Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2016 | Oct. 31, 2016 | |
Document Information [Line Items] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Sep. 30, 2016 | |
Document Fiscal Year Focus | 2,016 | |
Document Fiscal Period Focus | Q3 | |
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 | 543,919,936 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Income - USD ($) shares in Millions, $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Net sales | $ 2,558 | $ 2,487 | $ 7,518 | $ 7,365 |
Cost of sales | 1,487 | 1,453 | 4,510 | 4,291 |
Gross margin | 1,071 | 1,034 | 3,008 | 3,074 |
Marketing and administrative expenses | 726 | 794 | 2,076 | 2,361 |
Research and development expenses | 159 | 148 | 490 | 442 |
Operating income | 186 | 92 | 442 | 271 |
Net interest expense | 14 | 34 | 53 | 94 |
Other expense (income), net | 44 | 91 | (4,286) | (46) |
Income (loss) from continuing operations before income taxes | 128 | (33) | 4,675 | 223 |
Income tax expense (benefit) | 1 | (35) | (51) | 13 |
Income from continuing operations | 127 | 2 | 4,726 | 210 |
Income (loss) from discontinued operations, net of tax | 3 | (1) | (4) | 553 |
Net income | $ 130 | $ 1 | $ 4,722 | $ 763 |
Income from continuing operations per common share | ||||
Basic | $ 0.23 | $ 0 | $ 8.64 | $ 0.39 |
Diluted | 0.23 | 0 | 8.56 | 0.38 |
Income (loss) from discontinued operations per common share | ||||
Basic | 0.01 | 0 | (0.01) | 1.01 |
Diluted | 0.01 | 0 | (0.01) | 1.01 |
Net income per common share | ||||
Basic | 0.24 | 0 | 8.63 | 1.40 |
Diluted | $ 0.24 | $ 0 | $ 8.55 | $ 1.39 |
Weighted-average number of common shares outstanding | ||||
Basic | 544 | 546 | 547 | 544 |
Diluted | 551 | 549 | 552 | 548 |
Cash dividends declared per common share | $ 0.130 | $ 0.115 | $ 0.375 | $ 1.155 |
Condensed Consolidated Stateme3
Condensed Consolidated Statements of Comprehensive Income - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Net income | $ 130 | $ 1 | $ 4,722 | $ 763 |
Other comprehensive income (loss), net of tax: | ||||
Currency translation adjustments, net of tax benefit of ($2) and ($10) for the three months ended September 30, 2016 and 2015, respectively, and ($12) and ($78) for the nine months ended September 30, 2016 and 2015, respectively | 10 | (271) | (16) | (985) |
Pension and other employee benefits, net of tax expense of $11 and $16 for the three months ended September 30, 2016 and 2015, respectively, and $32 and $150 for the nine months ended September 30, 2016 and 2015, respectively | 21 | 31 | 61 | 212 |
Hedging activities, net of tax (benefit) expense of zero and ($1) for the three months ended September 30, 2016 and 2015, respectively, and $(5) and $9 for the nine months ended September 30, 2016 and 2015, respectively | 1 | (2) | (10) | 16 |
Available-for-sale securities, net of tax expense of zero and $2 for the three months ended September 30, 2016 and 2015, respectively, and zero and $6 for the nine months ended September 30, 2016 and 2015 | 3,418 | (4,431) | 3,440 | |
Total other comprehensive income (loss), net of tax | 32 | 3,176 | (4,396) | 2,683 |
Comprehensive income | $ 162 | $ 3,177 | $ 326 | $ 3,446 |
Condensed Consolidated Stateme4
Condensed Consolidated Statements of Comprehensive Income (Parenthetical) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Tax (benefit) expense on currency translation adjustments | $ (2) | $ (10) | $ (12) | $ (78) |
Tax expense on pension and other employee benefits | 11 | 16 | 32 | 150 |
Tax (benefit) expense on hedging activities | 0 | (1) | (5) | 9 |
Tax expense on available-for-sale securities | $ 0 | $ 2 | $ 0 | $ 6 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Millions | Sep. 30, 2016 | Dec. 31, 2015 |
Current assets | ||
Cash and equivalents | $ 2,597 | $ 2,213 |
Accounts and other current receivables, net | 1,739 | 1,731 |
Inventories | 1,568 | 1,604 |
Prepaid expenses and other | 634 | 855 |
Investment in Baxalta common stock | 5,148 | |
Current assets held for disposition | 51 | 245 |
Total current assets | 6,589 | 11,796 |
Property, plant and equipment, net | 4,327 | 4,386 |
Other assets | ||
Goodwill | 2,679 | 2,687 |
Other intangible assets, net | 1,180 | 1,349 |
Other | 1,020 | 744 |
Total other assets | 4,879 | 4,780 |
Total assets | 15,795 | 20,962 |
Current liabilities | ||
Short-term debt | 1,775 | |
Current maturities of long-term debt and lease obligations | 6 | 810 |
Accounts payable and accrued liabilities | 2,499 | 2,666 |
Current income taxes payable | 98 | 453 |
Current liabilities held for disposition | 3 | 46 |
Total current liabilities | 2,606 | 5,750 |
Long-term debt and lease obligations | 2,834 | 3,922 |
Other long-term liabilities | 1,691 | 2,425 |
Equity | ||
Common stock, $1 par value, authorized 2,000,000,000 shares, issued 683,494,944 shares in 2016 and 2015 | 683 | 683 |
Common stock in treasury, at cost, 139,581,579 shares in 2016 and 135,839,938 shares in 2015 | (7,813) | (7,646) |
Additional contributed capital | 5,930 | 5,902 |
Retained earnings | 14,049 | 9,683 |
Accumulated other comprehensive (loss) income | (4,172) | 224 |
Total Baxter shareholders' equity | 8,677 | 8,846 |
Noncontrolling interests | (13) | 19 |
Total equity | 8,664 | 8,865 |
Total liabilities and equity | $ 15,795 | $ 20,962 |
Condensed Consolidated Balance6
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares | Sep. 30, 2016 | Dec. 31, 2015 |
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 | 139,581,579 | 135,839,938 |
Condensed Consolidated Stateme7
Condensed Consolidated Statements of Cash Flows - USD ($) $ in Millions | 9 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | |
Cash flows from operations | ||
Net income | $ 4,722 | $ 763 |
Adjustments to reconcile income from continuing operations to net cash from operating activities: | ||
Loss (income) from discontinued operations, net of tax | 4 | (553) |
Depreciation and amortization | 599 | 593 |
Deferred income taxes | (298) | 63 |
Stock compensation | 84 | 96 |
Realized excess tax benefits from stock issued under employee benefit plans | (36) | (6) |
Net periodic pension benefit and OPEB costs | 90 | 170 |
Business optimization items | 237 | 102 |
Net realized gains on Baxalta common stock | (4,387) | |
Other | 236 | (8) |
Changes in balance sheet items | ||
Accounts and other current receivables, net | 22 | 5 |
Inventories | (11) | (205) |
Accounts payable and accrued liabilities | (326) | 14 |
Business optimization and infusion pump payments | (119) | (61) |
Other | 121 | (216) |
Cash flows from operations - continuing operations | 938 | 757 |
Cash flows from operations - discontinued operations | 3 | 290 |
Cash flows from operations | 941 | 1,047 |
Cash flows from investing activities | ||
Capital expenditures | (519) | (658) |
Acquisitions and investments, net of cash acquired | (47) | (27) |
Divestitures and other investing activities | 17 | 56 |
Cash flows from investing activities - continuing operations | (549) | (629) |
Cash flows from investing activities - discontinued operations | 13 | (946) |
Cash flows from investing activities | (536) | (1,575) |
Cash flows from financing activities | ||
Issuances of debt | 1,641 | 6,868 |
Payments of obligations | (1,383) | (3,723) |
Debt extinguishment costs | (16) | (114) |
Decrease in debt with original maturities of three months or less, net | (300) | (450) |
Transfer of cash and equivalents to Baxalta | (2,122) | |
Cash dividends on common stock | (197) | (847) |
Proceeds and realized excess tax benefits from stock issued under employee benefit plans | 286 | 174 |
Purchase of treasury stock | (45) | |
Other | (30) | (39) |
Cash flows from financing activities | (44) | (253) |
Effect of foreign exchange rate changes on cash and equivalents | 23 | (174) |
Increase (decrease) in cash and equivalents | 384 | (955) |
Cash and equivalents at beginning of period | 2,213 | 2,925 |
Cash and equivalents at end of period | 2,597 | 1,970 |
Supplemental Schedule of Non-Cash Investing and Financing Activities | ||
Net proceeds on Retained Share transactions | 4,387 | |
Payment of obligations in exchange for Retained Shares | 3,646 | |
Exchange of Baxter shares with Retained Shares | 611 | |
Other Supplemental Information | ||
Income taxes paid | $ 453 | $ 357 |
BASIS OF PRESENTATION
BASIS OF PRESENTATION | 9 Months Ended |
Sep. 30, 2016 | |
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, 2015 (2015 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 statements to the current period presentation. Separation of Baxalta Incorporated On July 1, 2015, Baxter completed the distribution of approximately 80.5% of the outstanding common stock of Baxalta Incorporated (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. As a result of the Distribution, Baxalta became an independent public company trading under the symbol “BXLT” on the New York Stock Exchange. On June 3, 2016, a wholly-owned subsidiary of Shire plc (Shire) merged with and into Baxalta, with Baxalta as the surviving company in the merger (Merger). References in this report to Baxalta prior to the Merger closing date refers to Baxalta as a stand-alone public company. References in this report to Baxalta subsequent to the Merger closing date refer to Baxalta as a subsidiary of Shire. As a result of the separation, the condensed consolidated statements of income, condensed consolidated balance sheets, condensed consolidated statements of cash flow and related financial information reflect Baxalta’s operations, assets and liabilities, and cash flows as discontinued operations for all periods presented. Refer to Note 2 for additional information regarding the separation of Baxalta. New accounting standards Recently issued accounting standards not yet adopted In March 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-09, Improvements to Employee Share-Based Payment Accounting, which amends ASC Topic 718, Compensation – Stock Compensation. The updated guidance requires all tax effects related to share-based payment be recorded in income tax expense in the consolidated statement of income. Current guidance requires that tax effects of deductions in excess of share-based compensation costs (windfall tax benefits) be recorded in additional paid-in capital, and tax deficiencies (shortfalls) be recorded in additional paid-in capital to the extent of previously recognized windfall tax benefits, with the remainder recorded in income tax expense. The new guidance also requires all tax-related cash flows resulting from share-based payments to be reported as operating activities in the consolidated statement of cash flows, rather than the current requirement to present windfall tax benefits as an inflow from financing activities and an outflow from operating activities. The guidance is effective for the company beginning January 1, 2017. The impact of the standard is dependent on the timing and value of award exercises and vesting. The company has evaluated the impact of this standard on its consolidated financial statements for the three and nine month periods ended September 30, 2016, and determined that net income and operating cash flow for the periods would have each increased by approximately $9 million and $36 million, respectively, if the company had adopted the new standard January 1, 2016. In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). Under the new guidance, lessees are required to recognize lease assets and liabilities on the balance sheet for leases classified as operating leases under current GAAP. This ASU is effective for the company beginning January 1, 2019. The company is currently evaluating the impact of this 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. ASU No. 2014-09 will be effective for the company beginning on January 1, 2018. 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. Recently adopted accounting pronouncements As of January 1, 2016, the company adopted ASU No. 2015-03, Simplifying the Presentation of Debt Issuance Costs, which amended ASC 835-30, Interest - Imputation of Interest. This guidance requires that debt issuance costs related to a recognized debt liability be presented as a direct deduction from the carrying amount of the related debt liability. As a result of the adoption, the company reclassified debt issuance costs of $13 million from other assets to long-term debt in the Company’s consolidated balance sheet as of December 31, 2015. The adoption of this guidance did not impact the company’s consolidated statements of earnings, comprehensive income, shareholders’ equity, or cash flows. As of January 1, 2016, the company adopted 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. This guidance requires software licenses within cloud computing arrangements to be classified as intangible assets. The adoption of ASU No. 2015-05 did not have a material impact on Baxter’s financial position or results of operations. As of July 1, 2016, the company adopted ASU No. 2016-15, Statement of Cash Flows (Topic 230). The guidance requires that the cash payments for debt prepayment or debt extinguishment costs be classified as cash outflows for financing activities. As a result of the adoption, in the third quarter of 2016 the company has reclassified certain debt prepayments and debt extinguishment costs from operating to financing activities which resulted in a decrease in financing cash flows of $16 million and $124 million for the first nine months of 2016 and 2015, respectively. The adoption of this guidance did not impact the company’s consolidated statements of earnings, consolidated balance sheet, comprehensive income, or shareholders’ equity. |
SEPARATION OF BAXALTA INCORPORA
SEPARATION OF BAXALTA INCORPORATED | 9 Months Ended |
Sep. 30, 2016 | |
SEPARATION OF BAXALTA INCORPORATED | 2. SEPARATION OF BAXALTA INCORPORATED After giving effect to the Distribution, the company retained 19.5% of the outstanding common stock, or 131,902,719 shares of Baxalta (Retained Shares). Effective January 27, 2016, Baxter completed a debt-for-equity exchange through the transfer of 37,573,040 Retained Shares in exchange for the extinguishment of the $1.45 billion aggregate principal amount of indebtedness outstanding under the company’s prior U.S. dollar denominated revolving credit facility, which was terminated in connection with the closing of this exchange. On March 16, 2016, the company completed a debt-for-equity exchange, in which Baxter exchanged 63,823,582 Retained Shares for the extinguishment of $2.2 billion in aggregate principal amount of Baxter indebtedness. On May 6, 2016 the company contributed 17,145,570 Retained Shares to Baxter’s U.S. pension fund. On May 26, 2016 the company completed an equity-for-equity exchange by exchanging 13,360,527 Retained Shares for 11,526,638 shares of Baxter. The company held no shares of Baxalta as of September 30, 2016. See Note 8 for additional details regarding these transactions. For a portion of Baxalta’s operations, the legal transfer of Baxalta’s assets and liabilities did not occur with the separation of Baxalta on July 1, 2015 due to the time required to transfer marketing authorizations and other regulatory requirements in certain countries. Under the terms of the International Commercial Operations Agreement (ICOA), Baxalta is subject to the risks and entitled to the benefits generated by these operations and assets until legal transfer; therefore, the net economic benefit and any cash collected by these entities are transferred to Baxalta. Following is a summary of the operating results of Baxalta, which have been reflected as discontinued operations for the three and nine months ended September 30, 2016 and 2015. The assets and liabilities have been classified as held for disposition as of September 30, 2016 and December 31, 2015. Three months ended Nine months ended (in millions) 2016 2015 2016 2015 Major classes of line items constituting income from discontinued operations before income taxes Net sales $ 24 $ 63 $ 144 $ 2,853 Cost of sales (20 ) (63 ) (135 ) (1,172 ) Marketing and administrative expenses — (1 ) (20 ) (547 ) Research and development expenses — — — (393 ) Other income and expense items that are not major — — — 7 Total income (loss) from discontinued operations before income taxes 4 (1 ) (11 ) 748 Gain on disposal of discontinued operations — — 17 — Income tax expense 1 — 10 195 Total income (loss) from discontinued operations $ 3 $ (1 ) $ (4 ) $ 553 September 30, December 31, (in millions) 2016 2015 Carrying amounts of major classes of assets included as part of discontinued operations Accounts and other current receivables, net $ 48 $ 228 Inventories — 8 Property, plant, and equipment, net 1 2 Other 2 7 Total assets of the disposal group $ 51 $ 245 Carrying amounts of major classes of liabilities included as part of discontinued operations Accounts payable and accrued liabilities $ 3 $ 46 Total liabilities of the disposal group $ 3 $ 46 As of September 30, 2016 and December 31, 2015, Baxter has recorded a net liability of $44 million and $190 million, respectively, for its obligation to transfer these net assets to Baxalta. In the first nine months of 2016, the company transferred $156 million of net assets to Baxalta resulting in a gain of $17 million, which is recorded within income from discontinued operations, net of tax. It is expected that the majority of the remaining operations will be transferred to Baxalta during the fourth quarter of 2016. Baxter and Baxalta entered into several agreements in connection with the July 1, 2015 separation, including a transition services agreement (TSA), separation and distribution agreement, manufacturing and supply agreements (MSA), tax matters agreement, an employee matters agreement, a long-term services agreement, and a shareholder’s and registration rights agreement. Pursuant to the TSA, Baxter and Baxalta and their respective subsidiaries are providing to each other, on an interim, transitional basis, various services. Services being provided by Baxter include, among others, finance, information technology, human resources, quality supply chain, and certain other administrative services. The services generally commenced on the Distribution date and are expected to terminate within 24 months (or 36 months in the case of certain information technology services) of the Distribution date. Billings by Baxter under the TSA are recorded as a reduction of the costs to provide the respective service in the applicable expense category, primarily in marketing and administrative expenses, in the condensed consolidated statements of income. In the three and nine months ended September 30, 2016, the company recognized approximately $26 million and $79 million, respectively, as a reduction in marketing and administrative expenses related to the TSA. Pursuant to the MSA, Baxalta or Baxter, as the case may be, manufactures, labels, and packages products for the other party. The terms of the agreements range in initial duration from five to ten years. In the three and nine months ended September 30, 2016, Baxter recognized approximately $6 million and $31 million, respectively, in sales to Baxalta. In addition, Baxter recognized $6 million and $30 million, respectively, in cost of sales related to purchases from Baxalta pursuant to the MSA. The cash flows associated with these agreements are included in cash flows from operations — continuing operations. Cash inflows of $3 million were reported in cash flows from operations – discontinued operations for the period ending September 30, 2016. These relate to non-assignable tenders whereby Baxter remains the seller of Baxalta products, transactions related to importation services Baxter provides in certain countries, in addition to trade payables settled by Baxter on Baxalta’s behalf after the local separation. |
SUPPLEMENTAL FINANCIAL INFORMAT
SUPPLEMENTAL FINANCIAL INFORMATION | 9 Months Ended |
Sep. 30, 2016 | |
SUPPLEMENTAL FINANCIAL INFORMATION | 3. SUPPLEMENTAL FINANCIAL INFORMATION Net interest expense Three months ended Nine months ended (in millions) 2016 2015 2016 2015 Interest expense, net of capitalized interest $ 20 $ 38 $ 69 $ 109 Interest income (6 ) (4 ) (16 ) (15 ) Net interest expense $ 14 $ 34 $ 53 $ 94 Other expense (income), net Three months ended Nine months ended September 30, September 30, (in millions) 2016 2015 2016 2015 Foreign exchange $ — $ (22 ) $ (12 ) $ (92 ) Net loss on debt extinguishment 52 130 153 130 Net realized gains on Retained Shares transactions — — (4,387 ) — Other (8 ) (17 ) (40 ) (84 ) Other expense (income), net $ 44 $ 91 $ (4,286) $ (46 ) Inventories September 30, December 31, (in millions) 2016 2015 Raw materials $ 346 $ 374 Work in process 148 142 Finished goods 1,074 1,088 Inventories $ 1,568 $ 1,604 Property, plant and equipment, net September 30, December 31, (in millions) 2016 2015 Property, plant and equipment, at cost $ 9,258 $ 8,990 Accumulated depreciation (4,931 ) (4,604 ) Property, plant and equipment, net $ 4,327 $ 4,386 |
EARNINGS PER SHARE
EARNINGS PER SHARE | 9 Months Ended |
Sep. 30, 2016 | |
EARNINGS PER SHARE | 4. 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 Nine months ended September 30, September 30, (in millions) 2016 2015 2016 2015 Basic shares 544 546 547 544 Effect of dilutive securities 7 3 5 4 Diluted shares 551 549 552 548 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 0.3 million and 10 million equity awards for the third quarter and nine months ended September 30, 2016, respectively, and 18 million and 16 million equity awards for the third quarter and nine months ended September 30, 2015, because their inclusion would have had an anti-dilutive effect on diluted EPS. Refer to Note 9 for additional information regarding items impacting basic shares. Stock repurchases In July 2012, the Board of Directors authorized the repurchase of up to $2.0 billion of the company’s common stock. In the third quarter of 2016, the company repurchased approximately 0.9 million shares pursuant to this authority and has $0.4 billion remaining available under this authorization as of September 30, 2016. In the second quarter of 2016, the company executed an equity-for-equity exchange of Retained Shares for 11.5 million outstanding Baxter shares. Refer to Note 8 for additional information regarding Retained Share transactions. |
ACQUISITIONS AND OTHER ARRANGEM
ACQUISITIONS AND OTHER ARRANGEMENTS | 9 Months Ended |
Sep. 30, 2016 | |
ACQUISITIONS AND OTHER ARRANGEMENTS | 5. ACQUISITIONS AND OTHER ARRANGEMENTS In the first quarter of 2016, Baxter paid approximately $23 million to acquire the rights to vancomycin injection in 0.9% Sodium Chloride (Normal Saline) in 500 mg, 750 mg and 1 gram presentations from Celerity Pharmaceuticals, LLC (Celerity). Baxter capitalized the purchase price as an intangible asset and is amortizing the asset over the estimated economic life of 12 years. Refer to Note 5 within the 2015 Annual Report for additional information regarding the company’s agreement with Celerity. |
GOODWILL AND OTHER INTANGIBLE A
GOODWILL AND OTHER INTANGIBLE ASSETS, NET | 9 Months Ended |
Sep. 30, 2016 | |
GOODWILL AND OTHER INTANGIBLE ASSETS, NET | 6. GOODWILL AND OTHER INTANGIBLE ASSETS, NET Goodwill The following is a reconciliation of goodwill by business segment. (in millions) Renal Hospital Products Total Balance as of December 31, 2015 $ 408 $2,279 $ 2,687 Additions 5 — 5 Currency translation adjustments (2 ) (11 ) (13 ) Balance as of September 30, 2016 $ 411 $2,268 $ 2,679 As of September 30, 2016, 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 September 30, 2016 Gross other intangible assets $1,753 $ 401 $58 $2,212 Accumulated amortization (866 ) (166 ) — (1,032 ) Other intangible assets, net $887 $ 235 $58 $1,180 December 31, 2015 Gross other intangible assets $1,742 $ 393 $86 $2,221 Accumulated amortization (729 ) (143 ) — (872 ) Other intangible assets, net $1,013 $ 250 $86 $1,349 Intangible asset amortization expense was $42 million and $40 million in the three months ended September 30, 2016 and 2015, respectively, and $124 million and $120 million for the nine months ended September 30, 2016 and 2015, respectively. In the third quarter of 2016, the company recorded an impairment charge of $27 million related to an indefinite-lived intangible asset (acquired IPR&D) in the company’s Renal segment and its in-center hemodialysis program. The assets of the business were written down to estimated fair value and recorded in research and development expenses. In the second quarter of 2016, the company recorded an impairment charge of $51 million, of which $41 million related to a developed technology asset, relating to the company’s Hospital Products segment synthetic bone repair products business which was acquired from ApaTech Limited in 2010. The assets of the business were written down to estimated fair value and recorded in cost of sales. The decrease in other intangible assets, net during the first nine months of 2016 was primarily driven by amortization expense and the impairments noted above, partially offset by the acquisition of vancomycin detailed in Note 5 and currency translation adjustments (CTA). |
INFUSION PUMP AND BUSINESS OPTI
INFUSION PUMP AND BUSINESS OPTIMIZATION CHARGES | 9 Months Ended |
Sep. 30, 2016 | |
INFUSION PUMP AND BUSINESS OPTIMIZATION CHARGES | 7. INFUSION PUMP AND BUSINESS OPTIMIZATION CHARGES Infusion pump charges In the first quarter of 2016, the company refined its estimates for remediation activities related to the SIGMA SPECTRUM infusion pump recall and decreased the reserve by $12 million. For the three and nine months ended September 30, 2016, the company recorded utilization of the SIGMA SPECTRUM reserve of zero and $24 million, respectively. The balance as of September 30, 2016 was $4 million for the SIGMA SPECTRUM infusion pump recall. Refer to the 2015 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 optimizing the company’s overall cost structure on a global basis, as the company streamlines its operations, rationalizes its manufacturing facilities, enhances its general and administrative infrastructure and realigns certain research and development (R&D) activities. During the three and nine months ended September 30, 2016 and 2015, the company recorded the following charges related to business optimization programs. Three months ended Nine months ended September 30, September 30, (in millions) 2016 2015 2016 2015 Restructuring charges, net $130 $ 92 $237 $102 Costs to implement business optimization programs 25 — 44 — Gambro integration costs 5 12 19 50 Accelerated depreciation 11 — 25 — Total business optimization charges $171 $104 $325 $152 Included in the restructuring charges for the three months ended September 30, 2016 were net employee termination costs of $101 million which primarily consisted of a global workforce reduction program and $27 million related to the impairment of acquired IPR&D as described in Note 6. The restructuring charges for the nine months ended September 30, 2016 also include $54 million for costs associated with the discontinuance of the VIVIA home hemodialysis development program. These costs consisted of contract termination costs of $21 million, asset impairments of $31 million, and other exit costs of $2 million. For the three and nine month periods ended September 30, 2016 and 2015, the company recorded the following components of restructuring costs: Three months ended September 30, 2016 (in millions) COGS SGA R&D Total Employee termination costs $21 $84 $ 1 $106 Asset impairments 6 — 27 33 Reserve adjustments Employee termination costs — (3 ) (2 ) (5 ) Contract termination costs (3 ) — (1 ) (4 ) Total restructuring charges $24 $81 $25 $130 Three months ended September 30, 2015 (in millions) COGS SGA R&D Total Employee termination costs $ 7 $56 $11 $ 74 Asset impairments 31 — — 31 Reserve adjustments (6) (4) (3) (13) Total restructuring charges $32 $52 $ 8 $ 92 Nine months ended September 30, 2016 (in millions) COGS SGA R&D Total Employee termination costs $51 $ 94 $13 $158 Contract termination costs 8 2 13 23 Asset impairments 28 — 40 68 Other exit costs 2 — — 2 Reserve adjustments Employee termination costs (1 ) (11 ) (2 ) (14 ) Total restructuring charges $88 $ 85 $64 $237 Nine months ended September 30, 2015 (in millions) COGS SGA R&D Total Employee termination costs $ 11 $ 72 $12 $ 95 Asset related costs 3 1 — 4 Asset impairment 33 — 2 35 Reserve adjustments (19) (10) (3) (32) Total restructuring charges $ 28 $ 63 $11 $102 Costs to implement business optimization programs for the three and nine months ended September 30, 2016, were $25 million and $44 million, respectively. These costs consisted primarily of external consulting and employee salary and related costs. The costs were included within marketing and administrative and R&D expense. Costs related to the integration of Gambro were included within marketing and administrative expense for all referenced periods. For the three and nine months ended September 30, 2016, the company recognized accelerated depreciation, primarily associated with facilities to be closed of $11 million and $25 million, respectively. The costs were recorded in cost of sales for all referenced periods. The following table summarizes cash activity in the reserves related to the company’s restructuring initiatives. (in millions) Reserves as of December 31, 2015 $ 116 Charges 183 Reserve adjustments (14 ) Utilization (98 ) CTA 9 Reserves as of September 30, 2016 $ 196 Reserve adjustments primarily relate to employee termination cost reserves established in prior periods. The company’s restructuring reserves of $196 million as of September 30, 2016 consisted of $171 million of employee termination costs and the remaining reserves related to contract termination costs. The reserves are expected to be substantially utilized by the end of 2017. |
DEBT, FINANCIAL INSTRUMENTS AND
DEBT, FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS | 9 Months Ended |
Sep. 30, 2016 | |
DEBT, FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS | 8. DEBT, FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS Debt Issuance In August 2016, Baxter issued senior notes with a total aggregate principal amount of $1.6 billion, comprised of $400 million at a fixed coupon rate of 1.70% due in August 2021, $750 million at a fixed coupon rate of 2.60% due in August 2026, and $450 million at a fixed coupon rate of 3.50% due in August 2046. Debt Redemptions In September 2016, Baxter redeemed an aggregate of approximately $1 billion in principal amount of its 1.850% Senior Notes due 2017, 1.850% Senior Notes due 2018, 5.375% Senior Notes due 2018, 4.500% Senior Notes due 2019, 4.250% Senior Notes due 2020, and 3.200% Senior Notes due 2023. Baxter paid approximately $1 billion, including accrued and unpaid interest and tender premium, to redeem such notes. As a result of the debt redemptions, the company recognized a loss on extinguishment of debt in the third quarter of 2016 of approximately $52 million, which is included in other expense (income), net. Debt-for-equity exchanges On January 27, 2016, Baxter exchanged Retained Shares for the extinguishment of $1.45 billion aggregate principal amount outstanding under its $1.8 billion U.S. dollar-denominated revolving credit facility. This exchange extinguished the indebtedness under the facility, which was terminated in connection with such debt-for-equity exchange. There were no material prepayment penalties or breakage costs associated with the termination of the facility. Baxter recognized a net realized gain of $1.25 billion related to the Retained Shares exchanged, which was included in other income, net for the nine months ended September 30, 2016. On March 16, 2016, the company exchanged Retained Shares for the extinguishment of approximately $2.2 billion in principal amount of its 0.950% Notes due May 2016, 5.900% Notes due August 2016, 1.850% Notes due January 2017, 5.375% Notes due May 2018, 1.850% Notes due June 2018, 4.500% Notes due August 2019, and 4.250% Notes due February 2020 purchased by certain third party purchasers in the previously announced debt tender offers. As a result, the company recognized a net loss on extinguishment of debt totaling $101 million and a net realized gain of $2.0 billion on the Retained Shares exchanged, which are included in other income, net for the nine months ended September 30, 2016. Debt Maturities In the second quarter of 2016, the company repaid the $190 million outstanding balance of its 0.95% senior unsecured notes that matured in June 2016. In the third quarter of 2016, the company repaid the $130 million outstanding balance of its 5.9% senior unsecured notes that matured in September 2016. Commercial paper During the first nine months of 2016, the company issued and redeemed commercial paper, of which zero was outstanding as of September 30, 2016. There was a balance of $300 million outstanding at December 31, 2015 with a weighted-average interest rate of 0.6%. This commercial paper is classified as short-term debt. Securitization arrangement The following is a summary of the activity relating to the company’s securitization arrangement in Japan. Three months ended Nine months ended (in millions) 2016 2015 2016 2015 Sold receivables at beginning of period $ 62 $ 106 $ 81 $ 104 Proceeds from sales of receivables 75 81 272 311 Cash collections (remitted to the owners of the receivables) (71 ) (59 ) (299 ) (284 ) Effect of currency exchange rate changes 2 4 14 1 Sold receivables at end of period $ 68 $ 132 $ 68 $ 132 The impacts on the condensed consolidated statements of income relating to the sale of receivables were immaterial for each period. Refer to the 2015 Annual Report for further information regarding the company’s securitization arrangement. Concentrations of credit risk The company invests excess cash in certificates of deposit or money market funds and diversifies the concentration of cash among different financial institutions. With respect to financial instruments, where appropriate, the company has diversified its selection of counterparties, and has arranged collateralization and master-netting agreements to minimize the risk of loss. The company continues to do business with foreign governments in certain countries, including Greece, Spain, Portugal and Italy, that have experienced a deterioration in credit and economic conditions. As of September 30, 2016, the company’s net accounts receivable from the public sector in Greece, Spain, Portugal and Italy totaled $181 million. 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 collectability 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, British Pound, Chinese Yuan, Korean Won, Australian Dollar, Canadian Dollar, Japanese Yen, Colombian Peso, Brazilian Real, Swedish Krona, Mexican Peso, and New Zealand Dollar. 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. For each derivative instrument that is designated and effective as a cash flow hedge, the gain or loss on the derivative is accumulated in accumulated other comprehensive income (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 $438 million and $378 million as of September 30, 2016 and December 31, 2015, respectively. There were no outstanding interest rate contracts designated as cash flow hedges as of September 30, 2016 and December 31, 2015. The maximum term over which the company has cash flow hedge contracts in place related to forecasted transactions as of September 30, 2016 is 15 months. Fair Value Hedges The company uses interest rate swaps to convert a portion of its fixed-rate debt into variable-rate debt. These instruments hedge the company’s earnings from changes in the fair value of debt due to fluctuations in the designated benchmark interest rate. For each derivative instrument that is designated and effective as a fair value hedge, the gain or loss on the derivative is recognized immediately to earnings, and offsets the loss or gain on the underlying hedged item. Fair value hedges are classified in net interest expense, as they hedge the interest rate risk associated with certain of the company’s fixed-rate debt. The total notional amount of interest rate contracts designated as fair value hedges was $200 million and $1.3 billion as of September 30, 2016 and December 31, 2015, respectively. The decrease is due to swaps terminated in conjunction with the previously mentioned debt-for-equity exchanges and debt redemptions. 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 nine months of 2016 or 2015 resulting from changes in the company’s assessment of the probability that the hedged forecasted transactions would occur. If the company terminates a fair value hedge, an amount equal to the cumulative fair value adjustment to the hedged items at the date of termination is amortized to earnings over the remaining term of the hedged item. In March 2016, the company terminated a total notional value of $765 million of interest rate contracts in connection with the March debt tender offers, resulting in a $34 million reduction to the debt extinguishment loss. In September 2016, the company terminated a total notional value of $335 million of interest rate contracts in connection with the September debt redemptions, resulting in a $14 million reduction to the debt extinguishment loss. The company terminated a total notional value of $1.65 billion of interest rate contracts in connection with debt tender offers, which resulted in a $33 million reduction to the debt extinguishment loss, during the first nine months of 2015. 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 expense (income), net. The terms of these instruments generally do not exceed one month. The total notional amount of undesignated derivative instruments was $914 million as of September 30, 2016 and $580 million as of December 31, 2015. 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 September 30, 2016 and 2015. Gain (loss) recognized in OCI Location of gain (loss) in income statement Gain (loss) reclassified from AOCI (in millions) 2016 2015 2016 2015 Cash flow hedges Interest rate contracts $— $— Other expense (income), net $ 5 $— Foreign exchange contracts 3 1 Cost of sales (2 ) 5 Total $ 3 $ 1 $ 3 $ 5 Gain (loss) recognized in income (in millions) Location of gain (loss) in income statement 2016 2015 Fair value hedges Interest rate contracts Net interest expense $(7 ) $(11 ) Undesignated derivative instruments Foreign exchange contracts Other expense (income), net $ 9 $ 12 The following tables summarize the income statement locations and gains and losses on the company’s derivative instruments for the nine months ended September 30, 2016 and 2015. Gain (loss) recognized in OCI Location of gain (loss) in income statement Gain (loss) reclassified from AOCI (in millions) 2016 2015 2016 2015 Cash flow hedges Interest rate contracts $ — $— Other expense (income), net $ 9 $— Foreign exchange contracts — (1 ) Net sales — — Foreign exchange contracts (8 ) 4 Cost of sales (3 ) 45 Total $ (8 ) $ 3 $ 6 $45 Gain (loss) recognized in income (in millions) Location of gain (loss) in income statement 2016 2015 Fair value hedges Interest rate contracts Net interest expense $ 19 $(24) Undesignated derivative instruments Foreign exchange contracts Other expense (income), net $ 4 $(13) For the company’s fair value hedges, equal and offsetting gain of $7 million and loss of $19 million were recognized in net interest expense in the third quarter and first nine months of 2016, respectively, and equal and offsetting gains of $11 million and $24 million were recognized in net interest expense in the third quarter and first nine months of 2015, respectively, as adjustments to the underlying hedged item, fixed-rate debt. Ineffectiveness related to the company’s cash flow and fair value hedges for the nine months ended September 30, 2016 was not material. As of September 30, 2016, $3 million of deferred, net after-tax losses on derivative instruments included in AOCI are expected to be recognized in earnings during the next 12 months, coinciding with when the hedged items are expected to impact earnings. Fair Values of Derivative Instruments The following table summarizes the classification and fair values of derivative instruments reported in the condensed consolidated balance sheet as of September 30, 2016. 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 $ 16 Other long-term liabilities $ — Foreign exchange contracts Prepaid expenses and other 13 Accounts payable and accrued liabilities 2 Foreign exchange contracts Other long-term assets 1 Other long-term liabilities — Total derivative instruments designated as hedges $ 30 $ 2 Undesignated derivative instruments Foreign exchange contracts Prepaid expenses and other $ — Accounts payable and accrued liabilities $ 1 Total derivative instruments $ 30 $ 3 The following table summarizes the classification and fair values of derivative instruments reported in the condensed consolidated balance sheet as of December 31, 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 $ 46 Other long-term liabilities $ — Foreign exchange contracts Prepaid expenses and 9 Accounts payable and 1 Total derivative instruments designated as hedges $ 55 $ 1 Undesignated derivative instruments Foreign exchange contracts Prepaid expenses and $ 1 Accounts payable and $ 1 Total derivative instruments $ 56 $ 2 While the company’s derivatives are all subject to master-netting arrangements, the company presents its assets and liabilities related to derivative instruments on a gross basis within the condensed consolidated balance sheets. Additionally, the company is not required to post collateral for any of its outstanding derivatives. The following table provides information on the company’s derivative positions as if they were presented on a net basis, allowing for the right of offset by counterparty. September 30, 2016 December 31, 2015 (in millions) Asset Liability Asset Liability Gross amounts recognized in the consolidated balance sheet $30 $ 3 $56 $ 2 Gross amount subject to offset in master-netting arrangements not offset in the consolidated balance sheet (3 ) (3 ) (2 ) (2 ) Total $27 $— $54 $— Fair value measurements The following tables summarize the basis 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 September 30, 2016 Quoted prices in active markets for identical assets (Level 1) Significant other observable inputs (Level 2) Significant unobservable (Level 3) Assets Foreign currency hedges $ 14 $— $ 14 $— Interest rate hedges 16 — 16 — Available-for-sale securities 10 10 — — Total assets $ 40 $10 $ 30 $— Liabilities Foreign currency hedges $ 3 $— $ 3 $— Contingent payments related to acquisitions 19 — — 19 Total liabilities $ 22 $— $ 3 $19 Basis of fair value measurement (in millions) Balance as of December 31, 2015 Quoted prices in active markets for identical assets (Level 1) Significant other observable inputs (Level 2) Significant unobservable (Level 3) Assets Foreign currency hedges $ 10 $— $ 10 $— Interest rate hedges 46 — 46 — Available-for-sale securities 5,162 14 5,148 — Total assets $5,218 $14 $5,204 $— Liabilities Foreign currency hedges $ 2 $— $ 2 $— Contingent payments related to acquisitions 20 — — 20 Total liabilities $ 22 $— $ 2 $20 As of September 30, 2016, cash and equivalents of $2.6 billion included money market funds of approximately $785 million, and as of December 31, 2015, cash and equivalents of $2.2 billion included money market funds of approximately $500 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 investment in the Retained Shares of $5.1 billion as of December 31, 2015 was categorized as a Level 2 security as these securities were not registered as of that date. The value of this investment was based on Baxalta’s common stock price as of December 31, 2015, which represents an identical equity instrument registered under the Securities Act of 1933, as amended. 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. Contingent payments related to acquisitions consist of commercial milestone payments and sales-based payments, and are valued using discounted cash flow techniques. The fair value of commercial milestone payments reflects management’s expectations of probability of payment, and increase as the probability of payment increases or expectation of timing of payments is accelerated. The fair value of sales-based payments is based upon probability-weighted future revenue estimates, and increases as revenue estimates increase, probability weighting of higher revenue scenarios increase or expectation of timing of payment is accelerated. Changes in the fair value of contingent payments related to Baxter’s acquisitions, which use significant unobservable inputs (Level 3) in the fair value measurement, were immaterial during the nine months of 2016. The company made minor sales-based payments in the first nine months of 2016. The following table provides information relating to the company’s investments in available-for-sale equity securities. (in millions) Amortized cost Unrealized gains Unrealized losses Fair value September 30, 2016 $ 13 $ 1 $ 4 $ 10 December 31, 2015 $732 $4,430 $— $5,162 In the first nine months of 2016 the company recorded net $4.4 billion of realized gains within other income, net related to exchanges of available-for-sale equity securities, which represented gains from the Retained Shares transactions. On May 6, 2016, Baxter made a voluntary non-cash contribution of 17,145,570 Retained Shares to the company’s U.S. pension fund. The company recorded $611 million of realized gains within other income, net related to the contribution of Retained Shares. On May 26, 2016, Baxter completed an exchange of 13,360,527 Retained Shares for 11,526,638 outstanding shares of Baxter common stock. The company recorded $537 million of realized gains within other income, net related to the exchange of the Retained Shares. The company held no shares of Baxalta as of September 30, 2016. Refer to the debt-for-equity exchange section above for discussion related to the first quarter 2016 Retained Shares transactions. In the first nine months of 2015 the company recorded $38 million of income in other expense (income), 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. Book Values and Fair Values of Financial Instruments In addition to the financial instruments that the company is required to recognize at fair value in the condensed consolidated balance sheets, the company has certain financial instruments that are recognized at historical cost or some basis other than fair value. For these financial instruments, the following table provides the values recognized in the condensed consolidated balance sheets and the approximate fair values as of September 30, 2016 and December 31, 2015. Book values Approximate fair values (in millions) 2016 2015 2016 2015 Assets Investments $ 33 $ 21 $ 32 $ 21 Liabilities Short-term debt $ — $1,775 $ — $1,775 Current maturities of long-term debt and lease obligations 6 810 6 818 Long-term debt and lease obligations 2,834 3,922 2,960 4,077 The following tables summarize the basis used to measure the approximate fair value of the financial instruments as of September 30, 2016 and December 31, 2015. Basis of fair value measurement (in millions) Balance as of September 30, 2016 Quoted prices in active markets for identical assets (Level 1) Significant other observable inputs (Level 2) Significant unobservable inputs (Level 3) Assets Investments $ 32 $— $ 2 $30 Total assets $ 32 $— $ 2 $30 Liabilities Short-term debt $ — $— $ — $— Current maturities of long-term debt and lease obligations 6 — 6 — Long-term debt and lease obligations 2,960 — 2,960 — Total liabilities $2,966 $— $2,966 $— Basis of fair value measurement (in millions) Balance as of December 31, 2015 Quoted prices in active markets for identical assets (Level 1) Significant other observable inputs (Level 2) Significant unobservable inputs (Level 3) Assets Investments $ 21 $— $ 2 $19 Total assets $ 21 $— $ 2 $19 Liabilities Short-term debt $1,775 $— $1,775 $— Current maturities of long-term debt and lease obligations 818 — 818 — Long-term debt and lease obligations 4,077 — 4,077 — Total liabilities $6,670 $— $6,670 $— Investments in 2016 and 2015 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. |
STOCK COMPENSATION
STOCK COMPENSATION | 9 Months Ended |
Sep. 30, 2016 | |
STOCK COMPENSATION | 9. STOCK COMPENSATION Stock compensation expense totaled $30 million for both the three months ended September 30, 2016 and 2015, and $84 million and $96 million for the nine months ended September 30, 2016 and 2015, respectively. Over 70% of stock compensation expense is classified in marketing and administrative expenses with the remainder classified in cost of sales and R&D expenses. In March 2016, the company awarded its annual stock compensation grants, which consisted of 6.4 million stock options, 1.0 million RSUs and 0.3 million PSUs. |
RETIREMENT AND OTHER BENEFIT PR
RETIREMENT AND OTHER BENEFIT PROGRAMS | 9 Months Ended |
Sep. 30, 2016 | |
RETIREMENT AND OTHER BENEFIT PROGRAMS | 10. RETIREMENT AND OTHER BENEFIT PROGRAMS The following is a summary of net periodic benefit cost relating to the company’s pension and other postemployment benefit (OPEB) plans. Three months ended Nine months ended September 30, September 30, (in millions) 2016 2015 2016 2015 Pension benefits Service cost $ 23 $ 27 $ 70 $ 75 Interest cost 46 50 138 149 Expected return on plan assets (76 ) (66 ) (227 ) (192 ) Amortization of net losses and other deferred amounts 38 44 113 130 Net periodic pension benefit cost $ 31 $ 55 $ 94 $ 162 OPEB Service cost $ 1 $ 1 $ 3 $ 2 Interest cost 4 3 8 13 Amortization of net loss and prior service credit (7 ) (4 ) (15 ) (7 ) Net periodic OPEB cost $ (2 ) $ — $ (4 ) $ 8 In the second quarter of 2016, the company made a $706 million voluntary, non-cash contribution to the qualified U.S. pension plan using Retained Shares. Refer to Note 8 for additional information regarding Retained Share transactions. |
ACCUMULATED OTHER COMPREHENSIVE
ACCUMULATED OTHER COMPREHENSIVE INCOME | 9 Months Ended |
Sep. 30, 2016 | |
ACCUMULATED OTHER COMPREHENSIVE INCOME | 11. 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 available-for-sale equity securities. The following table is a net-of-tax summary of the changes in AOCI by component for the nine months ended September 30, 2016 and 2015. (in millions) CTA Pension and other employee benefits Hedging activities Available- Total Gains (losses) Balance as of December 31, 2015 $ (3,191 ) $ (1,064 ) $ 7 $ 4,472 $ 224 Other comprehensive income before reclassifications (16 ) (6 ) (6 ) 105 77 Amounts reclassified from AOCI (a) — 67 (4 ) (4,536 ) (4,473 ) Net other comprehensive (loss) income (16 ) 61 (10 ) (4,431 ) (4,396 ) Balance as of September 30, 2016 $ (3,207 ) $ (1,003 ) $ (3 ) $ 41 $ (4,172 ) (in millions) CTA Pension and other employee benefits Hedging activities Available- Total Gains (losses) Balance as of December 31, 2014 $ (2,323 ) $ (1,427 ) $ 34 $ 66 $ (3,650 ) Other comprehensive income before reclassifications (985 ) 118 55 3,446 2,634 Amounts reclassified from AOCI (a) — 94 (39 ) (6 ) 49 Net other comprehensive (loss) income (985 ) 212 16 3,440 2,683 Distribution of Baxalta 226 198 (42 ) (32 ) 350 Balance as of September 30, 2015 $ (3,082 ) $ (1,017 ) $ 8 $ 3,474 $ (617 ) (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 months and nine months ended September 30, 2016 and 2015. Amounts reclassified from AOCI (a) (in millions) Three months ended September 30, 2016 Nine months ended September 30, 2016 Location of impact in income statement Amortization of pension and other employee benefits items Actuarial losses and other (b) $ (31 ) $ (98 ) (31 ) (98 ) Total before tax 11 31 Tax benefit $ (20 ) $ (67 ) Net of tax Gains on hedging activities Interest rate contracts $ 5 $ 9 Other income, net Foreign exchange contracts (2 ) (3 ) Cost of sales 3 6 Total before tax (1 ) (2 ) Tax expense $ 2 $ 4 Net of tax Available-for-sale-securities Gains on sale of equity securities $ — $ 4,536 Other income, net — 4,536 Total before tax — — Tax benefit $ — $ 4,536 Net of tax Total reclassification for the period $ (18 ) $ 4,473 Total net of tax Amounts reclassified from AOCI (a) (in millions) Three months ended September 30, 2015 Nine months ended 30, 2015 Location of impact in income statement Amortization of pension and other employee benefits items Actuarial losses and other (b) $ (40 ) $ (139 ) (40 ) (139 ) Total before tax 13 45 Tax benefit $ (27 ) $ (94 ) Net of tax Gains (losses) on hedging activities Foreign exchange contracts $ 5 $ 60 Cost of sales 5 60 Total before tax (1 ) (21 ) Tax expense $ 4 $ 39 Net of tax Other Gain on sale of available-for-sale equity securities $ 7 $ 22 Other expense (income), net Other-than-temporary impairment of available-for-sale equity securities — (9 ) Other expense (income), net 7 13 Total before tax (3 ) (7 ) Tax expense $ 4 $ 6 Net of tax Total reclassification for the period $ (19 ) $ (49 ) 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 10. Refer to Note 8 for additional information regarding hedging activity and Note 10 for additional information regarding the amortization of pension and other employee benefits items. |
INCOME TAXES
INCOME TAXES | 9 Months Ended |
Sep. 30, 2016 | |
INCOME TAXES | 12. INCOME TAXES Effective tax rate The company’s effective income tax rate for continuing operations was 0.8% and 106.1% in the three months ended September 30, 2016 and 2015, respectively, and (1.1%) and 5.8% in the nine months ended September 30, 2016 and 2015, 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 for continuing operations during the three months ended September 30, 2016 decreased due to restructuring and other charges incurred in higher tax rate jurisdictions as well as the favorable impact of discrete items including the partial settlement of an on-going income tax matter related to the company’s Turkish operations and the settlement of a transfer pricing audit related to the company’s Italian operations. Partially offsetting the foregoing items were tax charges related to the settlement of state income tax audit matters. The effective income tax rate for continuing operations in the third quarter of 2015 was primarily the result of charges associated with the company’s spin-off of Baxalta, such as debt tender premium costs associated with debt refinancing, which received tax benefits at rates significantly higher than the rate of tax without such charges. The resulting tax benefits were greater than the resulting net loss for the period. In addition to the foregoing factors, the income tax rate for the nine months ended September 30, 2016 benefited by several factors including tax-free net realized gains during the first and second quarter associated with the exchanges of Baxalta retained shares for the company’s debt and the company’s shares as well as tax-free net realized gains associated with the contribution of Baxalta retained shares to the company’s pension plan. Additionally, the income tax rate for this period was favorably impacted by tax benefits from partially settling an IRS (2008-2013) income tax audit and settling a German (2008-2011) income tax audit. During the first quarter of 2016, Baxter paid approximately $303 million to partially settle a US Federal income tax audit for the period 2008-2013. Additionally, the company settled a German income tax audit for the period 2008-2011. As a result, the company reduced its gross unrecognized tax benefits by $85 million. Pursuant to the tax matters agreement with Baxalta, Baxalta paid the company approximately $34 million related to its tax indemnity obligations in respect of its portion of the settled gross unrecognized tax benefits. See Note 2 for additional details regarding the separation of Baxalta. |
LEGAL PROCEEDINGS
LEGAL PROCEEDINGS | 9 Months Ended |
Sep. 30, 2016 | |
LEGAL PROCEEDINGS | 13. 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 September 30, 2016, the company’s total recorded reserves with respect to legal matters were $50 million and the total related receivables were $10 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 On July 31, 2015, Davita Healthcare Partners, Inc. filed suit against Baxter Healthcare Corporation in the District Court of the State of Colorado regarding an ongoing commercial dispute relating to the provision of peritoneal dialysis products. The company denies the claims and is vigorously defending itself against the suit. A bench trial concluded in third quarter 2016 and the parties are awaiting the court’s decision. In November 2016 a purported antitrust class action complaint seeking monetary and injunctive relief from the company was filed in the United States District Court for the Northern District of Illinois. The complaint alleges a conspiracy among manufacturers of IV solutions to restrict output and affect pricing in connection with a shortage of such solutions. Other 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 and related potential violation of the Food Drug and Cosmetic Act associated with operations at its North Cove facility. The company is fully cooperating with this investigation. |
SEGMENT INFORMATION
SEGMENT INFORMATION | 9 Months Ended |
Sep. 30, 2016 | |
SEGMENT INFORMATION | 14. SEGMENT INFORMATION Baxter’s two segments are strategic businesses that are managed separately because each business develops, manufactures and markets distinct products and services. The segments and a description of their products and services are as follows: The Renal The Hospital Products The company uses income from continuing operations before net interest expense, income tax expense, depreciation and amortization expense (Segment EBITDA), on a segment basis to make resource allocation decisions and assess the ongoing performance of the company’s business segments. 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, integration and separation-related costs, and asset impairment). Financial information for the company’s segments is as follows. Three months ended Nine months ended September 30, September 30, (in millions) 2016 2015 2016 2015 Net sales Renal $ 977 $ 943 $ 2,840 $ 2,805 Hospital Products 1,581 1,544 4,678 4,560 Total net sales $ 2,558 $ 2,487 $ 7,518 $ 7,365 EBITDA Renal $ 214 $ 182 $ 494 $ 422 Hospital Products 588 515 1,673 1,462 Total segment EBITDA $ 802 $ 697 $ 2,167 $ 1,884 September 30, December 31, (in millions) 2016 2015 Total assets Renal $ 4,586 $ 4,609 Hospital Products 6,602 6,632 Other 4,607 9,721 Total assets $ 15,795 $ 20,962 The following is a reconciliation of segment EBITDA to income from continuing operations before income taxes per the condensed consolidated statements of income. Three months ended Nine months ended September 30, September 30, (in millions) 2016 2015 2016 2015 Total segment EBITDA $ 802 $ 697 $ 2,167 $ 1,884 Reconciling items Depreciation and amortization (204 ) (216 ) (599 ) (593 ) Stock compensation (30 ) (30 ) (84 ) (96 ) Net interest expense (14 ) (34 ) (53 ) (94 ) Restructuring charges, net (130 ) (92 ) (237 ) (102 ) Certain foreign currency fluctuations and hedging activities 3 44 27 118 Net realized gains on Retained Shares transactions — — 4,387 — Net loss on debt extinguishment (52 ) (130 ) (153 ) (130 ) Other Corporate items (247 ) (272 ) (780 ) (764 ) Income from continuing operations before income taxes $ 128 $ (33 ) $ 4,675 $ 223 |
SEPARATION OF BAXALTA INCORPO22
SEPARATION OF BAXALTA INCORPORATED (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Summary of Discontinued Operations | Following is a summary of the operating results of Baxalta, which have been reflected as discontinued operations for the three and nine months ended September 30, 2016 and 2015. The assets and liabilities have been classified as held for disposition as of September 30, 2016 and December 31, 2015. Three months ended Nine months ended (in millions) 2016 2015 2016 2015 Major classes of line items constituting income from discontinued operations before income taxes Net sales $ 24 $ 63 $ 144 $ 2,853 Cost of sales (20 ) (63 ) (135 ) (1,172 ) Marketing and administrative expenses — (1 ) (20 ) (547 ) Research and development expenses — — — (393 ) Other income and expense items that are not major — — — 7 Total income (loss) from discontinued operations before income taxes 4 (1 ) (11 ) 748 Gain on disposal of discontinued operations — — 17 — Income tax expense 1 — 10 195 Total income (loss) from discontinued operations $ 3 $ (1 ) $ (4 ) $ 553 September 30, December 31, (in millions) 2016 2015 Carrying amounts of major classes of assets included as part of discontinued operations Accounts and other current receivables, net $ 48 $ 228 Inventories — 8 Property, plant, and equipment, net 1 2 Other 2 7 Total assets of the disposal group $ 51 $ 245 Carrying amounts of major classes of liabilities included as part of discontinued operations Accounts payable and accrued liabilities $ 3 $ 46 Total liabilities of the disposal group $ 3 $ 46 |
SUPPLEMENTAL FINANCIAL INFORM23
SUPPLEMENTAL FINANCIAL INFORMATION (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Net Interest Expense | Net interest expense Three months ended Nine months ended (in millions) 2016 2015 2016 2015 Interest expense, net of capitalized interest $ 20 $ 38 $ 69 $ 109 Interest income (6 ) (4 ) (16 ) (15 ) Net interest expense $ 14 $ 34 $ 53 $ 94 |
Other Expense (Income), Net | Other expense (income), net Three months ended Nine months ended September 30, September 30, (in millions) 2016 2015 2016 2015 Foreign exchange $ — $ (22 ) $ (12 ) $ (92 ) Net loss on debt extinguishment 52 130 153 130 Net realized gains on Retained Shares transactions — — (4,387 ) — Other (8 ) (17 ) (40 ) (84 ) Other expense (income), net $ 44 $ 91 $ (4,286) $ (46 ) |
Inventories | Inventories September 30, December 31, (in millions) 2016 2015 Raw materials $ 346 $ 374 Work in process 148 142 Finished goods 1,074 1,088 Inventories $ 1,568 $ 1,604 |
Property, Plant and Equipment, Net | Property, plant and equipment, net September 30, December 31, (in millions) 2016 2015 Property, plant and equipment, at cost $ 9,258 $ 8,990 Accumulated depreciation (4,931 ) (4,604 ) Property, plant and equipment, net $ 4,327 $ 4,386 |
EARNINGS PER SHARE (Tables)
EARNINGS PER SHARE (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Reconciliation of Basic Shares to Diluted Shares | The following is a reconciliation of basic shares to diluted shares. Three months ended Nine months ended September 30, September 30, (in millions) 2016 2015 2016 2015 Basic shares 544 546 547 544 Effect of dilutive securities 7 3 5 4 Diluted shares 551 549 552 548 |
GOODWILL AND OTHER INTANGIBLE25
GOODWILL AND OTHER INTANGIBLE ASSETS, NET (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Goodwill | The following is a reconciliation of goodwill by business segment. (in millions) Renal Hospital Products Total Balance as of December 31, 2015 $ 408 $2,279 $ 2,687 Additions 5 — 5 Currency translation adjustments (2 ) (11 ) (13 ) Balance as of September 30, 2016 $ 411 $2,268 $ 2,679 |
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 September 30, 2016 Gross other intangible assets $1,753 $ 401 $58 $2,212 Accumulated amortization (866 ) (166 ) — (1,032 ) Other intangible assets, net $887 $ 235 $58 $1,180 December 31, 2015 Gross other intangible assets $1,742 $ 393 $86 $2,221 Accumulated amortization (729 ) (143 ) — (872 ) Other intangible assets, net $1,013 $ 250 $86 $1,349 |
INFUSION PUMP AND BUSINESS OP26
INFUSION PUMP AND BUSINESS OPTIMIZATION CHARGES (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Business Optimization Charges | During the three and nine months ended September 30, 2016 and 2015, the company recorded the following charges related to business optimization programs. Three months ended Nine months ended September 30, September 30, (in millions) 2016 2015 2016 2015 Restructuring charges, net $130 $ 92 $237 $102 Costs to implement business optimization programs 25 — 44 — Gambro integration costs 5 12 19 50 Accelerated depreciation 11 — 25 — Total business optimization charges $171 $104 $325 $152 |
Components of Restructuring Costs | For the three and nine month periods ended September 30, 2016 and 2015, the company recorded the following components of restructuring costs: Three months ended September 30, 2016 (in millions) COGS SGA R&D Total Employee termination costs $21 $84 $ 1 $106 Asset impairments 6 — 27 33 Reserve adjustments Employee termination costs — (3 ) (2 ) (5 ) Contract termination costs (3 ) — (1 ) (4 ) Total restructuring charges $24 $81 $25 $130 Three months ended September 30, 2015 (in millions) COGS SGA R&D Total Employee termination costs $ 7 $56 $11 $ 74 Asset impairments 31 — — 31 Reserve adjustments (6) (4) (3) (13) Total restructuring charges $32 $52 $ 8 $ 92 Nine months ended September 30, 2016 (in millions) COGS SGA R&D Total Employee termination costs $51 $ 94 $13 $158 Contract termination costs 8 2 13 23 Asset impairments 28 — 40 68 Other exit costs 2 — — 2 Reserve adjustments Employee termination costs (1 ) (11 ) (2 ) (14 ) Total restructuring charges $88 $ 85 $64 $237 Nine months ended September 30, 2015 (in millions) COGS SGA R&D Total Employee termination costs $ 11 $ 72 $12 $ 95 Asset related costs 3 1 — 4 Asset impairment 33 — 2 35 Reserve adjustments (19) (10) (3) (32) Total restructuring charges $ 28 $ 63 $11 $102 |
Summary of Cash Activity in Reserves related to Restructuring Initiatives | The following table summarizes cash activity in the reserves related to the company’s restructuring initiatives. (in millions) Reserves as of December 31, 2015 $ 116 Charges 183 Reserve adjustments (14 ) Utilization (98 ) CTA 9 Reserves as of September 30, 2016 $ 196 |
DEBT, FINANCIAL INSTRUMENTS A27
DEBT, FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Summary of Activity Relating to Securitization Arrangement | The following is a summary of the activity relating to the company’s securitization arrangement in Japan. Three months ended Nine months ended (in millions) 2016 2015 2016 2015 Sold receivables at beginning of period $ 62 $ 106 $ 81 $ 104 Proceeds from sales of receivables 75 81 272 311 Cash collections (remitted to the owners of the receivables) (71 ) (59 ) (299 ) (284 ) Effect of currency exchange rate changes 2 4 14 1 Sold receivables at end of period $ 68 $ 132 $ 68 $ 132 |
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 September 30, 2016 and 2015. Gain (loss) recognized in OCI Location of gain (loss) in income statement Gain (loss) reclassified from AOCI (in millions) 2016 2015 2016 2015 Cash flow hedges Interest rate contracts $— $— Other expense (income), net $ 5 $— Foreign exchange contracts 3 1 Cost of sales (2 ) 5 Total $ 3 $ 1 $ 3 $ 5 Gain (loss) recognized in income (in millions) Location of gain (loss) in income statement 2016 2015 Fair value hedges Interest rate contracts Net interest expense $(7 ) $(11 ) Undesignated derivative instruments Foreign exchange contracts Other expense (income), net $ 9 $ 12 The following tables summarize the income statement locations and gains and losses on the company’s derivative instruments for the nine months ended September 30, 2016 and 2015. Gain (loss) recognized in OCI Location of gain (loss) in income statement Gain (loss) reclassified from AOCI (in millions) 2016 2015 2016 2015 Cash flow hedges Interest rate contracts $ — $— Other expense (income), net $ 9 $— Foreign exchange contracts — (1 ) Net sales — — Foreign exchange contracts (8 ) 4 Cost of sales (3 ) 45 Total $ (8 ) $ 3 $ 6 $45 Gain (loss) recognized in income (in millions) Location of gain (loss) in income statement 2016 2015 Fair value hedges Interest rate contracts Net interest expense $ 19 $(24) Undesignated derivative instruments Foreign exchange contracts Other expense (income), net $ 4 $(13) |
Classification and Fair Value Amounts of Derivative Instruments | The following table summarizes the classification and fair values of derivative instruments reported in the condensed consolidated balance sheet as of September 30, 2016. 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 $ 16 Other long-term liabilities $ — Foreign exchange contracts Prepaid expenses and other 13 Accounts payable and accrued liabilities 2 Foreign exchange contracts Other long-term assets 1 Other long-term liabilities — Total derivative instruments designated as hedges $ 30 $ 2 Undesignated derivative instruments Foreign exchange contracts Prepaid expenses and other $ — Accounts payable and accrued liabilities $ 1 Total derivative instruments $ 30 $ 3 The following table summarizes the classification and fair values of derivative instruments reported in the condensed consolidated balance sheet as of December 31, 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 $ 46 Other long-term liabilities $ — Foreign exchange contracts Prepaid expenses and 9 Accounts payable and 1 Total derivative instruments designated as hedges $ 55 $ 1 Undesignated derivative instruments Foreign exchange contracts Prepaid expenses and $ 1 Accounts payable and $ 1 Total derivative instruments $ 56 $ 2 |
Derivative Positions Presented on Net Basis | The following table provides information on the company’s derivative positions as if they were presented on a net basis, allowing for the right of offset by counterparty. September 30, 2016 December 31, 2015 (in millions) Asset Liability Asset Liability Gross amounts recognized in the consolidated balance sheet $30 $ 3 $56 $ 2 Gross amount subject to offset in master-netting arrangements not offset in the consolidated balance sheet (3 ) (3 ) (2 ) (2 ) Total $27 $— $54 $— |
Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis | The following tables summarize the basis 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 September 30, 2016 Quoted prices in active markets for identical assets (Level 1) Significant other observable inputs (Level 2) Significant unobservable (Level 3) Assets Foreign currency hedges $ 14 $— $ 14 $— Interest rate hedges 16 — 16 — Available-for-sale securities 10 10 — — Total assets $ 40 $10 $ 30 $— Liabilities Foreign currency hedges $ 3 $— $ 3 $— Contingent payments related to acquisitions 19 — — 19 Total liabilities $ 22 $— $ 3 $19 Basis of fair value measurement (in millions) Balance as of December 31, 2015 Quoted prices in active markets for identical assets (Level 1) Significant other observable inputs (Level 2) Significant unobservable (Level 3) Assets Foreign currency hedges $ 10 $— $ 10 $— Interest rate hedges 46 — 46 — Available-for-sale securities 5,162 14 5,148 — Total assets $5,218 $14 $5,204 $— Liabilities Foreign currency hedges $ 2 $— $ 2 $— Contingent payments related to acquisitions 20 — — 20 Total liabilities $ 22 $— $ 2 $20 |
Investments in Available-For-Sale Equity Securities | The following table provides information relating to the company’s investments in available-for-sale equity securities. (in millions) Amortized cost Unrealized gains Unrealized losses Fair value September 30, 2016 $ 13 $ 1 $ 4 $ 10 December 31, 2015 $732 $4,430 $— $5,162 |
Book Values and Fair Values of Financial Instruments | The following table provides the values recognized in the condensed consolidated balance sheets and the approximate fair values as of September 30, 2016 and December 31, 2015. Book values Approximate fair values (in millions) 2016 2015 2016 2015 Assets Investments $ 33 $21 $ 32 $ 21 Liabilities Short-term debt $ — $1,775 $ — $1,775 Current maturities of long-term debt and lease obligations 6 810 6 818 Long-term debt and lease obligations 2,834 3,922 2,960 4,077 |
Summarization of Basis Used to Measure Fair Value of Financial Instruments | The following tables summarize the basis used to measure the approximate fair value of the financial instruments as of September 30, 2016 and December 31, 2015. Basis of fair value measurement (in millions) Balance as of September 30, 2016 Quoted prices in active markets for identical assets (Level 1) Significant other observable inputs (Level 2) Significant unobservable inputs (Level 3) Assets Investments $ 32 $— $ 2 $30 Total assets $ 32 $— $ 2 $30 Liabilities Short-term debt $ — $— $ — $— Current maturities of long-term debt and lease obligations 6 — 6 — Long-term debt and lease obligations 2,960 — 2,960 — Total liabilities $2,966 $— $2,966 $— Basis of fair value measurement (in millions) Balance as of December 31, 2015 Quoted prices in active markets for identical assets (Level 1) Significant other observable inputs (Level 2) Significant unobservable inputs (Level 3) Assets Investments $ 21 $— $ 2 $19 Total assets $ 21 $— $ 2 $19 Liabilities Short-term debt $1,775 $— $1,775 $— Current maturities of long-term debt and lease obligations 818 — 818 — Long-term debt and lease obligations 4,077 — 4,077 — Total liabilities $6,670 $— $6,670 $— |
RETIREMENT AND OTHER BENEFIT 28
RETIREMENT AND OTHER BENEFIT PROGRAMS (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Net Periodic Benefit Cost Relating to Pension and Other Postemployement Benefit | The following is a summary of net periodic benefit cost relating to the company’s pension and other postemployment benefit (OPEB) plans. Three months ended Nine months ended September 30, September 30, (in millions) 2016 2015 2016 2015 Pension benefits Service cost $ 23 $ 27 $ 70 $ 75 Interest cost 46 50 138 149 Expected return on plan assets (76 ) (66 ) (227 ) (192 ) Amortization of net losses and other deferred amounts 38 44 113 130 Net periodic pension benefit cost $ 31 $ 55 $ 94 $ 162 OPEB Service cost $ 1 $ 1 $ 3 $ 2 Interest cost 4 3 8 13 Amortization of net loss and prior service credit (7 ) (4 ) (15 ) (7 ) Net periodic OPEB cost $ (2 ) $ — $ (4 ) $ 8 |
ACCUMULATED OTHER COMPREHENSI29
ACCUMULATED OTHER COMPREHENSIVE INCOME (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Summary of Changes in AOCI by Component | The following table is a net-of-tax summary of the changes in AOCI by component for the nine months ended September 30, 2016 and 2015. (in millions) CTA Pension and other employee benefits Hedging activities Available- Total Gains (losses) Balance as of December 31, 2015 $ (3,191 ) $ (1,064 ) $ 7 $ 4,472 $ 224 Other comprehensive income before reclassifications (16 ) (6 ) (6 ) 105 77 Amounts reclassified from AOCI (a) — 67 (4 ) (4,536 ) (4,473 ) Net other comprehensive (loss) income (16 ) 61 (10 ) (4,431 ) (4,396 ) Balance as of September 30, 2016 $ (3,207 ) $ (1,003 ) $ (3 ) $ 41 $ (4,172 ) (in millions) CTA Pension and other employee benefits Hedging activities Available- Total Gains (losses) Balance as of December 31, 2014 $ (2,323 ) $ (1,427 ) $ 34 $ 66 $ (3,650 ) Other comprehensive income before reclassifications (985 ) 118 55 3,446 2,634 Amounts reclassified from AOCI (a) — 94 (39 ) (6 ) 49 Net other comprehensive (loss) income (985 ) 212 16 3,440 2,683 Distribution of Baxalta 226 198 (42 ) (32 ) 350 Balance as of September 30, 2015 $ (3,082 ) $ (1,017 ) $ 8 $ 3,474 $ (617 ) (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 months and nine months ended September 30, 2016 and 2015. Amounts reclassified from AOCI (a) (in millions) Three months ended September 30, 2016 Nine months ended September 30, 2016 Location of impact in income statement Amortization of pension and other employee benefits items Actuarial losses and other (b) $ (31 ) $ (98 ) (31 ) (98 ) Total before tax 11 31 Tax benefit $ (20 ) $ (67 ) Net of tax Gains on hedging activities Interest rate contracts $ 5 $ 9 Other income, net Foreign exchange contracts (2 ) (3 ) Cost of sales 3 6 Total before tax (1 ) (2 ) Tax expense $ 2 $ 4 Net of tax Available-for-sale-securities Gains on sale of equity securities $ — $ 4,536 Other income, net — 4,536 Total before tax — — Tax benefit $ — $ 4,536 Net of tax Total reclassification for the period $ (18 ) $ 4,473 Total net of tax Amounts reclassified from AOCI (a) (in millions) Three months ended September 30, 2015 Nine months ended 30, 2015 Location of impact in income statement Amortization of pension and other employee benefits items Actuarial losses and other (b) $ (40 ) $ (139 ) (40 ) (139 ) Total before tax 13 45 Tax benefit $ (27 ) $ (94 ) Net of tax Gains (losses) on hedging activities Foreign exchange contracts $ 5 $ 60 Cost of sales 5 60 Total before tax (1 ) (21 ) Tax expense $ 4 $ 39 Net of tax Other Gain on sale of available-for-sale equity securities $ 7 $ 22 Other expense (income), net Other-than-temporary impairment of available-for-sale equity securities — (9 ) Other expense (income), net 7 13 Total before tax (3 ) (7 ) Tax expense $ 4 $ 6 Net of tax Total reclassification for the period $ (19 ) $ (49 ) 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 10. |
SEGMENT INFORMATION (Tables)
SEGMENT INFORMATION (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Segment Information | Financial information for the company’s segments is as follows. Three months ended Nine months ended September 30, September 30, (in millions) 2016 2015 2016 2015 Net sales Renal $ 977 $ 943 $ 2,840 $ 2,805 Hospital Products 1,581 1,544 4,678 4,560 Total net sales $ 2,558 $ 2,487 $ 7,518 $ 7,365 EBITDA Renal $ 214 $ 182 $ 494 $ 422 Hospital Products 588 515 1,673 1,462 Total segment EBITDA $ 802 $ 697 $ 2,167 $ 1,884 September 30, December 31, (in millions) 2016 2015 Total assets Renal $ 4,586 $ 4,609 Hospital Products 6,602 6,632 Other 4,607 9,721 Total assets $ 15,795 $ 20,962 |
EBITDA to Income from Continuing Operations Reconciliation | The following is a reconciliation of segment EBITDA to income from continuing operations before income taxes per the condensed consolidated statements of income. Three months ended Nine months ended September 30, September 30, (in millions) 2016 2015 2016 2015 Total segment EBITDA $ 802 $ 697 $ 2,167 $ 1,884 Reconciling items Depreciation and amortization (204 ) (216 ) (599 ) (593 ) Stock compensation (30 ) (30 ) (84 ) (96 ) Net interest expense (14 ) (34 ) (53 ) (94 ) Restructuring charges, net (130 ) (92 ) (237 ) (102 ) Certain foreign currency fluctuations and hedging activities 3 44 27 118 Net realized gains on Retained Shares transactions — — 4,387 — Net loss on debt extinguishment (52 ) (130 ) (153 ) (130 ) Other Corporate items (247 ) (272 ) (780 ) (764 ) Income from continuing operations before income taxes $ 128 $ (33 ) $ 4,675 $ 223 |
Basis of Presentation- Addition
Basis of Presentation- Additional Information (Detail) - USD ($) $ in Millions | Jul. 01, 2015 | Sep. 30, 2016 | Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2015 |
Basis Of Presentation [Line Items] | |||||
Other assets | $ 1,020 | $ 1,020 | $ 744 | ||
ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs | Restatement Adjustment | |||||
Basis Of Presentation [Line Items] | |||||
Other assets | (13) | ||||
Long-term debt, excluding capital lease obligations | $ 13 | ||||
ASU 2016-09, Improvements to Employee Share-Based Payment Accounting | |||||
Basis Of Presentation [Line Items] | |||||
Increase in net income | 9 | 36 | |||
Increase in operating cash flow | $ 9 | 36 | |||
ASU 2016-15, Statement of Cash Flows | |||||
Basis Of Presentation [Line Items] | |||||
Decrease in financing cash flows | $ (16) | $ (124) | |||
Spinoff | |||||
Basis Of Presentation [Line Items] | |||||
Percentage of outstanding common stock distributed | 80.50% | ||||
Record date for distribution | Jun. 17, 2015 |
Separation of Baxalta Incorpo32
Separation of Baxalta Incorporated - Additional Information (Detail) - USD ($) $ in Millions | May 26, 2016 | May 06, 2016 | Mar. 16, 2016 | Jan. 27, 2016 | Sep. 30, 2016 | Jun. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2015 |
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||||||||||
Number of outstanding shares of Baxter common stock acquired in exchange | 11,526,638 | 11,526,638 | ||||||||
Accounts payable and accrued net liabilities | $ 2,499 | $ 2,499 | $ 2,666 | |||||||
Cash flows from operations - discontinued operations | $ 3 | $ 290 | ||||||||
Spinoff | ||||||||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||||||||||
Percentage of common stock retained | 19.50% | 19.50% | ||||||||
Common stock, shares outstanding | 131,902,719 | 0 | 0 | |||||||
Disposition of Baxalta shares of common stock | 13,360,527 | 63,823,582 | 37,573,040 | |||||||
Extinguishment of debt | $ 2,200 | $ 1,450 | ||||||||
U.S. Pension Fund | ||||||||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||||||||||
Contribution of Retained Shares to pension fund | 17,145,570 | |||||||||
Transition Services Agreement | ||||||||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||||||||||
Reduction in marketing and administrative expense | $ 26 | $ 79 | ||||||||
Transition Services Agreement | Manufacturing and supply agreement (MSA) | Spinoff | ||||||||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||||||||||
Net sales | 6 | 31 | ||||||||
Cost of sales | 6 | $ 30 | ||||||||
Transition Services Agreement | Minimum | Manufacturing and supply agreement (MSA) | ||||||||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||||||||||
The termination of service period | 5 years | |||||||||
Transition Services Agreement | Maximum | Manufacturing and supply agreement (MSA) | ||||||||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||||||||||
The termination of service period | 10 years | |||||||||
Baxalta Inc | Discontinued Operations, Held-for-disposition | ||||||||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||||||||||
Accounts payable and accrued net liabilities | 44 | $ 44 | $ 190 | |||||||
Net assets | 156 | 156 | ||||||||
Gain on disposal of discontinued operations | 17 | |||||||||
Net sales | 24 | $ 63 | 144 | 2,853 | ||||||
Cost of sales | $ 20 | $ 63 | $ 135 | $ 1,172 |
Summary of Operating Results Wh
Summary of Operating Results Which Have Been Reflected As Discontinued Operations (Detail) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||||
Total income (loss) from discontinued operations | $ 3 | $ (1) | $ (4) | $ 553 |
Baxalta Inc | Discontinued Operations, Held-for-disposition | ||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||||
Net sales | 24 | 63 | 144 | 2,853 |
Cost of sales | (20) | (63) | (135) | (1,172) |
Marketing and administrative expenses | (1) | (20) | (547) | |
Research and development expenses | (393) | |||
Other income and expense items that are not major | 7 | |||
Total income (loss) from discontinued operations before income taxes | 4 | $ (1) | (11) | 748 |
Gain on disposal of discontinued operations | 17 | |||
Income tax expense | $ 1 | $ 10 | $ 195 |
Summary of Assets and Liabiliti
Summary of Assets and Liabilities Classified As Held For Disposition (Detail) - Baxalta Inc - Discontinued Operations, Held-for-disposition - USD ($) $ in Millions | Sep. 30, 2016 | Dec. 31, 2015 |
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||
Accounts and other current receivables, net | $ 48 | $ 228 |
Inventories | 8 | |
Property, plant, and equipment, net | 1 | 2 |
Other | 2 | 7 |
Total assets of the disposal group | 51 | 245 |
Accounts payable and accrued liabilities | 3 | 46 |
Total liabilities of the disposal group | $ 3 | $ 46 |
Net Interest Expense (Detail)
Net Interest Expense (Detail) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Interest Income Expense Net | ||||
Interest expense, net of capitalized interest | $ 20 | $ 38 | $ 69 | $ 109 |
Interest income | (6) | (4) | (16) | (15) |
Net interest expense | $ 14 | $ 34 | $ 53 | $ 94 |
Other Expense (Income), Net (De
Other Expense (Income), Net (Detail) - USD ($) $ in Millions | May 26, 2016 | May 06, 2016 | Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 |
Other Expense (Income), net | ||||||
Foreign exchange | $ (22) | $ (12) | $ (92) | |||
Net loss on debt extinguishment | $ 52 | 130 | 153 | 130 | ||
Net realized gains on Retained Shares transactions | $ (537) | $ (611) | (4,387) | |||
Other | (8) | (17) | (40) | (84) | ||
Other expense (income), net | $ 44 | $ 91 | $ (4,286) | $ (46) |
Inventories (Detail)
Inventories (Detail) - USD ($) $ in Millions | Sep. 30, 2016 | Dec. 31, 2015 |
Inventory | ||
Raw materials | $ 346 | $ 374 |
Work in process | 148 | 142 |
Finished goods | 1,074 | 1,088 |
Inventories | $ 1,568 | $ 1,604 |
Property, Plant and Equipment ,
Property, Plant and Equipment ,Net (Detail) - USD ($) $ in Millions | Sep. 30, 2016 | Dec. 31, 2015 |
Property, Plant and Equipment, Net | ||
Property, plant and equipment, at cost | $ 9,258 | $ 8,990 |
Accumulated depreciation | (4,931) | (4,604) |
Property, plant and equipment, net | $ 4,327 | $ 4,386 |
Reconciliation of Basic Shares
Reconciliation of Basic Shares to Diluted Shares (Detail) - shares shares in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Reconciliation of Basic Shares to Diluted Shares | ||||
Basic shares | 544 | 546 | 547 | 544 |
Effect of dilutive securities | 7 | 3 | 5 | 4 |
Diluted shares | 551 | 549 | 552 | 548 |
Earnings Per Share - Additional
Earnings Per Share - Additional Information (Detail) - USD ($) | May 26, 2016 | Sep. 30, 2016 | Jun. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Jul. 31, 2012 |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | |||||||
Anti-dilutive securities excluded from computation of EPS | 300,000 | 18,000,000 | 10,000,000 | 16,000,000 | |||
Stock repurchase program, authorized amount | $ 2,000,000,000 | ||||||
Purchases of common stock | 900,000 | ||||||
Remaining value available under stock repurchase programs | $ 400,000,000 | $ 400,000,000 | |||||
Number of outstanding shares of Baxter common stock acquired in exchange | 11,526,638 | 11,526,638 |
Acquisitions and Other Arrang41
Acquisitions and Other Arrangements - Additional Information (Detail) $ in Millions | 3 Months Ended |
Mar. 31, 2016USD ($) | |
Acquisitions and Other Arrangements [Line Items] | |
Payment to acquire the rights to vancomycin injection | $ 23 |
Estimated economic life | 12 years |
Goodwill (Detail)
Goodwill (Detail) $ in Millions | 9 Months Ended |
Sep. 30, 2016USD ($) | |
Goodwill [Line Items] | |
Goodwill, beginning balance | $ 2,687 |
Additions | 5 |
Currency translation adjustments | (13) |
Goodwill, ending balance | 2,679 |
Renal | |
Goodwill [Line Items] | |
Goodwill, beginning balance | 408 |
Additions | 5 |
Currency translation adjustments | (2) |
Goodwill, ending balance | 411 |
Hospital Products | |
Goodwill [Line Items] | |
Goodwill, beginning balance | 2,279 |
Currency translation adjustments | (11) |
Goodwill, ending balance | $ 2,268 |
Goodwill and Other Intangible43
Goodwill and Other Intangible Assets, Net - Additional Information (Detail) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2016 | Jun. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Goodwill And Other Intangible Asset [Line Items] | |||||
Accumulated goodwill impairment losses | $ 0 | $ 0 | |||
Amortization expense | 42 | $ 40 | $ 124 | $ 120 | |
Impairment of intangible assets | $ 51 | ||||
Developed Technology Rights | Hospital Products | |||||
Goodwill And Other Intangible Asset [Line Items] | |||||
Impairment of intangible assets | $ 41 | ||||
In-process research and development (IPR&D) | Renal | |||||
Goodwill And Other Intangible Asset [Line Items] | |||||
Impairment of intangible assets | $ 27 |
Other Intangible Assets, Net (D
Other Intangible Assets, Net (Detail) - USD ($) $ in Millions | Sep. 30, 2016 | Dec. 31, 2015 |
Intangible Asset Excluding Goodwill [Line Items] | ||
Gross other intangible assets | $ 2,212 | $ 2,221 |
Accumulated amortization | (1,032) | (872) |
Other intangible assets, net | 1,180 | 1,349 |
Developed technology, including patents | ||
Intangible Asset Excluding Goodwill [Line Items] | ||
Gross other intangible assets | 1,753 | 1,742 |
Accumulated amortization | (866) | (729) |
Other intangible assets, net | 887 | 1,013 |
Other Intangible Assets | ||
Intangible Asset Excluding Goodwill [Line Items] | ||
Gross other intangible assets | 401 | 393 |
Accumulated amortization | (166) | (143) |
Other intangible assets, net | 235 | 250 |
Indefinite Lived Intangible Assets | ||
Intangible Asset Excluding Goodwill [Line Items] | ||
Gross other intangible assets | 58 | 86 |
Other intangible assets, net | $ 58 | $ 86 |
Infusion Pump and Business Op45
Infusion Pump and Business Optimization Charges - Additional Information (Detail) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||||
Sep. 30, 2016 | Mar. 31, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2015 | |
Infusion Pump Charges | ||||||
Restructuring charges | $ 130 | $ 92 | $ 237 | $ 102 | ||
Costs to implement business optimization programs | 25 | 44 | ||||
Accelerated depreciation | 11 | 25 | ||||
VIVIA Home Hemodialysis Development Program | ||||||
Infusion Pump Charges | ||||||
Restructuring charges | 54 | |||||
SIGMA Spectrum Infusion Pump | ||||||
Infusion Pump Charges | ||||||
Decrease of infusion pump reserves | $ 12 | |||||
Utilization of reserves | 0 | 24 | ||||
Infusion pump reserve balance | 4 | 4 | ||||
Contract termination costs | ||||||
Infusion Pump Charges | ||||||
Restructuring charges | 23 | |||||
Contract termination costs | VIVIA Home Hemodialysis Development Program | ||||||
Infusion Pump Charges | ||||||
Restructuring charges | 21 | |||||
Asset Impairment | ||||||
Infusion Pump Charges | ||||||
Restructuring charges | 33 | 31 | 68 | 35 | ||
Asset Impairment | In-process research and development (IPR&D) | Renal | ||||||
Infusion Pump Charges | ||||||
Restructuring charges | 27 | |||||
Asset Impairment | VIVIA Home Hemodialysis Development Program | ||||||
Infusion Pump Charges | ||||||
Restructuring charges | 31 | |||||
Other exit costs | ||||||
Infusion Pump Charges | ||||||
Restructuring charges | 2 | |||||
Other exit costs | VIVIA Home Hemodialysis Development Program | ||||||
Infusion Pump Charges | ||||||
Restructuring charges | 2 | |||||
Severance and Other Employee Related Costs | ||||||
Infusion Pump Charges | ||||||
Restructuring charges | 183 | |||||
Restructuring reserves | 196 | 196 | $ 116 | |||
Employee termination costs | 171 | |||||
Employee Termination Costs | ||||||
Infusion Pump Charges | ||||||
Restructuring charges | 106 | $ 74 | $ 158 | $ 95 | ||
Employee Termination Costs | Global Workforce Reduction Program | ||||||
Infusion Pump Charges | ||||||
Restructuring charges | $ 101 |
Business Optimization Charges (
Business Optimization Charges (Detail) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Restructuring Cost and Reserve [Line Items] | ||||
Restructuring charges, net | $ 130 | $ 92 | $ 237 | $ 102 |
Costs to implement business optimization programs | 25 | 44 | ||
Gambro integration costs | 5 | 12 | 19 | 50 |
Accelerated depreciation | 11 | 25 | ||
Total business optimization charges | $ 171 | $ 104 | $ 325 | $ 152 |
Components of Restructuring Cos
Components of Restructuring Costs (Detail) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Restructuring Cost and Reserve [Line Items] | ||||
Restructuring charges, net | $ 130 | $ 92 | $ 237 | $ 102 |
Reserve adjustments | (13) | (32) | ||
Employee Termination Costs | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Restructuring charges, net | 106 | 74 | 158 | 95 |
Reserve adjustments | (5) | (14) | ||
Asset Impairment | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Restructuring charges, net | 33 | 31 | 68 | 35 |
Contract termination costs | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Restructuring charges, net | 23 | |||
Reserve adjustments | (4) | |||
Other exit costs | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Restructuring charges, net | 2 | |||
Asset Related Costs | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Restructuring charges, net | 4 | |||
Cost of Sales | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Restructuring charges, net | 24 | 32 | 88 | 28 |
Reserve adjustments | (6) | (19) | ||
Cost of Sales | Employee Termination Costs | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Restructuring charges, net | 21 | 7 | 51 | 11 |
Reserve adjustments | (1) | |||
Cost of Sales | Asset Impairment | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Restructuring charges, net | 6 | 31 | 28 | 33 |
Cost of Sales | Contract termination costs | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Restructuring charges, net | 8 | |||
Reserve adjustments | (3) | |||
Cost of Sales | Other exit costs | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Restructuring charges, net | 2 | |||
Cost of Sales | Asset Related Costs | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Restructuring charges, net | 3 | |||
Marketing and Administrative Expenses | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Restructuring charges, net | 81 | 52 | 85 | 63 |
Reserve adjustments | (4) | (10) | ||
Marketing and Administrative Expenses | Employee Termination Costs | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Restructuring charges, net | 84 | 56 | 94 | 72 |
Reserve adjustments | (3) | (11) | ||
Marketing and Administrative Expenses | Contract termination costs | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Restructuring charges, net | 2 | |||
Marketing and Administrative Expenses | Asset Related Costs | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Restructuring charges, net | 1 | |||
Research and Development Expenses | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Restructuring charges, net | 25 | 8 | 64 | 11 |
Reserve adjustments | (3) | (3) | ||
Research and Development Expenses | Employee Termination Costs | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Restructuring charges, net | 1 | $ 11 | 13 | 12 |
Reserve adjustments | (2) | (2) | ||
Research and Development Expenses | Asset Impairment | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Restructuring charges, net | 27 | 40 | $ 2 | |
Research and Development Expenses | Contract termination costs | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Restructuring charges, net | $ 13 | |||
Reserve adjustments | $ (1) |
Summary of Cash Activity in Res
Summary of Cash Activity in Reserves related to Restructuring Initiatives (Detail) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Restructuring Cost and Reserve [Line Items] | ||||
Charges | $ 130 | $ 92 | $ 237 | $ 102 |
Reserve adjustments | $ (13) | $ (32) | ||
Severance and Other Employee Related Costs | ||||
Restructuring Cost and Reserve [Line Items] | ||||
Reserves, Beginning balance | 116 | |||
Charges | 183 | |||
Reserve adjustments | (14) | |||
Utilization | (98) | |||
CTA | 9 | |||
Reserves, ending balance | $ 196 | $ 196 |
Debt, Financial Instruments a49
Debt, Financial Instruments and Fair Value Measurements - Additional Information (Detail) - USD ($) $ in Millions | May 26, 2016 | May 06, 2016 | Mar. 16, 2016 | Jan. 27, 2016 | Sep. 30, 2016 | Mar. 31, 2016 | Sep. 30, 2016 | Jun. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Aug. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 |
Debt and Financial Instruments [Line Items] | ||||||||||||||
Senior notes | $ 1,600 | |||||||||||||
Net loss on debt extinguishment | $ (52) | $ (130) | $ (153) | $ (130) | ||||||||||
Net realized gains on the Retained Share transactions | $ 537 | $ 611 | 4,387 | |||||||||||
Repayment of debt | 1,383 | 3,723 | ||||||||||||
Commercial paper outstanding | $ 0 | 0 | $ 0 | $ 300 | ||||||||||
Maximum length of time hedge in cash flow hedge | 15 months | |||||||||||||
Terminated interest rate contract | 335 | $ 765 | 1,650 | |||||||||||
Gain on termination of interest rate contract | 14 | $ 34 | 33 | |||||||||||
Gain (loss) on hedged item in fair value hedge | 7 | 11 | $ (19) | 24 | ||||||||||
Deferred, net after-tax losses on derivative instruments | (3) | |||||||||||||
Cash and equivalents | 2,597 | 2,597 | 1,970 | 2,597 | 1,970 | 2,213 | $ 2,925 | |||||||
Available-for-sale securities | 10 | 10 | 10 | $ 5,162 | ||||||||||
Number of outstanding shares of Baxter common stock acquired in exchange | 11,526,638 | 11,526,638 | ||||||||||||
Other expense (income), net | ||||||||||||||
Debt and Financial Instruments [Line Items] | ||||||||||||||
Equity income recognized from equity method investments | 38 | |||||||||||||
U.S. Pension Fund | ||||||||||||||
Debt and Financial Instruments [Line Items] | ||||||||||||||
Contribution of Retained Shares to pension fund | 17,145,570 | |||||||||||||
Spinoff | ||||||||||||||
Debt and Financial Instruments [Line Items] | ||||||||||||||
Disposition of Baxalta shares of common stock | 13,360,527 | 63,823,582 | 37,573,040 | |||||||||||
Baxalta Inc | ||||||||||||||
Debt and Financial Instruments [Line Items] | ||||||||||||||
Number of outstanding shares of Baxter common stock acquired in exchange | 11,526,638 | |||||||||||||
Commercial Paper | ||||||||||||||
Debt and Financial Instruments [Line Items] | ||||||||||||||
Debt instrument, weighted average interest rate | 0.60% | |||||||||||||
Not Designated as Hedging Instrument | ||||||||||||||
Debt and Financial Instruments [Line Items] | ||||||||||||||
Derivative notional amount | 914 | 914 | 914 | $ 580 | ||||||||||
Dedesignated As Hedging Instrument | ||||||||||||||
Debt and Financial Instruments [Line Items] | ||||||||||||||
Derivative notional amount | 0 | 0 | $ 0 | 0 | $ 0 | |||||||||
Interest rate contract | ||||||||||||||
Debt and Financial Instruments [Line Items] | ||||||||||||||
Derivative notional amount | 0 | 0 | 0 | 0 | ||||||||||
Interest rate contract | Fair value hedges | ||||||||||||||
Debt and Financial Instruments [Line Items] | ||||||||||||||
Derivative notional amount | 200 | 200 | 200 | 1,300 | ||||||||||
Foreign exchange contract | ||||||||||||||
Debt and Financial Instruments [Line Items] | ||||||||||||||
Derivative notional amount | 438 | 438 | 438 | 378 | ||||||||||
Countries With Liquidity Issues | ||||||||||||||
Debt and Financial Instruments [Line Items] | ||||||||||||||
Total accounts receivable from certain countries with liquidity issues | 181 | 181 | 181 | |||||||||||
Fair Value, Inputs, Level 2 | ||||||||||||||
Debt and Financial Instruments [Line Items] | ||||||||||||||
Money market funds, at carrying value | $ 785 | $ 785 | $ 785 | 500 | ||||||||||
Available-for-sale securities | $ 5,100 | |||||||||||||
5.9% Senior Unsecured Notes due 2016 | ||||||||||||||
Debt and Financial Instruments [Line Items] | ||||||||||||||
Senior notes, coupon rates | 590.00% | 590.00% | 590.00% | |||||||||||
Higher rate of debt maturity periods | September 2,016 | |||||||||||||
Repayment of debt | $ 130 | |||||||||||||
0.95% Senior Unsecured Notes Matured in June 2016 | ||||||||||||||
Debt and Financial Instruments [Line Items] | ||||||||||||||
Senior notes, coupon rates | 95.00% | |||||||||||||
Higher rate of debt maturity periods | June 2,016 | |||||||||||||
Repayment of debt | $ 190 | |||||||||||||
1.70% Senior Notes due August 2021 | ||||||||||||||
Debt and Financial Instruments [Line Items] | ||||||||||||||
Senior notes | $ 400 | |||||||||||||
Senior notes, coupon rates | 1.70% | |||||||||||||
Higher rate of debt maturity periods | August 2,021 | |||||||||||||
2.60% Senior Notes due August 2026 | ||||||||||||||
Debt and Financial Instruments [Line Items] | ||||||||||||||
Senior notes | $ 750 | |||||||||||||
Senior notes, coupon rates | 2.60% | |||||||||||||
Higher rate of debt maturity periods | August 2,026 | |||||||||||||
3.50% Senior Notes due August 2046 | ||||||||||||||
Debt and Financial Instruments [Line Items] | ||||||||||||||
Senior notes | $ 450 | |||||||||||||
Senior notes, coupon rates | 3.50% | |||||||||||||
Higher rate of debt maturity periods | August 2,046 | |||||||||||||
Debt Tender Offer | ||||||||||||||
Debt and Financial Instruments [Line Items] | ||||||||||||||
Net loss on debt extinguishment | $ (101) | |||||||||||||
Net realized gains on the Retained Share transactions | $ 2,000 | |||||||||||||
Tender offer date | Mar. 16, 2016 | |||||||||||||
Principal amount of notes exchanged for Retained Share | $ 2,200 | |||||||||||||
Debt Tender Offer | 0.950% notes due 2016 | ||||||||||||||
Debt and Financial Instruments [Line Items] | ||||||||||||||
Senior notes, coupon rates | 0.95% | |||||||||||||
Higher rate of debt maturity periods | May 2,016 | |||||||||||||
Debt Tender Offer | 5.9% Senior Unsecured Notes due 2016 | ||||||||||||||
Debt and Financial Instruments [Line Items] | ||||||||||||||
Senior notes, coupon rates | 5.90% | |||||||||||||
Higher rate of debt maturity periods | August 2,016 | |||||||||||||
Debt Tender Offer | 1.85% Notes due 2017 | ||||||||||||||
Debt and Financial Instruments [Line Items] | ||||||||||||||
Senior notes, coupon rates | 1.85% | |||||||||||||
Higher rate of debt maturity periods | January 2,017 | |||||||||||||
Debt Tender Offer | 5.375% notes due 2018 | ||||||||||||||
Debt and Financial Instruments [Line Items] | ||||||||||||||
Senior notes, coupon rates | 5.375% | |||||||||||||
Higher rate of debt maturity periods | May 2,018 | |||||||||||||
Debt Tender Offer | 1.85% notes due 2018 | ||||||||||||||
Debt and Financial Instruments [Line Items] | ||||||||||||||
Senior notes, coupon rates | 1.85% | |||||||||||||
Higher rate of debt maturity periods | June 2,018 | |||||||||||||
Debt Tender Offer | 4.500% notes due 2019 | ||||||||||||||
Debt and Financial Instruments [Line Items] | ||||||||||||||
Senior notes, coupon rates | 4.50% | |||||||||||||
Higher rate of debt maturity periods | August 2,019 | |||||||||||||
Debt Tender Offer | 4.25% notes due 2020 | ||||||||||||||
Debt and Financial Instruments [Line Items] | ||||||||||||||
Senior notes, coupon rates | 4.25% | |||||||||||||
Higher rate of debt maturity periods | February 2,020 | |||||||||||||
Senior Notes | ||||||||||||||
Debt and Financial Instruments [Line Items] | ||||||||||||||
Payments to redeem senior notes | $ 1,000 | |||||||||||||
Senior Notes | Other expense (income), net | ||||||||||||||
Debt and Financial Instruments [Line Items] | ||||||||||||||
Net loss on debt extinguishment | $ (52) | |||||||||||||
Domestic Line of Credit | ||||||||||||||
Debt and Financial Instruments [Line Items] | ||||||||||||||
Drawing | $ 1,450 | |||||||||||||
Line of Credit Facility Amount Outstanding | $ 1,800 | |||||||||||||
Net realized gains on the Retained Share transactions | $ 1,250 |
Summary of Activity Relating to
Summary of Activity Relating to Securitization Arrangement (Detail) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Accounts Receivable Securitization [Line Items] | ||||
Sold receivables at beginning of period | $ 62 | $ 106 | $ 81 | $ 104 |
Proceeds from sales of receivables | 75 | 81 | 272 | 311 |
Cash collections (remitted to the owners of the receivables) | (71) | (59) | (299) | (284) |
Effect of currency exchange rate changes | 2 | 4 | 14 | 1 |
Sold receivables at end of period | $ 68 | $ 132 | $ 68 | $ 132 |
Summary of Gains and Losses on
Summary of Gains and Losses on Derivative Instruments (Detail) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | ||
Derivative Instruments, Gain (Loss) [Line Items] | |||||
Gains (losses) on hedging activities reclassified from AOCI to net income, before tax | [1] | $ 3 | $ 5 | $ 6 | $ 60 |
Other expense (income), net | Not Designated as Hedging Instrument | |||||
Derivative Instruments, Gain (Loss) [Line Items] | |||||
Gain (loss) recognized in income, undesignated derivative instruments | 9 | 12 | 4 | (13) | |
Interest rate contract | Other expense (income), net | |||||
Derivative Instruments, Gain (Loss) [Line Items] | |||||
Gains (losses) on hedging activities reclassified from AOCI to net income, before tax | [1] | 5 | 9 | ||
Cash Flow Hedges | |||||
Derivative Instruments, Gain (Loss) [Line Items] | |||||
Gain (loss) recognized in OCI | 3 | 1 | (8) | 3 | |
Gains (losses) on hedging activities reclassified from AOCI to net income, before tax | 3 | 5 | 6 | 45 | |
Cash Flow Hedges | Interest rate contract | Other expense (income), net | |||||
Derivative Instruments, Gain (Loss) [Line Items] | |||||
Gains (losses) on hedging activities reclassified from AOCI to net income, before tax | 5 | 9 | |||
Cash Flow Hedges | Foreign Exchange Contracts One | |||||
Derivative Instruments, Gain (Loss) [Line Items] | |||||
Gain (loss) recognized in OCI | 3 | 1 | (1) | ||
Cash Flow Hedges | Foreign Exchange Contracts One | Cost of Sales | |||||
Derivative Instruments, Gain (Loss) [Line Items] | |||||
Gains (losses) on hedging activities reclassified from AOCI to net income, before tax | (2) | 5 | |||
Cash Flow Hedges | Foreign Exchange Contracts Two | |||||
Derivative Instruments, Gain (Loss) [Line Items] | |||||
Gain (loss) recognized in OCI | (8) | 4 | |||
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 | (3) | 45 | |||
Fair value hedges | Net Interest Expense | |||||
Derivative Instruments, Gain (Loss) [Line Items] | |||||
Gain (loss) recognized in income, fair value hedges | $ (7) | $ (11) | $ 19 | $ (24) | |
[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 | Sep. 30, 2016 | Dec. 31, 2015 |
Derivatives, Fair Value [Line Items] | ||
Derivative asset, fair value | $ 30 | $ 56 |
Derivative liability, fair value | 3 | 2 |
Designated as Hedging Instrument | ||
Derivatives, Fair Value [Line Items] | ||
Derivative asset, fair value | 30 | 55 |
Derivative liability, fair value | 2 | 1 |
Designated as Hedging Instrument | Interest rate contract | Other Long-Term Assets | ||
Derivatives, Fair Value [Line Items] | ||
Derivative asset, fair value | 16 | 46 |
Designated as Hedging Instrument | Foreign exchange contract | Accounts Payable And Accrued Liabilities | ||
Derivatives, Fair Value [Line Items] | ||
Derivative liability, fair value | 2 | 1 |
Designated as Hedging Instrument | Foreign exchange contract | Prepaid expenses and other | ||
Derivatives, Fair Value [Line Items] | ||
Derivative asset, fair value | 13 | 9 |
Designated as Hedging Instrument | Foreign exchange contract | Other Long-Term Assets | ||
Derivatives, Fair Value [Line Items] | ||
Derivative asset, fair value | 1 | |
Not Designated as Hedging Instrument | Foreign exchange contract | Accounts Payable And Accrued Liabilities | ||
Derivatives, Fair Value [Line Items] | ||
Derivative liability, fair value | $ 1 | 1 |
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 | Sep. 30, 2016 | Dec. 31, 2015 |
Derivatives, Fair Value [Line Items] | ||
Gross amounts recognized in the consolidated balance sheet, asset | $ 30 | $ 56 |
Gross amount subject to offset in master netting arrangements not offset in the consolidated balance sheet, asset | (3) | (2) |
Total | 27 | 54 |
Gross amounts recognized in the consolidated balance sheet, liability | 3 | 2 |
Gross amount subject to offset in master netting arrangements not offset in the consolidated balance sheet, liability | (3) | (2) |
Total | $ 0 | $ 0 |
Financial Assets and Liabilitie
Financial Assets and Liabilities Measured at Fair Value on Recurring Basis (Detail) - USD ($) $ in Millions | Sep. 30, 2016 | Dec. 31, 2015 |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Foreign currency hedges, assets at fair value | $ 30 | $ 56 |
Foreign currency hedges, liabilities at fair value | 3 | 2 |
Fair Value, Measurements, Recurring | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Foreign currency hedges, assets at fair value | 14 | 10 |
Interest rate hedges, assets at fair value | 16 | 46 |
Available-for-sale securities | 10 | 5,162 |
Total assets | 40 | 5,218 |
Foreign currency hedges, liabilities at fair value | 3 | 2 |
Contingent payments related to acquisitions | 19 | 20 |
Total liabilities | 22 | 22 |
Fair Value, Measurements, Recurring | Fair Value, Inputs, Level 1 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Available-for-sale securities | 10 | 14 |
Total assets | 10 | 14 |
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 | 14 | 10 |
Interest rate hedges, assets at fair value | 16 | 46 |
Available-for-sale securities | 5,148 | |
Total assets | 30 | 5,204 |
Foreign currency hedges, liabilities at fair value | 3 | 2 |
Total liabilities | 3 | 2 |
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 | 19 | 20 |
Total liabilities | $ 19 | $ 20 |
Available-for-Sale Equity Secur
Available-for-Sale Equity Securities (Detail) - USD ($) $ in Millions | Sep. 30, 2016 | Dec. 31, 2015 |
Schedule of Available-for-sale Securities [Line Items] | ||
Amortized cost | $ 13 | $ 732 |
Unrealized gains | 1 | 4,430 |
Unrealized losses | 4 | |
Fair value | $ 10 | $ 5,162 |
Book Values and Fair Values of
Book Values and Fair Values of Financial Instruments (Detail) - USD ($) $ in Millions | Sep. 30, 2016 | Dec. 31, 2015 |
Fair Value And Carrying Value By Balance Sheet Grouping [Line Items] | ||
Long-term debt and lease obligations | $ 2,834 | $ 3,922 |
Book Values | ||
Fair Value And Carrying Value By Balance Sheet Grouping [Line Items] | ||
Investments | 33 | 21 |
Short-term debt | 1,775 | |
Current maturities of long-term debt and lease obligations | 6 | 810 |
Long-term debt and lease obligations | 2,834 | 3,922 |
Approximate fair values | ||
Fair Value And Carrying Value By Balance Sheet Grouping [Line Items] | ||
Investments | 32 | 21 |
Short-term debt | 1,775 | |
Current maturities of long-term debt and lease obligations | 6 | 818 |
Long-term debt and lease obligations | $ 2,960 | $ 4,077 |
Summarization of Basis Used to
Summarization of Basis Used to Measure Fair Value of Financial Instruments (Detail) - USD ($) $ in Millions | Sep. 30, 2016 | Dec. 31, 2015 |
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Current maturities of long-term debt and lease obligations | $ 6 | $ 810 |
Long-term debt and lease obligations | 2,834 | 3,922 |
Approximate fair values | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Investments | 32 | 21 |
Total assets | 32 | 21 |
Short-term debt | 1,775 | |
Current maturities of long-term debt and lease obligations | 6 | 818 |
Long-term debt and lease obligations | 2,960 | 4,077 |
Total liabilities | 2,966 | 6,670 |
Fair Value, Inputs, Level 2 | Approximate fair values | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Investments | 2 | 2 |
Total assets | 2 | 2 |
Short-term debt | 1,775 | |
Current maturities of long-term debt and lease obligations | 6 | 818 |
Long-term debt and lease obligations | 2,960 | 4,077 |
Total liabilities | 2,966 | 6,670 |
Fair Value, Inputs, Level 3 | Approximate fair values | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Investments | 30 | 19 |
Total assets | $ 30 | $ 19 |
Stock Compensation - Additional
Stock Compensation - Additional Information (Detail) - USD ($) shares in Millions, $ in Millions | 1 Months Ended | 3 Months Ended | 9 Months Ended | ||
Mar. 31, 2016 | Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Stock compensation expense | $ 30 | $ 30 | $ 84 | $ 96 | |
Stock Options granted | 6.4 | ||||
Marketing and Administrative Expenses | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Stock compensation expense allocation percentage | 70.00% | 70.00% | 70.00% | 70.00% | |
Restricted Stock Units | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Awards Granted | 1 | ||||
Performance Shares | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Awards Granted | 0.3 |
Net Periodic Benefit Cost - Con
Net Periodic Benefit Cost - Continuing Operations (Detail) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Pension Benefits, Defined Benefit | ||||
Net periodic benefit cost | ||||
Service cost | $ 23 | $ 27 | $ 70 | $ 75 |
Interest cost | 46 | 50 | 138 | 149 |
Expected return on plan assets | (76) | (66) | (227) | (192) |
Amortization of net losses and other deferred amounts | 38 | 44 | 113 | 130 |
Net periodic OPEB cost | 31 | 55 | 94 | 162 |
Other Postretirement Benefit Plans, Defined Benefit | ||||
Net periodic benefit cost | ||||
Service cost | 1 | 1 | 3 | 2 |
Interest cost | 4 | 3 | 8 | 13 |
Amortization of net loss and prior service credit | (7) | $ (4) | (15) | (7) |
Net periodic OPEB cost | $ (2) | $ (4) | $ 8 |
Retirement and Other Benefit 60
Retirement and Other Benefit Programs - Additional Information (Detail) $ in Millions | 3 Months Ended |
Jun. 30, 2016USD ($) | |
U.S. Pension Fund | |
Defined Benefit Plan Disclosure [Line Items] | |
Contribution of the company in employee deferred contribution plan | $ 706 |
Summary of Changes in AOCI by C
Summary of Changes in AOCI by Component (Detail) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |||||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | ||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | |||||||
Currency translation adjustment, Beginning Balance | $ (3,191) | $ (2,323) | |||||
Currency translation adjustment, other comprehensive income (loss) before reclassifications | (16) | (985) | |||||
Currency translation adjustment, amounts reclassified from AOCI | [1] | 0 | 0 | ||||
Currency translation adjustment, net other comprehensive (loss) income | $ 10 | $ (271) | (16) | (985) | |||
Currency translation adjustment, Distribution to Baxalta | 226 | ||||||
Currency translation adjustment, Ending Balance | (3,207) | (3,082) | (3,207) | (3,082) | |||
Pension and other employee benefit, Beginning Balance | (1,064) | (1,427) | |||||
Pension and other employee benefit, Other comprehensive income (loss) before reclassifications | (6) | 118 | |||||
Pension and other employee benefit, Amounts reclassified from AOCI | [2] | 20 | 27 | 67 | [1] | 94 | [1] |
Pension and other employee benefit, Net other comprehensive (loss) income | 21 | 31 | 61 | 212 | |||
Pension and other employee benefit, Distribution to Baxalta | 198 | ||||||
Pension and other employee benefit, Ending Balance | (1,003) | (1,017) | (1,003) | (1,017) | |||
Hedging activities, Beginning Balance | 7 | 34 | |||||
Hedging activities, Other comprehensive income (loss) before reclassifications | (6) | 55 | |||||
Hedging activities, Amounts reclassified from AOCI | [2] | (2) | (4) | (4) | [1] | (39) | [1] |
Hedging activities, Net other comprehensive income (loss) | 1 | (2) | (10) | 16 | |||
Hedging activities, Distribution to Baxalta | (42) | ||||||
Hedging activities, Ending Balance | (3) | 8 | (3) | 8 | |||
Available-for-sale securities, Beginning Balance | 4,472 | 66 | |||||
Available-for-sale securities, Other comprehensive income (loss) before reclassifications | 105 | 3,446 | |||||
Available-for-sale securities, Amounts reclassified from AOCI | [1] | (4,536) | [2] | (6) | |||
Available-for-sale securities, Net other comprehensive (loss) income | 3,418 | (4,431) | 3,440 | ||||
Available-for-sale securities, Distribution to Baxalta | (32) | ||||||
Available-for-sale securities, Ending Balance | 41 | 3,474 | 41 | 3,474 | |||
Total, Beginning Balance | 224 | (3,650) | |||||
Total, Other comprehensive income (loss) before reclassifications | 77 | 2,634 | |||||
Total, Amounts reclassified from AOCI | [2] | 18 | 19 | (4,473) | [1] | 49 | [1] |
Total other comprehensive income (loss), net of tax | 32 | 3,176 | (4,396) | 2,683 | |||
Total, Distribution to Baxalta | 350 | ||||||
Total, Ending Balance | $ (4,172) | $ (617) | $ (4,172) | $ (617) | |||
[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 | 9 Months Ended | |||||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | ||||
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] | $ (31) | $ (40) | $ (98) | $ (139) | ||
Amortization of pension and other employee benefits items Actuarial losses and other reclassified from AOCI to net income, tax benefit | [1] | 11 | 13 | 31 | 45 | ||
Amortization of pension and other employee benefits items Actuarial losses and other reclassified from AOCI to net income, net of tax | [1] | (20) | (27) | (67) | [2] | (94) | [2] |
Gains (losses) on hedging activities reclassified from AOCI to net income, before tax | [1] | 3 | 5 | 6 | 60 | ||
Gains (losses) on hedging activities reclassified from AOCI to net income, tax expense | [1] | (1) | (1) | (2) | (21) | ||
Gains (losses) on hedging activities reclassified from AOCI to net income, net of tax | [1] | 2 | 4 | 4 | [2] | 39 | [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] | 7 | 4,536 | 13 | |||
Gains on available for sale securities reclassified from AOCI to net income, tax benefit | [1] | 0 | 0 | ||||
Gain (loss) on sale of available-for-sale equity securities and other-than-temporary impairment of available-for-sale equity securities, tax expense | [1] | (3) | (7) | ||||
Available-for-sale securities reclassified from AOCI to net income, net of tax | [2] | 4,536 | [1] | 6 | |||
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] | 4 | 6 | ||||
Total reclassification for the period | [1] | (18) | (19) | 4,473 | [2] | (49) | [2] |
Other expense (income), net | Equity securities | |||||||
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | |||||||
Gains on available for sale securities reclassified from AOCI to net income, before tax | [1] | 7 | 4,536 | 22 | |||
Other-than-temporary impairment of available-for-sale equity securities | [1] | (9) | |||||
Interest rate contract | Other expense (income), net | |||||||
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | |||||||
Gains (losses) on hedging activities reclassified from AOCI to net income, before tax | [1] | 5 | 9 | ||||
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] | (2) | 5 | (3) | 60 | ||
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] | $ (31) | $ (40) | $ (98) | $ (139) | ||
[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 10. |
Income Taxes - Additional Infor
Income Taxes - Additional Information (Detail) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2016 | Mar. 31, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Income Taxes [Line Items] | |||||
Effective income tax rate | 0.80% | 106.10% | (1.10%) | 5.80% | |
Decrease in gross unrecognized tax benefits | $ 85 | ||||
Baxalta Inc | |||||
Income Taxes [Line Items] | |||||
Decrease in gross unrecognized tax benefits | 34 | ||||
Internal Revenue Service (IRS) | |||||
Income Taxes [Line Items] | |||||
Payment made for partially settlement on US Federal income tax audit for the period 2008-2013 | $ 303 | ||||
Internal Revenue Service (IRS) | Earliest Tax Year | |||||
Income Taxes [Line Items] | |||||
Income tax period under audit | 2,008 | ||||
Internal Revenue Service (IRS) | Latest Tax Year | |||||
Income Taxes [Line Items] | |||||
Income tax period under audit | 2,013 | ||||
Federal Ministry of Finance, Germany | Earliest Tax Year | |||||
Income Taxes [Line Items] | |||||
Income tax period under audit | 2,008 | ||||
Federal Ministry of Finance, Germany | Latest Tax Year | |||||
Income Taxes [Line Items] | |||||
Income tax period under audit | 2,011 |
Legal Proceedings - Additional
Legal Proceedings - Additional Information (Detail) $ in Millions | Sep. 30, 2016USD ($) |
Loss Contingencies [Line Items] | |
Litigation reserve | $ 50 |
Litigation related receivables | $ 10 |
Segment Information - Additiona
Segment Information - Additional Information (Detail) | 9 Months Ended |
Sep. 30, 2016Segment | |
Segment Reporting Information [Line Items] | |
Number of segments | 2 |
Segment Information (Detail)
Segment Information (Detail) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Segment Reporting Information [Line Items] | ||||
Net sales | $ 2,558 | $ 2,487 | $ 7,518 | $ 7,365 |
Segment EBITDA | 802 | 697 | 2,167 | 1,884 |
Hospital Products | ||||
Segment Reporting Information [Line Items] | ||||
Net sales | 1,581 | 1,544 | 4,678 | 4,560 |
Segment EBITDA | 588 | 515 | 1,673 | 1,462 |
Renal | ||||
Segment Reporting Information [Line Items] | ||||
Net sales | 977 | 943 | 2,840 | 2,805 |
Segment EBITDA | $ 214 | $ 182 | $ 494 | $ 422 |
Segment Information Related to
Segment Information Related to Total Assets (Detail) - USD ($) $ in Millions | Sep. 30, 2016 | Dec. 31, 2015 |
Segment Reporting, Asset Reconciling Item [Line Items] | ||
Total assets | $ 15,795 | $ 20,962 |
Operating Segments | Renal | ||
Segment Reporting, Asset Reconciling Item [Line Items] | ||
Total assets | 4,586 | 4,609 |
Operating Segments | Hospital Products | ||
Segment Reporting, Asset Reconciling Item [Line Items] | ||
Total assets | 6,602 | 6,632 |
Corporate, Non-Segment | ||
Segment Reporting, Asset Reconciling Item [Line Items] | ||
Total assets | $ 4,607 | $ 9,721 |
EBITDA to Income from Continuin
EBITDA to Income from Continuing Operations Reconciliation (Detail) - USD ($) $ in Millions | May 26, 2016 | May 06, 2016 | Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 |
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items] | ||||||
Total segment EBITDA | $ 802 | $ 697 | $ 2,167 | $ 1,884 | ||
Reconciling items | ||||||
Depreciation and amortization | (204) | (216) | (599) | (593) | ||
Stock compensation | (30) | (30) | (84) | (96) | ||
Net interest expense | (14) | (34) | (53) | (94) | ||
Restructuring charges, net | (130) | (92) | (237) | (102) | ||
Certain foreign currency fluctuations and hedging activities | 3 | 44 | 27 | 118 | ||
Net realized gains on Retained Shares transactions | $ 537 | $ 611 | 4,387 | |||
Net loss on debt extinguishment | (52) | (130) | (153) | (130) | ||
Other Corporate items | (247) | (272) | (780) | (764) | ||
Income (loss) from continuing operations before income taxes | $ 128 | $ (33) | $ 4,675 | $ 223 |