Baxter International : Q2 2021 Financial Schedules

BAXTER - PAGE 8

BAXTER INTERNATIONAL INC.

Consolidated Statements of Income

(unaudited)

(in millions, except per share and percentage data)

			Three Months Ended June 30,
			2021					2020				Change
NET SALES		$	3,098				$	2,718				14	%
COST OF SALES			1,865					1,680			11 %
GROSS MARGIN			1,233					1,038				19	%
% of Net Sales			39.8 %				38.2 %			1.6 pts
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES			675					590				14	%
% of Net Sales			21.8 %				21.7 %			0.1 pts
RESEARCH AND DEVELOPMENT EXPENSES			139					117				19	%
% of Net Sales			4.5 %				4.3 %			0.2 pts
OTHER OPERATING INCOME, NET			(5)					-				NM
OPERATING INCOME			424					331			28 %
% of Net Sales			13.7	%				12.2	%			1.5pts
INTEREST EXPENSE, NET			34					36				(6)	%
OTHER (INCOME) EXPENSE, NET			(2)					6				NM
INCOME BEFORE INCOME TAXES			392					289			36 %
INCOME TAX EXPENSE			91					42				117	%
% of Income Before Income Taxes			23.2 %				14.5 %			8.7 pts
NET INCOME			301					247				22	%
NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS			3					1			200 %
NET INCOME ATTRIBUTABLE TO BAXTER STOCKHOLDERS		$	298				$	246				21	%
EARNINGS PER SHARE
Basic	$	0.59		$	0.48			23 %
Diluted		$	0.59				$	0.48				23	%
WEIGHTED-AVERAGE NUMBER OF SHARES OUTSTANDING
Basic			503					509
Diluted			509					517
ADJUSTED OPERATING INCOME (excluding special items)¹		$	533				$	436				22	%
ADJUSTED INCOME BEFORE INCOME TAXES (excluding special items)¹		$	501				$	394				27	%
ADJUSTED NET INCOME ATTRIBUTABLE TO BAXTER STOCKHOLDERS		$	409				$	329				24	%
(excluding special items)¹
ADJUSTED DILUTED EPS (excluding special items)¹	$	0.80		$	0.64			25 %

1 Refer to page 9 for a description of the adjustments and a reconciliation to U.S. GAAP measures. NM - Not Meaningful

BAXTER - PAGE 9

BAXTER INTERNATIONAL INC.

Description of Adjustments and Reconciliation of U.S. GAAPto Non-GAAP Measures

(unaudited, in millions)

The company's U.S. GAAP results for the three months ended June 30, 2021 included special items which impacted the U.S. GAAP measures as follows:

	Selling, General				Income			Net Income
	and	Research and	Other		Before	Income		Attributable	Diluted
Gross	Administrative	Development	Operating	Operating	Income	Tax	Net	to Baxter	Earnings
Margin	Expenses	Expenses	Income, Net	Income	Taxes	Expense	Income	Stockholders	Per Share

Reported

Reported percent of net sales (or percent of income before income

taxes for income tax expense)

Intangible asset amortization1

	$	1,233			$	675		$	139		$	(5)		$	424		$	392		$	91			$	301		$	298		$	0.59
	39.8	%			21.8	%		4.5	%		(0.2)	%		13.7	%		12.7	%		23.2	%		9.7	%		9.6	%
	67				-			-			-			67			67			14			53			53			0.10

Business optimization items2	10			(8)			-		-	18			18			3		15			15			0.03
Acquisition and integration			-			(1)			-			5			(4)			(4)			(1)		(3)			(3)			(0.01)
expenses3
European medical devices	11			-		-		-	11			11			3		8			8			0.02
regulation4
Investigation and related costs5			-			(17)			-			-			17			17			1		16			16			0.03
Tax matter7			-			-			-			-			-			-			(22)		22			22			0.04
Adjusted		$	1,321		$	649		$	139		$	-		$	533		$	501		$	89		$	412		$	409		$	0.80
	42.6 %		20.9 %		4.5 %		0.0 %		17.2 %		16.2 %		17.8 %	13.3 %		13.2 %

Adjusted percent of net sales (or adjusted percent of income before income taxes for income tax expense)

BAXTER - PAGE 9

The company's U.S. GAAP results for the three months ended June 30, 2020 included special items which impacted the U.S. GAAP measures as follows:

								Selling, General												Income							Net Income	Diluted
									and	Research and		Other					Before							Attributable	Earnings
						Gross	Administrative	Development		Operating	Operating		Income	Income Tax		Net		to Baxter		Per
					Margin		Expenses		Expenses	Income, Net		Income		Taxes		Expense		Income	Stockholders		Share
	Reported			$	1,038		$	590		$	117		$	-			$	331		$	289		$	42		$	247		$	246		$	0.48
	Reported percent of net sales (or		38.2	%		21.7	%		4.3	%		0.0	%			12.2	%		10.6	%		14.5	%		9.1	%		9.1	%
	percent of income before income
	taxes for income tax expense)
	Intangible asset amortization1		56			-			-			-				56			56			12			44			44			0.09
	Business optimization items2	8			(7)			2			-		13			13			2			11			11			0.02
	Acquisition and integration			4			(4)			(1)			-				9			9			2			7			7			0.01
	expenses	3
	European medical devices			8			-			-			-				8			8			2			6			6			0.01
	regulation4
	Investigation and related costs5				-			(2)			-			-				2			2			-			2			2			0.00
	Intangible asset impairment6		17			-			-			-				17			17			4			13			13			0.03
	Adjusted			$	1,131		$	577		$	118		$	-			$	436		$	394		$	64		$	330		$	329		$	0.64
			41.6 %		21.2 %		4.3 %		0.0 %		16.0 %		14.5 %		16.2 %		12.1 %		12.1 %

Adjusted percent of net sales (or adjusted percent of income before income taxes for income tax expense)

1

2

3

4

The company's results in 2021 and 2020 included intangible asset amortization expense of $67 million ($53 million, or $0.10 p er diluted share, on an after-tax basis) and $56 million ($44 million, or $0.09 per diluted share, on an after-tax basis), respectively.

The company's results in 2021 and 2020 included charges of $18 million ($15 million, or $0.03 per diluted share, on an after-tax basis) and $13 million ($11 million, or $0.02 per diluted share, on an after-tax basis), respectively, associated with its programs to optimize its organization and cost structure on a global basis.

The company's results in 2021 included $4 million ($3 million, or $0.01 per diluted share, on an after-tax basis) of benefits from the change in fair value of contingent consideration liabilities that was partially offset by integration expenses related to the acquisition of the rights to Caelyx and Doxil for specified territories outside of the U.S. The company's results in 2020 included $9 million ($7 million, or $0 .01 per diluted share, on an after-tax basis) of acquisition and integration expenses. This included acquisition and integration expenses related to the company's acquisitions of Cheetah Medical and Seprafilm and the purchase of an in-process R&D asset.

The company's results in 2021 and 2020 included costs of $11 million ($8 million, or $0.02 per diluted share, on an after-tax basis) and $8 million ($6 million, or $0.01 per diluted share, on an after-tax basis) related to updating its quality systems and product labeling to comply with the new medical device reporting regulation and other requirements of the European Union's regulations for medical devices that become effective in stages beginning in 2021.

BAXTER - PAGE 9

5

6

7

The company's results in 2021 and 2020 included costs of $17 million ($16 million, or $0.03 per diluted share, on an after-tax basis) and $2 million ($2 million, or $0.00 per diluted share, on an after-tax basis) for investigation and related costs. In 2021, this item primarily included charges related to matters associated with the company's investigation of foreign exchange gains and losses. In 2020, this item primarily included professional fees related to those matters.

The company's results in 2020 included a charge $17 million ($13 million, or $0.03 p er diluted share, on an after-tax basis) for an asset impairment related to a developed-technology intangible asset.

The company's results in 2021 included a charge of $22 million, or $0.04 per diluted share, related to an unfavorable court r uling for an uncertain tax position.

For more information on the company's use of non -GAAPfinancial measures, please see the Non-GAAP Financial Measures section of this press release.

BAXTER - PAGE 10

BAXTER INTERNATIONAL INC.

Consolidated Statements of Income

(unaudited)

(in millions, except per share and percentage data)

					Six Months Ended June 30,
					2021					2020				Change
NET SALES			$	6,044				$	5,520				9	%
COST OF SALES			3,666					3,319			10 %
GROSS MARGIN				2,378					2,201				8	%
% of Net Sales			39.3 %				39.9 %			(0.6 pts)
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES				1,302					1,218				7	%
% of Net Sales				21.5	%				22.1	%			(0.6 pts)
RESEARCH AND DEVELOPMENT EXPENSES				267					263				2	%
% of Net Sales			4.4 %				4.8 %			(0.4 pts)
OTHER OPERATING INCOME, NET				(5)					(20)				(75)	%
OPERATING INCOME			814					740			10 %
% of Net Sales				13.5	%				13.4	%			0.1 pts
INTEREST EXPENSE, NET			68					57			19 %
OTHER EXPENSE, NET				3					16				(81)	%
INCOME BEFORE INCOME TAXES			743					667			11 %
INCOME TAX EXPENSE				142					87				63	%
% of Income Before Income Taxes			19.1 %				13.0 %			6.1 pts
NET INCOME				601					580				4	%
NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS			5					2			150 %
NET INCOME ATTRIBUTABLE TO BAXTER STOCKHOLDERS			$	596				$	578				3	%
EARNINGS PER SHARE
	Basic	$	1.18		$	1.14			4 %
	Diluted			$	1.17				$	1.12				4	%
WEIGHTED-AVERAGE NUMBER OF SHARES OUTSTANDING
	Basic			504					508
	Diluted				510					517
ADJUSTED OPERATING INCOME (excluding special items)¹			$	1,034				$	964				7	%
ADJUSTED INCOME BEFORE INCOME TAXES (excluding special items)¹			$	963				$	891				8	%
ADJUSTED NET INCOME ATTRIBUTABLE TO BAXTER STOCKHOLDERS			$	795				$	754				5	%
(excluding special items)¹
ADJUSTED DILUTED EPS (excluding special items)¹	$	1.56		$	1.46			7 %
1	Refer to page 11 for a description of the adjustments and a reconciliation to U.S. GAAP measures.