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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________________________________________________________________________
FORM 10-Q
_________________________________________________________________________________
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2020
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to            
Commission file number 1-4448
_________________________________________________________________________________
BAXTER INTERNATIONAL INC.
(Exact name of registrant as specified in its charter)
_________________________________________________________________________________
Delaware36-0781620
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
One Baxter Parkway,Deerfield,Illinois60015
(Address of Principal Executive Offices)(Zip Code)

224.948.2000
(Registrant’s telephone number, including area code)
_________________________________________________________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $1.00 par valueBAX (NYSE)New York Stock Exchange
Chicago Stock Exchange
0.4% Global Notes due 2024BAX 24New York Stock Exchange
1.3% Global Notes due 2025BAX 25New York Stock Exchange
1.3% Global Notes due 2029BAX 29New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x  No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerxAccelerated filero
Non-accelerated fileroSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes    No x
The number of shares of the registrant’s Common Stock, par value $1.00 per share, outstanding as of July 21, 2020 was 506,231,732 shares.




BAXTER INTERNATIONAL INC.
FORM 10-Q
For the quarterly period ended June 30, 2020
TABLE OF CONTENTS
Page Number
Item 1A.































Explanatory Note

As previously disclosed, we restated our audited consolidated financial statements as of December 31, 2018 and for the years ended December 31, 2018 and December 31, 2017. The restatements of those consolidated financial statements were presented within our Annual Report on Form 10-K for the year ended December 31, 2019 (2019 Annual Report). See Note 2, Restatement of Previously Issued Consolidated Financial Statements, to the consolidated financial statements in the 2019 Annual Report for additional information related to those restatements.

Additionally, as previously disclosed, we restated our unaudited interim financial information as of and for the quarterly periods ended June 30, 2019, March 31, 2019, June 30, 2018, and March 31, 2018, for the quarterly period ended December 31, 2018, for the six months ended June 30, 2019 and as of September 30, 2018. The restatements of that unaudited interim financial information were presented within our 2019 Annual Report. See Note 19, Quarterly Financial Data (unaudited), to the consolidated financial statements in the 2019 Annual Report for additional information related to these restatements for each of those periods. See Note 2, Restatement of Previously Issued Condensed Consolidated Financial Statements, to the condensed consolidated financial statements within our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2020 for additional information related to the restatement of our condensed consolidated financial statements for the three months ended March 31, 2019.

Additionally, as previously disclosed, we restated our unaudited condensed consolidated financial statements for the three and nine months ended September 30, 2018. The restatements of those unaudited condensed consolidated financial statements were presented within our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2019. See Note 2, Restatement of Previously Issued Consolidated Financial Statements, to the condensed consolidated financial statements in that Quarterly Report on Form 10-Q for additional information related to those restatements.

This Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2020 includes unaudited condensed consolidated financial statements as of June 30, 2020 and December 31, 2019 and for the three and six months ended June 30, 2020 and 2019. As previously disclosed in our 2019 Annual Report, we have restated certain information within this Quarterly Report on Form 10-Q, including the condensed consolidated financial statements for the three and six months ended June 30, 2019. See Note 2, Restatement of Previously Issued Condensed Consolidated Financial Statements, in Item 1, Financial Statements, for additional information related to the restatement.

1


PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Baxter International Inc.
Condensed Consolidated Balance Sheets (unaudited)
(in millions, except share information)
June 30,
2020
December 31,
2019
Current assets:
Cash and cash equivalents $4,085  $3,335  
Accounts receivable, net of allowances of $120 in 2020 and $112 in 2019
1,884  1,896  
Inventories1,905  1,653  
Prepaid expenses and other current assets692  619  
Total current assets8,566  7,503  
Property, plant and equipment, net 4,382  4,512  
Goodwill 3,052  3,030  
Other intangible assets, net 1,716  1,471  
Operating lease right-of-use assets581  608  
Other non-current assets 1,168  1,069  
Total assets $19,465  $18,193  
Current liabilities:
Short-term debt $1  $226  
Current maturities of long-term debt and finance lease obligations318  315  
Accounts payable and accrued liabilities 2,561  2,689  
Total current liabilities 2,880  3,230  
Long-term debt and finance lease obligations 6,055  4,809  
Operating lease liabilities488  510  
Other non-current liabilities 1,882  1,732  
Total liabilities 11,305  10,281  
Commitments and contingencies
Equity:
Common stock, $1 par value, authorized 2,000,000,000 shares, issued 683,494,944 shares in 2020 and 2019
683  683  
Common stock in treasury, at cost, 173,312,541 shares in 2020 and 177,340,358 shares in 2019
(10,597) (10,764) 
Additional contributed capital5,975  5,955  
Retained earnings16,055  15,718  
Accumulated other comprehensive (loss) income(3,988) (3,710) 
Total Baxter stockholders’ equity8,128  7,882  
Noncontrolling interests32  30  
Total equity8,160  7,912  
Total liabilities and equity$19,465  $18,193  
The accompanying notes are an integral part of these condensed consolidated financial statements.
2


Baxter International Inc.
Condensed Consolidated Statements of Income (unaudited)
(in millions, except per share data)
Three months ended
June 30,
Six months ended
June 30,
As RestatedAs Restated
2020201920202019
Net sales$2,718  $2,834  $5,520  $5,472  
Cost of sales1,680  1,681  3,319  3,239  
Gross margin1,038  1,153  2,201  2,233  
Selling, general and administrative expenses590  641  1,218  1,242  
Research and development expenses117  166  263  295  
Other operating income, net  (4) (20) (37) 
Operating income331  350  740  733  
Interest expense, net36  20  57  38  
Other (income) expense, net6  4  16  (17) 
Income before income taxes289  326  667  712  
Income tax expense 42  13  87  57  
Net income 247  313  580  655  
Net income attributable to noncontrolling interests1    2    
Net income attributable to Baxter stockholders$246  $313  $578  $655  
Earnings per share
Basic$0.48  $0.61  $1.14  $1.28  
Diluted$0.48  $0.60  $1.12  $1.26  
Weighted-average number of shares outstanding
Basic509  510  508  511  
Diluted517  519  517  520  
The accompanying notes are an integral part of these condensed consolidated financial statements.
3


Baxter International Inc.
Condensed Consolidated Statements of Comprehensive Income (unaudited)
(in millions)
Three months ended
June 30,
Six months ended
June 30,
As RestatedAs Restated
2020201920202019
Net income$247  $313  $580  $655  
Other comprehensive income (loss), net of tax:
Currency translation adjustments, net of tax (benefit) expense of $2 and $2 for the three months ended June 30, 2020 and 2019, respectively, and ($6) and $2 for the six months ended June 30, 2020 and 2019, respectively
189  2  (170) (95) 
Pension and other postretirement benefits, net of tax expense of $1 and $2 for the three months ended June 30, 2020 and 2019, respectively, and $7 and $6 for the six months ended June 30, 2020 and 2019, respectively
4  6  26  20  
Hedging activities, net of tax (benefit) expense of $1 and ($3) for the three months ended June 30, 2020 and 2019, respectively, and ($38) and ($8) for the six months ended June 30, 2020 and 2019, respectively
(4) (12) (134) (27) 
Total other comprehensive income (loss), net of tax189  (4) (278) (102) 
Comprehensive income436  309  302  553  
Less: Comprehensive income attributable to noncontrolling interests1    2    
Comprehensive income attributable to Baxter stockholders$435  $309  $300  $553  
The accompanying notes are an integral part of these condensed consolidated financial statements.
4


Baxter International Inc.
Condensed Consolidated Statements of Changes in Equity (unaudited)
(in millions)

For the three months ended June 30, 2020
Baxter International Inc. stockholders' equity
Common stock sharesCommon stockCommon stock shares
in treasury
Common stock in
treasury
Additional contributed capitalRetained earningsAccumulated other comprehensive
income (loss)
Total Baxter stockholders' equityNoncontrolling interestsTotal equity
Balance as of April 1, 2020683  $683  175  $(10,677) $5,935  $15,935  $(4,177) $7,699  $31  $7,730  
Net income—  —  —  —  —  246  —  246  1  247  
Other comprehensive income (loss)—  —  —  —  —  —  189  189  —  189  
Stock issued under employee benefit plans and other—  —  (2) 80  40  —  —  120  —  120  
Dividends declared on common stock—  —  —  —  —  (126) —  (126) —  (126) 
Balance as of June 30, 2020683  $683  173  $(10,597) $5,975  $16,055  $(3,988) $8,128  $32  $8,160  

For the six months ended June 30, 2020
Baxter International Inc. stockholders' equity
Common stock sharesCommon stockCommon stock shares in treasuryCommon stock in treasuryAdditional contributed capitalRetained earningsAccumulated other comprehensive income (loss)Total Baxter stockholders' equityNoncontrolling interestsTotal equity
Balance as of January 1, 2020683  $683  177  $(10,764) $5,955  $15,718  $(3,710) $7,882  $30  $7,912  
Adoption of new accounting standards—  —  —  —  —  (4)   $(4) —  $(4) 
Net income—  —  —  —  —  578  —  578  2  580  
Other comprehensive income (loss)—  —  —  —  —  —  (278) (278) —  (278) 
Stock issued under employee benefit plans and other—  —  (4) 167  20    —  187  —  187  
Dividends declared on common stock—  —  —  —  —  (237) —  (237) —  (237) 
Balance as of June 30, 2020683  $683  173  $(10,597) $5,975  $16,055  $(3,988) $8,128  $32  $8,160  
The accompanying notes are an integral part of these condensed consolidated financial statements.


5


Baxter International Inc.
Condensed Consolidated Statements of Changes in Equity (unaudited)
(in millions)

For the three months ended June 30, 2019
Baxter International Inc. stockholders' equity
Common stock sharesCommon stockCommon stock shares in treasuryCommon stock in treasuryAdditional contributed capitalRetained earningsAccumulated other comprehensive income (loss)Total Baxter stockholders' equityNoncontrolling interestsTotal equity
Balance as of April 1, 2019 (As Restated)683  $683  173  $(10,284) $5,839  $15,414  $(4,082) $7,570  $23  $7,593  
Net income—  —  —  —  313  —  313  —  313  
Other comprehensive income (loss)—  —  —  —  —  —  (4) (4) —  (4) 
Purchases of treasury stock—  —  2  (157) 46  —  —  (111) —  (111) 
Stock issued under employee benefit plans and other—  —  (2) 119  21  (17) —  123  —  123  
Dividends declared on common stock—  —  —  —  —  (112) (112) —  (112) 
Change in noncontrolling interests—  —  —  —  —  —  —  —  1  1  
Balance as of June 30, 2019 (As Restated)683  $683  173  $(10,322) $5,906  $15,598  $(4,086) $7,779  $24  $7,803  

For the six months ended June 30, 2019
Baxter International Inc. stockholders' equity
Common stock sharesCommon stockCommon stock shares in treasuryCommon stock in treasuryAdditional contributed capitalRetained earningsAccumulated other comprehensive income (loss)Total Baxter stockholders' equityNoncontrolling interestsTotal equity
Balance as of January 1, 2019 (As Restated)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—  —  —  —  —  655  —  655  —  655  
Other comprehensive income (loss)—  —  —  —  —  —  (102) (102) —  (102) 
Purchases of treasury stock—  —  10  (743) 46  —  —  (697) —  (697) 
Stock issued under employee benefit plans and other—  —  (7) 410  (38) (83) —  289  —  289  
Dividends declared on common stock—  —  —  —  —  (210) —  (210) —  (210) 
Change in noncontrolling interests—  —  —  —  —  —  —  —  2  2  
Balance as of June 30, 2019 (As Restated)683  $683  173  $(10,322) $5,906  $15,598  $(4,086) $7,779  $24  $7,803  

The accompanying notes are an integral part of these condensed consolidated financial statements.
6


Baxter International Inc.
Condensed Consolidated Statements of Cash Flows (unaudited)
(in millions)
Six months ended
June 30,
As Restated
20202019
Cash flows from operations
Net income$580  $655  
Adjustments to reconcile net income to cash flows from operations:
Depreciation and amortization401  385  
Deferred income taxes(23) (63) 
Stock compensation64  57  
Net periodic pension benefit and other postretirement costs40  7  
Intangible asset impairments17  31  
Other27  44  
Changes in balance sheet items:
Accounts receivable, net(25) (60) 
Inventories(261) (91) 
Accounts payable and accrued liabilities(48) (299) 
Other(124) (86) 
Cash flows from operations – continuing operations648  580  
Cash flows from operations – discontinued operations(2) (6) 
Cash flows from operations646  574  
Cash flows from investing activities
Capital expenditures(316) (338) 
Acquisitions, net of cash acquired, and investments(453) (111) 
Other investing activities, net11  1  
Cash flows from investing activities(758) (448) 
Cash flows from financing activities
Issuances of debt1,240  1,661  
Net decreases in debt with original maturities of three months or less(225)   
Cash dividends on common stock(223) (198) 
Proceeds from stock issued under employee benefit plans151  262  
Purchases of treasury stock  (720) 
Other financing activities, net(34) (37) 
Cash flows from financing activities909  968  
Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash(38) 2  
Increase in cash, cash equivalents and restricted cash759