The paragraph introduces Baxter International's Third Quarter 2024 Earnings Conference Call. The operator outlines the format of the call and recording policies. Clare Trachtman, Baxter's Senior Vice President and Chief Investor Relations Officer, begins the presentation, mentioning that Joe Almeida, Chairman and CEO, and Joel Grade, Executive VP and CFO, are also present. The call will cover third-quarter results and the financial outlook for the fourth quarter and full year 2024, including strategic actions like the proposed Kidney Care sale and cost-saving initiatives. It includes forward-looking statements with risks, and non-GAAP financial measures will be discussed to provide insight into Baxter's business performance.

The paragraph discusses Baxter's financial reporting changes following the pending sale of its Kidney Care business to Carlyle, which is now categorized as a discontinued operation. Historical results have been restated to reflect this change, along with the divestment of the BioPharma Solutions business. Current financial reports focus on Baxter's ongoing segments: Medical Products & Therapies, Healthcare Systems & Technologies, and Pharmaceuticals. Joe Almeida then provides an update on the recovery efforts at Baxter's North Cove facility in North Carolina after Hurricane Helene, comments on third-quarter performance, and hints at future financial outlooks post-Kidney Care sale. The company plans to address questions at the end of the session.

The North Cove manufacturing facility, Baxter's largest plant, is crucial for producing IV and peritoneal dialysis fluids for the US. The North Cove team has worked tirelessly to recover from recent disruptions, logging over 1 million hours in just six weeks. They have successfully restarted one IV solutions line and expect to restart another soon, achieving milestones ahead of schedule. However, new shipments won’t start until late November. To support this, nine other global sites have been activated to boost US inventory. Full production at North Cove is expected by year-end. Throughout, the focus has been on prioritizing customers, patients, and employees.

The paragraph highlights Baxter's commitment to its mission and gratitude for the support received from various entities. It mentions the pending sale of the Kidney Care business, which is now reported as discontinued operations along with the BioPharma Solutions Business. The focus is on total company performance for the third quarter of 2024, which saw a 4% sales growth, supported by all segments showing year-over-year increases. Despite some softness in the Healthcare Systems & Technologies and Pharmaceutical segments, strength in Medical Products & Therapies and Kidney Care segments helped balance the results. The total company adjusted earnings per share exceeded the guidance range.

The paragraph outlines the performance of various business segments for Baxter, highlighting top-line growth, improved supply chain efficiency, and controlled operating expenses. Medical Products & Therapies led with 7% growth, fueled by strong demand and the successful adoption of the Novum IQ platform in the US. The Advanced Surgery division also contributed positively. The Healthcare Systems & Technologies (HST) segment grew by 1%, with growth driven by the US Care & Connectivity Solutions division, despite a decline in US Frontline Care sales due to challenges in the US Primary Care market and lower international sales in China and France. Baxter aims to improve growth in both the Frontline Care division and overall HST segment, expecting stabilization in the US Primary Care market over the next year.

The company is concentrating on innovation to boost performance and plans to launch new products for growth in the FLC and HST segments starting in 2025. In their Pharmaceutical segment, sales rose by 1%, with strong growth in drug compounding offset by declines in Injectables & Anesthesia due to sales phasing and supply issues. They expect improvement in the fourth quarter. The injectable sales team is preparing for new product launches in 2024. The Kidney Care segment, soon to be known as Vantive after its separation from Baxter, grew by 4-5%, driven by demand and pricing for acute therapies and peritoneal dialysis. The sale to Carlyle is progressing, expected to complete by late 2024 or early 2025, marking a significant step in their strategic transformation.

The paragraph discusses several strategic actions taken by the company, including realigning its operating model, selling its non-core BioPharma Solutions contract manufacturing business, and planning for the divestiture of the Kidney Care division. These moves aim to enhance stakeholder value, improve operational efficiency, boost research and development productivity, and mitigate costs associated with the Kidney Care sale. The company anticipates 4% to 5% revenue growth and a 16.5% adjusted operating margin by 2025, with further margin expansion beyond that. The passage highlights the dedication of Baxter's employees in driving these initiatives. It concludes with Joel Grade set to provide more details on financial results and business outlook, noting the Kidney Care business as discontinued operations.

The company's third-quarter results were generally in line with expectations, with total global sales reaching $3.85 billion, marking a 4% increase on both reported and constant currency bases. This growth was driven by better-than-expected sales in infusion therapies, product therapies, drug compounding, and US patient support systems, despite some weakness in Injectables & Anesthesia and HST. Continuing operations saw a similar 4% growth, with contributions from all segments. Total company adjusted earnings, accounting for both continuing and discontinued operations, were $0.80 per share, exceeding prior guidance. Excluding Kidney Care and BPS, adjusted earnings from continuing operations increased by 14% to $0.49 per share. The Medical Products & Therapies segment reported $1.3 billion in sales, a 7% increase, surpassing expectations.

In the third quarter, the Infusion Therapies & Technologies (ITT) division saw a 7% increase in sales to $1.1 billion, driven by strong demand for US Infusion Systems and growth in international IV Solutions and nutrition. Advanced Surgery sales also grew 7%, benefiting from demand for hemostat and sealants and favorable pricing. The Medical Products & Therapies (MPT) segment reported an improved operating margin. The Healthcare Systems & Technologies (HST) segment experienced a 1% sales increase to $752 million, with the Care & Connectivity Solutions (CCS) division growing 3% due to strong US Patient Support Systems sales. However, overall performance was partially offset by weaker international sales, notably in China and Western Europe, due to government policy impacts and funding delays.

The paragraph discusses the company's performance across various business segments. The care, communications, and connectivity business experienced strong order growth, but sales were affected by delayed hospital installations, with many expected to occur in 2025. The Global Surgical Solutions business saw a sales decline due to supply constraints, anticipated to be mostly resolved by year-end. Frontline Care sales decreased by 2%, impacted by tough comparisons from the previous year and softness in the US Primary Care market, which is expected to stabilize by 2025. HST achieved significant operating margin expansion, with adjusted margins up to 18.1%. In Pharmaceuticals, sales rose 1% to $588 million, though Injectables & Anesthesia sales declined due to tough prior year comparisons and timing issues with orders and a new product launch.

During the quarter, supply constraints outside the U.S. affected performance, with a decline in sales for Injectables & Anesthesia impacting overall results. Despite this, a rebound in sales was observed at the start of the fourth quarter, and efforts to improve the product launch strategy are ongoing. Drug Compounding experienced strong demand, leading to double-digit growth. Pharmaceuticals margins decreased both year-over-year and sequentially, with adjusted operating margins at 9.9% for the quarter. The focus is on improving margins through a better product mix, stabilizing anesthesia, and enhancing supply chain efficiencies. The Kidney Care segment reported $1.2 billion in sales, a 5% increase, driven by growth in chronic therapies and acute therapies, despite challenges in the in-center HD business. Unallocated sales, mainly from manufacturing facilities, rose by 12% to $17 million. Additional comments on continuing operations will follow in other sections.

The paragraph discusses the financial impact of Baxter's reporting changes due to moving its Kidney Care business to discontinued operations. Corporate costs previously allocated to Kidney Care are now reported as unallocated corporate costs, negatively affecting results but expected to be mostly offset by 2025 through transition service agreements with Vantive and cost-cutting measures. The impact is anticipated to be fully mitigated by 2027. In the third quarter, the total adjusted gross margin, including Kidney Care, increased by 80 basis points to 42.5%, driven by supply chain efficiencies and pricing strategies, although certain product mixes partially countered this growth. The adjusted gross margin for continuing operations decreased by 110 basis points to 43.7%. Adjusted SG&A, including Kidney Care, rose by 50 basis points to 22.6%, and for continuing operations, it increased by 20 basis points to 24.6%, reflecting investments in growth and product launches.

The paragraph outlines key financial metrics for a company, highlighting an increase in adjusted R&D spending to $169 million, which is 4.4% of sales, driven by investments in new products. The adjusted operating margin improved to 15.6% but faced a 240 basis point negative impact from $55 million in stranded costs. For the year-to-date, these costs negatively impacted margins by 250 basis points, or $200 million. Net interest expense decreased by $40 million to $88 million due to debt repayments from a BPS divestiture, and adjusted other non-operating income totaled $9 million, with $1 million from continuing operations.

In the latest quarter, the company's adjusted tax rate was 13.8%, a decrease from the previous year due to changes in earnings mix and additional R&D tax credits. Adjusted earnings per share rose 18% to $0.80, driven by better commercial performance and lower interest expenses. Earnings from continuing operations increased 14% to $0.49 per share, despite a $0.11 headwind from stranded costs. Year-to-date earnings from continuing operations grew 25% to $1.31 per share, with a $0.30 per share headwind. Looking ahead, the company adjusted its 2024 forecast due to Hurricane Helene's impact on North Cove operations, estimating a $200 million negative impact on fourth-quarter sales, including $40-$50 million from Kidney Care. This is expected to reduce adjusted earnings per share by $0.15 to $0.20. The guidance includes discontinued Kidney Care operations and excludes BPS discontinued operations.

Baxter anticipates overall sales growth for 2024 to be 1% to 2% on a reported basis and approximately 2% on a constant currency basis, despite over a 100 basis point negative impact from Hurricane Helene. For continuing operations, sales are expected to grow around 2% on both bases, with a 150 basis points negative impact from the hurricane. Segment-wise, MPT sales are expected to grow 2% to 3%, HST sales to decline slightly due to slow US market recovery, Pharmaceutical sales to rise by about 7% with strong injectable sales, and Kidney Care sales to grow about 2%. Baxter projects a more than 50 basis points increase in full year 2024 adjusted operating margins, despite a 50 basis points negative impact from the hurricane. However, margins on a continuing operations basis are expected to decline by 90 to 100 basis points, compounded by a 250 basis points impact from stranded costs. In 2023, adjusted operating margins stood at 14.7%, suffering a 300 basis points hit from these costs.

The company expects nonoperating expenses in 2024 to total $320 million, or $300 million for continuing operations. They anticipate a full-year adjusted tax rate of 22% for the total company and 18.5% for continuing operations, with an average diluted share count of 511 million. The adjusted earnings per share (EPS) for the full year, excluding special items and including discontinued operations, is projected to be $2.90 to $2.94, factoring in a $0.15 to $0.20 EPS impact from Hurricane Helene. The Kidney Care business, now a discontinued operation, brings a $0.10 per share benefit due to an accounting change. For continuing operations, the EPS before special items is expected to be $1.81 to $1.84, with a $0.42 per share impact from stranded costs. The previous year saw a $0.48 per share impact from stranded costs. In Q4 2024, sales are expected to decline in low single digits, impacted by a 500 basis point headwind from Hurricane Helene, with EPS projected at $0.77 to $0.81.

The paragraph is from a Q&A session following a financial outlook discussion. It begins with a recap of the financial impact of Hurricane Helene, including a $0.15 to $0.20 per share headwind and a $0.08 per share depreciation benefit, and mentions the expectation of adjusted earnings per share of $0.50 to $0.53, considering these disruptions and stranded costs. During the Q&A, an analyst from Bank of America Securities, Travis Steed, asks two questions: one about the performance of the HS&T business, which was below expectations, and another about the anticipated hurricane impact in 2025 and how the company plans to maintain their guidance. Joe Almeida responds, emphasizing the growth and competitive improvements in their US PSS business, indicating stabilized performance and market share gains despite previous concerns.

The paragraph discusses the company's current and future performance across various sectors. There is a healthy pipeline of orders with 20% growth, and operational issues have been resolved following a transition between plants. Care communications orders have grown by 14%, with installation delays due to high hospital volumes expected to resolve by next year. In the US Primary Care market, distributor destocking has shown market softness, but stabilization is anticipated by 2025. Internationally, China and France are experiencing order weaknesses due to postponed capital investments, with a strategic exit from low-margin business areas. In 2025, US PSS is expected to maintain positive order levels, with surgical solutions stabilizing from previous growth cycles, and FLC is likely to benefit from the launch of new products and resolved supply constraints.

The paragraph discusses the recovery of a business from operational issues and stabilization of the Primary Care market in 2024. There is an anticipation of some impact going into the first quarter of 2025, but production lines will be fully operational, with a focus on high-demand products. Significant growth is expected due to strong pump and set sales, forecasting a 50% increase in 2024 and continued strong growth in 2025. Injectables are contributing to mid-single-digit growth. Joel adds confidence in 2025 projections due to positive pricing impacts.

The paragraph discusses the company's expectations for positive growth and financial performance. They anticipate benefits from internal strategic changes, expense leverage, and business growth, which should offset some headwinds like previously identified MSAs and costs from one-time issues this year. They reaffirm confidence in achieving a 4% to 5% increase in top-line growth and a 16.5% improvement in the bottom line. Robbie Marcus from JPMorgan asks about the confidence in maintaining the 16.5% guidance for 2025 and inquires about strategies to mitigate stranded costs and declining income from TSAs. Joel Grade begins to respond, acknowledging these concerns and the company's plans to address them.

The paragraph discusses the company's financial strategy and plans post-separation, highlighting a 16.5% target as a foundational benchmark for growth and margin expansion. It acknowledges minimal expected impacts in the first quarter due to external factors and emphasizes opportunities for leveraging pricing and cost management. The company plans to eliminate stranded costs by rationalizing its dense distribution center network, particularly those related to its Kidney business, which will enhance operational efficiency and inventory management. Additionally, the organization aims to rightsize its operations to align with its future business scale.

The paragraph discusses a conversation during a call involving Joe Almeida, where Pito Chickering from Deutsche Bank praises the team for averting a crisis after a facility shutdown caused panic over IV solutions, emphasizing their critical role in healthcare. The question posed is whether Baxter intends to diversify manufacturing across more facilities to mitigate such risks in the future, and if this situation could lead to increased pricing for IV bags or cause hospitals to seek multiple suppliers. Joe Almeida acknowledges the importance of IV bags, highlighting that Baxter doesn't view them as a commodity due to high barriers to entry, and mentions significant investment in the facility since 2016.

The paragraph discusses Baxter's ability to recover quickly from disruptions compared to its competitors, highlighting its global network of production facilities as a key advantage. Baxter's rapid recovery and production capabilities are contrasted with competitors' capacity constraints in Europe and elsewhere. The speaker emphasizes the effectiveness of Baxter's operations without addressing product pricing. A follow-up question from Pito Chickering addresses the expected recovery in sales for the first quarter of 2025, following a fourth-quarter impact on sales due to supply chain adjustments when the North Cove plant was offline, suggesting that inventory restocking should contribute to revenue growth.

The paragraph is a discussion during a conference call about Baxter's financial outlook and recovery efforts following a disruption referred to as "Helene." Joe Almeida explains that the full recovery of production lines to pre-disruption levels has not been factored into projections yet, and there is potential for revenue growth as they work to restock inventory. However, the fiscal '25 guidance conservatively assumes a 4% to 5% organic growth rate, with uncertainty about whether the $150 million impact from an IV fluid shortage will be recovered. Overall, they remain comfortable with the guidance despite these variables.

In the paragraph, Joe Almeida discusses several factors driving a projected 4% to 5% growth, including the impact of plant operations ramping up, destocking and restocking processes, and key product launches in three business areas. Significant growth is expected from new product launches and a pump product in 2024, with continued growth anticipated in 2025. Almeida also highlights the higher margins from restocking IV solutions and ongoing efforts to offset costs and reduce manufacturing expenses. Vijay Kumar then notes that operating margins in the third quarter are down by 90 basis points year-on-year.

The paragraph involves a discussion between Vijay Kumar and Joel Grade about financial projections and comparisons for Baxter. Joel explains the difficulty in making an apples-to-apples comparison due to the reallocation of stranded costs previously assigned to kidney operations now categorized as unallocated corporate costs. This affects the company's continuing operations and projected 16.5% jump next year. Going into 2025, the 16.5% reflects the company's efforts and cost-containment measures. Joel also addresses the implications on free cash flow, noting that the current year has been volatile due to separation-related costs and discrete items in the first half of the year. Regarding dividend yield, the discussion implies uncertainties due to these financial complexities.

The paragraph discusses the seasonality in cash flows and anticipates a positive impact in the fourth quarter. However, cash flows from North Cove may be affected, although insurance proceeds will partially offset this. The company expects leverage from expense management and benefits from improved working capital and proceeds from Kidney Care sales. They aim for a threefold leverage by year-end, using free cash flow and Kidney Care proceeds. Clare Trachtman asks about dividends, to which Joel Grade responds that the dividend will be resized based on the organization's new size and will be announced soon. Later, Joanne Wuensch from Citi inquires about the company's perspective on developments in China and potential tariffs.

The paragraph discusses Baxter's reduced exposure to the Chinese market following exits and the impact of Vantive, noting that sales in China are now less than 2% of its total. Baxter does not manufacture products in China for the US, minimizing the effect of trade tariffs. Additionally, Joe Almeida mentions the successful launch and uptake of the Novum pump, highlighting increased market share growth from past rates, significant acceptance of the product, and its impact on syringe pump market share. Joel Grade briefly acknowledges the points made.

In the paragraph, Joel Grade addresses a question from Larry Biegelsen about understanding the company's projected 16.5% operating margin for the next year. Joel explains that the current year-to-date operating margin of 13.4% is complicated by stranded costs, which are not offset by any TSA income in 2024. He clarifies that this figure does not account for any cost containment measures they are currently implementing, which will only impact 2025. He emphasizes that the 16.5% projection is meant to serve as a post-separation benchmark for the company's performance. Additionally, there is a mention of the non-operating expense anticipated to be $300 million in 2024, but no specific guidance on how much it could decrease next year was provided.

The paragraph captures a financial discussion involving a few participants, mainly addressing the company's future earnings and expenses. Clare Trachtman and Lawrence Biegelsen talk about stranded costs and non-operating expenses, with an indication that debt repayment from Kidney Care proceeds might lessen interest expenses. Lawrence and David Roman also discuss future revenue growth projections of 4% to 5%, with a focus on understanding how this growth compares to the company's performance in the second and third quarters of 2024, excluding their Kidney Care segment. The aim is to contextualize growth expectations, considering various factors affecting different quarters, such as HST issues and IV dynamics.

The paragraph is a financial discussion between Joe Almeida and David Roman regarding a company's growth prospects and capital allocation strategy. Joe Almeida explains that growth from 4% to 5% is anticipated due to the normalization of their Frontline Care business, resolving past operational issues, and addressing softness in markets like France and China. David Roman asks about capital allocation, noting investments in SG&A and R&D for future growth. Joel Grade acknowledges the question, suggesting an expectation to offset the impact on IV by leveraging business strengths and proactive financial measures. The conversation emphasizes confidence in overcoming operational issues by the year's end and a return to normal growth patterns.

The paragraph discusses the company's plans for growth, emphasizing continued investment in research and development (R&D) and the expectation of modest growth in this area. The company also aims to achieve greater efficiency in selling, general, and administrative (SG&A) expenses through cost-containment strategies and leveraging growth. Innovation will be a central focus moving forward, supported by ongoing R&D investments. The paragraph ends with the conclusion of a conference call.

This summary was generated with AI and may contain some inaccuracies.