Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2017 | Apr. 30, 2017 | |
Document And Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Mar. 31, 2017 | |
Document Fiscal Year Focus | 2,017 | |
Document Fiscal Period Focus | Q1 | |
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 | 543,669,114 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Income (Unaudited) - USD ($) shares in Millions, $ in Millions | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Income Statement [Abstract] | ||
Net sales | $ 2,475 | $ 2,375 |
Cost of sales | 1,433 | 1,410 |
Gross margin | 1,042 | 965 |
Marketing and administrative expenses | 570 | 641 |
Research and development expenses | 128 | 136 |
Operating income | 344 | 188 |
Net interest expense | 14 | 28 |
Other expense (income), net | 2 | (3,169) |
Income from continuing operations before income taxes | 328 | 3,329 |
Income tax expense (benefit) | 55 | (58) |
Income from continuing operations | 273 | 3,387 |
Loss from discontinued operations, net of tax | (1) | (7) |
Net income | $ 272 | $ 3,380 |
Income from continuing operations per common share | ||
Basic | $ 0.50 | $ 6.17 |
Diluted | 0.50 | 6.13 |
Loss from discontinued operations per common share | ||
Basic | (0.01) | |
Diluted | (0.01) | (0.01) |
Net income per common share | ||
Basic | 0.50 | 6.16 |
Diluted | $ 0.49 | $ 6.12 |
Weighted-average number of common shares outstanding | ||
Basic | 541 | 549 |
Diluted | 551 | 552 |
Cash dividends declared per common share | $ 0.130 | $ 0.115 |
Condensed Consolidated Stateme3
Condensed Consolidated Statements of Comprehensive Income (Unaudited) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Statement Of Income And Comprehensive Income [Abstract] | ||
Net income | $ 272 | $ 3,380 |
Other comprehensive income (loss), net of tax: | ||
Currency translation adjustments, net of tax expense of $20 and $14 for the three months ended March 31, 2017 and 2016, respectively | 122 | 92 |
Pension and other employee benefits, net of tax expense of $10 and $11 for the three months ended March 31, 2017 and 2016, respectively | 21 | 21 |
Hedging activities, net of tax benefit of ($4) and ($3) for the three months ended March 31, 2017 and 2016, respectively | (7) | (6) |
Available-for-sale securities, net of tax expense of zero for the three months ended March 31, 2017 and 2016. | 2 | (3,366) |
Total other comprehensive income (loss), net of tax | 138 | (3,259) |
Comprehensive income | $ 410 | $ 121 |
Condensed Consolidated Stateme4
Condensed Consolidated Statements of Comprehensive Income (Unaudited) (Parenthetical) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Statement Of Income And Comprehensive Income [Abstract] | ||
Tax expense on currency translation adjustments | $ 20 | $ 14 |
Tax expense on pension and other employee benefits | 10 | 11 |
Tax benefit on hedging activities | (4) | (3) |
Tax expense on available-for-sale securities | $ 0 | $ 0 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Millions | Mar. 31, 2017 | Dec. 31, 2016 |
Current assets | ||
Cash and equivalents | $ 2,858 | $ 2,801 |
Accounts and other current receivables, net | 1,646 | 1,691 |
Inventories | 1,480 | 1,430 |
Prepaid expenses and other | 603 | 602 |
Current assets held for disposition | 46 | 50 |
Total current assets | 6,633 | 6,574 |
Property, plant and equipment, net | 4,274 | 4,289 |
Other assets | ||
Goodwill | 2,633 | 2,595 |
Other intangible assets, net | 1,091 | 1,111 |
Other | 1,028 | 977 |
Total other assets | 4,752 | 4,683 |
Total assets | 15,659 | 15,546 |
Current liabilities | ||
Current maturities of long-term debt and lease obligations | 3 | 3 |
Accounts payable and accrued liabilities | 2,330 | 2,612 |
Current income taxes payable | 102 | 126 |
Current liabilities held for disposition | 3 | 3 |
Total current liabilities | 2,438 | 2,744 |
Long-term debt and lease obligations | 2,784 | 2,779 |
Other long-term liabilities | 1,762 | 1,743 |
Equity | ||
Common stock, $1 par value, authorized 2,000,000,000 shares, issued 683,494,944 shares in 2017 and 2016 | 683 | 683 |
Common stock in treasury, at cost, 140,783,486 shares in 2017 and 143,890,064 shares in 2016 | (7,810) | (7,995) |
Additional contributed capital | 5,908 | 5,958 |
Retained earnings | 14,323 | 14,200 |
Accumulated other comprehensive (loss) income | (4,418) | (4,556) |
Total Baxter shareholders’ equity | 8,686 | 8,290 |
Noncontrolling interests | (11) | (10) |
Total equity | 8,675 | 8,280 |
Total liabilities and equity | $ 15,659 | $ 15,546 |
Condensed Consolidated Balance6
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares | Mar. 31, 2017 | Dec. 31, 2016 |
Statement Of Financial Position [Abstract] | ||
Common stock, par value | $ 1 | $ 1 |
Common stock, authorized | 2,000,000,000 | 2,000,000,000 |
Common stock, issued | 683,494,944 | 683,494,944 |
Treasury stock, shares | 140,783,486 | 143,890,064 |
Condensed Consolidated Stateme7
Condensed Consolidated Statements of Cash Flows (unaudited) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Cash flows from operations | ||
Net income | $ 272 | $ 3,380 |
Adjustments to reconcile income from continuing operations to net cash from operating activities: | ||
Income from discontinued operations, net of tax | 1 | 7 |
Depreciation and amortization | 194 | 189 |
Deferred income taxes | 9 | (71) |
Stock compensation | 18 | 23 |
Net periodic pension benefit and OPEB costs | 31 | 30 |
Net realized gains on the Retained Share transactions | (3,239) | |
Other | (1) | 97 |
Changes in balance sheet items | ||
Accounts and other current receivables, net | 78 | 16 |
Inventories | (29) | (26) |
Accounts payable and accrued liabilities | (262) | (438) |
Business optimization and infusion pump payments | (43) | (34) |
Other | (62) | (108) |
Cash flows from operations – continuing operations | 206 | (174) |
Cash flows from operations – discontinued operations | (17) | (159) |
Cash flows from operations | 189 | (333) |
Cash flows from investing activities | ||
Capital expenditures | (123) | (184) |
Acquisitions and investments, net of cash acquired | (6) | (33) |
Divestitures and other investing activities | 12 | 3 |
Cash flows from investing activities – continuing operations | (117) | (214) |
Cash flows from investing activities – discontinued operations | 13 | |
Cash flows from investing activities | (117) | (201) |
Cash flows from financing activities | ||
Issuances of debt | 61 | |
Payments of obligations | (20) | |
Increase in debt with original maturities of three months or less, net | 450 | |
Cash dividends on common stock | (70) | (63) |
Proceeds from stock issued under employee benefit plans | 111 | 84 |
Purchases of treasury stock | (51) | |
Other | (27) | (2) |
Cash flows from financing activities | (37) | 510 |
Effect of foreign exchange rate changes on cash and equivalents | 22 | 22 |
Decrease in cash and equivalents | 57 | (2) |
Cash and equivalents at beginning of period | 2,801 | 2,213 |
Cash and equivalents at end of period | $ 2,858 | 2,211 |
Supplemental Schedule of Non-Cash Investing and Financing Activities | ||
Net proceeds on Retained Share transactions | 3,239 | |
Payment of obligations in exchange for Retained Shares | $ 3,646 |
BASIS OF PRESENTATION
BASIS OF PRESENTATION | 3 Months Ended |
Mar. 31, 2017 | |
Organization Consolidation And Presentation Of Financial Statements [Abstract] | |
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, 2016 (2016 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. New accounting standards Recently issued accounting standards not yet adopted In March 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, which amends ASC 715, Compensation – Retirement Benefits, to require employers that present a measure of operating income in their statements of earnings to include only the service cost component of net periodic postretirement benefit cost in operating expenses. The service cost component of net periodic postretirement benefit cost should be presented in the same operating expense line items as other employee compensation costs arising from services rendered during the period. The other components of net benefit cost, including interest costs, expected return on assets, amortization of prior service cost/credit, and settlement and curtailment effects, are to be included separately and outside of any subtotal of operating income. The Company intends to adopt the standard effective January 1, 2018. This guidance will impact the presentation of the Company’s consolidated statements of income with no impact on net income. The Company’s current presentation of service cost components is consistent with the requirements of the new standard. Upon adoption of the new standard, the other components will be presented within other expense (income), net on the consolidated statements of income. Upon adoption of the standard on January 1, 2018, operating income for the three months ended March 31, 2017 will be recast to increase $9 million with a corresponding increase in other expense (income), net. Recently adopted accounting pronouncements As of January 1, 2017, the company adopted on a prospective basis 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 payments to be recorded in income tax expense in the consolidated statement of income. Previous guidance required 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 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 the cash flows resulting from windfall tax benefits to be reported as operating activities in the consolidated statement of cash flows, rather than the previous requirement to present windfall tax benefits as an inflow from financing activities and an outflow from operating activities. As a result of the adoption, net income and operating cash flow for the first quarter of 2017 increased by approximately $17 million. The prior period has not been restated and therefore, windfall tax benefits of $15 million were not included in net income and were included as an inflow from financing activities and an outflow from operating activities in the condensed consolidated statement of cash flows. |
SEPARATION OF BAXALTA INCORPORA
SEPARATION OF BAXALTA INCORPORATED | 3 Months Ended |
Mar. 31, 2017 | |
Discontinued Operations And Disposal Groups [Abstract] | |
SEPARATION OF BAXALTA INCORPORATED | 2. 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). 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). 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, Baxalta became a wholly-owned subsidiary of Shire plc (Shire) through a merger of a wholly-owned Shire subsidiary with and into Baxalta, with Baxalta as the surviving subsidiary (the Merger). References in this report to Baxalta prior to the Merger closing date refer 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. 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 by Baxter are transferred to Baxalta. Separation of the remaining two countries is expected to occur by 2018. Following is a summary of the operating results of Baxalta, which have been reflected as discontinued operations for the three months ended March 31, 2017 and 2016. The assets and liabilities have been classified as held for disposition as of March 31, 2017 and December 31, 2016. Three months ended March 31, (in millions) 2017 2016 Major classes of line items constituting income from discontinued operations before income taxes Net sales $ 4 $ 64 Cost of sales (4 ) (59 ) Marketing and administrative expenses (1 ) (20 ) Research and development expenses — — Other income and expense items that are not major — — Loss from discontinued operations before income taxes (1 ) (15 ) Gain on disposal of discontinued operations — 17 Income tax expense — 9 Loss from discontinued operations, net of tax $ (1 ) $ (7 ) March 31, December 31, (in millions) 2017 2016 Carrying amounts of major classes of assets included as part of discontinued operations Accounts and other current receivables, net $ 46 $ 48 Property, plant, and equipment, net — 1 Other — 1 Total assets of the disposal group $ 46 $ 50 Carrying amounts of major classes of liabilities included as part of discontinued operations Accounts payable and accrued liabilities $ 3 $ 3 Total liabilities of the disposal group $ 3 $ 3 As of March 31, 2017 and December 31, 2016, Baxter recorded a liability of $43 million and $46 million, respectively, for its obligation to transfer these net assets to Baxalta. On February 1, 2016, the legal transfer of approximately $90 million of net assets was distributed to Baxalta resulting in a gain of $17 million, which is recorded within income from discontinued operations, net of tax. 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 first quarter of 2017 and 2016, the company recognized approximately $20 million and $27 million, respectively, as a reduction to 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 10 years. In the first quarter of 2017 and 2016, Baxter recognized approximately $6 million and $11 million, respectively, in sales to Baxalta. In addition, in the first quarter of 2017 and 2016, Baxter recognized $48 million and $45 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 outflows of $17 million and $159 million were reported in cash flows from operations – discontinued operations for the periods ending March 31, 2017 and 2016, respectively. 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 post local separation on Baxalta’s behalf. |
SUPPLEMENTAL FINANCIAL INFORMAT
SUPPLEMENTAL FINANCIAL INFORMATION | 3 Months Ended |
Mar. 31, 2017 | |
Organization Consolidation And Presentation Of Financial Statements [Abstract] | |
SUPPLEMENTAL FINANCIAL INFORMATION | 3. SUPPLEMENTAL FINANCIAL INFORMATION Net interest expense Three months ended March 31, (in millions) 2017 2016 Interest expense, net of capitalized interest $ 20 $ 33 Interest income (6 ) (5 ) Net interest expense $ 14 $ 28 Other expense (income), net Three months ended March 31, (in millions) 2017 2016 Foreign exchange $ — $ (9 ) Net loss on debt extinguishment — 101 Net realized gains on Retained Shares transactions — (3,239 ) All other 2 (22 ) Other expense (income), net $ 2 $ (3,169 ) Inventories March 31, December 31, (in millions) 2017 2016 Raw materials $ 321 $ 319 Work in process 130 122 Finished goods 1,029 989 Inventories $ 1,480 $ 1,430 Property, plant and equipment, net March 31, December 31, (in millions) 2017 2016 Property, plant and equipment, at cost $ 9,336 $ 9,162 Accumulated depreciation (5,062 ) (4,873 ) Property, plant and equipment, net $ 4,274 $ 4,289 |
EARNINGS PER SHARE
EARNINGS PER SHARE | 3 Months Ended |
Mar. 31, 2017 | |
Earnings Per Share [Abstract] | |
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 table is a reconciliation of basic shares to diluted shares. Three months ended March 31, (in millions) 2017 2016 Basic shares 541 549 Effect of dilutive securities 10 3 Diluted shares 551 552 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 3 million and 20 million equity awards for the three months ended March 31, 2017 and 2016, respectively, 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 billion of the company’s common stock. The board of directors increased this authority by an additional $1.5 billion in November 2016. During the first quarter of 2017, the company repurchased 1 million shares for $51 million in cash. During the first quarter of 2016, the company did not repurchase any shares. The company has $1.6 billion remaining available under the authorization as of March 31, 2017. |
ACQUISITIONS AND OTHER ARRANGEM
ACQUISITIONS AND OTHER ARRANGEMENTS | 3 Months Ended |
Mar. 31, 2017 | |
Organization Consolidation And Presentation Of Financial Statements [Abstract] | |
ACQUISITIONS AND OTHER ARRANGEMENTS | 5. ACQUISITIONS AND OTHER ARRANGEMENTS Celerity Pharmaceuticals, LLC 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 500mg, 750mg, 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 2016 Annual Report for additional information regarding the company’s agreement with Celerity. |
GOODWILL AND OTHER INTANGIBLE A
GOODWILL AND OTHER INTANGIBLE ASSETS, NET | 3 Months Ended |
Mar. 31, 2017 | |
Goodwill And Intangible Assets Disclosure [Abstract] | |
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, 2016 $ 397 $ 2,198 $ 2,595 Currency translation adjustments 6 32 38 Balance as of March 31, 2017 $ 403 $ 2,230 $ 2,633 As of March 31, 2017, 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 March 31, 2017 Gross other intangible assets $ 1,735 $ 394 $ 31 $ 2,160 Accumulated amortization (893 ) (176 ) — (1,069 ) Other intangible assets, net $ 842 $ 218 $ 31 $ 1,091 December 31, 2016 Gross other intangible assets $ 1,690 $ 384 $ 57 $ 2,131 Accumulated amortization (855 ) (165 ) — (1,020 ) Other intangible assets, net $ 835 $ 219 $ 57 $ 1,111 Intangible asset amortization expense was $38 million and $40 million in the first quarters of 2017 and 2016, respectively. |
BUSINESS OPTIMIZATION CHARGES
BUSINESS OPTIMIZATION CHARGES | 3 Months Ended |
Mar. 31, 2017 | |
Restructuring And Related Activities [Abstract] | |
BUSINESS OPTIMIZATION CHARGES | 7. BUSINESS OPTIMIZATION CHARGES Beginning in the second half of 2015, the company initiated actions to transform its cost structure and enhance operational efficiency. These efforts include restructuring the organization, optimizing the manufacturing footprint, R&D operations and supply chain network, employing disciplined cost management, and centralizing and streamlining certain support functions. Through March 31, 2017, the company has incurred cumulative pretax costs of $439 million related to these actions. The costs consisted primarily of employee termination, implementation costs and accelerated depreciation. The company expects to incur additional pretax costs of approximately $360 million and capital expenditures of $90 million through the completion of these initiatives by the end of 2018. The costs will primarily include employee termination costs, implementation costs, and accelerated depreciation. Of this amount, the company expects that approximately 5 percent of the charges will be non-cash. During the first quarters of 2017 and 2016, the company recorded the following charges related to business optimization programs. Three months ended March 31, (in millions) 2017 2016 Restructuring charges, net $ 3 $ 4 Costs to implement business optimization programs 21 4 Gambro integration costs — 7 Accelerated depreciation 5 — Total business optimization charges $ 29 $ 15 During the first quarters of 2017 and 2016, the company recorded the following restructuring charges. Three months ended March 31, 2017 (in millions) COGS SGA R&D Total Employee termination costs $ 10 $ 6 $ — $ 16 Contract termination costs — 1 — 1 Reserve adjustments (7 ) (5 ) (2 ) (14 ) Total restructuring charges $ 3 $ 2 $ (2 ) $ 3 Three months ended March 31, 2016 (in millions) COGS SGA R&D Total Employee termination costs $ 13 $ 1 $ 1 $ 15 Reserve adjustments (1 ) (8 ) (2 ) (11 ) Total restructuring charges $ 12 $ (7 ) $ (1 ) $ 4 Costs to implement business optimization programs for the three months ended March 31, 2017, were $21 million and consisted primarily of external consulting and employee salary and related costs. These costs were included within cost of sales and marketing and administrative expense. Costs to implement business optimization programs for the three months ended March 31, 2016, were $4 million and related primarily to external consulting costs. These 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 months ended March 31, 2017, the company recognized accelerated depreciation, primarily associated with facilities to be closed, of $5 million. The costs were recorded within cost of sales and marketing and administrative expense. The following table summarizes cash activity in the reserves related to the company’s business optimization initiatives. (in millions) Reserves as of December 31, 2016 $ 164 Charges 17 Reserve adjustments (14 ) Utilization (43 ) CTA 1 Reserves as of March 31, 2017 $ 125 The reserves are expected to be substantially utilized by the end of 2018. |
DEBT, FINANCIAL INSTRUMENTS AND
DEBT, FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS | 3 Months Ended |
Mar. 31, 2017 | |
Debt Financial Instruments And Fair Value Measurements [Abstract] | |
DEBT, FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS | 8. DEBT, FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS 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 expense (income), net for the period ended March 31, 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 expense (income), net for the period ended March 31, 2016. Commercial paper The company had no commercial paper outstanding as of March 31, 2017 and December 31, 2016. Securitization arrangement The following is a summary of the activity relating to the company’s securitization arrangement in Japan. Three months ended March 31, (in millions) 2017 2016 Sold receivables at beginning of period $ 68 $ 81 Proceeds from sales of receivables 62 104 Cash collections (remitted to the owners of the receivables) (71 ) (107 ) Effect of currency exchange rate changes 2 7 Sold receivables at end of period $ 61 $ 85 The impacts on the condensed consolidated statements of income relating to the sale of receivables were immaterial for each period. Refer to the 2016 Annual Report for further information regarding the company’s securitization agreements. 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 March 31, 2017, the company’s net accounts receivable from the public sector in Greece, Spain, Portugal and Italy totaled $142 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, 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 $662 million and $561 million as of March 31, 2017 and December 31, 2016, respectively. There were no outstanding interest rate contracts designated as cash flow hedges as of March 31, 2017 and December 31, 2016. The maximum term over which the company has cash flow hedge contracts in place related to forecasted transactions as of March 31, 2017 is 20 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 as of March 31, 2017 and December 31, 2016. 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 quarters of 2017 or 2016 resulting from changes in the company’s assessment of the probability that the hedged forecasted transactions would occur. If the company terminates a fair value hedge, an amount equal to the cumulative fair value adjustment to the hedged items at the date of termination is amortized to earnings over the remaining term of the hedged item. There were no fair value hedges terminated during the first quarter of 2017. 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. 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 $739 million as of March 31, 2017 and $822 million as of December 31, 2016. 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 March 31, 2017 and 2016. Gain (loss) recognized in OCI Location of gain (loss) Gain (loss) reclassified from AOCI into income (in millions) 2017 2016 in income statement 2017 2016 Cash flow hedges Interest rate contracts $ — $ — Other expense (income), net $ — $ 4 Foreign exchange contracts (8 ) (4 ) Cost of sales 2 1 Total $ (8 ) $ (4 ) $ 2 $ 5 Gain (loss) recognized in income (in millions) Location of gain (loss) in income statement 2017 2016 Fair value hedges Interest rate contracts Net interest expense $ (1 ) $ 22 Undesignated derivative instruments Foreign exchange contracts Other expense (income), net $ — $ 6 For the company’s fair value hedges, equal and offsetting gains of $1 million and losses of $22 million were recognized in net interest expense in the first quarters of 2017 and 2016, 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 first quarter of 2017 was not material. As of March 31, 2017, $2 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 March 31, 2017. 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 $ 6 Other long- term liabilities $ — Foreign exchange contracts Prepaid expenses and other 12 Accounts payable and accrued liabilities 1 Foreign exchange contracts Other long-term assets 2 Other long- term liabilities 1 Total derivative instruments designated as hedges $ 20 $ 2 Undesignated derivative instruments Foreign exchange contracts Prepaid expenses and other $ — Accounts payable and accrued liabilities $ 1 Total derivative instruments $ 20 $ 3 The following table summarizes the classification and fair values of derivative instruments reported in the condensed consolidated balance sheet as of December 31, 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 $ 7 Other long- term liabilities $ — Foreign exchange contracts Prepaid expenses and other 22 Accounts payable and accrued liabilities 1 Total derivative instruments designated as hedges $ 29 $ 1 Undesignated derivative instruments Foreign exchange contracts Prepaid expenses and other $ 1 Accounts payable and accrued liabilities $ 2 Total derivative instruments $ 30 $ 3 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. March 31, 2017 December 31, 2016 (in millions) Asset Liability Asset Liability Gross amounts recognized in the consolidated balance sheet $ 20 $ 3 $ 30 $ 3 Gross amount subject to offset in master netting arrangements not offset in the consolidated balance sheet (3 ) (3 ) (3 ) (3 ) Total $ 17 $ — $ 27 $ — Fair value measurements The following tables summarize the bases used to measure financial assets and liabilities that are carried at fair value on a recurring basis in the condensed consolidated balance sheets. Basis of fair value measurement (in millions) Balance as of March 31, 2017 Quoted prices in active markets for identical assets (Level 1) Significant other observable inputs (Level 2) Significant unobservable inputs (Level 3) Assets Foreign currency hedges $ 14 $ — $ 14 $ — Interest rate hedges 6 — 6 — Available-for-sale securities 8 8 — — Total assets $ 28 $ 8 $ 20 $ — Liabilities Foreign currency hedges $ 3 $ — $ 3 $ — Contingent payments related to acquisitions 13 — — 13 Total liabilities $ 16 $ — $ 3 $ 13 Basis of fair value measurement (in millions) Balance as of December 31, 2016 Quoted prices in active markets for identical assets (Level 1) Significant other observable inputs (Level 2) Significant unobservable inputs (Level 3) Assets Foreign currency hedges $ 23 $ — $ 23 $ — Interest rate hedges 7 — 7 — Available-for-sale securities 9 9 — — Total assets $ 39 $ 9 $ 30 $ — Liabilities Foreign currency hedges $ 3 $ — $ 3 $ — Contingent payments related to acquisitions 19 — — 19 Total liabilities $ 22 $ — $ 3 $ 19 As of March 31, 2017, cash and equivalents of $2.9 billion included money market funds of approximately $1 billion, and as of December 31, 2016, cash and equivalents of $2.8 billion included money market funds of approximately $1.4 billion. Money market funds would be considered Level 2 in the fair value hierarchy. For assets that are measured using quoted prices in active markets, the fair value is the published market price per unit multiplied by the number of units held, without consideration of transaction costs. The majority of the derivatives entered into by the company are valued using internal valuation techniques as no quoted market prices exist for such instruments. The principal techniques used to value these instruments are discounted cash flow and Black-Scholes models. The key inputs are considered observable and vary depending on the type of derivative, and include contractual terms, interest rate yield curves, foreign exchange rates and volatility. 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 increases 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. The change 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 primarily driven by the payment of approximately $5 million in the first quarter of 2017. 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 March 31, 2017 $ 9 $ — $ 1 $ 8 December 31, 2016 $ 13 $ — $ 4 $ 9 In the first quarter of 2017, the company recorded $4 million of other-than-temporary impairment charges within other expense (income), net based on the duration of losses related to one of the company’s investments. In the first quarter of 2016 the company recorded $3.2 billion of net realized gains within other expense (income), net related to exchanges of available-for-sale equity securities, which represented gains from the Retained Share transactions. 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 March 31, 2017 and December 31, 2016. Book values Approximate fair values (in millions) 2017 2016 2017 2016 Assets Investments $ 34 $ 31 $ 31 $ 31 Liabilities Short-term debt $ — $ — $ — $ — Current maturities of long-term debt and lease obligations 3 3 3 3 Long-term debt and lease obligations 2,784 2,779 2,770 2,756 The following tables summarize the bases used to measure the approximate fair value of the financial instruments as of March 31, 2017 and December 31, 2016. Basis of fair value measurement (in millions) Balance as of March 31, 2017 Quoted prices in active markets for identical assets (Level 1) Significant other observable inputs (Level 2) Significant unobservable inputs (Level 3) Assets Investments $ 31 $ — $ — $ 31 Total assets $ 31 $ — $ — $ 31 Liabilities Short-term debt $ — $ — $ — $ — Current maturities of long-term debt and lease obligations 3 — 3 — Long-term debt and lease obligations 2,770 — 2,770 — Total liabilities $ 2,773 $ — $ 2,773 $ — Basis of fair value measurement (in millions) Balance as of December 31, 2016 Quoted prices in active markets for identical assets (Level 1) Significant other observable inputs (Level 2) Significant unobservable inputs (Level 3) Assets Investments $ 31 $ — $ — $ 31 Total assets $ 31 $ — $ — $ 31 Liabilities Short-term debt $ — $ — $ — $ — Current maturities of long-term debt and lease obligations 3 — 3 — Long-term debt and lease obligations 2,756 — 2,756 — Total liabilities $ 2,759 $ — $ 2,759 $ — Investments in 2017 and 2016 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 | 3 Months Ended |
Mar. 31, 2017 | |
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract] | |
STOCK COMPENSATION | 9. STOCK COMPENSATION Stock compensation expense totaled $18 million and $23 million in the first quarter of 2017 and 2016, respectively. Approximately 70% of stock compensation expense is classified in marketing and administrative expenses with the remainder classified in cost of sales and R&D expenses. The company awarded stock compensation grants consisting of 5.4 million stock options, 0.7 million RSUs and 0.6 million PSUs during the first quarter of 2017. Stock Options The weighted-average Black-Scholes assumptions used in estimating the fair value of stock options granted during the period, along with the weighted-average grant-date fair values, were as follows. Three months ended March 31, 2017 2016 Expected volatility 19 % 20 % Expected life (in years) 5.5 5.5 Risk-free interest rate 2.1 % 1.4 % Dividend yield 1.0 % 1.2 % Fair value per stock option $ 10 $ 7 The total intrinsic value of stock options exercised was $50 million and $55 million during the first quarters of 2017 and 2016, respectively. As of March 31, 2017, the unrecognized compensation cost related to all unvested stock options of $93 million is expected to be recognized as expense over a weighted-average period of 2.1 years. Restricted Stock Units As of March 31, 2017, the unrecognized compensation cost related to all unvested RSUs of $81 million is expected to be recognized as expense over a weighted-average period of 2.0 years. Performance Share Units As of March 31, 2017, the unrecognized compensation cost related to all granted unvested PSUs of $37 million is expected to be recognized as expense over a weighted-average period of 2.3 years. |
RETIREMENT AND OTHER BENEFIT PR
RETIREMENT AND OTHER BENEFIT PROGRAMS | 3 Months Ended |
Mar. 31, 2017 | |
Compensation And Retirement Disclosure [Abstract] | |
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 March 31, (in millions) 2017 2016 Pension benefits Service cost $ 22 $ 23 Interest cost 45 46 Expected return on plan assets (72 ) (75 ) Amortization of net losses and other deferred amounts 40 37 Net periodic pension benefit cost $ 35 $ 31 OPEB Service cost $ — $ 1 Interest cost 2 2 Amortization of net loss and prior service credit (6 ) (4 ) Net periodic OPEB cost $ (4 ) $ (1 ) |
ACCUMULATED OTHER COMPREHENSIVE
ACCUMULATED OTHER COMPREHENSIVE INCOME | 3 Months Ended |
Mar. 31, 2017 | |
Equity [Abstract] | |
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 three months ended March 31, 2017 and 2016. (in millions) CTA Pension and other employee benefits Hedging activities Available- for-sale securities Total Gains (losses) Balance as of December 31, 2016 $ (3,438 ) $ (1,161 ) $ 3 $ 40 $ (4,556 ) Other comprehensive income before reclassifications 122 (2 ) (6 ) (1 ) 113 Amounts reclassified from AOCI (a) — 23 (1 ) 3 25 Net other comprehensive (loss) income 122 21 (7 ) 2 138 Balance as of March 31, 2017 $ (3,316 ) $ (1,140 ) $ (4 ) $ 42 $ (4,418 ) (in millions) CTA Pension and other employee benefits Hedging activities Available- for-sale- securities Total Gains (losses) Balance as of December 31, 2015 $ (3,191 ) $ (1,064 ) $ 7 $ 4,472 $ 224 Other comprehensive income before reclassifications 92 (1 ) (3 ) 22 110 Amounts reclassified from AOCI (a) — 22 (3 ) (3,388 ) (3,369 ) Net other comprehensive (loss) income 92 21 (6 ) (3,366 ) (3,259 ) Balance as of March 31, 2016 $ (3,099 ) $ (1,043 ) $ 1 $ 1,106 $ (3,035 ) (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 ended March 31, 2017 and 2016. Amounts reclassified from AOCI (a) (in millions) Three months ended March 31, 2017 Three months ended March 31, 2016 Location of impact in income statement Amortization of pension and other employee benefits items Actuarial losses and other (b) $ (34 ) $ (33 ) (34 ) (33 ) Total before tax 11 11 Tax benefit $ (23 ) $ (22 ) Net of tax Gains on hedging activities Interest rate contracts $ — $ 4 Other expense (income), net Foreign exchange contracts 2 1 Cost of sales 2 5 Total before tax (1 ) (2 ) Tax expense $ 1 $ 3 Net of tax Available-for-sale-securities Gains on sale of equity securities $ — $ 3,388 Other expense (income), net Other-than-temporary impairment of equity securities (4 ) — Other expense (income), net (4 ) 3,388 Total before tax 1 — Tax benefit (3 ) 3,388 Net of tax Total reclassification for the period $ (25 ) $ 3,369 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 | 3 Months Ended |
Mar. 31, 2017 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | 12. INCOME TAXES Effective tax rate The company’s effective income tax rate for continuing operations was 16.8% and (1.7)% in the first quarters of 2017 and 2016, 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 increased during the three months ended March 31, 2017 principally due to the absence of the tax-free net realized gains associated with the Baxalta debt-for-equity exchanges and benefits attributable to closing an IRS and German income tax audit that were each reflected during the three months ended March 31, 2016. The effective income tax rate for continuing operations during the three months ended March 31, 2017 was favorably impacted by approximately 5.0 percentage points due to tax windfall benefits realized from stock option exercises and vesting of restricted share units and performance share units associated with the company’s stock compensation programs. |
LEGAL PROCEEDINGS
LEGAL PROCEEDINGS | 3 Months Ended |
Mar. 31, 2017 | |
Commitments And Contingencies Disclosure [Abstract] | |
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 March 31, 2017, the company’s total recorded reserves with respect to legal matters were $20 million and there were no related receivables. 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 the resolution thereof in any reporting period 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. 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 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. Similar parallel actions subsequently were filed. In January 2017, a single consolidated complaint covering these matters was filed in the Northern District of Illinois. The company filed a motion to dismiss the consolidated complaint in February 2017. In April 2017, the company became aware of a criminal investigation by the U.S. Department of Justice, Antitrust Division and a federal grand jury in the United States District Court for the Eastern District of Pennsylvania. The company and an employee received subpoenas seeking production of documents and testimony regarding the manufacturing, selling, pricing and shortages of intravenous solutions and containers (including saline solutions and certain other injectable medicines sold by the company) and communications with competitors regarding the same. The company is cooperating with the investigation. As previously disclosed, the New York Attorney General has requested that Baxter provide information regarding business practices in the IV saline industry. The company is cooperating with the New York Attorney General. Other In December 2016, the company received a civil investigative demand from the Commercial Litigation Branch of the United States Department of Justice primarily relating to contingent discount arrangements for, and other promotion of, the company’s TISSEEL and ARTIS products. The company is cooperating in this matter. |
SEGMENT INFORMATION
SEGMENT INFORMATION | 3 Months Ended |
Mar. 31, 2017 | |
Segment Reporting [Abstract] | |
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 impairments). Financial information for the company’s segments is as follows. Three months ended March 31, (in millions) 2017 2016 Net sales Renal $ 896 $ 898 Hospital Products 1,579 1,477 Total net sales $ 2,475 $ 2,375 EBITDA Renal $ 199 $ 122 Hospital Products 564 509 Total segment EBITDA $ 763 $ 631 March 31, December 31, (in millions) 2017 2016 Total assets Renal $ 4,506 $ 4,315 Hospital Products 6,466 6,407 Total assets $ 10,972 $ 10,722 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 March 31, (in millions) 2017 2016 Total segment EBITDA $ 763 $ 631 Reconciling items Depreciation and amortization (194 ) (189 ) Stock compensation (18 ) (23 ) Net interest expense (14 ) (28 ) Business optimization items (3 ) (5 ) Certain foreign currency fluctuations and hedging activities 8 22 Net realized gains on Retained Shares transactions — 3,239 Net loss on debt extinguishment — (101 ) Other Corporate items (214 ) (217 ) Income from continuing operations before income taxes $ 328 $ 3,329 |
BASIS OF PRESENTATION (Policies
BASIS OF PRESENTATION (Policies) | 3 Months Ended |
Mar. 31, 2017 | |
Accounting Policies [Abstract] | |
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, 2016 (2016 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. |
New Accounting Standards | New accounting standards Recently issued accounting standards not yet adopted In March 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, which amends ASC 715, Compensation – Retirement Benefits, to require employers that present a measure of operating income in their statements of earnings to include only the service cost component of net periodic postretirement benefit cost in operating expenses. The service cost component of net periodic postretirement benefit cost should be presented in the same operating expense line items as other employee compensation costs arising from services rendered during the period. The other components of net benefit cost, including interest costs, expected return on assets, amortization of prior service cost/credit, and settlement and curtailment effects, are to be included separately and outside of any subtotal of operating income. The Company intends to adopt the standard effective January 1, 2018. This guidance will impact the presentation of the Company’s consolidated statements of income with no impact on net income. The Company’s current presentation of service cost components is consistent with the requirements of the new standard. Upon adoption of the new standard, the other components will be presented within other expense (income), net on the consolidated statements of income. Upon adoption of the standard on January 1, 2018, operating income for the three months ended March 31, 2017 will be recast to increase $9 million with a corresponding increase in other expense (income), net. Recently adopted accounting pronouncements As of January 1, 2017, the company adopted on a prospective basis 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 payments to be recorded in income tax expense in the consolidated statement of income. Previous guidance required 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 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 the cash flows resulting from windfall tax benefits to be reported as operating activities in the consolidated statement of cash flows, rather than the previous requirement to present windfall tax benefits as an inflow from financing activities and an outflow from operating activities. As a result of the adoption, net income and operating cash flow for the first quarter of 2017 increased by approximately $17 million. The prior period has not been restated and therefore, windfall tax benefits of $15 million were not included in net income and were included as an inflow from financing activities and an outflow from operating activities in the condensed consolidated statement of cash flows. |
SEPARATION OF BAXALTA INCORPO23
SEPARATION OF BAXALTA INCORPORATED (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Discontinued Operations And Disposal Groups [Abstract] | |
Summary of Discontinued Operations | Following is a summary of the operating results of Baxalta, which have been reflected as discontinued operations for the three months ended March 31, 2017 and 2016. The assets and liabilities have been classified as held for disposition as of March 31, 2017 and December 31, 2016. Three months ended March 31, (in millions) 2017 2016 Major classes of line items constituting income from discontinued operations before income taxes Net sales $ 4 $ 64 Cost of sales (4 ) (59 ) Marketing and administrative expenses (1 ) (20 ) Research and development expenses — — Other income and expense items that are not major — — Loss from discontinued operations before income taxes (1 ) (15 ) Gain on disposal of discontinued operations — 17 Income tax expense — 9 Loss from discontinued operations, net of tax $ (1 ) $ (7 ) March 31, December 31, (in millions) 2017 2016 Carrying amounts of major classes of assets included as part of discontinued operations Accounts and other current receivables, net $ 46 $ 48 Property, plant, and equipment, net — 1 Other — 1 Total assets of the disposal group $ 46 $ 50 Carrying amounts of major classes of liabilities included as part of discontinued operations Accounts payable and accrued liabilities $ 3 $ 3 Total liabilities of the disposal group $ 3 $ 3 |
SUPPLEMENTAL FINANCIAL INFORM24
SUPPLEMENTAL FINANCIAL INFORMATION (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Organization Consolidation And Presentation Of Financial Statements [Abstract] | |
Net Interest Expense | Net interest expense Three months ended March 31, (in millions) 2017 2016 Interest expense, net of capitalized interest $ 20 $ 33 Interest income (6 ) (5 ) Net interest expense $ 14 $ 28 |
Other Expense (Income), Net | Other expense (income), net Three months ended March 31, (in millions) 2017 2016 Foreign exchange $ — $ (9 ) Net loss on debt extinguishment — 101 Net realized gains on Retained Shares transactions — (3,239 ) All other 2 (22 ) Other expense (income), net $ 2 $ (3,169 ) |
Inventories | Inventories March 31, December 31, (in millions) 2017 2016 Raw materials $ 321 $ 319 Work in process 130 122 Finished goods 1,029 989 Inventories $ 1,480 $ 1,430 |
Property, Plant and Equipment, Net | Property, plant and equipment, net March 31, December 31, (in millions) 2017 2016 Property, plant and equipment, at cost $ 9,336 $ 9,162 Accumulated depreciation (5,062 ) (4,873 ) Property, plant and equipment, net $ 4,274 $ 4,289 |
EARNINGS PER SHARE (Tables)
EARNINGS PER SHARE (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Earnings Per Share [Abstract] | |
Reconciliation of Basic Shares to Diluted Shares | The following table is a reconciliation of basic shares to diluted shares. Three months ended March 31, (in millions) 2017 2016 Basic shares 541 549 Effect of dilutive securities 10 3 Diluted shares 551 552 |
GOODWILL AND OTHER INTANGIBLE26
GOODWILL AND OTHER INTANGIBLE ASSETS, NET (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Goodwill And Intangible Assets Disclosure [Abstract] | |
Goodwill | The following is a reconciliation of goodwill by business segment. (in millions) Renal Hospital Products Total Balance as of December 31, 2016 $ 397 $ 2,198 $ 2,595 Currency translation adjustments 6 32 38 Balance as of March 31, 2017 $ 403 $ 2,230 $ 2,633 |
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 March 31, 2017 Gross other intangible assets $ 1,735 $ 394 $ 31 $ 2,160 Accumulated amortization (893 ) (176 ) — (1,069 ) Other intangible assets, net $ 842 $ 218 $ 31 $ 1,091 December 31, 2016 Gross other intangible assets $ 1,690 $ 384 $ 57 $ 2,131 Accumulated amortization (855 ) (165 ) — (1,020 ) Other intangible assets, net $ 835 $ 219 $ 57 $ 1,111 |
BUSINESS OPTIMIZATION CHARGES (
BUSINESS OPTIMIZATION CHARGES (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Restructuring And Related Activities [Abstract] | |
Business Optimization Charges | During the first quarters of 2017 and 2016, the company recorded the following charges related to business optimization programs. Three months ended March 31, (in millions) 2017 2016 Restructuring charges, net $ 3 $ 4 Costs to implement business optimization programs 21 4 Gambro integration costs — 7 Accelerated depreciation 5 — Total business optimization charges $ 29 $ 15 |
Components of Restructuring Charges | During the first quarters of 2017 and 2016, the company recorded the following restructuring charges. Three months ended March 31, 2017 (in millions) COGS SGA R&D Total Employee termination costs $ 10 $ 6 $ — $ 16 Contract termination costs — 1 — 1 Reserve adjustments (7 ) (5 ) (2 ) (14 ) Total restructuring charges $ 3 $ 2 $ (2 ) $ 3 Three months ended March 31, 2016 (in millions) COGS SGA R&D Total Employee termination costs $ 13 $ 1 $ 1 $ 15 Reserve adjustments (1 ) (8 ) (2 ) (11 ) Total restructuring charges $ 12 $ (7 ) $ (1 ) $ 4 |
Summary of Cash Activity in Reserves related to Business Optimization Initiatives | The following table summarizes cash activity in the reserves related to the company’s business optimization initiatives. (in millions) Reserves as of December 31, 2016 $ 164 Charges 17 Reserve adjustments (14 ) Utilization (43 ) CTA 1 Reserves as of March 31, 2017 $ 125 |
DEBT, FINANCIAL INSTRUMENTS A28
DEBT, FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Debt Financial Instruments And Fair Value Measurements [Abstract] | |
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 March 31, (in millions) 2017 2016 Sold receivables at beginning of period $ 68 $ 81 Proceeds from sales of receivables 62 104 Cash collections (remitted to the owners of the receivables) (71 ) (107 ) Effect of currency exchange rate changes 2 7 Sold receivables at end of period $ 61 $ 85 |
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 March 31, 2017 and 2016. Gain (loss) recognized in OCI Location of gain (loss) Gain (loss) reclassified from AOCI into income (in millions) 2017 2016 in income statement 2017 2016 Cash flow hedges Interest rate contracts $ — $ — Other expense (income), net $ — $ 4 Foreign exchange contracts (8 ) (4 ) Cost of sales 2 1 Total $ (8 ) $ (4 ) $ 2 $ 5 Gain (loss) recognized in income (in millions) Location of gain (loss) in income statement 2017 2016 Fair value hedges Interest rate contracts Net interest expense $ (1 ) $ 22 Undesignated derivative instruments Foreign exchange contracts Other expense (income), net $ — $ 6 |
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 March 31, 2017. 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 $ 6 Other long- term liabilities $ — Foreign exchange contracts Prepaid expenses and other 12 Accounts payable and accrued liabilities 1 Foreign exchange contracts Other long-term assets 2 Other long- term liabilities 1 Total derivative instruments designated as hedges $ 20 $ 2 Undesignated derivative instruments Foreign exchange contracts Prepaid expenses and other $ — Accounts payable and accrued liabilities $ 1 Total derivative instruments $ 20 $ 3 The following table summarizes the classification and fair values of derivative instruments reported in the condensed consolidated balance sheet as of December 31, 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 $ 7 Other long- term liabilities $ — Foreign exchange contracts Prepaid expenses and other 22 Accounts payable and accrued liabilities 1 Total derivative instruments designated as hedges $ 29 $ 1 Undesignated derivative instruments Foreign exchange contracts Prepaid expenses and other $ 1 Accounts payable and accrued liabilities $ 2 Total derivative instruments $ 30 $ 3 |
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. March 31, 2017 December 31, 2016 (in millions) Asset Liability Asset Liability Gross amounts recognized in the consolidated balance sheet $ 20 $ 3 $ 30 $ 3 Gross amount subject to offset in master netting arrangements not offset in the consolidated balance sheet (3 ) (3 ) (3 ) (3 ) Total $ 17 $ — $ 27 $ — |
Summary of Financial Assets and Liabilities Measured at Fair Value on Recurring Basis | The following tables summarize the bases used to measure financial assets and liabilities that are carried at fair value on a recurring basis in the condensed consolidated balance sheets. Basis of fair value measurement (in millions) Balance as of March 31, 2017 Quoted prices in active markets for identical assets (Level 1) Significant other observable inputs (Level 2) Significant unobservable inputs (Level 3) Assets Foreign currency hedges $ 14 $ — $ 14 $ — Interest rate hedges 6 — 6 — Available-for-sale securities 8 8 — — Total assets $ 28 $ 8 $ 20 $ — Liabilities Foreign currency hedges $ 3 $ — $ 3 $ — Contingent payments related to acquisitions 13 — — 13 Total liabilities $ 16 $ — $ 3 $ 13 Basis of fair value measurement (in millions) Balance as of December 31, 2016 Quoted prices in active markets for identical assets (Level 1) Significant other observable inputs (Level 2) Significant unobservable inputs (Level 3) Assets Foreign currency hedges $ 23 $ — $ 23 $ — Interest rate hedges 7 — 7 — Available-for-sale securities 9 9 — — Total assets $ 39 $ 9 $ 30 $ — Liabilities Foreign currency hedges $ 3 $ — $ 3 $ — Contingent payments related to acquisitions 19 — — 19 Total liabilities $ 22 $ — $ 3 $ 19 |
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 March 31, 2017 $ 9 $ — $ 1 $ 8 December 31, 2016 $ 13 $ — $ 4 $ 9 |
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 March 31, 2017 and December 31, 2016. Book values Approximate fair values (in millions) 2017 2016 2017 2016 Assets Investments $ 34 $ 31 $ 31 $ 31 Liabilities Short-term debt $ — $ — $ — $ — Current maturities of long-term debt and lease obligations 3 3 3 3 Long-term debt and lease obligations 2,784 2,779 2,770 2,756 |
Summarization of Bases Used to Measure Fair Value of Financial Instruments | The following tables summarize the bases used to measure the approximate fair value of the financial instruments as of March 31, 2017 and December 31, 2016. Basis of fair value measurement (in millions) Balance as of March 31, 2017 Quoted prices in active markets for identical assets (Level 1) Significant other observable inputs (Level 2) Significant unobservable inputs (Level 3) Assets Investments $ 31 $ — $ — $ 31 Total assets $ 31 $ — $ — $ 31 Liabilities Short-term debt $ — $ — $ — $ — Current maturities of long-term debt and lease obligations 3 — 3 — Long-term debt and lease obligations 2,770 — 2,770 — Total liabilities $ 2,773 $ — $ 2,773 $ — Basis of fair value measurement (in millions) Balance as of December 31, 2016 Quoted prices in active markets for identical assets (Level 1) Significant other observable inputs (Level 2) Significant unobservable inputs (Level 3) Assets Investments $ 31 $ — $ — $ 31 Total assets $ 31 $ — $ — $ 31 Liabilities Short-term debt $ — $ — $ — $ — Current maturities of long-term debt and lease obligations 3 — 3 — Long-term debt and lease obligations 2,756 — 2,756 — Total liabilities $ 2,759 $ — $ 2,759 $ — |
STOCK COMPENSATION (Tables)
STOCK COMPENSATION (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract] | |
Stock Options Fair Value Assumptions | The weighted-average Black-Scholes assumptions used in estimating the fair value of stock options granted during the period, along with the weighted-average grant-date fair values, were as follows. Three months ended March 31, 2017 2016 Expected volatility 19 % 20 % Expected life (in years) 5.5 5.5 Risk-free interest rate 2.1 % 1.4 % Dividend yield 1.0 % 1.2 % Fair value per stock option $ 10 $ 7 |
RETIREMENT AND OTHER BENEFIT 30
RETIREMENT AND OTHER BENEFIT PROGRAMS (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Compensation And Retirement Disclosure [Abstract] | |
Net Periodic Benefit Cost Relating to Pension and Other Postemployment Benefit Plans | 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 March 31, (in millions) 2017 2016 Pension benefits Service cost $ 22 $ 23 Interest cost 45 46 Expected return on plan assets (72 ) (75 ) Amortization of net losses and other deferred amounts 40 37 Net periodic pension benefit cost $ 35 $ 31 OPEB Service cost $ — $ 1 Interest cost 2 2 Amortization of net loss and prior service credit (6 ) (4 ) Net periodic OPEB cost $ (4 ) $ (1 ) |
ACCUMULATED OTHER COMPREHENSI31
ACCUMULATED OTHER COMPREHENSIVE INCOME (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Equity [Abstract] | |
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 three months ended March 31, 2017 and 2016. (in millions) CTA Pension and other employee benefits Hedging activities Available- for-sale securities Total Gains (losses) Balance as of December 31, 2016 $ (3,438 ) $ (1,161 ) $ 3 $ 40 $ (4,556 ) Other comprehensive income before reclassifications 122 (2 ) (6 ) (1 ) 113 Amounts reclassified from AOCI (a) — 23 (1 ) 3 25 Net other comprehensive (loss) income 122 21 (7 ) 2 138 Balance as of March 31, 2017 $ (3,316 ) $ (1,140 ) $ (4 ) $ 42 $ (4,418 ) (in millions) CTA Pension and other employee benefits Hedging activities Available- for-sale- securities Total Gains (losses) Balance as of December 31, 2015 $ (3,191 ) $ (1,064 ) $ 7 $ 4,472 $ 224 Other comprehensive income before reclassifications 92 (1 ) (3 ) 22 110 Amounts reclassified from AOCI (a) — 22 (3 ) (3,388 ) (3,369 ) Net other comprehensive (loss) income 92 21 (6 ) (3,366 ) (3,259 ) Balance as of March 31, 2016 $ (3,099 ) $ (1,043 ) $ 1 $ 1,106 $ (3,035 ) (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 ended March 31, 2017 and 2016. Amounts reclassified from AOCI (a) (in millions) Three months ended March 31, 2017 Three months ended March 31, 2016 Location of impact in income statement Amortization of pension and other employee benefits items Actuarial losses and other (b) $ (34 ) $ (33 ) (34 ) (33 ) Total before tax 11 11 Tax benefit $ (23 ) $ (22 ) Net of tax Gains on hedging activities Interest rate contracts $ — $ 4 Other expense (income), net Foreign exchange contracts 2 1 Cost of sales 2 5 Total before tax (1 ) (2 ) Tax expense $ 1 $ 3 Net of tax Available-for-sale-securities Gains on sale of equity securities $ — $ 3,388 Other expense (income), net Other-than-temporary impairment of equity securities (4 ) — Other expense (income), net (4 ) 3,388 Total before tax 1 — Tax benefit (3 ) 3,388 Net of tax Total reclassification for the period $ (25 ) $ 3,369 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) | 3 Months Ended |
Mar. 31, 2017 | |
Segment Reporting [Abstract] | |
Segment Information | Financial information for the company’s segments is as follows. Three months ended March 31, (in millions) 2017 2016 Net sales Renal $ 896 $ 898 Hospital Products 1,579 1,477 Total net sales $ 2,475 $ 2,375 EBITDA Renal $ 199 $ 122 Hospital Products 564 509 Total segment EBITDA $ 763 $ 631 March 31, December 31, (in millions) 2017 2016 Total assets Renal $ 4,506 $ 4,315 Hospital Products 6,466 6,407 Total assets $ 10,972 $ 10,722 |
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 March 31, (in millions) 2017 2016 Total segment EBITDA $ 763 $ 631 Reconciling items Depreciation and amortization (194 ) (189 ) Stock compensation (18 ) (23 ) Net interest expense (14 ) (28 ) Business optimization items (3 ) (5 ) Certain foreign currency fluctuations and hedging activities 8 22 Net realized gains on Retained Shares transactions — 3,239 Net loss on debt extinguishment — (101 ) Other Corporate items (214 ) (217 ) Income from continuing operations before income taxes $ 328 $ 3,329 |
Basis of Presentation - Additio
Basis of Presentation - Additional Information (Detail) $ in Millions | 3 Months Ended |
Mar. 31, 2017USD ($) | |
ASU 2017-07 Not Yet Adopted, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost | |
Basis Of Presentation [Line Items] | |
Increase in operating income | $ 9 |
Increase in other expense (income), net | 9 |
ASU 2016-09, Improvements to Employee Share-Based Payment Accounting | |
Basis Of Presentation [Line Items] | |
Increase in net income | 17 |
Increase in operating cash flow | 17 |
Windfall tax benefits | $ 15 |
Separation of Baxalta Incorpo34
Separation of Baxalta Incorporated - Additional Information (Detail) - USD ($) $ in Millions | Feb. 01, 2016 | Jul. 02, 2015 | Mar. 31, 2017 | Mar. 31, 2016 | Dec. 31, 2016 |
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||||
Accounts payable and accrued liabilities | $ 2,330 | $ 2,612 | |||
Cash flows from operations – discontinued operations | (17) | $ (159) | |||
Transition Services Agreement | |||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||||
Reduction in marketing and administrative expense | $ 20 | 27 | |||
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 | ||||
Spinoff | Transition Services Agreement | Manufacturing and supply agreement (MSA) | |||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||||
Net sales | $ 6 | 11 | |||
Cost of sales | 48 | 45 | |||
Baxalta Inc | |||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||||
Cash flows from operations – discontinued operations | (17) | (159) | |||
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 liabilities | 43 | $ 46 | |||
Net assets | $ 90 | ||||
Gain on disposal of discontinued operations | $ 17 | 17 | |||
Net sales | 4 | 64 | |||
Cost of sales | $ 4 | $ 59 | |||
Spinoff | |||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||||
Percentage of outstanding common stock distributed | 80.50% | ||||
Percentage of common stock retained | 19.50% | ||||
Common stock, shares outstanding | 131,902,719 | ||||
Record date for distribution | Jun. 17, 2015 | ||||
Shares issued for each share held | 1 |
Summary of Operating Results Wh
Summary of Operating Results Which Have Been Reflected As Discontinued Operations (Detail) - USD ($) $ in Millions | Feb. 01, 2016 | Mar. 31, 2017 | Mar. 31, 2016 |
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||
Loss from discontinued operations, net of tax | $ (1) | $ (7) | |
Baxalta Inc | Discontinued Operations, Held-for-disposition | |||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||
Net sales | 4 | 64 | |
Cost of sales | (4) | (59) | |
Marketing and administrative expenses | (1) | (20) | |
Loss from discontinued operations before income taxes | (1) | (15) | |
Gain on disposal of discontinued operations | $ 17 | 17 | |
Income tax expense | 9 | ||
Loss from discontinued operations, net of tax | $ (1) | $ (7) |
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 | Mar. 31, 2017 | Dec. 31, 2016 |
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||
Accounts and other current receivables, net | $ 46 | $ 48 |
Property, plant, and equipment, net | 1 | |
Other | 1 | |
Total assets of the disposal group | 46 | 50 |
Accounts payable and accrued liabilities | 3 | 3 |
Total liabilities of the disposal group | $ 3 | $ 3 |
Net Interest Expense (Detail)
Net Interest Expense (Detail) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Interest Income Expense Net | ||
Interest expense, net of capitalized interest | $ 20 | $ 33 |
Interest income | (6) | (5) |
Net interest expense | $ 14 | $ 28 |
Other Expense (Income), Net (De
Other Expense (Income), Net (Detail) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Other Expense (Income), net | ||
Foreign exchange | $ (9) | |
Net loss on debt extinguishment | 101 | |
Net realized gains on Retained Shares transactions | (3,239) | |
All other | $ 2 | (22) |
Other expense (income), net | $ 2 | $ (3,169) |
Inventories (Detail)
Inventories (Detail) - USD ($) $ in Millions | Mar. 31, 2017 | Dec. 31, 2016 |
Inventory Disclosure [Abstract] | ||
Raw materials | $ 321 | $ 319 |
Work in process | 130 | 122 |
Finished goods | 1,029 | 989 |
Inventories | $ 1,480 | $ 1,430 |
Property, Plant and Equipment,
Property, Plant and Equipment, Net (Detail) - USD ($) $ in Millions | Mar. 31, 2017 | Dec. 31, 2016 |
Property, Plant and Equipment, Net | ||
Property, plant and equipment, at cost | $ 9,336 | $ 9,162 |
Accumulated depreciation | (5,062) | (4,873) |
Property, plant and equipment, net | $ 4,274 | $ 4,289 |
Reconciliation of Basic Shares
Reconciliation of Basic Shares to Diluted Shares (Detail) - shares shares in Millions | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Reconciliation of Basic Shares to Diluted Shares | ||
Basic shares | 541 | 549 |
Effect of dilutive securities | 10 | 3 |
Diluted shares | 551 | 552 |
Earnings Per Share - Additional
Earnings Per Share - Additional Information (Detail) - USD ($) | 3 Months Ended | |||
Mar. 31, 2017 | Mar. 31, 2016 | Nov. 30, 2016 | Jul. 31, 2012 | |
Earnings Per Share [Abstract] | ||||
Anti-dilutive securities excluded from computation of EPS | 3,000,000 | 20,000,000 | ||
Stock repurchase program, authorized amount | $ 2,000,000,000 | |||
Stock repurchase program, additional authorized amount | $ 1,500,000,000 | |||
Share repurchases | 1,000,000 | 0 | ||
Value of share repurchases | $ 51,000,000 | |||
Remaining value available under stock repurchase programs | $ 1,600,000,000 |
Acquisitions and Other Arrang43
Acquisitions and Other Arrangements - Additional Information (Detail) - Celerity Pharmaceutical LLC $ in Millions | 3 Months Ended |
Mar. 31, 2016USD ($) | |
Acquisitions And Collaborations [Line Items] | |
Estimated economic life | 12 years |
Vancomycin injection | |
Acquisitions And Collaborations [Line Items] | |
Payment to acquire the rights | $ 23 |
Goodwill (Detail)
Goodwill (Detail) $ in Millions | 3 Months Ended |
Mar. 31, 2017USD ($) | |
Goodwill [Line Items] | |
Goodwill, beginning balance | $ 2,595 |
Currency translation adjustments | 38 |
Goodwill, ending balance | 2,633 |
Renal | |
Goodwill [Line Items] | |
Goodwill, beginning balance | 397 |
Currency translation adjustments | 6 |
Goodwill, ending balance | 403 |
Hospital Products | |
Goodwill [Line Items] | |
Goodwill, beginning balance | 2,198 |
Currency translation adjustments | 32 |
Goodwill, ending balance | $ 2,230 |
Goodwill and Other Intangible45
Goodwill and Other Intangible Assets, Net - Additional Information (Detail) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Goodwill And Intangible Assets Disclosure [Abstract] | ||
Accumulated goodwill impairment losses | $ 0 | |
Intangible asset amortization expense | $ 38 | $ 40 |
Other Intangible Assets, Net (D
Other Intangible Assets, Net (Detail) - USD ($) $ in Millions | Mar. 31, 2017 | Dec. 31, 2016 |
Intangible Asset Excluding Goodwill [Line Items] | ||
Gross other intangible assets | $ 2,160 | $ 2,131 |
Accumulated amortization | (1,069) | (1,020) |
Other intangible assets, net | 1,091 | 1,111 |
Developed technology, including patents | ||
Intangible Asset Excluding Goodwill [Line Items] | ||
Gross other intangible assets | 1,735 | 1,690 |
Accumulated amortization | (893) | (855) |
Other intangible assets, net | 842 | 835 |
Other amortized intangible assets | ||
Intangible Asset Excluding Goodwill [Line Items] | ||
Gross other intangible assets | 394 | 384 |
Accumulated amortization | (176) | (165) |
Other intangible assets, net | 218 | 219 |
Indefinite-lived intangible assets | ||
Intangible Asset Excluding Goodwill [Line Items] | ||
Other intangible assets | $ 31 | $ 57 |
Business Optimization Charges -
Business Optimization Charges - Additional Information (Detail) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Restructuring And Related Activities [Abstract] | ||
Cumulative pretax costs incurred | $ 439 | |
Expected additional pretax costs | 360 | |
Expected capital expenditures | $ 90 | |
Restructuring charges non-cash percentage | 5.00% | |
Costs to implement business optimization programs | $ 21 | $ 4 |
Accelerated depreciation | $ 5 |
Business Optimization Charges48
Business Optimization Charges (Detail) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Restructuring And Related Activities [Abstract] | ||
Restructuring charges | $ 3 | $ 4 |
Costs to implement business optimization programs | 21 | 4 |
Gambro integration costs | 7 | |
Accelerated depreciation | 5 | |
Total business optimization charges | $ 29 | $ 15 |
Components of Restructuring Cha
Components of Restructuring Charges (Detail) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Restructuring Cost and Reserve [Line Items] | ||
Restructuring charges | $ 3 | $ 4 |
Reserve adjustments | (14) | (11) |
Employee Termination Costs | ||
Restructuring Cost and Reserve [Line Items] | ||
Restructuring charges | 16 | 15 |
Contract Termination Costs | ||
Restructuring Cost and Reserve [Line Items] | ||
Restructuring charges | 1 | |
Cost of Goods Sold | ||
Restructuring Cost and Reserve [Line Items] | ||
Restructuring charges | 3 | 12 |
Reserve adjustments | (7) | (1) |
Cost of Goods Sold | Employee Termination Costs | ||
Restructuring Cost and Reserve [Line Items] | ||
Restructuring charges | 10 | 13 |
Selling, General and Administrative Expenses | ||
Restructuring Cost and Reserve [Line Items] | ||
Restructuring charges | 2 | (7) |
Reserve adjustments | (5) | (8) |
Selling, General and Administrative Expenses | Employee Termination Costs | ||
Restructuring Cost and Reserve [Line Items] | ||
Restructuring charges | 6 | 1 |
Selling, General and Administrative Expenses | Contract Termination Costs | ||
Restructuring Cost and Reserve [Line Items] | ||
Restructuring charges | 1 | |
Research and Development Expenses | ||
Restructuring Cost and Reserve [Line Items] | ||
Restructuring charges | (2) | (1) |
Reserve adjustments | $ (2) | (2) |
Research and Development Expenses | Employee Termination Costs | ||
Restructuring Cost and Reserve [Line Items] | ||
Restructuring charges | $ 1 |
Summary of Cash Activity and Re
Summary of Cash Activity and Reserve Adjustments (Detail) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Restructuring Cost and Reserve [Line Items] | ||
Charges | $ 3 | $ 4 |
Reserve adjustments | (14) | $ (11) |
Severance and Other Employee Related Costs | ||
Restructuring Cost and Reserve [Line Items] | ||
Reserve, beginning balance | 164 | |
Charges | 17 | |
Reserve adjustments | (14) | |
Utilization | (43) | |
CTA | 1 | |
Reserve, ending balance | $ 125 |
Debt, Financial Instruments a51
Debt, Financial Instruments and Fair Value Measurements - Additional Information (Detail) - USD ($) | Mar. 16, 2016 | Jan. 27, 2016 | Mar. 31, 2016 | Mar. 31, 2017 | Mar. 31, 2016 | Dec. 31, 2016 | Dec. 31, 2015 |
Debt and Financial Instruments [Line Items] | |||||||
Net realized gains on the Retained Share transactions | $ 3,239,000,000 | ||||||
Loss on extinguishment of debt | 101,000,000 | ||||||
Commercial paper outstanding | $ 0 | $ 0 | |||||
Maximum length of time hedge in cash flow hedge | 20 months | ||||||
Terminated interest rate contract | $ 765,000,000 | ||||||
Gain on termination of interest rate contract | 34,000,000 | ||||||
Terminated fair value hedges | $ 0 | ||||||
Gain (loss) on hedged item in fair value hedge | 1,000,000 | (22,000,000) | |||||
Deferred, net after-tax losses on derivative instruments | (2,000,000) | ||||||
Cash and equivalents | 2,211,000,000 | 2,858,000,000 | 2,211,000,000 | 2,801,000,000 | $ 2,213,000,000 | ||
Other-than-temporary impairment losses related to investments | 4,000,000 | ||||||
Significant Other Observable Inputs (Level 2) | |||||||
Debt and Financial Instruments [Line Items] | |||||||
Money market funds, at carrying value | 1,000,000,000 | 1,400,000,000 | |||||
Significant Unobservable Inputs (Level 3) | |||||||
Debt and Financial Instruments [Line Items] | |||||||
Change in fair value of contingent payment related to achievement of certain sales-based milestones | 5,000,000 | ||||||
Designated as Hedging Instrument | |||||||
Debt and Financial Instruments [Line Items] | |||||||
Derivative notional amount | $ 0 | 0 | 0 | ||||
Not Designated as Hedging Instrument | |||||||
Debt and Financial Instruments [Line Items] | |||||||
Derivative notional amount | 739,000,000 | 822,000,000 | |||||
Foreign exchange contract | |||||||
Debt and Financial Instruments [Line Items] | |||||||
Derivative notional amount | 662,000,000 | 561,000,000 | |||||
Interest rate contract | |||||||
Debt and Financial Instruments [Line Items] | |||||||
Derivative notional amount | 0 | 0 | |||||
Interest rate contract | Fair value hedges | |||||||
Debt and Financial Instruments [Line Items] | |||||||
Derivative notional amount | 200,000,000 | $ 200,000,000 | |||||
Greece, Spain, Portugal and Italy | |||||||
Debt and Financial Instruments [Line Items] | |||||||
Total accounts receivable from certain countries with liquidity issues | $ 142,000,000 | ||||||
Debt Tender Offer | |||||||
Debt and Financial Instruments [Line Items] | |||||||
Net realized gains on the Retained Share transactions | 2,000,000,000 | ||||||
Tender offer date | Mar. 16, 2016 | ||||||
Principal amount of notes exchanged for Retained Share | $ 2,200,000,000 | ||||||
Loss on extinguishment of debt | 101,000,000 | ||||||
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 | 5.900% 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 | 1.850% 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 | 1.850% 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 | 4.250% notes due 2020 | |||||||
Debt and Financial Instruments [Line Items] | |||||||
Senior notes, coupon rates | 4.25% | ||||||
Higher rate of debt maturity periods | February 2,020 | ||||||
Domestic Line of Credit | |||||||
Debt and Financial Instruments [Line Items] | |||||||
Drawing | $ 1,450,000,000 | ||||||
Line of Credit Facility Amount Outstanding | $ 1,800,000,000 | ||||||
Net realized gains on the Retained Share transactions | $ 1,250,000,000 |
Summary of Activity Relating to
Summary of Activity Relating to Securitization Arrangement (Detail) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Fair Value Disclosures [Abstract] | ||
Sold receivables at beginning of period | $ 68 | $ 81 |
Proceeds from sales of receivables | 62 | 104 |
Cash collections (remitted to the owners of the receivables) | (71) | (107) |
Effect of currency exchange rate changes | 2 | 7 |
Sold receivables at end of period | $ 61 | $ 85 |
Summary of Gains and Losses on
Summary of Gains and Losses on Derivative Instruments (Detail) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Derivative Instruments, Gain (Loss) [Line Items] | ||
Gain (loss) recognized in income, fair value hedges | $ 1 | $ (22) |
Other expense (income), net | Not Designated as Hedging Instrument | ||
Derivative Instruments, Gain (Loss) [Line Items] | ||
Gain (loss) recognized in income, undesignated derivative instruments | 6 | |
Cash Flow Hedges | ||
Derivative Instruments, Gain (Loss) [Line Items] | ||
Gain (loss) recognized in OCI | (8) | (4) |
Gains (losses) on hedging activities reclassified from AOCI to net income, before tax | 2 | 5 |
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 | 4 | |
Cash Flow Hedges | Foreign exchange contract | ||
Derivative Instruments, Gain (Loss) [Line Items] | ||
Gain (loss) recognized in OCI | (8) | (4) |
Cash Flow Hedges | Foreign exchange contract | Cost of sales | ||
Derivative Instruments, Gain (Loss) [Line Items] | ||
Gains (losses) on hedging activities reclassified from AOCI to net income, before tax | 2 | 1 |
Fair value hedges | Net Interest Expense | ||
Derivative Instruments, Gain (Loss) [Line Items] | ||
Gain (loss) recognized in income, fair value hedges | $ (1) | $ 22 |
Classification and Fair Value A
Classification and Fair Value Amounts of Derivative Instruments (Detail) - USD ($) $ in Millions | Mar. 31, 2017 | Dec. 31, 2016 |
Derivatives, Fair Value [Line Items] | ||
Derivative asset, fair value | $ 20 | $ 30 |
Derivative liability, fair value | 3 | 3 |
Designated as Hedging Instrument | ||
Derivatives, Fair Value [Line Items] | ||
Derivative asset, fair value | 20 | 29 |
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 | 6 | 7 |
Designated as Hedging Instrument | Foreign exchange contract | Other Long-Term Assets | ||
Derivatives, Fair Value [Line Items] | ||
Derivative asset, fair value | 2 | |
Designated as Hedging Instrument | Foreign exchange contract | Prepaid expenses and other | ||
Derivatives, Fair Value [Line Items] | ||
Derivative asset, fair value | 12 | 22 |
Designated as Hedging Instrument | Foreign exchange contract | Other Long-Term Liabilities | ||
Derivatives, Fair Value [Line Items] | ||
Derivative liability, fair value | 1 | |
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 | |
Not Designated as Hedging Instrument | Foreign exchange contract | Accounts Payable And Accrued Liabilities | ||
Derivatives, Fair Value [Line Items] | ||
Derivative liability, fair value | $ 1 | $ 2 |
Derivative Positions Presented
Derivative Positions Presented On Net Basis (Detail) - USD ($) $ in Millions | Mar. 31, 2017 | Dec. 31, 2016 |
Derivative Instruments And Hedging Activities Disclosure [Abstract] | ||
Gross amounts recognized in the consolidated balance sheet, Asset | $ 20 | $ 30 |
Gross amount subject to offset in master netting arrangements not offset in the consolidated balance sheet, Asset | (3) | (3) |
Total, Asset | 17 | 27 |
Gross amounts recognized in the consolidated balance sheet, Liability | 3 | 3 |
Gross amount subject to offset in master netting arrangements not offset in the consolidated balance sheet, Liability | $ (3) | $ (3) |
Summary of Financial Assets and
Summary of Financial Assets and Liabilities Measured at Fair Value on Recurring Basis (Detail) - Fair Value, Measurements, Recurring - USD ($) $ in Millions | Mar. 31, 2017 | Dec. 31, 2016 |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Foreign currency hedges, assets at fair value | $ 14 | $ 23 |
Interest rate hedges, assets at fair value | 6 | 7 |
Available-for-sale securities | 8 | 9 |
Total assets | 28 | 39 |
Foreign currency hedges, liabilities at fair value | 3 | 3 |
Contingent payments related to acquisitions | 13 | 19 |
Total liabilities | 16 | 22 |
Quoted Prices in Active Markets for Identical Assets (Level 1) | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Available-for-sale securities | 8 | 9 |
Total assets | 8 | 9 |
Significant Other Observable Inputs (Level 2) | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Foreign currency hedges, assets at fair value | 14 | 23 |
Interest rate hedges, assets at fair value | 6 | 7 |
Total assets | 20 | 30 |
Foreign currency hedges, liabilities at fair value | 3 | 3 |
Total liabilities | 3 | 3 |
Significant Unobservable Inputs (Level 3) | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Contingent payments related to acquisitions | 13 | 19 |
Total liabilities | $ 13 | $ 19 |
Available-for-Sale Equity Secur
Available-for-Sale Equity Securities (Detail) - USD ($) $ in Millions | Mar. 31, 2017 | Dec. 31, 2016 |
Fair Value Disclosures [Abstract] | ||
Amortized cost | $ 9 | $ 13 |
Unrealized losses | 1 | 4 |
Fair value | $ 8 | $ 9 |
Book Values and Fair Values of
Book Values and Fair Values of Financial Instruments (Detail) - USD ($) $ in Millions | Mar. 31, 2017 | Dec. 31, 2016 |
Book Values | ||
Fair Value And Carrying Value By Balance Sheet Grouping [Line Items] | ||
Investments | $ 34 | $ 31 |
Current maturities of long-term debt and lease obligations | 3 | 3 |
Long-term debt and lease obligations | 2,784 | 2,779 |
Approximate fair values | ||
Fair Value And Carrying Value By Balance Sheet Grouping [Line Items] | ||
Investments | 31 | 31 |
Current maturities of long-term debt and lease obligations | 3 | 3 |
Long-term debt and lease obligations | $ 2,770 | $ 2,756 |
Summarization of Bases Used to
Summarization of Bases Used to Measure Fair Value of Financial Instruments (Detail) - Approximate fair values - USD ($) $ in Millions | Mar. 31, 2017 | Dec. 31, 2016 |
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Investments | $ 31 | $ 31 |
Total assets | 31 | 31 |
Current maturities of long-term debt and lease obligations | 3 | 3 |
Long-term debt and lease obligations | 2,770 | 2,756 |
Total liabilities | 2,773 | 2,759 |
Significant other observable inputs (Level 2) | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Current maturities of long-term debt and lease obligations | 3 | 3 |
Long-term debt and lease obligations | 2,770 | 2,756 |
Total liabilities | 2,773 | 2,759 |
Significant unobservable inputs (Level 3) | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Investments | 31 | 31 |
Total assets | $ 31 | $ 31 |
Stock Compensation - Additional
Stock Compensation - Additional Information (Detail) - USD ($) shares in Millions, $ in Millions | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Stock compensation expense | $ 18 | $ 23 |
Stock Options granted | 5.4 | |
Restricted Stock Units | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Awards Granted | 0.7 | |
Unrecognized compensation cost related to all unvested | $ 81 | |
Weighted-average period for all unvested | 2 years | |
Performance Shares | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Awards Granted | 0.6 | |
Unrecognized compensation cost related to all unvested | $ 37 | |
Weighted-average period for all unvested | 2 years 3 months 18 days | |
Stock Options | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Total intrinsic value of stock options exercised | $ 50 | $ 55 |
Unrecognized compensation cost related to all unvested | $ 93 | |
Weighted-average period for all unvested | 2 years 1 month 6 days | |
Marketing and Administrative Expenses | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Stock compensation expense allocation percentage | 70.00% | 70.00% |
Stock Options Fair Value Assump
Stock Options Fair Value Assumptions (Detail) - Stock Options - $ / shares | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Expected volatility | 19.00% | 20.00% |
Expected life (in years) | 5 years 6 months | 5 years 6 months |
Risk-free interest rate | 2.10% | 1.40% |
Dividend yield | 1.00% | 1.20% |
Fair value per stock option | $ 10 | $ 7 |
Net Periodic Benefit Cost Relat
Net Periodic Benefit Cost Relating to Pension and Other Postemployment Benefit Plans (Detail) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Pension benefits | ||
Net periodic benefit cost | ||
Service cost | $ 22 | $ 23 |
Interest cost | 45 | 46 |
Expected return on plan assets | (72) | (75) |
Amortization of net losses and other deferred amounts | 40 | 37 |
Net periodic benefit cost | 35 | 31 |
OPEB | ||
Net periodic benefit cost | ||
Service cost | 1 | |
Interest cost | 2 | 2 |
Amortization of net loss and prior service credit | (6) | (4) |
Net periodic benefit cost | $ (4) | $ (1) |
Summary of Changes in AOCI by C
Summary of Changes in AOCI by Component (Detail) - USD ($) $ in Millions | 3 Months Ended | ||
Mar. 31, 2017 | Mar. 31, 2016 | ||
Accumulated Other Comprehensive Income Loss [Line Items] | |||
Beginning Balance | $ 8,280 | ||
Other comprehensive income before reclassifications | 113 | $ 110 | |
Amounts reclassified from AOCI | [1],[2] | 25 | (3,369) |
Total other comprehensive income (loss), net of tax | 138 | (3,259) | |
Ending Balance | 8,675 | ||
CTA | |||
Accumulated Other Comprehensive Income Loss [Line Items] | |||
Beginning Balance | (3,438) | (3,191) | |
Other comprehensive income before reclassifications | 122 | 92 | |
Amounts reclassified from AOCI | [2] | 0 | |
Total other comprehensive income (loss), net of tax | 122 | 92 | |
Ending Balance | (3,316) | (3,099) | |
Pension and other employee benefits | |||
Accumulated Other Comprehensive Income Loss [Line Items] | |||
Beginning Balance | (1,161) | (1,064) | |
Other comprehensive income before reclassifications | (2) | (1) | |
Amounts reclassified from AOCI | [1],[2] | 23 | 22 |
Total other comprehensive income (loss), net of tax | 21 | 21 | |
Ending Balance | (1,140) | (1,043) | |
Hedging activities | |||
Accumulated Other Comprehensive Income Loss [Line Items] | |||
Beginning Balance | 3 | 7 | |
Other comprehensive income before reclassifications | (6) | (3) | |
Amounts reclassified from AOCI | [2] | (1) | (3) |
Total other comprehensive income (loss), net of tax | (7) | (6) | |
Ending Balance | (4) | 1 | |
Available-for-sale securities | |||
Accumulated Other Comprehensive Income Loss [Line Items] | |||
Beginning Balance | 40 | 4,472 | |
Other comprehensive income before reclassifications | (1) | 22 | |
Amounts reclassified from AOCI | [2] | 3 | (3,388) |
Total other comprehensive income (loss), net of tax | 2 | (3,366) | |
Ending Balance | 42 | 1,106 | |
Accumulated Other Comprehensive Income (Loss) | |||
Accumulated Other Comprehensive Income Loss [Line Items] | |||
Beginning Balance | (4,556) | 224 | |
Ending Balance | $ (4,418) | $ (3,035) | |
[1] | Amounts in parentheses indicate reductions to net income. | ||
[2] | See table below for details about these reclassifications. |
Summary of Amounts Reclassifica
Summary of Amounts Reclassification from AOCI to Net Income (Detail) - USD ($) $ in Millions | 3 Months Ended | ||
Mar. 31, 2017 | Mar. 31, 2016 | ||
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | |||
Total reclassification for the period, net of tax | [1],[2] | $ (25) | $ 3,369 |
Other expense (income), net | (2) | 3,169 | |
Cost of sales | 1,433 | 1,410 | |
Reclassifications, Total before tax | 328 | 3,329 | |
Reclassifications, Tax expense (benefit) | (55) | 58 | |
Net income | 272 | 3,380 | |
Actuarial losses and other | |||
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | |||
Amortization of pension and other employee benefits items, reclassifications, Total before tax | [1],[3] | (34) | (33) |
Amortization of pension and other employee benefits items | |||
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | |||
Amortization of pension and other employee benefits items, reclassifications, Total before tax | [1] | (34) | (33) |
Amortization of pension and other employee benefits items, reclassifications, Tax benefit | [1] | 11 | 11 |
Total reclassification for the period, net of tax | [1],[2] | (23) | (22) |
Gains on hedging activities | |||
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | |||
Total reclassification for the period, net of tax | [2] | 1 | 3 |
Gains on hedging activities | Amounts reclassified from AOCI | |||
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | |||
Reclassifications, Total before tax | [1] | 2 | 5 |
Reclassifications, Tax expense (benefit) | [1] | (1) | (2) |
Net income | [1] | 1 | 3 |
Gains on hedging activities | Interest rate contracts | Amounts reclassified from AOCI | |||
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | |||
Other expense (income), net | [1] | 4 | |
Gains on hedging activities | Foreign exchange contract | Amounts reclassified from AOCI | |||
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | |||
Cost of sales | [1] | 2 | 1 |
Gains on sale of equity securities | |||
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | |||
Total reclassification for the period, net of tax | [2] | (3) | 3,388 |
Gains on sale of equity securities | Amounts reclassified from AOCI | |||
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | |||
Other expense (income), net | [1] | 3,388 | |
Other-than-temporary impairment of equity securities | Amounts reclassified from AOCI | |||
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | |||
Other expense (income), net | [1] | (4) | |
Available-for-sale-securities | Amounts reclassified from AOCI | |||
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | |||
Reclassifications, Tax expense (benefit) | [1] | 1 | |
Net income | [1] | (3) | 3,388 |
Reclassifications, Total before tax | [1] | $ (4) | $ 3,388 |
[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) | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Income Tax Disclosure [Abstract] | ||
Effective income tax rate | 16.80% | (1.70%) |
Effective income tax rate stock compensation program with tax windfall benefits percentage points | 5.00% |
Legal Proceedings - Additional
Legal Proceedings - Additional Information (Detail) | Mar. 31, 2017USD ($) |
Commitments And Contingencies Disclosure [Abstract] | |
Litigation reserve | $ 20,000,000 |
Litigation related receivables | $ 0 |
Segment Information - Additiona
Segment Information - Additional Information (Detail) | 3 Months Ended |
Mar. 31, 2017Segment | |
Segment Reporting [Abstract] | |
Number of segments | 2 |
Segment Information (Detail)
Segment Information (Detail) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Segment Reporting Information [Line Items] | ||
Net sales | $ 2,475 | $ 2,375 |
Segment EBITDA | 763 | 631 |
Renal | ||
Segment Reporting Information [Line Items] | ||
Net sales | 896 | 898 |
Segment EBITDA | 199 | 122 |
Hospital Products | ||
Segment Reporting Information [Line Items] | ||
Net sales | 1,579 | 1,477 |
Segment EBITDA | $ 564 | $ 509 |
Segment Information Related to
Segment Information Related to Total Assets (Detail) - USD ($) $ in Millions | Mar. 31, 2017 | Dec. 31, 2016 |
Segment Reporting, Asset Reconciling Item [Line Items] | ||
Total assets | $ 15,659 | $ 15,546 |
Operating Segments | ||
Segment Reporting, Asset Reconciling Item [Line Items] | ||
Total assets | 10,972 | 10,722 |
Operating Segments | Renal | ||
Segment Reporting, Asset Reconciling Item [Line Items] | ||
Total assets | 4,506 | 4,315 |
Operating Segments | Hospital Products | ||
Segment Reporting, Asset Reconciling Item [Line Items] | ||
Total assets | $ 6,466 | $ 6,407 |
EBITDA to Income from Continuin
EBITDA to Income from Continuing Operations Reconciliation (Detail) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Segment Reporting [Abstract] | ||
Total segment EBITDA | $ 763 | $ 631 |
Reconciling items | ||
Depreciation and amortization | (194) | (189) |
Stock compensation | (18) | (23) |
Net interest expense | (14) | (28) |
Business optimization items | (3) | (5) |
Certain foreign currency fluctuations and hedging activities | 8 | 22 |
Net realized gains on Retained Shares transactions | 3,239 | |
Net loss on debt extinguishment | (101) | |
Other Corporate items | (214) | (217) |
Income from continuing operations before income taxes | $ 328 | $ 3,329 |