RESTATEMENT OF PREVIOUSLY ISSUED CONSOLIDATED FINANCIAL STATEMENTS (Tables)

6 Months Ended

Jun. 30, 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 2019 Annual Report. See Note 19, Quarterly Financial Data (unaudited), to the consolidated financial statements in our 2019 Annual Report. 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 and six months ended June 30, 2019. The amounts as previously reported were derived from our Quarterly Report on Form 10-Q for the quarter ended June 30, 2019 filed on July 30, 2019.


Baxter International Inc.
Condensed Consolidated Statement of Income
(in millions, except per share)

	Three months ended June 30, 2019
	As previously reported		Restatement impacts		Restatement reference	As restated
Net sales	$	2,840	$	(6)	(e)	$	2,834
Cost of sales	1,681		—		(c)(e)	1,681
Gross margin	1,159		(6)			1,153
Selling, general and administrative expenses	642		(1)		(e)	641
Research and development expenses	166		—			166
Other operating income, net	(4)		—			(4)
Operating income	355		(5)			350
Interest expense, net	20		—			20
Other (income) expense, net	(28)		32		(a)(b)	4
Income before income taxes	363		(37)			326
Income tax expense	20		(7)		(a)(c)	13
Net income	$	343	$	(30)		$	313
Earnings per share
Basic	$	0.67	$	(0.06)		$	0.61
Diluted	$	0.66	$	(0.06)		$	0.60
Weighted-average number of shares outstanding
Basic	510		—			510
Diluted	519		—			519

(a) Foreign Currency Denominated Monetary Assets and Liabilities—The correction of these misstatements resulted in a decrease to other (income) expense, net of $26 million and a decrease to income tax expense of $5 million for the three months ended June 30, 2019.

(b) Foreign Currency Derivative Contracts—The correction of these misstatements resulted in a decrease to other (income) expense, net of $6 million for the three months ended June 30, 2019.

(c) Equipment Leased to Customers under Operating Leases—The correction of these misstatements resulted in an increase to cost of sales of $5 million and a decrease to income tax expense of $2 million for the three months ended June 30, 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 decreases to net sales of $6 million, cost of sales of $5 million and selling, general and administrative (SG&A) expense of $1 million for the three months ended June 30, 2019.


Baxter International Inc.
Condensed Consolidated Statement of Comprehensive Income
(in millions)

	Three months ended June 30, 2019
	As previously reported		Restatement impacts		As restated
Net income	$	343	$	(30)	$	313
Other comprehensive income (loss), net of tax:
Currency translation adjustments	(78)		80		2
Pension and other postretirement benefit plans	13		(7)		6
Hedging activities	(12)		—		(12)
Total other comprehensive loss, net of tax	(77)		73		(4)
Comprehensive income	$	266	$	43	$	309


Baxter International Inc.
Condensed Consolidated Statement of Comprehensive Income
(in millions)

	Six months ended June 30, 2019
	As previously reported		Restatement impacts		As restated
Net income	$	690	$	(35)	$	655
Other comprehensive income (loss), net of tax:
Currency translation adjustments	(48)		(47)		(95)
Pension and other postretirement benefit plans	21		(1)		20
Hedging activities	(27)		—		(27)
Total other comprehensive loss, net of tax	(54)		(48)		(102)
Comprehensive income	$	636	$	(83)	$	553


Baxter International Inc.
Condensed Consolidated Statement of Changes in Equity
(in millions)
	For the Three Months Ended June 30, 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 April 1, 2019	683	$	683	173	$	(10,284)	$	5,839	$	15,970	$	(4,562)	$	7,646	$	23	$	7,669

Net income	—	—		—	—		—		343		—		343		—		343
Other comprehensive income (loss)	—	—		—	—		—		—		(77)		(77)		—		(77)
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)
Changes in noncontrolling interests	—	—		—	—		—		—		—		—		1		1
Balance as of June 30, 2019	683	$	683	173	$	(10,322)	$	5,906	$	16,184	$	(4,639)	$	7,812	$	24	$	7,836
Restatement impacts
Balance as of April 1, 2019	—	$	—	—	$	—	$	—	$	(556)	$	480	$	(76)	$	—	$	(76)
Net income	—	—		—	—		—		(30)		—		(30)		—		(30)
Other comprehensive income (loss)	—	—		—	—		—		—		73		73		—		73
Balance as of June 30, 2019	—	$	—	—	$	—	$	—	$	(586)	$	553	$	(33)	$	—	$	(33)
As restated
Balance as of April 1, 2019	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)
Changes in noncontrolling interests	—	—		—	—		—		—		—		—		1		1
Balance as of June 30, 2019	683	$	683	173	$	(10,322)	$	5,906	$	15,598	$	(4,086)	$	7,779	$	24	$	7,803

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 June 30, 2019 sections above.


Baxter International Inc.
Condensed Consolidated Statement of Cash Flows
(in millions)

	For the Six Months Ended June 30, 2019
	As previously reported		Restatement impacts		Restatement reference	As restated
Cash flows from operations
Net income	$	690	$	(35)		$	655
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization	393		(8)		(c)(f)	385
Deferred income taxes	(55)		(8)		(c)(f)	(63)
Stock compensation	57		—			57
Net periodic pension benefit and other postretirement costs	7		—			7
Intangible asset impairment	31		—			31
Other	34		10		(d)	44
Changes in balance sheet items:
Accounts receivable, net	(60)		—			(60)
Inventories	(91)		—			(91)
Accounts payable and accrued liabilities	(303)		4		(b)	(299)
Other	(86)		—		(e)(f)	(86)
Cash flows from operations - continuing operations	617		(37)			580
Cash flows from operations - discontinued operations	(6)		—			(6)
Cash flows from operations	611		(37)			574
Cash flows from investing activities
Capital expenditures	(352)		14		(c)	(338)
Acquisitions, net of cash acquired, and investments	(111)		—			(111)
Other investing activities, net	1		—			1
Cash flows from investing activities	(462)		14			(448)
Cash flows from financing activities

Issuances of debt	1,661		—			1,661
Cash dividends on common stock	(198)		—			(198)
Proceeds from stock issued under employee benefit plans	262		—			262
Purchases of treasury stock	(720)		—			(720)
Other financing activities, net	(37)		—			(37)
Cash flows from financing activities	968		—			968
Effect of foreign exchange rate changes on cash and cash equivalents	(24)		26		(a)(d)(e)	2
Increase (decrease) in cash and cash equivalents	1,093		3			1,096
Cash and cash equivalents at beginning of period	1,832		6		(e)	1,838
Cash and cash equivalents at end of period	$	2,925	$	9	(e)	$	2,934

The $35 million decrease to net income was driven by the items described above in the condensed consolidated statement of income for the six months ended June 30, 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 $33 million for the six months ended June 30, 2019.

(b) Foreign Currency Derivative Contracts—The correction of these misstatements resulted in an increase to changes in accounts payable and accrued liabilities of $4 million for the six months ended June 30, 2019.

(c) Equipment Leased to Customers under Operating Leases—The correction of these misstatements resulted in decreases to depreciation and amortization of $7 million, deferred income taxes of $2 million and capital expenditures of $14 million for the six months ended June 30, 2019.

(d) Classification of Foreign Currency Gains and Losses in our Consolidated Statements of Cash Flows—The corrections of these misstatements resulted in a decrease to the effect of foreign exchange rate changes on cash and cash equivalents and an increase to other adjustments to reconcile net income to net cash from operating activities of $10 million for the six months ended June 30, 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, at the end of the period of $9 million and the effect of foreign exchange rate changes on cash and cash equivalents of $3 million and a decrease to other changes in balance sheet items of $1 million for the six months ended June 30, 2019.

(f) Other miscellaneous adjustments—The correction of these misstatements resulted in decreases to depreciation and amortization of $1 million and deferred income taxes of $6 million and an increase to other changes in balance sheet items of $1 million for the six months ended June 30, 2019.