interest expense | 6,000,000 | |||||||||||||||||||||||||
Deferred gain amortized over the remaining term of the hedged item | 21,000,000 | 21,000,000 | ||||||||||||||||||||||||
Total gross notional amount of undesignated derivative instruments | 318,000,000 | 318,000,000 | 3,200,000,000 | 1,500,000,000 | 3,700,000,000 | |||||||||||||||||||||
Gambro derivative gain (loss) | 49,000,000 | -23,000,000 | ||||||||||||||||||||||||
(Gain) loss on hedged item in fair value hedge | 1,000,000 | 5,000,000 | -25,000,000 | 15,000,000 | ||||||||||||||||||||||
Deferred, net after-tax gains on derivative instruments | 9,000,000 | |||||||||||||||||||||||||
Cash and equivalents | 2,376,000,000 | 3,191,000,000 | 2,376,000,000 | 3,191,000,000 | 3,270,000,000 | 2,905,000,000 | ||||||||||||||||||||
Money market funds, at carrying value | 1,100,000,000 | 1,100,000,000 | ||||||||||||||||||||||||
Weighted average probability | 55.00% | |||||||||||||||||||||||||
Available for sale equity securities amortized cost basis | 91,000,000 | 91,000,000 | 13,000,000 | |||||||||||||||||||||||
Available for sale equity securities fair value | 110,000,000 | 110,000,000 | 15,000,000 | |||||||||||||||||||||||
Available for sale securities cumulative unrealized gain (losses) | 19,000,000 | 19,000,000 | 2,000,000 | 1,000,000 | 1,000,000 | |||||||||||||||||||||
Losses recognized related to realized an unrealized losses associated with the company's Greek government and European Financial Stability Facility bonds | ($8,000,000) |
Summary_of_Gains_and_Losses_on
Summary of Gains and Losses on Derivative Instruments (Detail) (USD $) | 3 Months Ended | 9 Months Ended | ||
In Millions, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 |
Fair Value Hedges | Interest Expense | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Gain (loss) recognized in income, fair value hedges | $1 | $5 | ($25) | $15 |
Not Designated as Hedging Instrument | Other (income) expense, net | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Gain (loss) recognized in income, undesignated derivative instruments | 51 | -2 | 6 | -13 |
Cash Flow Hedges | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Gain (loss) recognized in OCI | 6 | -24 | 68 | -25 |
Gain (loss) reclassified from AOCI into income | 8 | 4 | 36 | 2 |
Cash Flow Hedges | Interest Rate Contract | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Gain (loss) recognized in OCI | -3 | 26 | -12 | |
Gain (loss) reclassified from AOCI into income | -1 | 10 | ||
Cash Flow Hedges | Foreign Exchange Contracts One | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Gain (loss) recognized in OCI | -1 | -1 | -1 | -2 |
Gain (loss) reclassified from AOCI into income | -1 | -1 | -2 | |
Cash Flow Hedges | Foreign Exchange Contracts Two | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Gain (loss) recognized in OCI | 7 | -20 | 43 | -11 |
Gain (loss) reclassified from AOCI into income | $9 | $5 | $27 | $4 |
Classification_and_Fair_Value_
Classification and Fair Value Amounts of Derivative Instruments (Detail) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
In Millions, unless otherwise specified | ||
Derivatives, Fair Value [Line Items] | ||
Derivative asset, fair value | $96 | $142 |
Derivative liability, fair value | 8 | 37 |
Designated as Hedging Instrument | ||
Derivatives, Fair Value [Line Items] | ||
Derivative asset, fair value | 96 | 95 |
Derivative liability, fair value | 7 | 26 |
Designated as Hedging Instrument | Interest Rate Contract | Accounts Payable And Accrued Liabilities | ||
Derivatives, Fair Value [Line Items] | ||
Derivative liability, fair value | 21 | |
Designated as Hedging Instrument | Interest Rate Contract | Other Long -Term Assets | ||
Derivatives, Fair Value [Line Items] | ||
Derivative asset, fair value | 42 | 67 |
Designated as Hedging Instrument | Foreign Exchange Contract | Accounts Payable And Accrued Liabilities | ||
Derivatives, Fair Value [Line Items] | ||
Derivative liability, fair value | 6 | 5 |
Designated as Hedging Instrument | Foreign Exchange Contract | Other Long -Term Assets | ||
Derivatives, Fair Value [Line Items] | ||
Derivative asset, fair value | 8 | |
Designated as Hedging Instrument | Foreign Exchange Contract | Prepaid Expense And Other | ||
Derivatives, Fair Value [Line Items] | ||
Derivative asset, fair value | 46 | 28 |
Designated as Hedging Instrument | Foreign Exchange Contract | Other Long -Term Liabilities | ||
Derivatives, Fair Value [Line Items] | ||
Derivative liability, fair value | 1 | |
Not Designated as Hedging Instrument | Foreign Exchange Contract | Accounts Payable And Accrued Liabilities | ||
Derivatives, Fair Value [Line Items] | ||
Derivative liability, fair value | 1 | 11 |
Not Designated as Hedging Instrument | Foreign Exchange Contract | Prepaid Expense And Other | ||
Derivatives, Fair Value [Line Items] | ||
Derivative asset, fair value | $47 |
Derivative_Positions_Presented
Derivative Positions Presented On Net Basis (Detail) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
In Millions, unless otherwise specified | ||
Derivatives, Fair Value [Line Items] | ||
Gross amounts recognized in the consolidated balance sheet | $96 | $142 |
Gross amount subject to offset in master netting arrangements not offset in the consolidated balance sheet | -8 | -37 |
Total | 88 | 105 |
Gross amounts recognized in the consolidated balance sheet | 8 | 37 |
Gross amount subject to offset in master netting arrangements not offset in the consolidated balance sheet | -8 | -37 |
Total |
Financial_Assets_and_Liabiliti
Financial Assets and Liabilities Measured at Fair Value on Recurring Basis (Detail) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
In Millions, unless otherwise specified | ||
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items] | ||
Equity securities | $110 | $15 |
Fair Value, Measurements, Recurring | ||
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items] | ||
Foreign currency hedges, assets at fair value | 54 | 75 |
Interest rate hedges, assets at fair value | 42 | 67 |
Equity securities | 110 | 15 |
Total assets | 223 | 224 |
Foreign currency hedges, liabilities at fair value | 8 | 16 |
Interest rate hedges, liabilities at fair value | 21 | |
Contingent payments related to acquisitions, liabilities at fair value | 344 | 86 |
Total liabilities | 352 | 123 |
Fair Value, Measurements, Recurring | Preferred Stock | ||
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items] | ||
Debt securities | 51 | |
Fair Value, Measurements, Recurring | Foreign Government Debt Securities | ||
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items] | ||
Debt securities | 17 | 16 |
Fair Value, Measurements, Recurring | Fair Value, Inputs, Level 1 | ||
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items] | ||
Equity securities | 110 | 15 |
Total assets | 110 | 15 |
Fair Value, Measurements, Recurring | Fair Value, Inputs, Level 2 | ||
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items] | ||
Foreign currency hedges, assets at fair value | 54 | 75 |
Interest rate hedges, assets at fair value | 42 | 67 |
Total assets | 113 | 158 |
Foreign currency hedges, liabilities at fair value | 8 | 16 |
Interest rate hedges, liabilities at fair value | 21 | |
Total liabilities | 8 | 37 |
Fair Value, Measurements, Recurring | Fair Value, Inputs, Level 2 | Foreign Government Debt Securities | ||
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items] | ||
Debt securities | 17 | 16 |
Fair Value, Measurements, Recurring | Fair Value, Inputs, Level 3 | ||
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items] | ||
Total assets | 51 | |
Contingent payments related to acquisitions, liabilities at fair value | 344 | 86 |
Total liabilities | 344 | 86 |
Fair Value, Measurements, Recurring | Fair Value, Inputs, Level 3 | Preferred Stock | ||
Fair Value, Assets and Liabilities Measured on Recurring Basis [Line Items] | ||
Debt securities | $51 |
Reconciliation_of_Fair_Value_M
Reconciliation of Fair Value Measurements that Use Significant Unobservable Inputs (Level 3) (Detail) (USD $) | 9 Months Ended |
In Millions, unless otherwise specified | Sep. 30, 2013 |
Fair Value, Assets and Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | |
Contingent payments, fair value as of beginning of period | $86 |
Contingent payments, additions | 269 |
Contingent payments, payments | -2 |
Contingent payments, unrealized gains recognized in earnings | -9 |
Contingent payments, fair value as of end of period | 344 |
Preferred stock, fair value as of beginning of period | 51 |
Preferred stock, Conversion to a publicly traded equity security | ($51) |
Book_Values_and_Fair_Values_of
Book Values and Fair Values of Financial Instruments (Detail) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
In Millions, unless otherwise specified | ||
Fair Value And Carrying Value By Balance Sheet Grouping [Line Items] | ||
Long-term debt and lease obligations | $8,652 | $5,580 |
Book Values | ||
Fair Value And Carrying Value By Balance Sheet Grouping [Line Items] | ||
Long-term insurance receivables | 2 | 2 |
Investments | 52 | 46 |
Short-term debt | 42 | 27 |
Current maturities of long-term debt and lease obligations | 372 | 323 |
Long-term debt and lease obligations | 8,652 | 5,580 |
Long-term litigation liabilities | 53 | 32 |
Approximate Fair Values | ||
Fair Value And Carrying Value By Balance Sheet Grouping [Line Items] | ||
Long-term insurance receivables | 2 | 2 |
Investments | 53 | 49 |
Short-term debt | 42 | 27 |
Current maturities of long-term debt and lease obligations | 377 | 324 |
Long-term debt and lease obligations | 8,930 | 6,201 |
Long-term litigation liabilities | $52 | $31 |
Summarization_of_Bases_Used_to
Summarization of Bases Used to Measure Fair Value of Financial Instruments (Detail) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
In Millions, unless otherwise specified | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Long-term debt and lease obligations | $8,652 | $5,580 |
Approximate Fair Values | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Long-term insurance receivables | 2 | 2 |
Investments | 53 | 49 |
Total assets | 55 | 51 |
Short-term debt | 42 | 27 |
Current maturities of long-term debt and lease obligations | 377 | 324 |
Long-term debt and lease obligations | 8,930 | 6,201 |
Long-term litigation liabilities | 52 | 31 |
Total liabilities | 9,401 | 6,583 |
Fair Value, Inputs, Level 2 | Approximate Fair Values | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Long-term insurance receivables | 2 | 2 |
Investments | 18 | 19 |
Total assets | 20 | 21 |
Short-term debt | 42 | 27 |
Current maturities of long-term debt and lease obligations | 377 | 324 |
Long-term debt and lease obligations | 8,930 | 6,201 |
Long-term litigation liabilities | 52 | 31 |
Total liabilities | 9,401 | 6,583 |
Fair Value, Inputs, Level 3 | Approximate Fair Values | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Investments | 35 | 30 |
Total assets | $35 | $30 |
Shareholders_Equity_Additional
Shareholders' Equity - Additional Information (Detail) (USD $) | 1 Months Ended | 3 Months Ended | 9 Months Ended | |||||
Jul. 31, 2013 | 31-May-13 | Mar. 31, 2013 | Jul. 31, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | |
Stockholders Equity Note [Line Items] | ||||||||
Stock compensation expense | $39,000,000 | $34,000,000 | $111,000,000 | $97,000,000 | ||||
Stock based compensation in marketing and administrative expenses | 70.00% | 70.00% | 70.00% | 70.00% | ||||
Stock Options granted | 6,200,000 | |||||||
Performance condition to percentage of PSU's | 50.00% | |||||||
Cash dividend payments | 757,000,000 | 558,000,000 | ||||||
Percentage of increase in dividend over the previously quarterly rate | 9.00% | 34.00% | ||||||
Cash dividends declared per common share | $0.49 | $0.49 | $0.45 | $0.49 | $0.45 | $1.43 | $1.12 | |
Share repurchases | 2,000,000 | 12,400,000 | ||||||
Value of share repurchases | 145,000,000 | 863,000,000 | ||||||
Stock repurchase program, authorized amount | 2,000,000,000 | |||||||
Remaining value available under stock repurchase programs | 1,100,000,000 | |||||||
Stock Options | ||||||||
Stockholders Equity Note [Line Items] | ||||||||
Total intrinsic value of stock options exercised | 60,000,000 | 34,000,000 | 167,000,000 | 67,000,000 | ||||
Unrecognized compensation cost related to all unvested | 74,000,000 | 74,000,000 | ||||||
Weighted-average period for all unvested | 1 year 7 months 6 days | |||||||
Senior Management | Performance Based Awards With Market Conditions | ||||||||
Stockholders Equity Note [Line Items] | ||||||||
Performance condition to percentage of PSU's | 50.00% | |||||||
Restricted Stock Units | ||||||||
Stockholders Equity Note [Line Items] | ||||||||
Awards Granted | 852,000 | |||||||
Unrecognized compensation cost related to all unvested | 82,000,000 | 82,000,000 | ||||||
Weighted-average period for all unvested | 1 year 10 months 24 days | |||||||
Performance Shares | ||||||||
Stockholders Equity Note [Line Items] | ||||||||
Awards Granted | 376,000 | |||||||
Unrecognized compensation cost related to all unvested | $20,000,000 | $20,000,000 | ||||||
Weighted-average period for all unvested | 1 year 3 months 18 days |
Stock_Options_Fair_Value_Assum
Stock Options Fair Value Assumptions (Detail) (Stock Option, USD $) | 9 Months Ended | |
Sep. 30, 2013 | Sep. 30, 2012 | |
Stock Option | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Expected volatility | 25.00% | 25.00% |
Expected life (in years) | 5 years 6 months | 5 years 6 months |
Risk-free interest rate | 0.90% | 1.00% |
Dividend yield | 2.60% | 2.30% |
Fair value per stock option | $12 | $10 |
Performance_Stock_Units_Fair_V
Performance Stock Units Fair Value Assumptions (Detail) (Performance Shares, USD $) | 9 Months Ended | |
Sep. 30, 2013 | Sep. 30, 2012 | |
Performance Shares | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Baxter volatility | 21.00% | 24.00% |
Peer group volatility | ||
Peer group volatility minimum | 13.00% | 14.00% |
Peer group volatility maximum | 38.00% | 50.00% |
Correlation of returns | ||
Correlation of returns minimum | 0.37 | 0.26 |
Correlation of returns maximum | 0.62 | 0.54 |
Risk-free interest rate | 0.30% | 0.40% |
Fair value per PSU | $67 | $72 |
Net_Periodic_Benefit_Cost_Deta
Net Periodic Benefit Cost (Detail) (USD $) | 3 Months Ended | 9 Months Ended | ||
In Millions, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 |
Pension Plans, Defined Benefit | ||||
Net periodic benefit cost | ||||
Service cost | $34 | $28 | $101 | $83 |
Interest cost | 52 | 58 | 154 | 176 |
Expected return on plan assets | -63 | -72 | -190 | -216 |
Amortization of net losses and other deferred amounts | 61 | 52 | 184 | 156 |
Net periodic benefit cost | 84 | 66 | 249 | 199 |
Other Postretirement Benefit Plans, Defined Benefit | ||||
Net periodic benefit cost | ||||
Service cost | 2 | 2 | 7 | 5 |
Interest cost | 6 | 8 | 19 | 22 |
Amortization of net loss and prior service credit | 3 | 1 | 7 | 5 |
Net periodic benefit cost | $11 | $11 | $33 | $32 |
Income_Taxes_Additional_Inform
Income Taxes - Additional Information (Detail) (USD $) | 3 Months Ended | 9 Months Ended | ||
In Millions, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 |
Income Taxes [Line Items] | ||||
Effective income tax rate | 20.20% | 23.90% | 20.40% | 20.90% |
Tax and legal reserves associated with VAT matters in Turkey | $104 | |||
Currency related charges | 52 | |||
Infusion pump reserve adjustment | 37 | |||
Reduction in gross unrecognized tax benefits | $153 | $153 |
Legal_Proceedings_Additional_I
Legal Proceedings - Additional Information (Detail) (USD $) | Sep. 30, 2013 | Aug. 31, 2013 | Aug. 31, 2013 | Aug. 31, 2013 | Mar. 31, 2012 | Sep. 30, 2013 | Oct. 31, 2013 |
In Millions, unless otherwise specified | DerivativeAction | Illinois State | Delaware | Hemodialysis Litigation | Heparin Litigation | Subsequent Event | |
DerivativeAction | DerivativeAction | Case | |||||
Loss Contingencies [Line Items] | |||||||
Total legal liabilities | $160 | ||||||
Litigation related receivables | 9 | ||||||
Royalties awarded | 9 | ||||||
Past damages and interest awarded | 20 | ||||||
Lawsuits pending | 130 | ||||||
Number of derivative actions filed in state court | 2 | 1 | 1 | ||||
Settlement of claims announced by co-defendant | $64 |
Segment_Information_Additional
Segment Information - Additional Information (Detail) | 9 Months Ended |
Sep. 30, 2013 | |
Segment | |
Segment Information [Line Items] | |
Number of segments | 2 |
Financial_Information_for_Comp
Financial Information for Company's Segments (Detail) (USD $) | 3 Months Ended | 9 Months Ended | ||
In Millions, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 |
Segment Information [Line Items] | ||||
Net sales | $3,774 | $3,477 | $10,891 | $10,437 |
Pre-tax income | 958 | 925 | 2,889 | 2,819 |
BioScience | ||||
Segment Information [Line Items] | ||||
Net sales | 1,620 | 1,522 | 4,788 | 4,550 |
Pre-tax income | 615 | 537 | 1,851 | 1,605 |
Medical Products | ||||
Segment Information [Line Items] | ||||
Net sales | 2,154 | 1,955 | 6,103 | 5,887 |
Pre-tax income | $343 | $388 | $1,038 | $1,214 |
PreTax_Income_Reconciliation_D
Pre-Tax Income Reconciliation (Detail) (USD $) | 3 Months Ended | 9 Months Ended | ||
In Millions, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 |
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items] | ||||
Income before income taxes | $682 | $766 | $2,118 | $2,315 |
Operating Segments | ||||
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items] | ||||
Income before income taxes | 958 | 925 | 2,889 | 2,819 |
Unallocated Amount To Segment Stock Compensation | ||||
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items] | ||||
Income before income taxes | -39 | -34 | -111 | -97 |
Unallocated Amount To Segment Net Interest Expense | ||||
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items] | ||||
Income before income taxes | -45 | -25 | -87 | -65 |
Unallocated Amount To Segment Certain Foreign Currency Fluctuations and Hedging Activities | ||||
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items] | ||||
Income before income taxes | 21 | 13 | 63 | 33 |
Unallocated Amount To Segment Certain Tax And Legal Reserves | ||||
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items] | ||||
Income before income taxes | -104 | -104 | ||
Unallocated Amount to Segment Other Corporate Items | ||||
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items] | ||||
Income before income taxes | ($109) | ($113) | ($532) | ($375) |