RESTATEMENT OF PREVIOUSLY ISSUED CONSOLIDATED FINANCIAL STATEMENTS (Tables)

3 Months Ended

Mar. 31, 2020

Accounting Changes and Error Corrections [Abstract]

Schedule of Quantifying Prior Year Misstatements Corrected in Current Year Financial Statements

The following tables were previously presented in our Annual Report on Form 10-K for the year ended December 31, 2019. See Note 19, Quarterly Financial Data (unaudited), to the consolidated financial statements in our Annual Report on Form 10-K. Below, we have presented reconciliations from our prior periods as previously reported to the restated amounts for each of our condensed consolidated financial statements for the three months ended March 31, 2019. The amounts as previously reported were derived from our Quarterly Report on Form 10-Q for the quarter ended March 31, 2019 filed on May 7, 2019.

Baxter International Inc.
Condensed Consolidated Statement of Income
(in millions, except per share)
	Three months ended March 31, 2019
	As previously reported		Restatement impacts		Restatement reference	As restated
Net sales	$	2,632	$	6	(e)	$	2,638
Cost of sales	1,552		6		(c)(e)	1,558
Gross margin	1,080		—			1,080
Selling, general and administrative expenses	600		1		(e)	601
Research and development expenses	129		—			129
Other operating income, net	(33)		—			(33)
Operating income	384		(1)			383
Interest expense, net	18		—			18
Other (income) expense, net	(25)		4		(a)(b)	(21)
Income before income taxes	391		(5)			386
Income tax expense	44		—			44
Net income	$	347	$	(5)		$	342
Earnings per share
Basic	$	0.68	$	(0.01)		$	0.67
Diluted	$	0.66	$	—		$	0.66
Weighted-average number of shares outstanding
Basic	512		—			512
Diluted	522		—			522

(a) Foreign Currency Denominated Monetary Assets and Liabilities—The correction of these misstatements resulted in a decrease to other (income) expense, net of $5 million for the three months ended March 31, 2019.

(b) Foreign Currency Derivative Contracts—The correction of these misstatements resulted in an increase to other (income) expense, net of $1 million for the three months ended March 31, 2019.

(c) Equipment Leased to Customers under Operating Leases—The correction of these misstatements resulted in an increase to cost of sales of $2 million for the three months ended March 31, 2019.

(e) Translation of the Financial Position and Results of Operations of our Foreign Operations into U.S. Dollars—The correction of these misstatements resulted in increases to net sales of $6 million, cost of sales of $4 million and selling, general and administrative (SG&A) expense of $1 million for the three months ended March 31, 2019.

Baxter International Inc.
Condensed Consolidated Statement of Comprehensive Income
(in millions)
	Three months ended March 31, 2019
	As previously reported		Restatement impacts		As restated
Net income	$	347	$	(5)	$	342
Other comprehensive (loss) income, net of tax:
Currency translation adjustments	30		(127)		(97)
Pension and other postretirement benefit plans	8		6		14
Hedging activities	(15)		—		(15)
Total other comprehensive loss, net of tax	23		(121)		(98)
Comprehensive income	$	370	$	(126)	$	244

Baxter International Inc.
Condensed Consolidated Statement of Changes in Equity
(in millions)
	For the Three Months Ended March 31, 2019
	Baxter International Inc. stockholders' equity
	Common stock shares	Common stock		Common stock shares in treasury	Common stock in treasury		Additional contributed capital		Retained earnings		Accumulated other comprehensive income (loss)		Total Baxter stockholders' equity		Noncontrolling interests		Total equity
As previously reported
Balance as of January 1, 2019	683	$	683	170	$	(9,989)	$	5,898	$	15,626	$	(4,424)	$	7,794	$	22	$	7,816
Adoption of new accounting standards	—	—		—	—		—		161		(161)		—		—		—
Net income	—	—		—	—		—		347		—		347		—		347
Other comprehensive income (loss)	—	—		—	—		—		—		23		23		—		23
Purchases of treasury stock	—	—		8	(586)		—		—		—		(586)		—		(586)
Stock issued under employee benefit plans and other	—	—		(5)	291		(59)		(66)		—		166		—		166
Dividends declared on common stock	—	—		—	—		—		(98)		—		(98)		—		(98)
Changes in noncontrolling interests	—	—		—	—		—		—		—		—		1		1
Balance as of March 31, 2019	683	$	683	173	$	(10,284)	$	5,839	$	15,970	$	(4,562)	$	7,646	$	23	$	7,669
Restatement impacts
Balance as of January 1, 2019	—	$	—	—	$	—	$	—	$	(551)	$	601	$	50	$	—	$	50
Net income	—	—		—	—		—		(5)		—		(5)		—		(5)
Other comprehensive income (loss)	—	—		—	—		—		—		(121)		(121)		—		(121)
Balance as of March 31, 2019	—	$	—	—	$	—	$	—	$	(556)	$	480	$	(76)	$	—	$	(76)
As restated
Balance as of January 1, 2019	683	$	683	170	$	(9,989)	$	5,898	$	15,075	$	(3,823)	$	7,844	$	22	$	7,866
Adoption of new accounting standards	—	—		—	—		—		161		(161)		—		—		—
Net income	—	—		—	—		—		342		—		342		—		342
Other comprehensive income (loss)	—	—		—	—		—		—		(98)		(98)		—		(98)
Purchases of treasury stock	—	—		8	(586)		—		—		—		(586)		—		(586)
Stock issued under employee benefit plans and other	—	—		(5)	291		(59)		(66)		—		166		—		166
Dividends declared on common stock	—	—		—	—		—		(98)		—		(98)		—		(98)
Changes in noncontrolling interests	—	—		—	—		—		—		—		—		1		1
Balance as of March 31, 2019	683	$	683	173	$	(10,284)	$	5,839	$	15,414	$	(4,082)	$	7,570	$	23	$	7,593

The adjustments to the January 1, 2019 retained earnings and accumulated other comprehensive loss represent the cumulative impacts of foreign exchange gains and losses and the translation of our financial position and results of operations for our foreign operations into U.S. dollars for the periods prior to January 1, 2019. Retained earnings also includes the cumulative impacts of equipment leased to customers under operating leases and other miscellaneous adjustments for the periods prior to January 1, 2019.

See descriptions of the net income and other comprehensive income impacts in the condensed consolidated statement of income and condensed consolidated statement of comprehensive income for the three months ended March 31, 2019 sections above.

Baxter International Inc.
Condensed Consolidated Statement of Cash Flows
(in millions)
	For the Three Months Ended March 31, 2019
	As previously reported		Restatement impacts		Restatement reference	As restated
Cash flows from operations
Net income	$	347	$	(5)		$	342
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization	195		(3)		(c)	192
Deferred income taxes	(6)		—			(6)
Stock compensation	22		—			22
Net periodic pension benefit and other postretirement costs	3		—			3
Other	19		(5)		(d)	14
Changes in balance sheet items:
Accounts receivable, net	32		—			32
Inventories	(82)		—			(82)
Accounts payable and accrued liabilities	(333)		(2)		(b)(f)	(335)
Other	(49)		1		(b)(e)(f)	(48)
Cash flows from operations - continuing operations	148		(14)			134
Cash flows from operations - discontinued operations	(6)		—			(6)
Cash flows from operations	142		(14)			128
Cash flows from investing activities
Capital expenditures	(198)		5		(c)	(193)
Acquisitions and investments, net of cash acquired	(109)		—			(109)
Other investing activities, net	1		—			1
Cash flows from investing activities	(306)		5			(301)
Cash flows from financing activities
Net increases in debt obligations with original maturities of three months or less	795		—			795
Cash dividends on common stock	(101)		—			(101)
Proceeds from stock issued under employee benefit plans	173		—			173
Purchases of treasury stock	(597)		—			(597)
Other financing activities, net	(32)		—			(32)
Cash flows from financing activities	238		—			238
Effect of foreign exchange rate changes on cash and cash equivalents	2		(3)		(a)(d)(e)	(1)
Increase (decrease) in cash and cash equivalents	76		(12)			64
Cash and cash equivalents at beginning of period	1,832		6		(e)	1,838
Cash and cash equivalents at end of period	$	1,908	$	(6)	(e)	$	1,902

The $5 million decrease to net income was driven by the items described above in the condensed consolidated statement of income for the three months ended March 31, 2019 section.

(a) Foreign Currency Denominated Monetary Assets and Liabilities—The correction of these misstatements resulted in an increase to the effect of foreign exchange rate changes on cash and cash equivalents of $4 million for the three months ended March 31, 2019.

(b) Foreign Currency Derivative Contracts—The correction of these misstatements resulted in a decrease to changes in accounts payable and accrued liabilities of $1 million and an increase in other changes in balance sheet items of $1 million for the three months ended March 31, 2019.

(c) Equipment Leased to Customers under Operating Leases—The correction of these misstatements resulted in decreases to depreciation and amortization of $3 million and capital expenditures of $5 million for the three months ended March 31, 2019.

(d) Classification of Foreign Currency Gains and Losses in our Consolidated Statements of Cash Flows—The corrections of these misstatements resulted in an increase to the effect of foreign exchange rate changes on cash and cash equivalents and a decrease to other adjustments to reconcile net income to net cash from operating activities of $5 million for the three months ended March 31, 2019.

(e) Translation of the Financial Position and Results of Operations of our Foreign Operations into U.S. Dollars—The corrections of these misstatements resulted in an increase in cash and cash equivalents at the beginning of the period of $6 million and decreases to other changes in balance sheet items of $1 million, cash and cash equivalents at the end of the period of $6 million and the effect of foreign exchange rate changes on cash and cash equivalents of $12 million for the three months ended March 31, 2019.

(f) Other miscellaneous adjustments—The correction of these misstatements resulted in an increase to other changes in balance sheet items of $1 million and a decrease in changes in accounts payable and accrued liabilities of $1 million for the three months ended March 31, 2019.