Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2015 | Jul. 31, 2015 | |
Document Information [Line Items] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Jun. 30, 2015 | |
Document Fiscal Year Focus | 2,015 | |
Document Fiscal Period Focus | Q2 | |
Trading Symbol | BAX | |
Entity Registrant Name | BAXTER INTERNATIONAL INC | |
Entity Central Index Key | 10,456 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 545,538,967 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Income - USD ($) shares in Millions, $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | |
Net sales | $ 3,893 | $ 4,154 | $ 7,657 | $ 8,002 |
Cost of sales | 1,973 | 2,185 | 3,936 | 4,142 |
Gross margin | 1,920 | 1,969 | 3,721 | 3,860 |
Marketing and administrative expenses | 1,097 | 988 | 2,112 | 1,898 |
Research and development expenses | 388 | 322 | 688 | 631 |
Net interest expense | 34 | 42 | 64 | 85 |
Other (income) expense, net | (67) | 15 | (141) | (9) |
Income from continuing operations before income taxes | 468 | 602 | 998 | 1,255 |
Income tax expense | 132 | 134 | 242 | 280 |
Income from continuing operations | 336 | 468 | 756 | 975 |
(Loss) income from discontinued operations, net of tax | (4) | 52 | 6 | 101 |
Net income | $ 332 | $ 520 | $ 762 | $ 1,076 |
Income from continuing operations per common share | ||||
Basic | $ 0.62 | $ 0.86 | $ 1.39 | $ 1.79 |
Diluted | 0.61 | 0.85 | 1.38 | 1.78 |
Income from discontinued operations per common share | ||||
Basic | (0.01) | 0.10 | 0.01 | 0.19 |
Diluted | (0.01) | 0.10 | 0.01 | 0.18 |
Net income per common share | ||||
Basic | 0.61 | 0.96 | 1.40 | 1.98 |
Diluted | $ 0.60 | $ 0.95 | $ 1.39 | $ 1.96 |
Weighted-average number of common shares outstanding | ||||
Basic | 544 | 542 | 544 | 542 |
Diluted | 549 | 548 | 548 | 548 |
Cash dividends declared per common share | $ 0.52 | $ 0.52 | $ 1.04 | $ 1.01 |
Condensed Consolidated Stateme3
Condensed Consolidated Statements of Comprehensive Income - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | |
Net income | $ 332 | $ 520 | $ 762 | $ 1,076 |
Other comprehensive income (loss), net of tax: | ||||
Currency translation adjustments, net of tax expense (benefit) of $41 and ($12) for the three months ended June 30, 2015 and 2014, respectively, and ($68) and ($8) for the six months ended June 30, 2015 and 2014, respectively | 421 | (213) | (717) | (207) |
Pension and other employee benefits, net of tax expense of $103 and $14 for the three months ended June 30, 2015 and 2014, respectively, and $134 and $23 for the six months ended June 30, 2015 and 2014, respectively | 113 | 28 | 181 | 51 |
Hedging activities, net of tax expense (benefit) of $17 and $4 for the three months ended June 30, 2015 and 2014, respectively, and $10 and ($2) for the six months ended June 30, 2015 and 2014, respectively | 28 | 4 | 18 | (6) |
Other, net of tax (benefit) expense of ($2) and ($5) for the three months ended June 30, 2015 and 2014, respectively, and $7 and ($2) for the six months ended June 30, 2015 and 2014, respectively | 1 | (18) | 22 | (7) |
Total other comprehensive income (loss), net of tax | 563 | (199) | (496) | (169) |
Comprehensive income | $ 895 | $ 321 | $ 266 | $ 907 |
Condensed Consolidated Stateme4
Condensed Consolidated Statements of Comprehensive Income (Parenthetical) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | |
Tax (benefit) expense on currency translation adjustments | $ 41 | $ (12) | $ (68) | $ (8) |
Tax expense pension and other employee benefits | 103 | 14 | 134 | 23 |
Tax expense (benefit) on hedging activities | 17 | 4 | 10 | (2) |
Tax (benefit) expense on Other | $ (2) | $ (5) | $ 7 | $ (2) |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Millions | Jun. 30, 2015 | Dec. 31, 2014 |
Current assets | ||
Cash and equivalents | $ 6,680 | $ 2,925 |
Accounts and other current receivables, net | 2,852 | 2,803 |
Inventories | 3,842 | 3,559 |
Prepaid expenses and other | 1,123 | 1,064 |
Total current assets | 14,497 | 10,351 |
Property, plant and equipment, net | 8,967 | 8,698 |
Other assets | ||
Goodwill | 3,792 | 3,874 |
Other intangible assets, net | 2,084 | 2,079 |
Other | 675 | 915 |
Total other assets | 6,551 | 6,868 |
Total assets | 30,015 | 25,917 |
Current liabilities | ||
Short-term debt | 1,493 | 913 |
Current maturities of long-term debt and lease obligations | 671 | 786 |
Accounts payable and accrued liabilities | 4,148 | 4,343 |
Total current liabilities | 6,312 | 6,042 |
Long-term debt and lease obligations | 12,054 | 7,606 |
Other long-term liabilities | $ 3,628 | $ 4,113 |
Commitments and contingencies | ||
Equity | ||
Common stock, $1 par value, authorized 2,000,000,000 shares, issued 683,494,944 shares in 2015 and 2014 | $ 683 | $ 683 |
Common stock in treasury, at cost, 138,295,306 shares in 2015 and 141,116,857 shares in 2014 | (7,798) | (7,993) |
Additional contributed capital | 5,860 | 5,853 |
Retained earnings | 13,389 | 13,227 |
Accumulated other comprehensive loss | (4,146) | (3,650) |
Total Baxter shareholders' equity | 7,988 | 8,120 |
Noncontrolling interests | 33 | 36 |
Total equity | 8,021 | 8,156 |
Total liabilities and equity | $ 30,015 | $ 25,917 |
Condensed Consolidated Balance6
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares | Jun. 30, 2015 | Dec. 31, 2014 |
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 | 138,295,306 | 141,116,857 |
Condensed Consolidated Stateme7
Condensed Consolidated Statements of Cash Flows - USD ($) $ in Millions | 6 Months Ended | |
Jun. 30, 2015 | Jun. 30, 2014 | |
Cash flows from operations | ||
Net income | $ 762 | $ 1,076 |
Adjustments | ||
Depreciation and amortization | 497 | 489 |
Deferred income taxes | 51 | (31) |
Stock compensation | 87 | 72 |
Net periodic pension benefit and OPEB costs | 158 | 141 |
Infusion pump and other product-related charges | 93 | |
Other | 21 | 57 |
Changes in balance sheet items | ||
Accounts and other current receivables, net | (98) | 3 |
Inventories | (439) | (360) |
Accounts payable and accrued liabilities | (34) | (261) |
Business optimization and infusion pump payments | (45) | (83) |
Other | (168) | (38) |
Cash flows from operations | 792 | 1,158 |
Cash flows from investing activities | ||
Capital expenditures | (1,021) | (844) |
Acquisitions and investments, net of cash acquired | (341) | (176) |
Divestitures and other investing activities | 2 | 94 |
Cash flows from investing activities | (1,360) | (926) |
Cash flows from financing activities | ||
Issuances of debt | 6,747 | 34 |
Payments of obligations | (944) | (526) |
(Decrease) increase in debt with original maturities of three months or less, net | (875) | 150 |
Cash dividends on common stock | (564) | (531) |
Proceeds and realized excess tax benefits from stock issued under employee benefit plans | 119 | 249 |
Purchases of treasury stock | (450) | |
Other | (27) | 2 |
Cash flows from financing activities | 4,456 | (1,072) |
Effect of foreign exchange rate changes on cash and equivalents | (133) | (27) |
Increase (decrease) in cash and equivalents | 3,755 | (867) |
Cash and equivalents at beginning of period | 2,925 | 2,733 |
Cash and equivalents at end of period | $ 6,680 | $ 1,866 |
BASIS OF PRESENTATION
BASIS OF PRESENTATION | 6 Months Ended |
Jun. 30, 2015 | |
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, 2014 (2014 Annual Report). 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. Certain reclassifications have been made to conform the prior period condensed consolidated financial statements to the current period presentation. Prior to 2015, the company’s biosurgery products and services were reported in the BioScience segment. As a result of the planned spin-off of the biopharmaceuticals business, Baxalta Incorporated (Baxalta), the company realigned its biosurgery products and services to the Medical Products segment. Effective January 1, 2015, the company changed its segment presentation to reflect this new structure, and recast all prior periods presented to conform to the new presentation. Spin-off of Baxalta Incorporated On July 1, 2015, Baxter completed the distribution of approximately 80.5% of the outstanding common stock of Baxalta to Baxter shareholders (the Distribution). The Distribution was made to Baxter’s shareholders of record as of the close of business on June 17, 2015 (Record Date), who received one share of Baxalta common stock for each Baxter common share held as of the Record Date. The Distribution was intended to take the form of a tax-free distribution for federal income tax purposes in the United States. As a result of the Distribution, Baxalta is now an independent public company trading under the symbol “BXLT” on the New York Stock Exchange. In the aggregate, 544,521,483 shares of Baxalta common stock were distributed to Baxter’s shareholders of record in the Distribution. After giving effect to the Distribution, Baxter holds 131,902,719 shares of Baxalta’s common stock. The company will account for this investment as an available-for-sale equity security. The value of the company’s investment in Baxalta as of July 1, 2015 was approximately $4.3 billion, calculated using a stock price of $32.54 per share, which represents the mid-point price for Baxalta’s common stock on July 1, 2015. The unaudited interim condensed consolidated financial statements for the quarterly and six month periods ended June 30, 2015 include the results of Baxalta. The spin-off of Baxalta has therefore not yet been reflected in our historical results and will be presented as a discontinued operation starting in the third quarter of 2015. Discontinued operations will reflect the revenues and expenses directly associated with the results of operations of Baxalta for all periods presented. In conjunction with the spin-off, the company entered into certain agreements with Baxalta, including the Employee Matters Agreement, which made certain adjustments to the company’s outstanding equity awards. Refer to Exhibit 99.1 of Baxter’s Current Report on Form 8-K filed on July 7, 2015 for additional information. Vaccines discontinued operations In December 2014, the company completed the divestiture of its commercial vaccines business. During the first quarter of 2015, the company recorded an after-tax gain of $9 million as a result of a purchase price adjustment. The company has also entered into a separate agreement for the sale of the remainder of the Vaccines franchise. As a result of the divestitures, the operations and cash flows of the Vaccines franchise have been eliminated from the ongoing operations of the company. Following is a summary of the operating results of the Vaccines franchise, which have been reflected as discontinued operations for the three and six months ended June 30, 2015 and 2014. Three months ended Six months ended June 30, June 30, (in millions) 2015 2014 2015 2014 Net sales $ — $110 $1 $213 (Loss) income before income taxes (5) 59 6 115 Income tax (benefit) expense (1) 7 — 14 Net (loss) income $(4) $52 $6 $101 New accounting standards In April 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2015-05, Intangibles–Goodwill and Other–Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement, which provides guidance to customers about how to account for cloud computing arrangements when such arrangements include software licenses. ASU No. 2015-05 will be effective for the company beginning on January 1, 2016. Early adoption is permitted. The standard may be applied retrospectively or prospectively. The company is currently evaluating the impact of adopting the standard on its consolidated financial statements. In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which amends the existing accounting standards for revenue recognition. ASU No. 2014-09 is based on principles that govern the recognition of revenue at an amount an entity expects to be entitled when products are transferred to customers. In July 2015, the FASB voted to approve a one-year deferral of the original effective date of January 1, 2017; therefore, ASU No. 2014-09 will be effective for the company beginning on January 1, 2018. Early adoption is permitted as of the original effective date. The standard may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of adoption. The company is currently evaluating the impact of adopting the standard on its consolidated financial statements. |
SUPPLEMENTAL FINANCIAL INFORMAT
SUPPLEMENTAL FINANCIAL INFORMATION | 6 Months Ended |
Jun. 30, 2015 | |
SUPPLEMENTAL FINANCIAL INFORMATION | 2. SUPPLEMENTAL FINANCIAL INFORMATION Net interest expense Three months ended Six months ended June 30, June 30, (in millions) 2015 2014 2015 2014 Interest expense, net of capitalized interest $40 $47 $ 75 $ 95 Interest income (6 ) (5 ) (11 ) (10) Net interest expense $34 $42 $ 64 $ 85 Inventories June 30, December 31, (in millions) 2015 2014 Raw materials $ 900 $ 910 Work in process 1,226 1,126 Finished goods 1,716 1,523 Inventories $3,842 $3,559 Property, plant and equipment, net June 30, December 31, (in millions) 2015 2014 Property, plant and equipment, at cost $15,146 $14,808 Accumulated depreciation (6,179 ) (6,110 ) Property, plant and equipment (PP&E), net $ 8,967 $ 8,698 |
EARNINGS PER SHARE
EARNINGS PER SHARE | 6 Months Ended |
Jun. 30, 2015 | |
EARNINGS PER SHARE | 3. EARNINGS PER SHARE The numerator for both basic and diluted earnings per share (EPS) is either net income, income from continuing operations, or income from discontinued operations. 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 Six months ended June 30, June 30, (in millions) 2015 2014 2015 2014 Basic shares 544 542 544 542 Effect of dilutive securities 5 6 4 6 Diluted shares 549 548 548 548 The effect of dilutive securities included unexercised stock options, unvested RSUs and contingently issuable shares related to granted PSUs. The computation of diluted EPS excluded 21 million and 16 million equity awards for the second quarter and the six months ended June 30, 2015, respectively, and 11 million and 9 million equity awards for the second quarter and the six months ended June 30, 2014, because their inclusion would have had an anti-dilutive effect on diluted EPS. Refer to Note 8 and Note 10 for additional information regarding items impacting basic shares, including the company’s stock repurchase program. |
ACQUISITIONS AND COLLABORATIONS
ACQUISITIONS AND COLLABORATIONS | 6 Months Ended |
Jun. 30, 2015 | |
ACQUISITIONS AND COLLABORATIONS | 4. ACQUISITIONS AND COLLABORATIONS Acquisitions In March 2015, Baxter acquired all of the outstanding shares of SuppreMol GmbH (SuppreMol), a privately held biopharmaceutical company based in Germany. Through the acquisition, Baxter acquired SuppreMol’s early-stage pipeline of treatment options for autoimmune and allergic diseases, as well as its operations in Munich, Germany. The acquired investigational treatments will complement and build upon Baxter’s immunology portfolio and offer an opportunity to expand into new areas with significant market potential and unmet medical needs in autoimmune diseases. The following table summarizes the fair value of the consideration transferred and the recognized amounts of the assets acquired and liabilities assumed as of the acquisition date. (in millions) Consideration transferred Cash, net of cash acquired $228 Fair value of consideration transferred $228 Assets acquired and liabilities assumed Deferred tax asset $ 17 In-process research and development (IPR&D) 179 Other assets, net 1 Deferred tax liability (52 ) Total identifiable net assets 145 Goodwill 83 Total assets acquired and liabilities assumed $228 While the valuation of the assets acquired and liabilities assumed is substantially complete, measurement period adjustments may be recorded in the future as the company finalizes its fair value estimates. Pro forma financial information has not been provided because the pro forma impact of the acquisition was not material to the company’s condensed consolidated financial statements. Baxter allocated $179 million of the consideration to acquired IPR&D, which is being accounted for as an indefinite-lived intangible asset. The acquired IPR&D relates to SuppreMol’s SM-101, an investigational immunoregulatory treatment, which had completed Phase IIa studies at the time of the acquisition. This project is expected to be completed in approximately 5 years. The value of the IPR&D was calculated using cash flow projections adjusted for the inherent technical, regulatory, commercial and obsolescence risks in such activities, discounted at a rate of 20%. Additional research and development will be required prior to regulatory approval, and as of the acquisition date, incremental research and development costs were projected to be in excess of $400 million. The goodwill, which is not deductible for tax purposes, includes the value of potential future technologies as well as the overall strategic benefits of the acquisition to Baxter’s immunology portfolio and is included in the BioScience segment. Collaborations SFJ Pharmaceuticals Group In June 2015, the company entered into an agreement with SFJ Pharmaceuticals Group (SFJ) relating to adalimumab (BAX 923) (formerly known as M923/BAX 2923) whereby SFJ will fund up to $200 million of specified development costs related to the company’s BAX 923 program in exchange for payments in the event the product obtains regulatory approval in the United States or Europe. The terms of the agreement include funding limitations of up to $50 million for incurred costs through Phase I development and cumulative spending caps in six month intervals through December 31, 2017. The contingent success payments, which total approximately 5.5 times the incurred development costs, are payable in annual installments over an approximate eight-year period following the dates of regulatory approval. The development funding from SFJ is being recognized as an offset to R&D expenses as incurred because there is substantive and genuine transfer of risk to SFJ. The R&D expense offset for the second quarter of 2015 totaled $9 million. CTI BioPharma Corp. In June 2015, the company entered into an amendment of its agreement with CTI BioPharma Corp. (CTI BioPharma). Pursuant to the amendment, the company paid $32 million to CTI BioPharma relating to two contingent milestone payments included in the original agreement. The company obtained additional rights relating to manufacturing and supply, and CTI BioPharma committed to spend a specified amount on the development of pacritinib through February 2016, with failure to do so resulting in payments to the company equal to the deficiency. Milestone payments to collaboration partners Baxter recognized R&D charges of $87 million for the second quarter and first half of 2015 related to milestone payments pursuant to the company’s collaboration arrangements. In the second quarter and first half of 2014, Baxter also recognized R&D charges of $35 million and $60 million, respectively, related to milestone payments pursuant to one of the company’s collaboration arrangements. Refer to the 2014 Annual Report for further discussion of the company’s collaboration arrangements. |
GOODWILL AND OTHER INTANGIBLE A
GOODWILL AND OTHER INTANGIBLE ASSETS, NET | 6 Months Ended |
Jun. 30, 2015 | |
GOODWILL AND OTHER INTANGIBLE ASSETS, NET | 5. GOODWILL AND OTHER INTANGIBLE ASSETS, NET Goodwill The following is a reconciliation of goodwill by business segment. (in millions) BioScience Medical Products Total Balance as of December 31, 2014 $ 947 $2,927 $3,874 Additions 83 — 83 Currency translation and other adjustments (13 ) (152 ) (165 ) Balance as of June 30, 2015 $1,017 $2,775 $3,792 The balance as of December 31, 2014 has been recast to reflect the realignment of the company’s biosurgery products and services from the BioScience segment to the Medical Products segment. The addition in the first six months of 2015 related to the acquisition of SuppreMol and the overall decrease in goodwill was driven by currency translation adjustments (CTA). As of June 30, 2015, there were no accumulated goodwill impairment losses. Other intangible assets, net The following is a summary of the company’s other intangible assets. (in millions) Developed technology, including patents Other amortized intangible assets Indefinite-lived intangible assets Total June 30, 2015 Gross other intangible assets $2,223 $ 431 $423 $3,077 Accumulated amortization (835 ) (158 ) — (993 ) Other intangible assets, net $1,388 $ 273 $423 $2,084 December 31, 2014 Gross other intangible assets $2,278 $ 443 $272 $2,993 Accumulated amortization (769 ) (145 ) — (914 ) Other intangible assets, net $1,509 $ 298 $272 $2,079 Intangible asset amortization expense was $48 million and $47 million in the three months ended June 30, 2015 and 2014, respectively, and $96 million and $90 million for the six months ended June 30, 2015 and 2014, respectively. The increase in other intangible assets, net from the IPR&D acquired in the acquisition of SuppreMol during the first quarter of 2015 was offset by the decrease from amortization expense and CTA. |
INFUSION PUMP AND BUSINESS OPTI
INFUSION PUMP AND BUSINESS OPTIMIZATION CHARGES | 6 Months Ended |
Jun. 30, 2015 | |
INFUSION PUMP AND BUSINESS OPTIMIZATION CHARGES | 6. INFUSION PUMP AND BUSINESS OPTIMIZATION CHARGES Infusion pump charges There were no significant updates related to the company’s infusion pump recall activities during the first half of 2015. Refer to the 2014 Annual Report for further information about the company’s infusion pump recall activities. Business optimization charges The company records charges from its business optimization initiatives 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 realigned certain R&D activities. Refer to the 2014 Annual Report for further information about these charges. Three months ended Six months ended June 30, June 30, (in millions) 2015 2014 2015 2014 Cash expenses $12 $ 4 $ 28 $ 32 Non-cash expenses 2 1 4 1 Reserve adjustments — (37 ) (29 ) (37 ) Total business optimization items $14 $(32 ) $ 3 $ (4 ) Discontinued operations — — — (8 ) Business optimization items in continuing operations $14 $(32 ) $ 3 $(12 ) The 2015 and 2014 charges primarily included severance and employee-related costs. The company also recorded adjustments to its previous estimates in both 2015 and 2014. The business optimization items are recorded as follows in the consolidated statements of income: • Second quarter of 2015: $3 million in cost of sales, $8 million in marketing and administrative expenses, and $3 million in R&D expenses • Second quarter of 2014: ($14 million) in cost of sales, ($16 million) in marketing and administrative expenses, and ($2 million) in R&D expenses • First half of 2015: ($4 million) in cost of sales, $10 million in marketing and administrative expenses, and ($3 million) in R&D expenses • First half of 2014: ($10 million) in cost of sales, ($6 million) in marketing and administrative expenses, and $4 million in R&D expenses (with an additional $8 million recorded in discontinued operations) The following table summarizes cash activity in the reserves related to the company’s business optimization initiatives. (in millions) Reserves as of December 31, 2014 $ 169 Charges 28 Reserve adjustments (29 ) Utilization (36 ) CTA (10 ) Reserves as of June 30, 2015 $ 122 The reserves are expected to be substantially utilized by the end of 2016. The company believes the remaining reserves to be adequate; however, additional adjustments may be recorded in the future as the programs are completed. |
DEBT, FINANCIAL INSTRUMENTS AND
DEBT, FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS | 6 Months Ended |
Jun. 30, 2015 | |
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 Six months ended (in millions) 2015 2014 2015 2014 Sold receivables at beginning of period $ 96 $ 109 $ 104 $ 114 Proceeds from sales of receivables 117 117 230 240 Cash collections (remitted to the owners of the receivables) (105 ) (120 ) (225 ) (249 ) Effect of currency exchange rate changes (2 ) — (3 ) 1 Sold receivables at end of period $ 106 $ 106 $ 106 $ 106 The net losses relating to the sales of receivables were immaterial for each period. Refer to the 2014 Annual Report for further information regarding the company’s securitization agreements. Significant debt issuances In June 2015, the company’s wholly-owned subsidiary Baxalta issued senior notes with a total aggregate principal amount of $5.0 billion. Approximately $4.0 billion of the related net proceeds were distributed to Baxter in connection with the spin-off. The general terms of the notes, which remain obligations of Baxalta subsequent to the spin-off, are as follows: • $375 million aggregate principal amount of senior notes bearing a fixed coupon rate of 2.000% and maturing in June 2018. • $375 million of aggregate principal amount senior notes bearing a floating coupon rate of three-month LIBOR plus 0.780% and maturing in June 2018. • $1.0 billion of aggregate principal amount senior notes bearing a fixed coupon rate of 2.875% and maturing in June 2020 • $500 million of aggregate principal amount senior notes bearing a fixed coupon rate of 3.600% and maturing in June 2022. • $1.75 billion of senior notes bearing a fixed coupon rate of 4.000% and maturing in June of 2025. • $1.0 billion senior note bearing a fixed coupon rate of 5.250% and maturing in June 2045. In connection with this issuance, the company recognized a debt discount of $51 million and deferred issue costs totaling $9 million. After giving effect to the spin-off, Baxter has no obligations as it relates to the Baxalta senior notes. Credit facilities and commercial paper In the first half of 2015, the company borrowed $1.5 billion which was outstanding as of June 30, 2015, under its $1.8 billion U.S. dollar-denominated revolving credit facility at a weighted average interest rate of 1.37%. This facility matures in December 2015. As of December 31, 2014 there were no borrowings under any of the company’s credit facilities. Effective July 1, 2015, the company terminated its $1.5 billion U.S. dollar-denominated revolving credit facility and €300 million Euro-denominated revolving credit facility and entered into credit agreements providing for a senior U.S. dollar-denominated revolving credit facility in an aggregate principal amount of up to $1.5 billion maturing in 2020, as well as a Euro-denominated senior revolving credit facility in an aggregate principal amount of up to €200 million maturing in 2020. The facilities enable the company to borrow funds on an unsecured basis at variable interest rates, and contain various covenants, including a maximum net leverage ratio and maximum interest coverage ratio. During the first six months of 2015, the company issued and redeemed commercial paper, of which zero was outstanding as of June 30, 2015. There was a balance of $875 million outstanding at December 31, 2014 with a weighted-average interest rate of 0.46%. Debt tender offers On July 6, 2015 and July 21, 2015 the company purchased an aggregate of approximately $2.7 billion in principal amount of its 5.900% Notes due September 2016, 6.625% Debentures due February 2028, 6.250% Notes due December 2037, 3.650% Notes due August 2042, 4.500% Notes due June 2043, 3.200% Notes due June 2023, and 2.400% Notes due August 2022 in the settlement of previously announced debt tender offers. Baxter paid approximately $2.9 billion, including accrued and unpaid interest and tender premium, to purchase such notes. As a result of the debt tender offers, the company will recognize a loss on extinguishment of debt in the third quarter of 2015 of approximately $130 million, net of gains from the unwinding of interest rate swaps related to the debt. 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 June 30, 2015, the company’s net accounts receivable from the public sector in Greece, Spain, Portugal and Italy totaled $327 million, of which $48 million related to Greece. 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. In prior periods, the company entered into $1.8 billion of forward-starting interest rate swaps to hedge the risk to earnings associated with movements in benchmark interest rates relating to the anticipated issuance of the Baxalta senior notes. During the six months ended June 30, 2015, in conjunction with the above debt issuance, the company terminated the swaps, which resulted in a $36.7 million net gain that is deferred in accumulated other comprehensive income (AOCI) that is being amortized as a decrease to net interest expense over the terms of the underlying debt. 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 $1.2 billion and $917 million as of June 30, 2015 and December 31, 2014, respectively. There were no outstanding interest rate contracts designated as cash flow hedges as of June 30, 2015. The notional amount of interest rate contracts were $550 million as of December 31, 2014. The maximum term over which the company has cash flow hedge contracts in place related to forecasted transactions as of June 30, 2015 is 18 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 $3.9 billion and $2.9 billion as of June 30, 2015 and December 31, 2014, respectively. The increase is due to swaps executed in conjunction with the debt issuance described above. 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. There were no hedge dedesignations in the first six months of 2015 or 2014 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. There were no fair value hedges terminated during the first half of 2015 and 2014. 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 $681 million as of June 30, 2015 and $434 million as of December 31, 2014. Gains and Losses on Derivative Instruments The following tables summarize the income statement locations and gains and losses on the company’s derivative instruments for the three months ended June 30, 2015 and 2014. Gain (loss) recognized in OCI Location of gain (loss) in income statement Gain (loss) reclassified from AOCI (in millions) 2015 2014 2015 2014 Cash flow hedges Interest rate contracts $ 93 $ — Net interest expense $— $— Foreign exchange contracts — 1 Net sales — 1 Foreign exchange contracts (18 ) 5 Cost of sales 30 (3 ) Total $ 75 $ 6 $30 $(2 ) Gain (loss) recognized in income (in millions) Location of gain (loss) in income statement 2015 2014 Fair value hedges Interest rate contracts Net interest expense $(72) $ 17 Undesignated derivative instruments Foreign exchange contracts Other (income) expense, net $(17) $(22 ) The following tables summarize the income statement locations and gains and losses on the company’s derivative instruments for the six months ended June 30, 2015 and 2014. Gain (loss) recognized in OCI Location of gain (loss) in income statement Gain (loss) reclassified from AOCI (in millions) 2015 2014 2015 2014 Cash flow hedges Interest rate contracts $38 $ — Net interest expense $— $(1 ) Foreign exchange contracts (1 ) — Net sales — 1 Foreign exchange contracts 46 (6) Cost of sales 55 2 Total $83 $(6) $55 $ 2 Gain (loss) recognized in income (in millions) Location of gain (loss) in income statement 2015 2014 Fair value hedges Interest rate contracts Net interest expense $(25) $ 31 Undesignated derivative instruments Foreign exchange contracts Other (income) expense, net $(25) $(10 ) For the company’s fair value hedges, equal and offsetting gains of $72 million and $25 million were recognized in net interest expense in the second quarter and first half of 2015, respectively, and equal and offsetting losses of $17 million and $31 million were recognized in net interest expense in the second quarter and first half of 2014, 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 six months ended June 30, 2015 was not material. As of June 30, 2015, $26 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 June 30, 2015. 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 $ 76 Other long-term liabilities $12 Foreign exchange contracts Prepaid expenses and other 33 Accounts payable and 5 Foreign exchange contracts Other long-term assets 1 Other long-term liabilities 2 Total derivative instruments designated as hedges $110 $19 Undesignated derivative instruments Foreign exchange contracts Prepaid expenses and other $ 1 Accounts payable and $ 2 Total derivative instruments $111 $21 The following table summarizes the classification and fair values of derivative instruments reported in the condensed consolidated balance sheet as of December 31, 2014. 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 Prepaid expenses and other $ 1 Accounts payable and $ 2 Interest rate contracts Other long-term assets 89 Other long-term liabilities — Foreign exchange contracts Prepaid expenses and other 51 Accounts payable and — Total derivative instruments designated as hedges $141 $ 2 Undesignated derivative instruments Foreign exchange contracts Prepaid expenses and other $ — Accounts payable and $23 Total derivative instruments $141 $25 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. June 30, 2015 December 31, 2014 (in millions) Asset Liability Asset Liability Gross amounts recognized in the consolidated balance sheet $111 $21 $141 $25 Gross amount subject to offset in master netting arrangements not offset in the consolidated balance sheet (21 ) (21 ) (22 ) (22 ) Total $ 90 $— $119 $ 3 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 June 30, 2015 Quoted prices in (Level 1) Significant other (Level 2) Significant inputs (Level 3) Assets Foreign currency hedges $ 35 $ — $ 35 $ — Interest rate hedges 76 — 76 — Available-for-sale securities Equity securities 117 117 — — Foreign government debt securities 16 — 16 — Total assets $244 $117 $127 $ — Liabilities Foreign currency hedges $ 9 $ — $ 9 $ — Interest rate hedges 12 — 12 — Contingent payments related to acquisitions 553 — — 553 Total liabilities $574 $ — $ 21 $553 Basis of fair value measurement (in millions) Balance as of December 31, 2014 Quoted prices in (Level 1) Significant other (Level 2) Significant inputs (Level 3) Assets Foreign currency hedges $ 51 $ — $ 51 $ — Interest rate hedges 90 — 90 — Available-for-sale securities Equity securities 105 105 — — Foreign government debt securities 18 — 18 — Total assets $264 $105 $159 $ — Liabilities Foreign currency hedges $ 23 $ — $ 23 $ — Interest rate hedges 2 — 2 — Contingent payments related to acquisitions 569 — — 569 Total liabilities $594 $ — $ 25 $569 As of June 30, 2015, cash and equivalents of $6.7 billion included money market funds of approximately $2.0 billion, and as of December 31, 2014, cash and equivalents of $2.9 billion included money market funds of approximately $989 million. Money market funds 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. Contingent payments related to acquisitions consist of development, regulatory, and commercial milestone payments, in addition to sales-based payments, and are valued using discounted cash flow techniques. The fair value of development, regulatory, and commercial milestone payments reflects management’s expectations of probability of payment, and increases or decreases as the probability of payment or expectation of timing of payments changes. As of June 30, 2015, management’s expected weighted-average probability of payment for development and commercial milestone payments was approximately 26%. The fair value of sales-based payments is based upon probability-weighted future revenue estimates and increases or decreases as revenue estimates or expectation of timing of payments changes. At June 30, 2015, the company held available-for-sale equity securities that had an amortized cost basis and fair value of $61 million and $117 million, respectively. The company had net unrealized gains of $56 million, comprised of unrealized losses of $2 million, which the company believes to be temporary in nature, and unrealized gains of $58 million. In the first half of 2015, the company recorded $9 million in other-than-temporary impairment charges based on the duration of losses related to two of the company’s investments. At December 31, 2014, the amortized cost basis and fair value of the available-for-sale equity securities was $79 million and $105 million, respectively. The company had net unrealized gains of $26 million, comprised of unrealized losses of $9 million, which the company believed to be temporary in nature, and unrealized gains of $35 million. Changes in the fair value of contingent payments related to acquisitions, which use significant unobservable inputs (Level 3) in the fair value measurement, were immaterial during the first half of 2015. 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 June 30, 2015 and December 31, 2014. Book values Approximate fair values (in millions) 2015 2014 2015 2014 Assets Investments $ 65 $ 54 $ 65 $ 52 Liabilities Short-term debt 1,493 913 1,493 913 Current maturities of long-term debt and lease obligations 671 786 671 791 Long-term debt and lease obligations 12,054 7,606 12,421 8,192 Long-term litigation liabilities 50 53 49 52 The following tables summarize the bases used to measure the approximate fair value of the financial instruments as of June 30, 2015 and December 31, 2014. Basis of fair value measurement (in millions) Fair value as of June 30, 2015 Quoted prices in (Level 1) Significant other (Level 2) Significant inputs (Level 3) Assets Investments $ 65 $— $ 10 $55 Total assets $ 65 $— $ 10 $55 Liabilities Short-term debt $ 1,493 $— $ 1,493 $— Current maturities of long-term debt and lease obligations 671 — 671 — Long-term debt and lease obligations 12,421 — 12,421 — Long-term litigation liabilities 49 — — 49 Total liabilities $14,634 $— $14,585 $49 Basis of fair value measurement (in millions) Fair value as of December 31, 2014 Quoted prices in (Level 1) Significant other (Level 2) Significant inputs (Level 3) Assets Investments $ 52 $— $ 8 $44 Total assets $ 52 $— $ 8 $44 Liabilities Short-term debt $ 913 $— $ 913 $— Current maturities of long-term debt and lease obligations 791 — 791 — Long-term debt and lease obligations 8,192 — 8,192 — Long-term litigation liabilities 52 — — 52 Total liabilities $9,948 $— $9,896 $52 The estimated fair values of 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 company. Investments in 2015 and 2014 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. The carrying values of the other financial instruments approximate their fair values due to the short-term maturities of most of these assets and liabilities. In connection with the company’s initiative to invest in early-stage products and therapies, the company increased its unfunded commitments as a limited partner in multiple investment companies to $78 million as of June 30, 2015 from $38 million as of December 31, 2014. In the first half of 2015 and 2014, the company recorded $25 million and $44 million, respectively, of income in other (income) expense, net related to sales of available-for-sale equity securities and equity method investments, which primarily represented gains from the sale of certain investments as well as distributions from funds that sold portfolio companies. |
STOCK COMPENSATION
STOCK COMPENSATION | 6 Months Ended |
Jun. 30, 2015 | |
STOCK COMPENSATION | 8. STOCK COMPENSATION Stock compensation expense totaled $48 million and $41 million for the three months ended June 30, 2015 and 2014, respectively, and $87 million and $72 million for the six months ended June 30, 2015 and 2014, respectively. In March 2015, the company awarded its annual stock compensation grants, which consisted of 8.8 million stock options and 1.3 million RSUs. Stock Options The weighted-average Black-Scholes 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. Six months ended 2015 2014 Expected volatility 20% 24% Expected life (in years) 5.5 5.5 Risk-free interest rate 1.7% 1.7% Dividend yield 3.0% 2.8% Fair value per stock option $9 $12 The total intrinsic value of stock options exercised was $15 million and $34 million during the three months ended June 30, 2015 and 2014, respectively, and $29 million and $79 million during the six months ended June 30, 2015 and 2014, respectively. As of June 30, 2015, the unrecognized compensation cost related to all unvested stock options of $106 million is expected to be recognized as expense over a weighted-average period of 1.9 years. Restricted Stock Units As of June 30, 2015, the unrecognized compensation cost related to all unvested RSUs of $140 million is expected to be recognized as expense over a weighted-average period of 1.9 years. Performance Share Units As of June 30, 2015, the unrecognized compensation cost related to all granted unvested PSUs of $13 million is expected to be recognized as expense over a weighted-average period of 1.0 years. Baxter International Inc. 2015 Incentive Plan In May 2015, shareholders approved the Baxter International Inc. 2015 Incentive Plan which provides for 35 million additional shares of common stock available for issuance with respect to awards for eligible participants. |
RETIREMENT AND OTHER BENEFIT PR
RETIREMENT AND OTHER BENEFIT PROGRAMS | 6 Months Ended |
Jun. 30, 2015 | |
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 Six months ended June 30, June 30, (in millions) 2015 2014 2015 2014 Pension benefits Service cost $38 $33 $ 75 $ 66 Interest cost 56 60 111 120 Expected return on plan assets (71 ) (68 ) (138 ) (134 ) Amortization of net losses and other deferred amounts 51 36 102 72 Net periodic pension benefit cost $74 $61 $150 $124 OPEB Service cost $ 1 $ 2 $ 2 $ 3 Interest cost 4 7 10 14 Amortization of net loss and prior service credit (3 ) — (4 ) — Net periodic OPEB cost $ 2 $ 9 $ 8 $ 17 In the second quarter of 2015, in connection with the transfer of liabilities and assets from a combined Baxter pension or OPEB plan to a newly created Baxalta pension or OPEB plan, the company remeasured pension and OPEB liabilities and assets for several of its plans. The remeasurement resulted in a reduction to pension and OPEB obligations of $203 million, with an offset to AOCI. The significant weighted-average assumptions used at the measurement date were as follows. Pension benefits OPEB Discount rate U.S. plans 4.03% 3.78% International plans 1.32% n/a Expected return on plan assets U.S. plans 7.25% n/a International plans 5.74% n/a Rate of compensation increase U.S. plans 3.80% n/a International plans 3.30% n/a Annual rate of increase in the per-capita cost n/a 6.00% Rate decreased to n/a 5.00% by the year ended n/a 2019 The company also adjusted its assumptions for future company actions related to postemployment medical benefits for retirees who are age 65 and older and receive a subsidy to be utilized on a medical insurance exchange. Baxter contributed a discretionary amount of $100 million in the second quarter of 2015 to its U.S. qualified pension plan. |
SHAREHOLDERS' EQUITY
SHAREHOLDERS' EQUITY | 6 Months Ended |
Jun. 30, 2015 | |
SHAREHOLDERS' EQUITY | 10. SHAREHOLDERS’ EQUITY Stock repurchases In July 2012, the Board of Directors authorized the repurchase of up to $2.0 billion of the company’s common stock. During the first half of 2015, the company did not repurchase any shares and has $0.5 billion remaining available under the authorization as of June 30, 2015. Accumulated other comprehensive income Comprehensive income includes all changes in shareholders’ equity that do not arise from transactions with shareholders, and consists of net income, 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 six months ended June 30, 2015 and 2014. (in millions) CTA Pension and Hedging Other Total Gains (losses) Balance as of December 31, 2014 $(2,323 ) $(1,427 ) $34 $66 $(3,650 ) Other comprehensive income before reclassifications (717 ) 114 53 24 (526 ) Amounts reclassified from AOCI (a) — 67 (35 ) (2 ) 30 Net other comprehensive (loss) income (717 ) 181 18 22 (496 ) Balance as of June 30, 2015 $(3,040 ) $(1,246 ) $52 $88 $(4,146 ) (in millions) CTA Pension and Hedging Other Total Gains (losses) Balance as of December 31, 2013 $ (991 ) $(1,027 ) $10 $32 $(1,976 ) Other comprehensive income before reclassifications (207 ) 2 (5 ) (7 ) (217 ) Amounts reclassified from AOCI (a) — 49 (1 ) — 48 Net other comprehensive (loss) income (207 ) 51 (6 ) (7 ) (169 ) Balance as of June 30, 2014 $(1,198 ) $ (976 ) $ 4 $25 $(2,145 ) (a) See table below for details about these reclassifications. The following is a summary of the amounts reclassified from AOCI to net income during the three and six months ended June 30, 2015 and 2014. Amounts reclassified from AOCI (a) (in millions) Three months ended June 30, 2015 Six months ended June 30, 2015 Location of impact in income statement Amortization of pension and other employee benefits items Actuarial losses and other $(48 )(b) $(98 )(b) (48 ) (98 ) Total before tax 16 31 Tax benefit $(32 ) $(67 ) Net of tax Gains (losses) on hedging activities Interest rate contracts $ — $ — Net interest expense Foreign exchange contracts — — Net sales Foreign exchange contracts 30 55 Cost of sales 30 55 Total before tax (11 ) (20 ) Tax expense $ 19 $ 35 Net of tax Other Gain on sale of available-for-sale equity securities $ 15 $ 15 Other (income) expense, net Other-than-temporary impairment of available-for-sale equity securities — (9 ) Other (income) expense, net 15 6 Total before tax (6 ) (4 ) Tax expense $ 9 $ 2 Net of tax Total reclassification for the period $ (4 ) $(30 ) Total net of tax Amounts reclassified from AOCI (a) (in millions) Three months ended June 30, 2014 Six months ended June 30, 2014 Location of impact in income statement Amortization of pension and other employee benefits items Actuarial losses and other $(36 )(b) $(72 )(b) (36 ) (72 ) Total before tax 13 23 Tax benefit $(23 ) $(49 ) Net of tax Gains (losses) on hedging activities Interest rate contracts $ — $ (1 ) Net interest expense Foreign exchange contracts 1 1 Net sales Foreign exchange contracts (3 ) 2 Cost of sales (2 ) 2 Total before tax 1 (1 ) Tax expense $ (1 ) $ 1 Net of tax Total reclassification for the period $(24 ) $(48 ) 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 7 for additional information regarding hedging activity and Note 9 for additional information regarding the amortization of pension and other employee benefits items. |
INCOME TAXES
INCOME TAXES | 6 Months Ended |
Jun. 30, 2015 | |
INCOME TAXES | 11. INCOME TAXES Effective tax rate The company’s effective income tax rate for continuing operations was 28.2% and 22.3% in the three months ended June 30, 2015 and 2014, respectively, and 24.2% and 22.3% in the six months ended June 30, 2015 and 2014, 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 income tax rate increased during the three and six months ended June 30, 2015 compared to the prior year periods primarily as a result of a valuation allowance increase related to a foreign affiliate as well as certain tax audit developments, including tax costs associated with internal restructurings related to the company’s spin-off of Baxalta. As a result of the spin-off of Baxalta on July 1, 2015, Baxter is re-evaluating its assertions relating to prior earnings outside the United States that were previously deemed indefinitely reinvested. The company expects to amend certain assertions and, as a consequence, may record a significant tax charge in the third quarter of 2015. |
LEGAL PROCEEDINGS
LEGAL PROCEEDINGS | 6 Months Ended |
Jun. 30, 2015 | |
LEGAL PROCEEDINGS | 12. 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 recorded. If a loss is not probable or a probable loss cannot be reasonably estimated, no liability is recorded. As of June 30, 2015, the company’s total recorded reserves with respect to legal matters were $110 million and the total related receivables were $49 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 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 the risk of future 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. General litigation Baxter was 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 matters. A consolidated derivative suit filed in the U.S.D.C. for the Northern District of Illinois was settled with the plaintiffs in February 2015, and as a result the two other derivative actions previously filed in state courts, one in Lake County, Illinois and one in the Delaware Chancery Court, were dismissed. The company also has agreed to settle within its insurance limits a consolidated alleged class action pending in the U.S.D.C. for the Northern District of Illinois against the company and certain of its executive officers. Subject to court approval of the settlement, all claims and related, consolidated cases will be favorably resolved. On July 31, 2015, Davita Healthcare Partners, Inc. filed suit against Baxter Healthcare Corporation in the District Court of the State of Colorado for a breach of contract claim regarding an ongoing commercial dispute relating to the provision of peritoneal dialysis products. The company intends to vigorously defend against the suit. Other In May 2014, the company received a formal demand for information from the United States Attorney for the Western District of Pennsylvania for information related to alleged “off-label” sales of its pulmonary treatments. The Department of Justice informed the company on February 27, 2015 that its investigation is closed. 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 | 6 Months Ended |
Jun. 30, 2015 | |
SEGMENT INFORMATION | 13. 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. Prior to 2015, the company’s biosurgery products and services were reported in the BioScience segment. In preparation of the planned spin-off of Baxalta, the company realigned its biosurgery products and services to the Medical Products segment. Effective January 1, 2015, the company changed its segment presentation to reflect this new structure, and recast all prior periods presented to conform to the new presentation. The segments and a description of their products and services are as follows: The BioScience The Medical Products The operating results of the Vaccines franchise, previously reported within the BioScience segment, have been reflected as discontinued operations for the three and six months ended June 30, 2015 and 2014. Refer to Note 1 for additional information regarding the presentation of the Vaccines franchise. 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 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, 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, nonstrategic investments and related income and expense, certain employee benefit plan costs as well as certain nonrecurring gains, losses, and other charges (such as business optimization and asset impairment). With respect to depreciation and amortization and expenditures for long-lived assets, the difference between the segment totals and the consolidated totals principally relate to assets maintained at Corporate. Financial information for the company’s segments is as follows. Three months ended Six months ended June 30, June 30, (in millions) 2015 2014 2015 2014 Net sales BioScience $ 1,429 $ 1,452 $2,790 $2,781 Medical Products 2,464 2,702 4,867 5,221 Total net sales $ 3,893 $ 4,154 $7,657 $8,002 Pre-tax income from continuing operations BioScience $ 427 $ 479 $ 863 $ 963 Medical Products 310 299 582 641 Total pre-tax income from continuing operations segments $ 737 $ 778 $1,445 $1,604 June 30, December 31, (in millions) 2015 2014 Total assets BioScience $ 10,123 $ 9,312 Medical Products 11,654 12,064 Other 8,238 4,541 Total assets $ 30,015 $25,917 The following is a reconciliation of segment pre-tax income from continuing operations to income before income taxes from continuing operations per the condensed consolidated statements of income. Three months ended Six months ended June 30, June 30, (in millions) 2015 2014 2015 2014 Total pre-tax income from continuing operations from segments $737 $778 $ 1,445 $ 1,604 Unallocated amounts Stock compensation (48 ) (41 ) (87 ) (72 ) Net interest expense (34 ) (42 ) (64 ) (85 ) Business optimization items (14 ) 32 (3 ) 12 Certain foreign currency fluctuations and hedging activities 22 10 137 26 Other Corporate items (195 ) (135 ) (430 ) (230 ) Income from continuing operations before income taxes $468 $602 $ 998 $ 1,255 |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 6 Months Ended |
Jun. 30, 2015 | |
SUBSEQUENT EVENTS | 14. SUBSEQUENT EVENTS Refer to Notes 1, 7, and 11 for additional information regarding the spin-off of Baxalta as well as other events that occurred after June 30, 2015. |
BASIS OF PRESENTATION (Tables)
BASIS OF PRESENTATION (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
Summary of Operating Results Reflected as Discontinued Operations and Assets and Liabilities Classified as Held for Sale Associated with Franchise Vaccines | Following is a summary of the operating results of the Vaccines franchise, which have been reflected as discontinued operations for the three and six months ended June 30, 2015 and 2014. Three months ended Six months ended June 30, June 30, (in millions) 2015 2014 2015 2014 Net sales $ — $110 $1 $213 (Loss) income before income taxes (5) 59 6 115 Income tax (benefit) expense (1) 7 — 14 Net (loss) income $(4) $52 $6 $101 |
SUPPLEMENTAL FINANCIAL INFORM23
SUPPLEMENTAL FINANCIAL INFORMATION (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
Net Interest Expense | Net interest expense Three months ended Six months ended June 30, June 30, (in millions) 2015 2014 2015 2014 Interest expense, net of capitalized interest $40 $47 $ 75 $ 95 Interest income (6 ) (5 ) (11 ) (10) Net interest expense $34 $42 $ 64 $ 85 |
Inventories | Inventories June 30, December 31, (in millions) 2015 2014 Raw materials $ 900 $ 910 Work in process 1,226 1,126 Finished goods 1,716 1,523 Inventories $3,842 $3,559 |
Property, Plant and Equipment, Net | Property, plant and equipment, net June 30, December 31, (in millions) 2015 2014 Property, plant and equipment, at cost $15,146 $14,808 Accumulated depreciation (6,179 ) (6,110 ) Property, plant and equipment (PP&E), net $ 8,967 $ 8,698 |
EARNINGS PER SHARE (Tables)
EARNINGS PER SHARE (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
Reconciliation of Basic Shares to Diluted Shares | The following is a reconciliation of basic shares to diluted shares. Three months ended Six months ended June 30, June 30, (in millions) 2015 2014 2015 2014 Basic shares 544 542 544 542 Effect of dilutive securities 5 6 4 6 Diluted shares 549 548 548 548 |
ACQUISITIONS AND COLLABORATIO25
ACQUISITIONS AND COLLABORATIONS (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
Summary of Fair Value of Consideration Transferred and Amounts Recognized for Assets Acquired and Liabilities Assumed | The following table summarizes the fair value of the consideration transferred and the recognized amounts of the assets acquired and liabilities assumed as of the acquisition date. (in millions) Consideration transferred Cash, net of cash acquired $228 Fair value of consideration transferred $228 Assets acquired and liabilities assumed Deferred tax asset $ 17 In-process research and development (IPR&D) 179 Other assets, net 1 Deferred tax liability (52 ) Total identifiable net assets 145 Goodwill 83 Total assets acquired and liabilities assumed $228 |
GOODWILL AND OTHER INTANGIBLE26
GOODWILL AND OTHER INTANGIBLE ASSETS, NET (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
Goodwill | The following is a reconciliation of goodwill by business segment. (in millions) BioScience Medical Products Total Balance as of December 31, 2014 $ 947 $2,927 $3,874 Additions 83 — 83 Currency translation and other adjustments (13 ) (152 ) (165 ) Balance as of June 30, 2015 $1,017 $2,775 $3,792 |
Indefinite-lived intangible assets | The following is a summary of the company’s other intangible assets. (in millions) Developed technology, including patents Other amortized intangible assets Indefinite-lived intangible assets Total June 30, 2015 Gross other intangible assets $2,223 $ 431 $423 $3,077 Accumulated amortization (835 ) (158 ) — (993 ) Other intangible assets, net $1,388 $ 273 $423 $2,084 December 31, 2014 Gross other intangible assets $2,278 $ 443 $272 $2,993 Accumulated amortization (769 ) (145 ) — (914 ) Other intangible assets, net $1,509 $ 298 $272 $2,079 |
Other Intangible Assets, Net | The following is a summary of the company’s other intangible assets. (in millions) Developed technology, including patents Other amortized intangible assets Indefinite-lived intangible assets Total June 30, 2015 Gross other intangible assets $2,223 $ 431 $423 $3,077 Accumulated amortization (835 ) (158 ) — (993 ) Other intangible assets, net $1,388 $ 273 $423 $2,084 December 31, 2014 Gross other intangible assets $2,278 $ 443 $272 $2,993 Accumulated amortization (769 ) (145 ) — (914 ) Other intangible assets, net $1,509 $ 298 $272 $2,079 |
INFUSION PUMP AND BUSINESS OP27
INFUSION PUMP AND BUSINESS OPTIMIZATION CHARGES (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
Total Charges | Three months ended Six months ended June 30, June 30, (in millions) 2015 2014 2015 2014 Cash expenses $12 $ 4 $ 28 $ 32 Non-cash expenses 2 1 4 1 Reserve adjustments — (37 ) (29 ) (37 ) Total business optimization items $14 $(32 ) $ 3 $ (4 ) Discontinued operations — — — (8 ) Business optimization items in continuing operations $14 $(32 ) $ 3 $(12 ) |
Business Optimization Initiatives | The following table summarizes cash activity in the reserves related to the company’s business optimization initiatives. (in millions) Reserves as of December 31, 2014 $ 169 Charges 28 Reserve adjustments (29 ) Utilization (36 ) CTA (10 ) Reserves as of June 30, 2015 $ 122 |
DEBT, FINANCIAL INSTRUMENTS A28
DEBT, FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
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 Six months ended (in millions) 2015 2014 2015 2014 Sold receivables at beginning of period $ 96 $ 109 $ 104 $ 114 Proceeds from sales of receivables 117 117 230 240 Cash collections (remitted to the owners of the receivables) (105 ) (120 ) (225 ) (249 ) Effect of currency exchange rate changes (2 ) — (3 ) 1 Sold receivables at end of period $ 106 $ 106 $ 106 $ 106 |
Summary of Gains and Losses on Derivative Instruments | The following tables summarize the income statement locations and gains and losses on the company’s derivative instruments for the three months ended June 30, 2015 and 2014. Gain (loss) recognized in OCI Location of gain (loss) in income statement Gain (loss) reclassified from AOCI (in millions) 2015 2014 2015 2014 Cash flow hedges Interest rate contracts $ 93 $ — Net interest expense $— $— Foreign exchange contracts — 1 Net sales — 1 Foreign exchange contracts (18 ) 5 Cost of sales 30 (3 ) Total $ 75 $ 6 $30 $(2 ) Gain (loss) recognized in income (in millions) Location of gain (loss) in income statement 2015 2014 Fair value hedges Interest rate contracts Net interest expense $(72) $ 17 Undesignated derivative instruments Foreign exchange contracts Other (income) expense, net $(17) $(22 ) The following tables summarize the income statement locations and gains and losses on the company’s derivative instruments for the six months ended June 30, 2015 and 2014. Gain (loss) recognized in OCI Location of gain (loss) in income statement Gain (loss) reclassified from AOCI (in millions) 2015 2014 2015 2014 Cash flow hedges Interest rate contracts $38 $ — Net interest expense $— $(1 ) Foreign exchange contracts (1 ) — Net sales — 1 Foreign exchange contracts 46 (6) Cost of sales 55 2 Total $83 $(6) $55 $ 2 Gain (loss) recognized in income (in millions) Location of gain (loss) in income statement 2015 2014 Fair value hedges Interest rate contracts Net interest expense $(25) $ 31 Undesignated derivative instruments Foreign exchange contracts Other (income) expense, net $(25) $(10 ) |
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 June 30, 2015. 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 $ 76 Other long-term liabilities $12 Foreign exchange contracts Prepaid expenses and other 33 Accounts payable and 5 Foreign exchange contracts Other long-term assets 1 Other long-term liabilities 2 Total derivative instruments designated as hedges $110 $19 Undesignated derivative instruments Foreign exchange contracts Prepaid expenses and other $ 1 Accounts payable and $ 2 Total derivative instruments $111 $21 The following table summarizes the classification and fair values of derivative instruments reported in the condensed consolidated balance sheet as of December 31, 2014. 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 Prepaid expenses and other $ 1 Accounts payable and $ 2 Interest rate contracts Other long-term assets 89 Other long-term liabilities — Foreign exchange contracts Prepaid expenses and other 51 Accounts payable and — Total derivative instruments designated as hedges $141 $ 2 Undesignated derivative instruments Foreign exchange contracts Prepaid expenses and other $ — Accounts payable and $23 Total derivative instruments $141 $25 |
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. June 30, 2015 December 31, 2014 (in millions) Asset Liability Asset Liability Gross amounts recognized in the consolidated balance sheet $111 $21 $141 $25 Gross amount subject to offset in master netting arrangements not offset in the consolidated balance sheet (21 ) (21 ) (22 ) (22 ) Total $ 90 $— $119 $ 3 |
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 June 30, 2015 Quoted prices in (Level 1) Significant other (Level 2) Significant inputs (Level 3) Assets Foreign currency hedges $ 35 $ — $ 35 $ — Interest rate hedges 76 — 76 — Available-for-sale securities Equity securities 117 117 — — Foreign government debt securities 16 — 16 — Total assets $244 $117 $127 $ — Liabilities Foreign currency hedges $ 9 $ — $ 9 $ — Interest rate hedges 12 — 12 — Contingent payments related to acquisitions 553 — — 553 Total liabilities $574 $ — $ 21 $553 Basis of fair value measurement (in millions) Balance as of December 31, 2014 Quoted prices in (Level 1) Significant other (Level 2) Significant inputs (Level 3) Assets Foreign currency hedges $ 51 $ — $ 51 $ — Interest rate hedges 90 — 90 — Available-for-sale securities Equity securities 105 105 — — Foreign government debt securities 18 — 18 — Total assets $264 $105 $159 $ — Liabilities Foreign currency hedges $ 23 $ — $ 23 $ — Interest rate hedges 2 — 2 — Contingent payments related to acquisitions 569 — — 569 Total liabilities $594 $ — $ 25 $569 |
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 June 30, 2015 and December 31, 2014. Book values Approximate fair values (in millions) 2015 2014 2015 2014 Assets Investments $ 65 $ 54 $ 65 $ 52 Liabilities Short-term debt 1,493 913 1,493 913 Current maturities of long-term debt and lease obligations 671 786 671 791 Long-term debt and lease obligations 12,054 7,606 12,421 8,192 Long-term litigation liabilities 50 53 49 52 |
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 June 30, 2015 and December 31, 2014. Basis of fair value measurement (in millions) Fair value as of June 30, 2015 Quoted prices in (Level 1) Significant other (Level 2) Significant inputs (Level 3) Assets Investments $ 65 $— $ 10 $55 Total assets $ 65 $— $ 10 $55 Liabilities Short-term debt $ 1,493 $— $ 1,493 $— Current maturities of long-term debt and lease obligations 671 — 671 — Long-term debt and lease obligations 12,421 — 12,421 — Long-term litigation liabilities 49 — — 49 Total liabilities $14,634 $— $14,585 $49 Basis of fair value measurement (in millions) Fair value as of December 31, 2014 Quoted prices in (Level 1) Significant other (Level 2) Significant inputs (Level 3) Assets Investments $ 52 $— $ 8 $44 Total assets $ 52 $— $ 8 $44 Liabilities Short-term debt $ 913 $— $ 913 $— Current maturities of long-term debt and lease obligations 791 — 791 — Long-term debt and lease obligations 8,192 — 8,192 — Long-term litigation liabilities 52 — — 52 Total liabilities $9,948 $— $9,896 $52 |
STOCK COMPENSATION (Tables)
STOCK COMPENSATION (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
Stock Options Fair Value Assumptions | The weighted-average Black-Scholes 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. Six months ended 2015 2014 Expected volatility 20% 24% Expected life (in years) 5.5 5.5 Risk-free interest rate 1.7% 1.7% Dividend yield 3.0% 2.8% Fair value per stock option $9 $12 |
RETIREMENT AND OTHER BENEFIT 30
RETIREMENT AND OTHER BENEFIT PROGRAMS (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
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 Six months ended June 30, June 30, (in millions) 2015 2014 2015 2014 Pension benefits Service cost $38 $33 $ 75 $ 66 Interest cost 56 60 111 120 Expected return on plan assets (71 ) (68 ) (138 ) (134 ) Amortization of net losses and other deferred amounts 51 36 102 72 Net periodic pension benefit cost $74 $61 $150 $124 OPEB Service cost $ 1 $ 2 $ 2 $ 3 Interest cost 4 7 10 14 Amortization of net loss and prior service credit (3 ) — (4 ) — Net periodic OPEB cost $ 2 $ 9 $ 8 $ 17 |
Significant Weighted-Average Assumptions Used in Determining Benefit Obligations at Measurement Date | The significant weighted-average assumptions used at the measurement date were as follows. Pension benefits OPEB Discount rate U.S. plans 4.03% 3.78% International plans 1.32% n/a Expected return on plan assets U.S. plans 7.25% n/a International plans 5.74% n/a Rate of compensation increase U.S. plans 3.80% n/a International plans 3.30% n/a Annual rate of increase in the per-capita cost n/a 6.00% Rate decreased to n/a 5.00% by the year ended n/a 2019 |
SHAREHOLDERS' EQUITY (Tables)
SHAREHOLDERS' EQUITY (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
Summary of Changes in AOCI by Component | The following is a net-of-tax summary of the changes in AOCI by component for the six months ended June 30, 2015 and 2014. (in millions) CTA Pension and Hedging Other Total Gains (losses) Balance as of December 31, 2014 $(2,323 ) $(1,427 ) $34 $66 $(3,650 ) Other comprehensive income before reclassifications (717 ) 114 53 24 (526 ) Amounts reclassified from AOCI (a) — 67 (35 ) (2 ) 30 Net other comprehensive (loss) income (717 ) 181 18 22 (496 ) Balance as of June 30, 2015 $(3,040 ) $(1,246 ) $52 $88 $(4,146 ) (in millions) CTA Pension and Hedging Other Total Gains (losses) Balance as of December 31, 2013 $ (991 ) $(1,027 ) $10 $32 $(1,976 ) Other comprehensive income before reclassifications (207 ) 2 (5 ) (7 ) (217 ) Amounts reclassified from AOCI (a) — 49 (1 ) — 48 Net other comprehensive (loss) income (207 ) 51 (6 ) (7 ) (169 ) Balance as of June 30, 2014 $(1,198 ) $ (976 ) $ 4 $25 $(2,145 ) (a) See table below for details about these reclassifications. |
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 six months ended June 30, 2015 and 2014. Amounts reclassified from AOCI (a) (in millions) Three months ended June 30, 2015 Six months ended June 30, 2015 Location of impact in income statement Amortization of pension and other employee benefits items Actuarial losses and other $(48 )(b) $(98 )(b) (48 ) (98 ) Total before tax 16 31 Tax benefit $(32 ) $(67 ) Net of tax Gains (losses) on hedging activities Interest rate contracts $ — $ — Net interest expense Foreign exchange contracts — — Net sales Foreign exchange contracts 30 55 Cost of sales 30 55 Total before tax (11 ) (20 ) Tax expense $ 19 $ 35 Net of tax Other Gain on sale of available-for-sale equity securities $ 15 $ 15 Other (income) expense, net Other-than-temporary impairment of available-for-sale equity securities — (9 ) Other (income) expense, net 15 6 Total before tax (6 ) (4 ) Tax expense $ 9 $ 2 Net of tax Total reclassification for the period $ (4 ) $(30 ) Total net of tax Amounts reclassified from AOCI (a) (in millions) Three months ended June 30, 2014 Six months ended June 30, 2014 Location of impact in income statement Amortization of pension and other employee benefits items Actuarial losses and other $(36 )(b) $(72 )(b) (36 ) (72 ) Total before tax 13 23 Tax benefit $(23 ) $(49 ) Net of tax Gains (losses) on hedging activities Interest rate contracts $ — $ (1 ) Net interest expense Foreign exchange contracts 1 1 Net sales Foreign exchange contracts (3 ) 2 Cost of sales (2 ) 2 Total before tax 1 (1 ) Tax expense $ (1 ) $ 1 Net of tax Total reclassification for the period $(24 ) $(48 ) 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. |
SEGMENT INFORMATION (Tables)
SEGMENT INFORMATION (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
Segment Information | Financial information for the company’s segments is as follows. Three months ended Six months ended June 30, June 30, (in millions) 2015 2014 2015 2014 Net sales BioScience $ 1,429 $ 1,452 $2,790 $2,781 Medical Products 2,464 2,702 4,867 5,221 Total net sales $ 3,893 $ 4,154 $7,657 $8,002 Pre-tax income from continuing operations BioScience $ 427 $ 479 $ 863 $ 963 Medical Products 310 299 582 641 Total pre-tax income from continuing operations segments $ 737 $ 778 $1,445 $1,604 June 30, December 31, (in millions) 2015 2014 Total assets BioScience $ 10,123 $ 9,312 Medical Products 11,654 12,064 Other 8,238 4,541 Total assets $ 30,015 $25,917 |
Pre-Tax Income from Continuing Operations Reconciliation | The following is a reconciliation of segment pre-tax income from continuing operations to income before income taxes from continuing operations per the condensed consolidated statements of income. Three months ended Six months ended June 30, June 30, (in millions) 2015 2014 2015 2014 Total pre-tax income from continuing operations from segments $737 $778 $ 1,445 $ 1,604 Unallocated amounts Stock compensation (48 ) (41 ) (87 ) (72 ) Net interest expense (34 ) (42 ) (64 ) (85 ) Business optimization items (14 ) 32 (3 ) 12 Certain foreign currency fluctuations and hedging activities 22 10 137 26 Other Corporate items (195 ) (135 ) (430 ) (230 ) Income from continuing operations before income taxes $468 $602 $ 998 $ 1,255 |
Basis of Presentation- Addition
Basis of Presentation- Additional Information (Detail) - USD ($) $ / shares in Units, $ in Millions | Jul. 01, 2015 | Mar. 31, 2015 |
Subsequent Event | Spinoff | ||
Disclosure Basis Of Presentation Details [Line Items] | ||
Percentage of outstanding common stock distributed | 80.50% | |
Record date for distribution | Jun. 17, 2015 | |
Number of common stock distributed | 544,521,483 | |
Number of common stock held by Baxter after spinoff | 131,902,719 | |
Value of common stock held by Baxter after spinoff | $ 4,300 | |
Stock price per share | $ 32.54 | |
Vaccines | ||
Disclosure Basis Of Presentation Details [Line Items] | ||
After-tax gain from divestiture of commercial vaccines business | $ 9 |
Summary of Operating Results Re
Summary of Operating Results Reflected as Discontinued Operations (Detail) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | |
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||||
Net (loss) income | $ (4) | $ 52 | $ 6 | $ 101 |
Vaccines Franchise | ||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||||
Net sales | 110 | 1 | 213 | |
(Loss) income before income taxes | (5) | 59 | 6 | 115 |
Income tax (benefit) expense | (1) | 7 | 14 | |
Net (loss) income | $ (4) | $ 52 | $ 6 | $ 101 |
Net Interest Expense (Detail)
Net Interest Expense (Detail) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | |
Interest Income Expense Net | ||||
Interest expense, net of capitalized interest | $ 40 | $ 47 | $ 75 | $ 95 |
Interest income | (6) | (5) | (11) | (10) |
Net interest expense | $ 34 | $ 42 | $ 64 | $ 85 |
Inventories (Detail)
Inventories (Detail) - USD ($) $ in Millions | Jun. 30, 2015 | Dec. 31, 2014 |
Inventory | ||
Raw materials | $ 900 | $ 910 |
Work in process | 1,226 | 1,126 |
Finished goods | 1,716 | 1,523 |
Inventories | $ 3,842 | $ 3,559 |
Property, Plant and Equipment ,
Property, Plant and Equipment ,Net (Detail) - USD ($) $ in Millions | Jun. 30, 2015 | Dec. 31, 2014 |
Property, Plant and Equipment, Net | ||
Property, plant and equipment, at cost | $ 15,146 | $ 14,808 |
Accumulated depreciation | (6,179) | (6,110) |
Property, plant and equipment (PP&E), net | $ 8,967 | $ 8,698 |
Reconciliation of Basic Shares
Reconciliation of Basic Shares to Diluted Shares (Detail) - shares shares in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | |
Reconciliation of Basic Shares to Diluted Shares | ||||
Basic shares | 544 | 542 | 544 | 542 |
Effect of dilutive securities | 5 | 6 | 4 | 6 |
Diluted shares | 549 | 548 | 548 | 548 |
Earnings Per Share - Additional
Earnings Per Share - Additional Information (Detail) - shares shares in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Anti-dilutive securities excluded from computation of EPS | 21 | 11 | 16 | 9 |
Summary of Fair Value of Consid
Summary of Fair Value of Consideration Transferred and Amounts Recognized for Assets Acquired and Liabilities Assumed (Detail) - USD ($) $ in Millions | 1 Months Ended | 6 Months Ended | ||
Mar. 31, 2015 | Jun. 30, 2015 | Jun. 30, 2014 | Dec. 31, 2014 | |
Consideration transferred | ||||
Cash, net of cash acquired | $ 341 | $ 176 | ||
Assets acquired and liabilities assumed | ||||
Goodwill | $ 3,792 | $ 3,874 | ||
SuppreMol GmbH | ||||
Consideration transferred | ||||
Cash, net of cash acquired | $ 228 | |||
Fair value of consideration transferred | 228 | |||
Assets acquired and liabilities assumed | ||||
Deferred tax asset | 17 | |||
In-process research and development (IPR&D) | 179 | |||
Other assets, net | 1 | |||
Deferred tax liability | (52) | |||
Total identifiable net assets | 145 | |||
Goodwill | 83 | |||
Total assets acquired and liabilities assumed | $ 228 |
Acquisitions and Collaboratio41
Acquisitions and Collaborations - Additional Information (Detail) - USD ($) | 1 Months Ended | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2015 | Mar. 31, 2015 | Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | |
Acquisitions And Collaborations [Line Items] | ||||||
Research and development charges | $ 388,000,000 | $ 322,000,000 | $ 688,000,000 | $ 631,000,000 | ||
SuppreMol GmbH | ||||||
Acquisitions And Collaborations [Line Items] | ||||||
In-process research and development (IPR&D) | $ 179,000,000 | |||||
IPR&D completion term | 5 years | |||||
SuppreMol GmbH | In-process research and development (IPR&D) | ||||||
Acquisitions And Collaborations [Line Items] | ||||||
Cash flow projections discount rate | 20.00% | |||||
SuppreMol GmbH | Minimum | In-process research and development (IPR&D) | ||||||
Acquisitions And Collaborations [Line Items] | ||||||
Future research and development costs | $ 400,000,000 | |||||
SFJ Pharmaceuticals Group (SFJ) | ||||||
Acquisitions And Collaborations [Line Items] | ||||||
Contingent success payment description | The contingent success payments, which total approximately 5.5 times the incurred development costs | |||||
Contingent success payment period | 8 years | |||||
Research and development charges | (9,000,000) | |||||
SFJ Pharmaceuticals Group (SFJ) | Maximum | ||||||
Acquisitions And Collaborations [Line Items] | ||||||
Business collaboration development cost funding | $ 200,000,000 | 200,000,000 | $ 200,000,000 | |||
CTI BioPharma Corp. | ||||||
Acquisitions And Collaborations [Line Items] | ||||||
Business collaboration contingent milestone payment | $ 32,000,000 | |||||
Collaboration arrangements | ||||||
Acquisitions And Collaborations [Line Items] | ||||||
Research and development charges | $ 87,000,000 | $ 35,000,000 | $ 87,000,000 | $ 60,000,000 |
Goodwill (Detail)
Goodwill (Detail) $ in Millions | 6 Months Ended |
Jun. 30, 2015USD ($) | |
Goodwill [Line Items] | |
Goodwill, beginning balance | $ 3,874 |
Additions | 83 |
Currency translation and other adjustments | (165) |
Goodwill, ending balance | 3,792 |
BioScience | |
Goodwill [Line Items] | |
Goodwill, beginning balance | 947 |
Additions | 83 |
Currency translation and other adjustments | (13) |
Goodwill, ending balance | 1,017 |
Medical Products | |
Goodwill [Line Items] | |
Goodwill, beginning balance | 2,927 |
Currency translation and other adjustments | (152) |
Goodwill, ending balance | $ 2,775 |
Goodwill and Other Intangible43
Goodwill and Other Intangible Assets, Net - Additional Information (Detail) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | |
Goodwill And Other Intangible Asset [Line Items] | ||||
Accumulated goodwill impairment losses | $ 0 | $ 0 | ||
Amortization expense | $ 48,000,000 | $ 47,000,000 | $ 96,000,000 | $ 90,000,000 |
Other Intangible Assets, Net (D
Other Intangible Assets, Net (Detail) - USD ($) $ in Millions | Jun. 30, 2015 | Dec. 31, 2014 |
Intangible Asset Excluding Goodwill [Line Items] | ||
Gross other intangible assets | $ 3,077 | $ 2,993 |
Accumulated amortization | (993) | (914) |
Other intangible assets, net | 2,084 | 2,079 |
Developed technology, including patents | ||
Intangible Asset Excluding Goodwill [Line Items] | ||
Gross other intangible assets | 2,223 | 2,278 |
Accumulated amortization | (835) | (769) |
Other intangible assets, net | 1,388 | 1,509 |
Other Intangible Assets | ||
Intangible Asset Excluding Goodwill [Line Items] | ||
Gross other intangible assets | 431 | 443 |
Accumulated amortization | (158) | (145) |
Other intangible assets, net | 273 | 298 |
Indefinite Lived Intangible Assets | ||
Intangible Asset Excluding Goodwill [Line Items] | ||
Gross other intangible assets | 423 | 272 |
Other intangible assets, net | $ 423 | $ 272 |
Business Optimization Initiativ
Business Optimization Initiatives (Detail) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | |
Restructuring Cost and Reserve [Line Items] | ||||
Cash expenses | $ 12 | $ 4 | $ 28 | $ 32 |
Non-cash expenses | 2 | 1 | 4 | 1 |
Reserve adjustments | (37) | (29) | (37) | |
Total business optimization items | 14 | (32) | 3 | (4) |
Discontinued operations | (8) | |||
Business optimization items in continuing operations | $ 14 | $ (32) | $ 3 | $ (12) |
Infusion Pump and Business Op46
Infusion Pump and Business Optimization Charges - Additional Information (Detail) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | |
Business Optimization Initiative | ||||
Costs associated with optimizing the cost structure | $ 14 | $ (32) | $ 3 | $ (12) |
Restructuring cost recorded in discontinued operations | 8 | |||
Cost of Sales | ||||
Business Optimization Initiative | ||||
Costs associated with optimizing the cost structure | 3 | (14) | (4) | (10) |
Marketing and Administrative Expenses | ||||
Business Optimization Initiative | ||||
Costs associated with optimizing the cost structure | 8 | (16) | 10 | (6) |
Research and Development Expenses | ||||
Business Optimization Initiative | ||||
Costs associated with optimizing the cost structure | $ 3 | $ (2) | $ (3) | $ 4 |
Business Optimization Charges (
Business Optimization Charges (Detail) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | |
Business Optimization Initiatives | ||||
Reserves, beginning balance | $ 169 | |||
Charges | $ 12 | $ 4 | 28 | $ 32 |
Reserve adjustments | $ (37) | (29) | $ (37) | |
Utilization | (36) | |||
CTA | (10) | |||
Reserves, ending balance | $ 122 | $ 122 |
Summary of Activity Relating to
Summary of Activity Relating to Securitization Arrangement (Detail) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | |
Accounts Receivable Securitization [Line Items] | ||||
Sold receivables at beginning of period | $ 96 | $ 109 | $ 104 | $ 114 |
Proceeds from sales of receivables | 117 | 117 | 230 | 240 |
Cash collections (remitted to the owners of the receivables) | (105) | (120) | (225) | (249) |
Effect of currency exchange rate changes | (2) | (3) | 1 | |
Sold receivables at end of period | $ 106 | $ 106 | $ 106 | $ 106 |
Debt, Financial Instruments a49
Debt, Financial Instruments and Fair Value Measurements - Additional Information (Detail) | Jul. 31, 2015USD ($) | Jun. 30, 2015USD ($) | Sep. 30, 2015USD ($) | Jun. 30, 2015USD ($) | Mar. 31, 2015USD ($) | Jun. 30, 2014USD ($) | Jun. 30, 2015USD ($) | Jun. 30, 2014USD ($) | Dec. 31, 2014USD ($) | Jul. 01, 2015USD ($) | Jul. 01, 2015EUR (€) | Dec. 31, 2013USD ($) |
Debt and Financial Instruments [Line Items] | ||||||||||||
Senior notes | $ 5,000,000,000 | $ 5,000,000,000 | $ 5,000,000,000 | |||||||||
Net proceeds of senior notes issued | 4,000,000,000 | |||||||||||
Debt discount | 51,000,000 | 51,000,000 | 51,000,000 | |||||||||
Deferred debt issuance costs | 9,000,000 | 9,000,000 | 9,000,000 | |||||||||
Borrowing | $ 0 | |||||||||||
Commercial paper outstanding | 0 | 0 | 0 | 875,000,000 | ||||||||
Net gain deferred in accumulated other comprehensive income (AOCI) | 52,000,000 | 52,000,000 | $ 4,000,000 | $ 52,000,000 | $ 4,000,000 | 34,000,000 | $ 10,000,000 | |||||
Maximum length of time hedge in cash flow hedge | 18 months | |||||||||||
Losses on hedged item in fair value hedge | 72,000,000 | (17,000,000) | $ 25,000,000 | (31,000,000) | ||||||||
Deferred, net after-tax gains on derivative instruments | 26,000,000 | |||||||||||
Cash and equivalents | 6,680,000,000 | 6,680,000,000 | 1,866,000,000 | $ 6,680,000,000 | 1,866,000,000 | 2,925,000,000 | $ 2,733,000,000 | |||||
Weighted average probability | 26.00% | |||||||||||
Available for sale equity securities amortized cost basis | 61,000,000 | 61,000,000 | $ 61,000,000 | 79,000,000 | ||||||||
Available for sale equity securities fair value | 117,000,000 | 117,000,000 | 117,000,000 | 105,000,000 | ||||||||
Unfunded commitment payments | 78,000,000 | 78,000,000 | 78,000,000 | 38,000,000 | ||||||||
Equity income recognized from equity method investments | 25,000,000 | 44,000,000 | ||||||||||
Forward-starting interest rate swaps | ||||||||||||
Debt and Financial Instruments [Line Items] | ||||||||||||
Derivative amount of hedge item | $ 1,800,000,000 | |||||||||||
Net gain deferred in accumulated other comprehensive income (AOCI) | 36,700,000 | 36,700,000 | 36,700,000 | |||||||||
Equity Securities | ||||||||||||
Debt and Financial Instruments [Line Items] | ||||||||||||
Available for sale equity securities net unrealized gain (loss) | 56,000,000 | 26,000,000 | ||||||||||
Available for sale equity securities cumulative unrealized losses | 2,000,000 | 2,000,000 | 2,000,000 | 9,000,000 | ||||||||
Available for sale equity securities cumulative unrealized gain | 58,000,000 | 58,000,000 | 58,000,000 | 35,000,000 | ||||||||
Available for sale equity securities other-than-temporary impairment charges | $ 9,000,000 | |||||||||||
Domestic Line of Credit | ||||||||||||
Debt and Financial Instruments [Line Items] | ||||||||||||
Borrowing | $ 1,500,000,000 | |||||||||||
Interest rate | 1.37% | |||||||||||
Line of Credit Facility Amount Outstanding | 1,800,000,000 | 1,800,000,000 | $ 1,800,000,000 | |||||||||
Fair Value, Inputs, Level 2 | ||||||||||||
Debt and Financial Instruments [Line Items] | ||||||||||||
Money market funds, at carrying value | 2,000,000,000 | 2,000,000,000 | 2,000,000,000 | 989,000,000 | ||||||||
Dedesignated As Hedging Instrument | ||||||||||||
Debt and Financial Instruments [Line Items] | ||||||||||||
Derivative notional amount | 0 | 0 | 0 | 0 | 0 | |||||||
Terminated Fair Value Hedge | ||||||||||||
Debt and Financial Instruments [Line Items] | ||||||||||||
Derivative notional amount | 0 | 0 | $ 0 | 0 | $ 0 | |||||||
Not Designated as Hedging Instrument | ||||||||||||
Debt and Financial Instruments [Line Items] | ||||||||||||
Derivative notional amount | 681,000,000 | 681,000,000 | 681,000,000 | 434,000,000 | ||||||||
Foreign exchange contract | ||||||||||||
Debt and Financial Instruments [Line Items] | ||||||||||||
Derivative notional amount | 1,200,000,000 | 1,200,000,000 | 1,200,000,000 | 917,000,000 | ||||||||
Interest rate contract | ||||||||||||
Debt and Financial Instruments [Line Items] | ||||||||||||
Derivative notional amount | 0 | 0 | 0 | 550,000,000 | ||||||||
Interest rate contract | Fair value hedges | ||||||||||||
Debt and Financial Instruments [Line Items] | ||||||||||||
Derivative notional amount | 3,900,000,000 | 3,900,000,000 | 3,900,000,000 | $ 2,900,000,000 | ||||||||
Senior notes maturing June 2018 | ||||||||||||
Debt and Financial Instruments [Line Items] | ||||||||||||
Senior notes | $ 375,000,000 | $ 375,000,000 | $ 375,000,000 | |||||||||
Senior notes, coupon rates | 2.00% | 2.00% | 2.00% | |||||||||
Higher rate of debt maturity periods | June 2,018 | |||||||||||
Senior Notes maturing 2020 | ||||||||||||
Debt and Financial Instruments [Line Items] | ||||||||||||
Senior notes | $ 1,000,000,000 | $ 1,000,000,000 | $ 1,000,000,000 | |||||||||
Senior notes, coupon rates | 2.875% | 2.875% | 2.875% | |||||||||
Higher rate of debt maturity periods | June 2,020 | |||||||||||
Senior Notes maturing 2022 | ||||||||||||
Debt and Financial Instruments [Line Items] | ||||||||||||
Senior notes | $ 500,000,000 | $ 500,000,000 | $ 500,000,000 | |||||||||
Senior notes, coupon rates | 3.60% | 3.60% | 3.60% | |||||||||
Higher rate of debt maturity periods | June 2,022 | |||||||||||
Senior Notes maturing 2025 | ||||||||||||
Debt and Financial Instruments [Line Items] | ||||||||||||
Senior notes | $ 1,750,000,000 | $ 1,750,000,000 | $ 1,750,000,000 | |||||||||
Senior notes, coupon rates | 4.00% | 4.00% | 4.00% | |||||||||
Higher rate of debt maturity periods | June of 2025 | |||||||||||
Senior Notes Due Twenty Forty Five [Member] | ||||||||||||
Debt and Financial Instruments [Line Items] | ||||||||||||
Senior notes | $ 1,000,000,000 | $ 1,000,000,000 | $ 1,000,000,000 | |||||||||
Senior notes, coupon rates | 5.25% | 5.25% | 5.25% | |||||||||
Higher rate of debt maturity periods | June 2,045 | |||||||||||
Subsequent Event | Domestic Line of Credit | ||||||||||||
Debt and Financial Instruments [Line Items] | ||||||||||||
Credit facility maximum capacity | $ 1,500,000,000 | |||||||||||
Subsequent Event | Foreign Line of Credit | ||||||||||||
Debt and Financial Instruments [Line Items] | ||||||||||||
Credit facility maximum capacity | € | € 200,000,000 | |||||||||||
Subsequent Event | Facility terminated | Domestic Line of Credit | ||||||||||||
Debt and Financial Instruments [Line Items] | ||||||||||||
Credit facility maximum capacity | $ 1,500,000,000 | |||||||||||
Subsequent Event | Facility terminated | Foreign Line of Credit | ||||||||||||
Debt and Financial Instruments [Line Items] | ||||||||||||
Credit facility maximum capacity | € | € 300,000,000 | |||||||||||
Subsequent Event | Debt Tender Offer | ||||||||||||
Debt and Financial Instruments [Line Items] | ||||||||||||
Aggregate principal amount of debts repurchased | $ 2,700,000,000 | |||||||||||
Payment to repurchase Notes including accrued and unpaid interest and tender premium | $ 2,900,000,000 | |||||||||||
Subsequent Event | Debt Tender Offer | Purchase Date One | ||||||||||||
Debt and Financial Instruments [Line Items] | ||||||||||||
Tender offer date | Jul. 6, 2015 | |||||||||||
Subsequent Event | Debt Tender Offer | Purchase Date Two | ||||||||||||
Debt and Financial Instruments [Line Items] | ||||||||||||
Tender offer date | Jul. 21, 2015 | |||||||||||
Subsequent Event | Debt Tender Offer | Senior Notes maturing June 2016 | ||||||||||||
Debt and Financial Instruments [Line Items] | ||||||||||||
Senior notes, coupon rates | 5.90% | |||||||||||
Higher rate of debt maturity periods | September 2,016 | |||||||||||
Subsequent Event | Debt Tender Offer | 6.625% Debentures due 2028 | ||||||||||||
Debt and Financial Instruments [Line Items] | ||||||||||||
Senior notes, coupon rates | 6.625% | |||||||||||
Higher rate of debt maturity periods | February 2,028 | |||||||||||
Subsequent Event | Debt Tender Offer | Senior Notes due December 2037 | ||||||||||||
Debt and Financial Instruments [Line Items] | ||||||||||||
Senior notes, coupon rates | 6.25% | |||||||||||
Higher rate of debt maturity periods | December 2,037 | |||||||||||
Subsequent Event | Debt Tender Offer | Senior Notes Due Twenty Forty Two [Member] | ||||||||||||
Debt and Financial Instruments [Line Items] | ||||||||||||
Senior notes, coupon rates | 3.65% | |||||||||||
Higher rate of debt maturity periods | August 2,042 | |||||||||||
Subsequent Event | Debt Tender Offer | Senior Notes maturing June 2043 | ||||||||||||
Debt and Financial Instruments [Line Items] | ||||||||||||
Senior notes, coupon rates | 4.50% | |||||||||||
Higher rate of debt maturity periods | June 2,043 | |||||||||||
Subsequent Event | Debt Tender Offer | Senior Notes due June 2023 | ||||||||||||
Debt and Financial Instruments [Line Items] | ||||||||||||
Senior notes, coupon rates | 3.20% | |||||||||||
Higher rate of debt maturity periods | June 2,023 | |||||||||||
Subsequent Event | Debt Tender Offer | Senior Note Due August 2022 | ||||||||||||
Debt and Financial Instruments [Line Items] | ||||||||||||
Senior notes, coupon rates | 2.40% | |||||||||||
Higher rate of debt maturity periods | August 2,022 | |||||||||||
Countries With Liquidity Issues | ||||||||||||
Debt and Financial Instruments [Line Items] | ||||||||||||
Total accounts receivable from certain countries with liquidity issues | $ 327,000,000 | $ 327,000,000 | $ 327,000,000 | |||||||||
Countries With Liquidity Issues | Greece | ||||||||||||
Debt and Financial Instruments [Line Items] | ||||||||||||
Total accounts receivable from certain countries with liquidity issues | 48,000,000 | 48,000,000 | 48,000,000 | |||||||||
Forecast | Debt Tender Offer | ||||||||||||
Debt and Financial Instruments [Line Items] | ||||||||||||
Loss on extinguishment of debt | $ 130,000,000 | |||||||||||
London Interbank Offered Rate (LIBOR) [Member] | Senior notes maturing June 2018 | ||||||||||||
Debt and Financial Instruments [Line Items] | ||||||||||||
Senior notes | $ 375,000,000 | $ 375,000,000 | $ 375,000,000 | |||||||||
Higher rate of debt maturity periods | June 2,018 | |||||||||||
Senior notes, variable rate | 0.78% | |||||||||||
Commercial Paper | ||||||||||||
Debt and Financial Instruments [Line Items] | ||||||||||||
Debt instrument, weighted average interest rate | 0.46% |
Summary of Gains and Losses on
Summary of Gains and Losses on Derivative Instruments (Detail) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | ||
Derivative Instruments, Gain (Loss) [Line Items] | |||||
Gains (losses) on hedging activities reclassified from AOCI to net income, before tax | [1] | $ 30 | $ (2) | $ 55 | $ 2 |
Other (income) expense, net | Not Designated as Hedging Instrument | |||||
Derivative Instruments, Gain (Loss) [Line Items] | |||||
Gain (loss) recognized in income, undesignated derivative instruments | (17) | (22) | (25) | (10) | |
Interest rate contract | Net Interest Expense | |||||
Derivative Instruments, Gain (Loss) [Line Items] | |||||
Gains (losses) on hedging activities reclassified from AOCI to net income, before tax | [1] | (1) | |||
Cash Flow Hedges | |||||
Derivative Instruments, Gain (Loss) [Line Items] | |||||
Gain (loss) recognized in OCI | 75 | 6 | 83 | (6) | |
Gains (losses) on hedging activities reclassified from AOCI to net income, before tax | 30 | (2) | 55 | 2 | |
Cash Flow Hedges | Interest rate contract | |||||
Derivative Instruments, Gain (Loss) [Line Items] | |||||
Gain (loss) recognized in OCI | 93 | 38 | |||
Cash Flow Hedges | Interest rate contract | Net Interest Expense | |||||
Derivative Instruments, Gain (Loss) [Line Items] | |||||
Gains (losses) on hedging activities reclassified from AOCI to net income, before tax | (1) | ||||
Cash Flow Hedges | Foreign Exchange Contracts One | |||||
Derivative Instruments, Gain (Loss) [Line Items] | |||||
Gain (loss) recognized in OCI | 1 | (1) | |||
Cash Flow Hedges | Foreign Exchange Contracts One | Net Sales | |||||
Derivative Instruments, Gain (Loss) [Line Items] | |||||
Gains (losses) on hedging activities reclassified from AOCI to net income, before tax | 1 | 1 | |||
Cash Flow Hedges | Foreign Exchange Contracts Two | |||||
Derivative Instruments, Gain (Loss) [Line Items] | |||||
Gain (loss) recognized in OCI | (18) | 5 | 46 | (6) | |
Cash Flow Hedges | Foreign Exchange Contracts Two | Cost of Sales | |||||
Derivative Instruments, Gain (Loss) [Line Items] | |||||
Gains (losses) on hedging activities reclassified from AOCI to net income, before tax | 30 | (3) | 55 | 2 | |
Fair value hedges | Net Interest Expense | |||||
Derivative Instruments, Gain (Loss) [Line Items] | |||||
Gain (loss) recognized in income, fair value hedges | $ (72) | $ 17 | $ (25) | $ 31 | |
[1] | Amounts in parentheses indicate reductions to net income. |
Classification and Fair Value A
Classification and Fair Value Amounts of Derivative Instruments (Detail) - USD ($) $ in Millions | Jun. 30, 2015 | Dec. 31, 2014 |
Derivatives, Fair Value [Line Items] | ||
Derivative asset, fair value | $ 111 | $ 141 |
Derivative liability, fair value | 21 | 25 |
Designated as Hedging Instrument | ||
Derivatives, Fair Value [Line Items] | ||
Derivative asset, fair value | 110 | 141 |
Derivative liability, fair value | 19 | 2 |
Designated as Hedging Instrument | Interest rate contract | Other Long-Term Liabilities | ||
Derivatives, Fair Value [Line Items] | ||
Derivative liability, fair value | 12 | |
Designated as Hedging Instrument | Interest rate contract | Accounts Payable And Accrued Liabilities | ||
Derivatives, Fair Value [Line Items] | ||
Derivative liability, fair value | 2 | |
Designated as Hedging Instrument | Interest rate contract | Other Long-Term Assets | ||
Derivatives, Fair Value [Line Items] | ||
Derivative asset, fair value | 76 | 89 |
Designated as Hedging Instrument | Interest rate contract | Prepaid expenses and other | ||
Derivatives, Fair Value [Line Items] | ||
Derivative asset, fair value | 1 | |
Designated as Hedging Instrument | Foreign exchange contract | Other Long-Term Liabilities | ||
Derivatives, Fair Value [Line Items] | ||
Derivative liability, fair value | 2 | |
Designated as Hedging Instrument | Foreign exchange contract | Accounts Payable And Accrued Liabilities | ||
Derivatives, Fair Value [Line Items] | ||
Derivative liability, fair value | 5 | |
Designated as Hedging Instrument | Foreign exchange contract | Other Long-Term Assets | ||
Derivatives, Fair Value [Line Items] | ||
Derivative asset, fair value | 1 | |
Designated as Hedging Instrument | Foreign exchange contract | Prepaid Expenses and Other | ||
Derivatives, Fair Value [Line Items] | ||
Derivative asset, fair value | 33 | |
Designated as Hedging Instrument | Foreign exchange contract | Prepaid expenses and other | ||
Derivatives, Fair Value [Line Items] | ||
Derivative asset, fair value | 51 | |
Not Designated as Hedging Instrument | Foreign exchange contract | Accounts Payable And Accrued Liabilities | ||
Derivatives, Fair Value [Line Items] | ||
Derivative liability, fair value | 2 | $ 23 |
Not Designated as Hedging Instrument | Foreign exchange contract | Prepaid expenses and other | ||
Derivatives, Fair Value [Line Items] | ||
Derivative asset, fair value | $ 1 |
Derivative Positions Presented
Derivative Positions Presented On Net Basis (Detail) - USD ($) $ in Millions | Jun. 30, 2015 | Dec. 31, 2014 |
Derivatives, Fair Value [Line Items] | ||
Gross amounts recognized in the consolidated balance sheet, asset | $ 111 | $ 141 |
Gross amount subject to offset in master netting arrangements not offset in the consolidated balance sheet, asset | (21) | (22) |
Total | 90 | 119 |
Gross amounts recognized in the consolidated balance sheet, liability | 21 | 25 |
Gross amount subject to offset in master netting arrangements not offset in the consolidated balance sheet, liability | $ (21) | (22) |
Total | $ 3 |
Financial Assets and Liabilitie
Financial Assets and Liabilities Measured at Fair Value on Recurring Basis (Detail) - USD ($) $ in Millions | Jun. 30, 2015 | Dec. 31, 2014 |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Foreign currency hedges, assets at fair value | $ 111 | $ 141 |
Equity securities | 117 | 105 |
Foreign currency hedges, liabilities at fair value | 21 | 25 |
Fair Value, Measurements, Recurring | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Foreign currency hedges, assets at fair value | 35 | 51 |
Interest rate hedges, assets at fair value | 76 | 90 |
Equity securities | 117 | 105 |
Foreign government debt securities | 16 | 18 |
Total assets | 244 | 264 |
Foreign currency hedges, liabilities at fair value | 9 | 23 |
Interest rate hedges, liabilities at fair value | 12 | 2 |
Contingent payments related to acquisitions | 553 | 569 |
Total liabilities | 574 | 594 |
Fair Value, Measurements, Recurring | Fair Value, Inputs, Level 1 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Equity securities | 117 | 105 |
Total assets | 117 | 105 |
Fair Value, Measurements, Recurring | Fair Value, Inputs, Level 2 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Foreign currency hedges, assets at fair value | 35 | 51 |
Interest rate hedges, assets at fair value | 76 | 90 |
Foreign government debt securities | 16 | 18 |
Total assets | 127 | 159 |
Foreign currency hedges, liabilities at fair value | 9 | 23 |
Interest rate hedges, liabilities at fair value | 12 | 2 |
Total liabilities | 21 | 25 |
Fair Value, Measurements, Recurring | Fair Value, Inputs, Level 3 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Contingent payments related to acquisitions | 553 | 569 |
Total liabilities | $ 553 | $ 569 |
Book Values and Fair Values of
Book Values and Fair Values of Financial Instruments (Detail) - USD ($) $ in Millions | Jun. 30, 2015 | Dec. 31, 2014 |
Fair Value And Carrying Value By Balance Sheet Grouping [Line Items] | ||
Current maturities of long-term debt and lease obligations | $ 671 | $ 786 |
Long-term debt and lease obligations | 12,054 | 7,606 |
Book Values | ||
Fair Value And Carrying Value By Balance Sheet Grouping [Line Items] | ||
Investments | 65 | 54 |
Short-term debt | 1,493 | 913 |
Current maturities of long-term debt and lease obligations | 671 | 786 |
Long-term debt and lease obligations | 12,054 | 7,606 |
Long-term litigation liabilities | 50 | 53 |
Approximate fair values | ||
Fair Value And Carrying Value By Balance Sheet Grouping [Line Items] | ||
Investments | 65 | 52 |
Short-term debt | 1,493 | 913 |
Current maturities of long-term debt and lease obligations | 671 | 791 |
Long-term debt and lease obligations | 12,421 | 8,192 |
Long-term litigation liabilities | $ 49 | $ 52 |
Summarization of Bases Used to
Summarization of Bases Used to Measure Fair Value of Financial Instruments (Detail) - USD ($) $ in Millions | Jun. 30, 2015 | Dec. 31, 2014 |
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Current maturities of long-term debt and lease obligations | $ 671 | $ 786 |
Long-term debt and lease obligations | 12,054 | 7,606 |
Approximate fair values | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Investments | 65 | 52 |
Total assets | 65 | 52 |
Short-term debt | 1,493 | 913 |
Current maturities of long-term debt and lease obligations | 671 | 791 |
Long-term debt and lease obligations | 12,421 | 8,192 |
Long-term litigation liabilities | 49 | 52 |
Total liabilities | 14,634 | 9,948 |
Fair Value, Inputs, Level 2 | Approximate fair values | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Investments | 10 | 8 |
Total assets | 10 | 8 |
Short-term debt | 1,493 | 913 |
Current maturities of long-term debt and lease obligations | 671 | 791 |
Long-term debt and lease obligations | 12,421 | 8,192 |
Total liabilities | 14,585 | 9,896 |
Fair Value, Inputs, Level 3 | Approximate fair values | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Investments | 55 | 44 |
Total assets | 55 | 44 |
Long-term litigation liabilities | 49 | 52 |
Total liabilities | $ 49 | $ 52 |
Stock Compensation - Additional
Stock Compensation - Additional Information (Detail) - USD ($) shares in Millions, $ in Millions | 1 Months Ended | 3 Months Ended | 6 Months Ended | |||
May. 31, 2015 | Jun. 30, 2015 | Mar. 31, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Stock compensation expense | $ 48 | $ 41 | $ 87 | $ 72 | ||
Stock Options granted | 8.8 | |||||
Additional shares of common stock available for issuance | 35 | |||||
Restricted Stock Units | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Awards Granted | 1.3 | |||||
Unrecognized compensation cost related to all unvested | 140 | $ 140 | ||||
Weighted-average period for all unvested | 1 year 10 months 24 days | |||||
Employee Stock Option | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Total intrinsic value of stock options exercised | 15 | $ 34 | $ 29 | $ 79 | ||
Unrecognized compensation cost related to all unvested | 106 | $ 106 | ||||
Weighted-average period for all unvested | 1 year 10 months 24 days | |||||
Performance Shares | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Unrecognized compensation cost related to all unvested | $ 13 | $ 13 | ||||
Weighted-average period for all unvested | 1 year |
Stock Options Fair Value Assump
Stock Options Fair Value Assumptions (Detail) - Employee Stock Option - $ / shares | 6 Months Ended | |
Jun. 30, 2015 | Jun. 30, 2014 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Expected volatility | 20.00% | 24.00% |
Expected life (in years) | 5 years 6 months | 5 years 6 months |
Risk-free interest rate | 1.70% | 1.70% |
Dividend yield | 3.00% | 2.80% |
Fair value per stock option | $ 9 | $ 12 |
Net Periodic Benefit Cost (Deta
Net Periodic Benefit Cost (Detail) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | |
Pension Plans, Defined Benefit | ||||
Net periodic benefit cost | ||||
Service cost | $ 38 | $ 33 | $ 75 | $ 66 |
Interest cost | 56 | 60 | 111 | 120 |
Expected return on plan assets | (71) | (68) | (138) | (134) |
Amortization of net loss and prior service credit/other deferred amounts | 51 | 36 | 102 | 72 |
Net periodic benefit cost | 74 | 61 | 150 | 124 |
Other Postretirement Benefit Plans, Defined Benefit | ||||
Net periodic benefit cost | ||||
Service cost | 1 | 2 | 2 | 3 |
Interest cost | 4 | 7 | 10 | 14 |
Amortization of net loss and prior service credit/other deferred amounts | (3) | (4) | ||
Net periodic benefit cost | $ 2 | $ 9 | $ 8 | $ 17 |
Retirement and Other Benefit 59
Retirement and Other Benefit Programs - Additional Information (Detail) $ in Millions | 3 Months Ended |
Jun. 30, 2015USD ($) | |
Defined Benefit Plan Disclosure [Line Items] | |
Reduction to pension and OPED obligation due to remeasurement | $ 203 |
United States Qualified Pension Plan | |
Defined Benefit Plan Disclosure [Line Items] | |
Discretionary amount contributed to qualified pension plan | $ 100 |
Weighted-Average Assumptions Us
Weighted-Average Assumptions Used in Determining (Detail) - 6 months ended Jun. 30, 2015 | Total |
Pension Benefits | |
Defined Benefit Plan Disclosure [Line Items] | |
by the year ended | |
Pension Benefits | United States Nonqualified Plans | |
Defined Benefit Plan Disclosure [Line Items] | |
Discount rate | 4.03% |
Expected return on plan assets | 7.25% |
Rate of compensation increase | 3.80% |
Pension Benefits | International Unfunded Plans | |
Defined Benefit Plan Disclosure [Line Items] | |
Discount rate | 1.32% |
Expected return on plan assets | 5.74% |
Rate of compensation increase | 3.30% |
Other Postretirement Benefit Plans, Defined Benefit | |
Defined Benefit Plan Disclosure [Line Items] | |
Annual rate of increase in the per-capita cost | 6.00% |
Rate decreased to | 5.00% |
by the year ended | 2,019 |
Other Postretirement Benefit Plans, Defined Benefit | United States Nonqualified Plans | |
Defined Benefit Plan Disclosure [Line Items] | |
Discount rate | 3.78% |
Shareholders' Equity - Addition
Shareholders' Equity - Additional Information (Detail) - USD ($) $ in Billions | 6 Months Ended | |
Jun. 30, 2015 | Jul. 31, 2012 | |
Stockholders Equity Note [Line Items] | ||
Stock repurchase program, authorized amount | $ 2 | |
Share repurchases | 0 | |
Remaining value available under stock repurchase programs | $ 0.5 |
Summary of Changes in AOCI by C
Summary of Changes in AOCI by Component (Detail) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | |||||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | ||||
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | |||||||
Currency translation adjustment, Beginning Balance | $ (2,323) | $ (991) | |||||
Currency translation adjustment, other comprehensive income (loss) before reclassifications | (717) | (207) | |||||
Currency translation adjustment, amounts reclassified from AOCI | [1] | 0 | 0 | ||||
Currency translation adjustment, net other comprehensive (loss) income | $ 421 | $ (213) | (717) | (207) | |||
Currency translation adjustment, Ending Balance | (3,040) | (1,198) | (3,040) | (1,198) | |||
Pension and other employee benefit, Beginning Balance | (1,427) | (1,027) | |||||
Pension and other employee benefit, Other comprehensive income (loss) before reclassifications | 114 | 2 | |||||
Pension and other employee benefit, Amounts reclassified from AOCI | [2] | 32 | 23 | 67 | [1] | 49 | [1] |
Pension and other employee benefit, Net other comprehensive (loss) income | 113 | 28 | 181 | 51 | |||
Pension and other employee benefit, Ending Balance | (1,246) | (976) | (1,246) | (976) | |||
Hedging activities, Beginning Balance | 34 | 10 | |||||
Hedging activities, Other comprehensive income (loss) before reclassifications | 53 | (5) | |||||
Hedging activities, Amounts reclassified from AOCI | [2] | (19) | 1 | (35) | [1] | (1) | [1] |
Hedging activities, Net other comprehensive income (loss) | 28 | 4 | 18 | (6) | |||
Hedging activities, Ending Balance | 52 | 4 | 52 | 4 | |||
Other, Beginning Balance | 66 | 32 | |||||
Other, Other comprehensive income (loss) before reclassifications | 24 | (7) | |||||
Other, Amounts reclassified from AOCI | [2] | (9) | (2) | [1] | |||
Other, Net other comprehensive (loss) income | 1 | (18) | 22 | (7) | |||
Other, Ending Balance | 88 | 25 | 88 | 25 | |||
Total, Beginning Balance | (3,650) | (1,976) | |||||
Total, Other comprehensive income (loss) before reclassifications | (526) | (217) | |||||
Total, Amounts reclassified from AOCI | [2] | 4 | 24 | 30 | [1] | 48 | [1] |
Total other comprehensive income (loss), net of tax | 563 | (199) | (496) | (169) | |||
Total, Ending Balance | $ (4,146) | $ (2,145) | $ (4,146) | $ (2,145) | |||
[1] | See table below for details about these reclassifications. | ||||||
[2] | Amounts in parentheses indicate reductions to net income. |
Summary of Amounts Reclassifica
Summary of Amounts Reclassification from AOCI to Net Income (Detail) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | |||||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | ||||
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | |||||||
Gains (losses) on hedging activities reclassified from AOCI to net income, before tax | [1] | $ 30 | $ (2) | $ 55 | $ 2 | ||
Gains (losses) on hedging activities reclassified from AOCI to net income, tax expense | [1] | (11) | 1 | (20) | (1) | ||
Gains (loss) on hedging activities reclassified from AOCI to net income, net of tax | [1] | 19 | (1) | 35 | [2] | 1 | [2] |
Total reclassification for the period | [1] | (4) | (24) | (30) | [2] | (48) | [2] |
Amortization of pension and other employee benefits items Actuarial losses and other reclassified from AOCI to net income, before tax | [1] | (48) | (36) | (98) | (72) | ||
Amortization of pension and other employee benefits items Actuarial losses and other reclassified from AOCI to net income, tax benefit | [1] | 16 | 13 | 31 | 23 | ||
Amortization of pension and other employee benefits items Actuarial losses and other reclassified from AOCI to net income, net of tax | [1] | (32) | (23) | (67) | [2] | (49) | [2] |
Gain (loss) on sale of available-for-sale equity securities and other-than-temporary impairment of available-for-sale equity securities, before tax | [1] | 15 | 6 | ||||
Gain (loss) on sale of available-for-sale equity securities and other-than-temporary impairment of available-for-sale equity securities, tax expense | [1] | (6) | (4) | ||||
Gain (loss) on sale of available-for-sale equity securities and other-than-temporary impairment of available-for-sale equity securities, net of tax | [1] | 9 | 2 | [2] | |||
Other (income) expense, net | Equity securities | |||||||
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | |||||||
Gain (loss) on sale of available-for-sale equity securities | [1] | 15 | 15 | ||||
Other-than-temporary impairment of available-for-sale equity securities | [1] | (9) | |||||
Interest rate contract | Net Interest Expense | |||||||
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | |||||||
Gains (losses) on hedging activities reclassified from AOCI to net income, before tax | [1] | (1) | |||||
Foreign exchange contract | Net Sales | |||||||
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | |||||||
Gains (losses) on hedging activities reclassified from AOCI to net income, before tax | [1] | 1 | 1 | ||||
Foreign exchange contract | Cost of Sales | |||||||
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | |||||||
Gains (losses) on hedging activities reclassified from AOCI to net income, before tax | [1] | 30 | (3) | 55 | 2 | ||
Actuarial losses and other | |||||||
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | |||||||
Amortization of pension and other employee benefits items Actuarial losses and other reclassified from AOCI to net income, before tax | [1],[3] | $ (48) | $ (36) | $ (98) | $ (72) | ||
[1] | Amounts in parentheses indicate reductions to net income. | ||||||
[2] | See table below for details about these reclassifications. | ||||||
[3] | These AOCI components are included in the computation of net periodic benefit cost disclosed in Note 9. |
Income Taxes - Additional Infor
Income Taxes - Additional Information (Detail) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | |
Income Taxes [Line Items] | ||||
Effective income tax rate for continuing operations | 28.20% | 22.30% | 24.20% | 22.30% |
Legal Proceedings - Additional
Legal Proceedings - Additional Information (Detail) - Jun. 30, 2015 $ in Millions | USD ($)DerivativeAction |
Loss Contingencies [Line Items] | |
Litigation reserve | $ | $ 110 |
Litigation related receivables | $ | $ 49 |
Other Litigation Cases | |
Loss Contingencies [Line Items] | |
Number of derivative actions filed in state court | 2 |
Illinois State | |
Loss Contingencies [Line Items] | |
Number of derivative actions filed in state court | 1 |
Delaware | |
Loss Contingencies [Line Items] | |
Number of derivative actions filed in state court | 1 |
Segment Information - Additiona
Segment Information - Additional Information (Detail) | 6 Months Ended |
Jun. 30, 2015Segment | |
Segment Information [Line Items] | |
Number of segments | 2 |
Segment Information (Detail)
Segment Information (Detail) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | |
Segment Information [Line Items] | ||||
Net sales | $ 3,893 | $ 4,154 | $ 7,657 | $ 8,002 |
Pre-tax income from continuing operations | 468 | 602 | 998 | 1,255 |
Operating Segments | ||||
Segment Information [Line Items] | ||||
Pre-tax income from continuing operations | 737 | 778 | 1,445 | 1,604 |
BioScience | ||||
Segment Information [Line Items] | ||||
Net sales | 1,429 | 1,452 | 2,790 | 2,781 |
Pre-tax income from continuing operations | 427 | 479 | 863 | 963 |
Medical Products | ||||
Segment Information [Line Items] | ||||
Net sales | 2,464 | 2,702 | 4,867 | 5,221 |
Pre-tax income from continuing operations | $ 310 | $ 299 | $ 582 | $ 641 |
Segment Information Related to
Segment Information Related to Total Assets (Detail) - USD ($) $ in Millions | Jun. 30, 2015 | Dec. 31, 2014 |
Segment Reporting, Asset Reconciling Item [Line Items] | ||
Total assets | $ 30,015 | $ 25,917 |
BioScience | ||
Segment Reporting, Asset Reconciling Item [Line Items] | ||
Total assets | 10,123 | 9,312 |
Medical Products | ||
Segment Reporting, Asset Reconciling Item [Line Items] | ||
Total assets | 11,654 | 12,064 |
Other | ||
Segment Reporting, Asset Reconciling Item [Line Items] | ||
Total assets | $ 8,238 | $ 4,541 |
Pre- Tax Income Reconciliation
Pre- Tax Income Reconciliation (Detail) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | |
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items] | ||||
Consolidated income before income taxes | $ 468 | $ 602 | $ 998 | $ 1,255 |
Unallocated Amount To Segment Stock Compensation | ||||
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items] | ||||
Consolidated income before income taxes | (48) | (41) | (87) | (72) |
Unallocated Amount To Segment Net Interest Expense | ||||
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items] | ||||
Consolidated income before income taxes | (34) | (42) | (64) | (85) |
Unallocated Amount To Segment Business Optimization Items | ||||
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items] | ||||
Consolidated income before income taxes | (14) | 32 | (3) | 12 |
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] | ||||
Consolidated income before income taxes | 22 | 10 | 137 | 26 |
Unallocated Amount to Segment Other Corporate Items | ||||
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items] | ||||
Consolidated income before income taxes | (195) | (135) | (430) | (230) |
Operating Segments | ||||
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items] | ||||
Consolidated income before income taxes | $ 737 | $ 778 | $ 1,445 | $ 1,604 |