filings.toolsItem 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Refer to our Annual Report on Form 10-K for the year ended December 31, 2023 for management’s discussion and analysis of our financial condition and results of operations. The following is management’s discussion and analysis of our financial condition and results of operations for the three months ended March 31, 2024 and 2023.
RECENT STRATEGIC ACTIONS
In mid-2022, our Board of Directors authorized a strategic review of our business portfolio, with the goal of increasing stockholder value. As part of that review process, we identified and evaluated a range of potential strategic actions, including opportunities for sales and other separation transactions. In January 2023, following the completion of that review, we announced a number of planned strategic actions, as discussed below, which are intended to enhance our operational effectiveness, accelerate innovation and drive additional stockholder value.
Proposed Separation of Kidney Care Business
In January 2023, we announced a proposed spinoff of our Kidney Care business into an independent publicly traded company. In March 2024, we announced that we have been in recent discussions with select private equity investors to explore a potential sale of our Kidney Care business in lieu of the proposed spinoff. Regardless of the separation structure ultimately selected, the separation of our Kidney Care business is currently expected to be completed during the second half of 2024, subject to the satisfaction of customary conditions. During the first quarter of 2024 we generated $1.10 billion of net sales from our Kidney Care segment, representing approximately 31% of our consolidated net sales.
Since the initial announcement of the proposed separation of our Kidney Care business, we have incurred significant separation-related costs that have adversely impacted our earnings and cash flows. We expect to continue to incur significant separation costs, which will continue to adversely impact our earnings and cash flows, until the proposed separation is completed. Additionally, if the proposed separation is completed, we expect to incur some amount of dis-synergies due to the reduced size of our company and, as a result, we will need to undertake various actions to help ensure that our cost structure is appropriate to support our remaining businesses.
There can be no guarantees that the proposed separation will be completed in the manner or over the timeframe described above, or at all.
Implementation of New Operating Model and Resulting Segment Change
In the third quarter of 2023, we completed the implementation of a new operating model intended to simplify and streamline our operations and better align our manufacturing and supply chain to our commercial activities. Under this new operating model, our business is comprised of four segments: Medical Products and Therapies, Healthcare Systems and Technologies, Pharmaceuticals, and Kidney Care (which we are currently planning to divest during the second half of 2024 through either a sale or spinoff, as discussed above). Our segments were changed during the third quarter of 2023 to align with our new operating model and prior period segment disclosures have been revised to reflect the new segment presentation. See Note 16 in Item 1 of this Quarterly Report on Form 10-Q for additional information.
Sale of BioPharma Solutions (BPS) Business
On September 29, 2023, we completed the sale of our BioPharma Solutions (BPS) business and received cash proceeds of $3.96 billion from that transaction. The results of operations and cash flows of our BPS business for the three months ended March 31, 2023 are reported as discontinued operations in the accompanying condensed consolidated financial statements. We intend to use substantially all of the after-tax proceeds from this transaction to repay certain of our debt obligations, including $514 million of commercial paper borrowings and $2.28 billion of long-term debt that we repaid during the fourth quarter of 2023. See Note 2 in Item 1 of this Quarterly Report on Form 10-Q for additional information.
FACTORS AFFECTING OUR RESULTS OF OPERATIONS
Supply Constraints, Global Economic Conditions, and Regulatory Matters
We have experienced significant challenges to our global supply chain in recent periods, including production delays and interruptions, increased costs and shortages of raw materials and component parts (including resins and
electromechanical devices), and higher transportation costs, resulting from the COVID-19 pandemic and other exogenous factors including significant weather events, elevated inflation levels, increased interest rates, disruptions to certain ports of call and access to shipping ports around the world, the war in Ukraine, the conflict in the Middle East (including attacks on merchant ships in the Red Sea), tensions amongst China, Taiwan, and the U.S., and other geopolitical events. Due to the nature of our products, which include dense consumable medical products such as IV fluids, and the geographic locations of our manufacturing facilities, which often require us to transport our products long distances, we may be more susceptible to increases in freight costs and other supply chain challenges than certain of our industry peers. While we have seen meaningful improvements in the availability of certain component parts and improved pricing in certain raw materials and on certain transportation costs, these challenges may have a negative impact on our supply chain in future periods. These challenges, including the unavailability of certain raw materials and component parts, have also had a negative impact on our sales for certain product categories (including those acquired in our December 2021 acquisition of Hill-Rom Holdings, Inc. (Hillrom)) due to our inability to fully satisfy demand and may continue to have a negative impact on our sales in the future.
Our results of operations are also affected by macroeconomic conditions and levels of business confidence. The war in Ukraine, the conflict in the Middle East (including attacks on merchant ships in the Red Sea), tensions amongst China, Taiwan, and the U.S., and the sanctions and other measures being imposed in response to these conflicts (and the potential for escalation of these conflicts) have increased the levels of economic and political uncertainty and we continue to closely monitor the developing situations. While we have substantially completed our wind down efforts related to our business in Russia, a significant escalation or expansion of economic disruption or the current scope of the war in Ukraine could have an adverse effect on our operations (including our supply chain) in the region.
Our global operations expose us to risks associated with public health crises and epidemics/pandemics. COVID-19 had, and it or any other future public health crisis could in the future have an adverse impact on, among other things, our expenses, operations, supply chains, and distribution systems. Any resurgence of the pandemic or any new public health crisis could again impact healthcare priorities and cause volatility in the demand for our products.
The existence of high inflation rates in the United States and in many of the countries where we conduct business has resulted in, and may continue to result in, higher interest rates, shipping costs, labor costs, and other costs and expenses. Additionally, adverse changes in foreign currency exchange rates have increased, and could continue to increase, our costs of sourcing certain raw materials in some jurisdictions. We have experienced and may continue to experience inflationary increases in manufacturing costs and operating expenses and we may not be able to pass these cost increases on to our customers in a timely manner or at all, which could have a material adverse impact on our profitability and results of operations. Inflation and general macroeconomic factors have caused certain of our customers to reduce or delay orders for our products and services and could cause them to do so in the future, which could have a material adverse impact on our sales and results of operations.
As a medical products company, our operations and many of the products manufactured or sold by us are subject to extensive regulation by numerous government agencies, both within and outside the United States. These regulations (as described in Item 1, Government Regulation, of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023) require that we obtain specific approval from the Food and Drug Administration (FDA) or applicable non-U.S. regulatory authorities before we can market and sell most of our products in a particular country. Failure to obtain or maintain those approvals or clearances could have a material adverse impact on our business (including with respect to our ability to compete in the product markets in which we currently operate). Furthermore, the FDA in the United States, the European Medicines Agency in Europe, the China Food and Drug Administration in China, and other government agencies, inside and outside of the United States, administer requirements covering the testing, safety, effectiveness, manufacturing, labeling, promotion and advertising, pricing, distribution, and post-market surveillance of our products. Our failure to comply with these requirements may subject us to various actions, including warning letters, product recalls or seizures, monetary sanctions, injunctions to halt the manufacture and distribution of products, civil or criminal sanctions, refusal of a government to grant approvals or licenses, restrictions on operations or withdrawal of existing approvals and licenses, and may have a material adverse impact on our results of operations.
For further discussion, please refer to Item 1A, "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.
NON-GAAP FINANCIAL MEASURES
Our presentation of percentage changes in net sales at constant currency rates, which is computed using current period local currency sales at the prior period’s foreign exchange rates, is a non-GAAP financial measure. This measure provides information about growth (or declines) in our net sales as if foreign currency exchange rates had not changed between the prior period and the current period. We believe that the non-GAAP measure of percent change in net sales at constant currency rates, when used in conjunction with the U.S. GAAP measure of percent change in net sales at actual currency rates, may provide a more complete understanding and facilitate a fuller analysis of our results of operations, particularly in evaluating performance from one period to another.
RESULTS OF OPERATIONS
For the three months ended March 31, 2024, net income attributable to Baxter stockholders was $37 million, or $0.07 per diluted share. For the three months ended March 31, 2023, net loss from continuing operations attributable to Baxter stockholders was $1 million, or $0.00 per diluted share, and net income from discontinued operations was $45 million, or $0.09 per diluted share. For the three months ended March 31, 2024, our results included special items that decreased net income attributable to Baxter stockholders by $294 million, or $0.58 per diluted share. For the three months ended March 31, 2023, our results included special items that decreased income from continuing operations attributable to Baxter stockholders by $249 million, or $0.49 per diluted share, and decreased net income from discontinued operations by $4 million, or $0.01 per diluted share. See the subsection entitled “Special Items” for information about special items for all periods presented.
CONSOLIDATED NET SALES
| Three Months Ended March 31, | Percent change | ||||||||||||||||
| (in millions) | 2024 | 2023 | At actual currency rates | At constant currency rates 1 | |||||||||||||
| United States | $ | 1,659 | $ | 1,667 | (0) | % | 0 | % | |||||||||
| Emerging markets2 | 778 | 757 | 3 | % | 4 | % | |||||||||||
| Rest of world3 | 1,155 | 1,089 | 6 | % | 6 | % | |||||||||||
| Total net sales | $ | 3,592 | $ | 3,513 | 2 | % | 3 | % |
1 Percent change in net sales at constant currency rates is a non-GAAP financial measure. See the section entitled “Non-GAAP Financial Measures” for additional information about our use of that measure.
2 Emerging markets includes sales from our operations in Eastern Europe, the Middle East, Africa, Latin America, and Asia (except for Japan).
3 Rest of world includes sales from our operations in Western Europe, Canada, Japan, Australia, and New Zealand.
Foreign currency adversely impacted net sales by 1 percentage point during the first quarter of 2024, compared to the prior year period, primarily due to the strengthening of the U.S. Dollar relative to the Turkish Lira, Chinese Renminbi, Australian Dollar, and Japanese Yen, partially offset by the weakening of the U.S. Dollar relative to the Colombian Peso, British Pound, Mexican Peso, and Euro.
NET SALES BY SEGMENT
Medical Products and Therapies
Our Medical Products and Therapies segment includes sales of our sterile IV solutions, infusion systems, administration sets, parenteral nutrition therapies and surgical hemostat, sealant, and adhesion prevention products.
| Three Months Ended March 31, | Percent change | |||||||||||||||||||
| (in millions) | 2024 | 2023 | At actual currency rates | At constant currency rates 1 | ||||||||||||||||
| Infusion Therapies and Technologies | $ | 966 | $ | 911 | 6 | % | 6 | % | ||||||||||||
| Advanced Surgery | 263 | 246 | 7 | % | 8 | % | ||||||||||||||
| Total Medical Product and Therapies net sales | $ | 1,229 | $ | 1,157 | 6 | % | 6 | % |
1 Percent change in net sales at constant currency rates is a non-GAAP financial measure. See the section entitled “Non-GAAP Financial Measures” for additional information about our use of that measure.
Medical Product and Therapies segment net sales increased 6% in the first quarter of 2024, as compared to the prior year period.
Infusion Therapies and Technologies net sales increased 6% in the first quarter of 2024, as compared to the prior year period. Sales performance primarily reflected growth in IV solutions and, to a lesser extent, international nutrition product offerings. Growth in the current year period was primarily attributable to pricing initiatives with the remainder driven by volume.
In April 2024, we received U.S. Food and Drug Administration (FDA) 510(k) clearance of our Novum IQ large volume infusion pump (LVP), which is expected to favorably impact the net sales generated by our Infusion Therapies and Technologies business during the second half of 2024.
Advanced Surgery net sales increased 7% in the first quarter of 2024, as compared to the prior year period. Sales performance primarily reflected growth in hemostats and sealants and, to a lesser extent, adhesion prevention product offerings. Growth in the current year period was primarily attributable to increased sales volume. Foreign currency exchange rates adversely impacted sales growth by 1%, as compared to the prior year period.
Healthcare Systems and Technologies
Our Healthcare Systems and Technologies segment includes sales of our connected care solutions and collaboration tools, including smart bed systems, patient monitoring systems and diagnostic technologies, respiratory health devices, and advanced equipment for the surgical space, including surgical video technologies, precision positioning devices, and other accessories.
| Three Months Ended March 31, | Percent change | ||||||||||||||||
| (in millions) | 2024 | 2023 | At actual currency rates | At constant currency rates 1 | |||||||||||||
| Care and Connectivity Solutions | $ | 402 | $ | 429 | (6) | % | (7) | % | |||||||||
| Front Line Care | 265 | 302 | (12) | % | (12) | % | |||||||||||
| Total Healthcare Systems and Technologies net sales | $ | 667 | $ | 731 | (9) | % | (9) | % |
1 Percent change in net sales at constant currency rates is a non-GAAP financial measure. See the section entitled “Non-GAAP Financial Measures” for additional information about our use of that measure.
Healthcare Systems and Technologies segment net sales decreased 9% in the first quarter of 2024, as compared to the prior year period.
Care and Connectivity Solutions net sales decreased 6% in the first quarter of 2024, as compared to the prior year period, primarily driven by volume declines resulting from the timing of capital orders by our hospital customers, the phasing of installations, primarily with respect to care communications products, to future periods, and lower rental revenues. We were also impacted by challenges related to commercial execution that we are currently addressing in order to improve the performance of this business. Foreign currency exchange rates favorably impacted sales growth by 1% for the quarter, as compared to the prior year period.
Front Line Care net sales decreased 12% in the first quarter of 2024, as compared to the prior year period. Sales performance primarily reflected declines in our connected monitoring and intelligent diagnostics product offerings. The sales decline as compared to the prior year was primarily driven by an increased backlog in the current year period, compared with a backlog reduction in the prior year period, and softer demand in the primary care market.
We currently expect the growth rates for our Healthcare Systems and Technologies segment to meaningfully improve during the second half of 2024.
Pharmaceuticals
Our Pharmaceuticals segment includes sales of specialty injectable pharmaceuticals, inhaled anesthesia and drug compounding.
| Three Months Ended March 31, | Percent change | ||||||||||||||||
| (in millions) | 2024 | 2023 | At actual currency rates | At constant currency rates 1 | |||||||||||||
| Injectables and Anesthesia | $ | 328 | $ | 305 | 8 | % | 8 | % | |||||||||
| Drug Compounding | 250 | 218 | 15 | % | 15 | % | |||||||||||
| Total Pharmaceuticals net sales | $ | 578 | $ | 523 | 11 | % | 11 | % |
1 Percent change in net sales at constant currency rates is a non-GAAP financial measure. See the section entitled “Non-GAAP Financial Measures” for additional information about our use of that measure.
Pharmaceuticals segment net sales increased 11% in the first quarter of 2024 compared to the prior year period.
Injectables and Anesthesia net sales increased 8% in the first quarter of 2024 compared to the prior year period primarily due to growth in our U.S. specialty injectable products, driven by new product launches, including Zosyn, following the transfer of the related product rights to us in April 2023, Bendamustine, and Norepinephrine, partially offset by lower sales of inhaled anesthesia products.
Drug Compounding net sales increased 15% in the first quarter of 2024, as compared to the prior year period. The increase was driven by increased demand for our international pharmacy compounding services.
Kidney Care
Our Kidney Care segment includes Chronic Therapies, comprised of peritoneal dialysis (PD) and hemodialysis (HD),and Acute Therapies, comprised of continuous renal replacement therapies (CRRT) and other organ support therapies.
| Three Months Ended March 31, | Percent change | ||||||||||||||||
| (in millions) | 2024 | 2023 | At actual currency rates | At constant currency rates 1 | |||||||||||||
| Chronic Therapies | $ | 888 | $ | 884 | 0 | % | 2 | % | |||||||||
| Acute Therapies | 214 | 188 | 14 | % | 15 | % | |||||||||||
| Total Kidney Care net sales | $ | 1,102 | $ | 1,072 | 3 | % | 4 | % |
1 Percent change in net sales at constant currency rates is a non-GAAP financial measure. See the section entitled “Non-GAAP Financial Measures” for additional information about our use of that measure.
Kidney Care segment net sales increased 3% in the first quarter of 2024, as compared to the prior year period.
Chronic Therapies sales were flat in the first quarter of 2024, as compared to the prior year period. Sales performance in the current year period was primarily due to patient growth, pricing, and recent government tender awards, partially offset by lower sales in China, primarily due to government-based procurement initiatives and the impact of COVID-19 on that country’s renal patient population, and select product and market exits. Foreign currency exchange rates adversely impacted sales growth by 2%, as compared to the prior year period.
Acute Therapies net sales increased 14% in the first quarter of 2024, as compared to the prior year period. The increase in the current year period was primarily driven by higher sales volume resulting from strong demand for our CRRT offerings, particularly in the United States. Foreign currency exchange rates adversely impacted sales growth by 1%, as compared to the prior year period.
Other
During the three months ended March 31, 2024 and 2023, we earned $16 million and $30 million, respectively, of revenues that were not attributable to our reportable segments. In the current and prior year periods, those other sales primarily represent revenues earned by certain of our manufacturing facilities from contract manufacturing activities. The prior year period also includes royalty income under a business development arrangement. The decrease in the current year as compared to the prior year period primarily reflects lower contract manufacturing
volume and, to a lesser extent, termination of the royalty arrangement following our acquisition of the rights to the underlying product.
COSTS AND EXPENSES
Special Items
The following table provides a summary of our special items from continuing operations and the related impact by line item on our results for the three months ended March 31, 2024 and 2023.
| Three Months Ended March 31, | |||||||||||||||||
| (in millions) | 2024 | 2023 | |||||||||||||||
| Gross Margin | |||||||||||||||||
| Intangible asset amortization expense | $ | (114) | $ | (110) | |||||||||||||
| Business optimization items1 | (14) | (35) | |||||||||||||||
| Acquisition and integration items2 | (1) | — | |||||||||||||||
| European medical devices regulation3 | (8) | (12) | |||||||||||||||
| Separation-related costs4 | (4) | (1) | |||||||||||||||
| Total Special Items | $ | (141) | $ | (158) | |||||||||||||
| Impact on Gross Margin Ratio | (3.9) pts | (4.5) pts | |||||||||||||||
| Selling, General and Administrative (SG&A) Expenses | |||||||||||||||||
| Intangible asset amortization expense | $ | 52 | $ | 52 | |||||||||||||
| Business optimization items1 | 27 | 92 | |||||||||||||||
| Acquisition and integration items2 | 4 | 6 | |||||||||||||||
| Separation-related costs4 | 88 | $ | 8 | ||||||||||||||
| Total Special Items | $ | 171 | $ | 158 | |||||||||||||
| Impact on SG&A Ratio | 4.8 pts | 4.5 pts | |||||||||||||||
| Research and Development (R&D) Expenses | |||||||||||||||||
| Business optimization items1 | $ | 16 | $ | 7 | |||||||||||||
| Total Special Items | $ | 16 | $ | 7 | |||||||||||||
| Impact on R&D Ratio | 0.4 pts | 0.2 pts | |||||||||||||||
| Other Operating Income, net | |||||||||||||||||
| Acquisition and integration items2 | $ | — | $ | (13) | |||||||||||||
| Total Special Items | $ | — | $ | (13) | |||||||||||||
| Income Tax Expense | |||||||||||||||||
| Tax matters5 | $ | 37 | $ | 3 | |||||||||||||
| Tax effects of special items6 | (71) | $ | (64) | ||||||||||||||
| Total Special Items | $ | (34) | $ | (61) | |||||||||||||
| Impact on Effective Tax Rate | 41.4 pts | 76.9 pts |
1Our results in 2024 and 2023 were impacted by costs associated with our execution of programs to optimize our organization and cost structure. These restructuring and other business optimization costs included actions related to our current implementation of a new operating model intended to simplify and streamline our operations and better align our manufacturing and supply chain to our commercial activities, rationalization of certain other manufacturing and distribution facilities, and transformation of certain general and administrative functions. Our results in 2024 and 2023 included business optimization charges of $57 million and $134 million, respectively. Refer to Note 10 in Item 1 of this Quarterly Report on Form 10-Q for further information regarding these charges and related liabilities.
2Our results in 2024 and 2023 reflected integration costs of $5 million and $6 million, respectively, which primarily included third party consulting costs related to our integration of Hillrom. In 2023, those costs were offset by $13 million of net gains from changes in the estimated fair values of contingent consideration liabilities.
3Our results in 2024 and 2023 included $8 million and $12 million, respectively, of incremental costs to comply with the European Union's medical device regulations for previously registered products, which primarily consist of contractor costs and other direct third-party costs. We consider the adoption of these regulations to be a significant one-time regulatory charge and believe that the costs of initial compliance for previously registered products over the implementation period are not indicative of our core operating results.
4Our results in 2024 and 2023 included separation-related costs of $92 million and $9 million, respectively, primarily reflecting costs of external advisors supporting our activities to prepare for the proposed separation of our Kidney Care segment. We also incurred $7 million of additional
separation-related costs in 2023 related to the sale of our BPS business that are reported in discontinued operations and are not presented in the table above.
5Our results in 2024 included $37 million of income tax expenses resulting from internal reorganization transactions related to the proposed separation of our Kidney Care segment. Our results in 2023 included a $3 million reallocation of income tax expense between discontinued operations and continuing operations resulting from the application of intraperiod tax allocation to our adjusted results in an interim period.
6This item reflects the income tax impact of the special items identified in this table. The tax effect of each special item is based on the jurisdiction in which the item was incurred and the tax laws in effect for each such jurisdiction.
Gross Margin and Expense Ratios
| Three months ended March 31, | ||||||||||||||||||||
| 2024 | % of net sales | 2023 | % of net sales | $ change | % change | |||||||||||||||
| Gross margin | $ | 1,387 | 38.6 | % | $ | 1,275 | 36.3 | % | $ | 112 | 8.8 | % | ||||||||
| SG&A | $ | 1,027 | 28.6 | % | $ | 995 | 28.3 | % | $ | 32 | 3.2 | % | ||||||||
| R&D | $ | 176 | 4.9 | % | $ | 164 | 4.7 | % | $ | 12 | 7.3 | % |
Gross Margin
The gross margin ratio was 38.6% and 36.3% in the first quarter of 2024 and 2023, respectively. The special items identified earlier in this section had an unfavorable impact of approximately 3.9 and 4.5 percentage points on the gross margin ratio in the first quarter of 2024 and 2023, respectively. Refer to the Special Items caption above for additional detail.
Excluding the impact of special items, the gross margin ratio increased 1.7 percentage points in the first quarter of 2024 compared to the prior year period, primarily due to pricing and initiatives to reduce our manufacturing and supply chain costs.
SG&A
The SG&A expenses ratio was 28.6% and 28.3% in the first quarter of 2024 and 2023, respectively. The special items identified earlier in this section had an unfavorable impact of approximately 4.8 and 4.5 percentage points on the SG&A expenses ratio in the first quarter of 2024 and 2023, respectively.
Excluding the impact of special items, the SG&A expenses ratio remained flat in the first quarter of 2024 compared to the prior year period.
R&D
The R&D expenses ratio was 4.9% and 4.7% in the first quarter of 2024 and 2023, respectively. The special items identified earlier in this section had an unfavorable impact of approximately 0.4 and 0.2 percentage points on the R&D expenses ratio in the first quarter of 2024 and 2023, respectively.
Excluding the impact of special items, the R&D expenses ratio remained flat in the first quarter of 2024 compared to the prior year period.
Business Optimization Items
In recent years, we have undertaken actions to transform our cost structure and enhance operational efficiency. These efforts have included restructuring the organization, optimizing our manufacturing footprint, R&D operations, and supply chain network, employing disciplined cost management, and centralizing and streamlining certain support functions. The related costs of these actions consisted primarily of employee termination costs, implementation costs, contract termination costs, and asset impairments.
For the three months ended March 31, 2024, our most significant restructuring actions, reflecting $24 million of the restructuring charges in the current year period, were related to a program to centralize certain of our R&D activities into a new location and to our recent implementation of a new operating model intended to simplify and streamline our operations.
We currently expect to incur additional pre-tax costs, primarily related to the implementation of business optimization programs, of approximately $15 million through the completion of initiatives that are currently underway. We continue to pursue cost savings initiatives and, to the extent further cost savings opportunities are identified, we would incur
additional restructuring charges and costs to implement business optimization programs in future periods. Refer to Note 10 in Item 1 of this Quarterly Report on Form 10-Q for additional information regarding our business optimization programs.
Other Operating Income, Net
Other operating income, net was $3 million and $13 million in the first quarter of 2024 and 2023, respectively. In the first quarter of 2024, this amount was comprised of income from transition services arrangements related to the divestiture of our BPS business. In the first quarter of 2023, this amount was comprised of gains from changes in the estimated fair value of contingent consideration arrangements.
Interest Expense, Net
Interest expense, net was $78 million and $117 million in the first quarter of 2024 and 2023, respectively. The decrease in 2024 was driven by debt repayments in the fourth quarter of 2023, partially offset by higher interest income due to a higher average cash balance and higher interest rates during the current year period.
Other Income, net
Other income, net was $7 million and $2 million in the first quarter of 2024 and 2023, respectively. In both the current and prior year periods, other income, net was primarily driven by pension and other postretirement benefits and increases in the fair value of marketable equity securities, partially offset by foreign exchange losses.
Income Taxes
Our effective income tax rate was 66.4% and 100.0% in the first quarter of 2024 and 2023, respectively. Our effective income tax rate can differ from the 21% U.S. federal statutory rate due to a number of factors, including foreign rate differences, tax incentives, non-deductible expenses, non-taxable income, increases or decreases in valuation allowances, increases or decreases in liabilities for uncertain tax positions, and excess tax benefits or shortfalls on stock compensation awards. Our effective income tax rate during interim periods reflects our estimated annual effective tax rate and discrete items.
For the three months ended March 31, 2024, the difference between our effective income tax rate and the U.S. federal statutory rate was primarily driven by $37 million of income tax expense resulting from internal reorganization transactions related to the proposed separation of our Kidney Care segment, an increase in a valuation allowance in a foreign jurisdiction resulting from changes in future projected income, and an increase in our liabilities for various uncertain tax positions.
For the three months ended March 31, 2023, the difference between our effective income tax rate and the U.S. federal statutory rate was primarily attributable to tax shortfalls on stock compensation awards and an increase in our liabilities for uncertain tax positions.
The Organization of Economic Co-operation and Development (OECD) and the G20 Inclusive Framework on Base Erosion and Profit Shifting (the Inclusive Framework) has put forth two proposals—Pillar One and Pillar Two—that revise the existing profit allocation and nexus rules and ensure a minimal level of taxation, respectively. On December 12, 2022, the EU member states agreed to implement the Inclusive Framework’s global corporate minimum tax rate of 15%, and various countries both within and outside the EU have enacted new laws implementing Pillar Two or have draft legislation proposed for adoption. The OECD continues to release additional guidance on the two-pillar framework, with widespread implementation occurring in 2024. We currently expect that the impact of the Pillar Two legislation on our income tax expense for the year ending December 31, 2024 will be approximately $10 million to $15 million. We are continuing to evaluate the potential impacts of the Inclusive Framework for 2025 and future years, pending legislative adoption by individual countries, which could result in further adverse impacts on our income tax expense and cash flows.
Discontinued Operations
On September 29, 2023, we completed the sale of our BPS business. The results of operations and cash flows of our BPS business are reported as discontinued operations in the condensed consolidated financial statements included in Item 1 of this Quarterly Report on Form 10-Q. Prior period amounts have been adjusted to reflect discontinued operations presentation. Refer to Note 2 within Item 1 for additional information.
SEGMENT OPERATING INCOME
The following is a summary of our operating income for our reportable segments.
| Three months ended March 31, | |||||||||||||||||
| (in millions) | 2024 | 2023 | |||||||||||||||
| Medical Products and Therapies | $ | 227 | $ | 197 | |||||||||||||
| % of Segment Net Sales | 18.5 | % | 17.0 | % | |||||||||||||
| Healthcare Systems and Technologies | 67 | 112 | |||||||||||||||
| % of Segment Net Sales | 10.0 | % | 15.3 | % | |||||||||||||
| Pharmaceuticals | 78 | 87 | |||||||||||||||
| % of Segment Net Sales | 13.5 | % | 16.6 | % | |||||||||||||
| Kidney Care | 159 | 57 | |||||||||||||||
| % of Segment Net Sales | 14.4 | % | 5.3 | % | |||||||||||||
| Other | 4 | 7 | |||||||||||||||
| Total | 535 | 460 | |||||||||||||||
| Unallocated corporate costs | (20) | (21) | |||||||||||||||
| Intangible asset amortization expense | (166) | (162) | |||||||||||||||
| Business optimization items | (57) | (134) | |||||||||||||||
| Acquisition and integration items | (5) | 7 | |||||||||||||||
| Separation-related costs | (92) | (9) | |||||||||||||||
| European Medical Devices Regulation | (8) | (12) | |||||||||||||||
| Total operating income | 187 | 129 | |||||||||||||||
| Interest expense, net | 78 | 117 | |||||||||||||||
| Other income, net | (7) | (2) | |||||||||||||||
| Income from continuing operations before income taxes | $ | 116 | $ | 14 |
Medical Products and Therapies
Segment operating income was $227 million and $197 million in the first quarter of 2024 and 2023, respectively. Segment operating income increased in the first quarter compared to the prior year period due to the increased gross profit from higher sales in the current year period.
Healthcare Systems and Technologies
Segment operating income was $67 million and $112 million in the first quarter of 2024 and 2023, respectively. Segment operating income decreased in the first quarter compared to the prior year period due to lower gross profit from lower sales in the current year period and, to a lesser extent, increased R&D expense, primarily related to our connected care portfolio.
Pharmaceuticals
Segment operating income was $78 million and $87 million in the first quarter of 2024 and 2023, respectively. Segment operating income decreased in the first quarter compared to the prior year period due to a lower gross margin percentage, reflecting increased costs of certain inventory manufactured by our former BPS business, which now incorporates a third-party mark-up following our divestiture of that business in September 2023, and increased SG&A expense, including marketing-related costs in connection with recent product launches.
Kidney Care
Segment operating income was $159 million and $57 million in the first quarter of 2024 and 2023, respectively. Segment operating income increased in the first quarter compared to the prior year period due to a higher gross margin, primarily driven by sales growth, initiatives to reduce our manufacturing and supply chain costs, a favorable product mix and, to a lesser extent, improved margins on dialyzers sold in the current period driven by higher
production volumes and better absorption in advance of our closure of a dialyzer manufacturing facility at the end of 2023.
Other
During the three months ended March 31, 2024 and 2023 we earned $4 million and $7 million, respectively, of operating income that was not attributable to our reportable segments. Operating income generated by activities not attributable to our reportable segments is presented as Other. In the current and prior year periods, other operating income primarily represents income from revenues earned by certain of our manufacturing facilities from contract manufacturing activities. The prior year period also includes royalty income under a business development arrangement. The decreases in the current year as compared to the prior year periods reflect lower contract manufacturing volume and, to a lesser extent, termination of the royalty arrangement following our acquisition of the rights to the underlying product.
Unallocated Corporate Costs
Under our new operating model, most global functional support costs, overhead costs and other shared costs that benefit our segments are allocated to those segments. Corporate costs that are not allocated to our segments, as well as any differences between actual corporate costs and the amounts allocated to our segments, are presented as unallocated corporate costs. Additionally, intangible asset amortization and other special items are not allocated to our segments. Prior to the implementation of our new operating model in the third quarter of 2023, more costs were maintained at corporate and were not allocated to our previous segments. Certain of the costs that were previously maintained at corporate under our prior segment structure that are now allocated to our segments include manufacturing variances and centrally managed supply chain costs, certain R&D costs, product category support costs, stock compensation expense, and certain employee benefit plan costs.
LIQUIDITY AND CAPITAL RESOURCES
The following table is a summary of the statement of cash flows for the three-month periods ended March 31, 2024 and 2023.
| Three months ended March 31, | |||||||||||
| (in millions) | 2024 | 2023 | |||||||||
| Cash flows from operations - continuing operations | $ | 163 | $ | 469 | |||||||
| Cash flows from investing activities - continuing operations | (166) | $ | (163) | ||||||||
| Cash flows from financing activities | (140) | $ | (372) |
Cash Flows from Operations - Continuing Operations
For the three months ended March 31, 2024 and 2023, operating cash flows from continuing operations were $163 million and $469 million, respectively. Operating cash flows from continuing operations in the current year period were unfavorably impacted, as compared to the prior year period, by higher annual payouts under our employee incentive compensation plans, which were determined based on our 2023 performance, payments for costs incurred in connection with the separation of our Kidney Care business, a larger increase in inventory, and higher payments of restructuring costs.
Cash Flows from Investing Activities - Continuing Operations
For the first three months ended March 31, 2024, cash used in investing activities from continuing operations primarily included capital expenditures of $176 million, partially offset by $16 million of proceeds from sales of marketable securities. For the first three months ended March 31, 2023, cash used in investing activities from continuing operations primarily included capital expenditures of $165 million.
Cash Flows from Financing Activities
For the first three months ended March 31, 2024, cash used in financing activities included dividend payments of $147 million and debt repayments of $15 million, partially offset by proceeds from stock issued under employee benefit plans of $40 million. In the first three months of 2023, cash used for financing activities included a net decrease of commercial paper borrowings of $249 million and dividend payments of $146 million, partially offset by proceeds from stock issued under employee benefit plans of $36 million.
As authorized by our Board of Directors, we repurchase our stock depending upon our cash flows, net debt levels and market conditions. In July 2012, our Board of Directors authorized a share repurchase program and the related authorization was subsequently increased a number of times. We did not repurchase any shares under this authority in the first three months of 2024. We had $1.30 billion remaining available under this authorization as of March 31, 2024.
Credit Facilities, Commercial Paper Program and Access to Capital and Credit Ratings
Credit Facilities and Commercial Paper Program
As of March 31, 2024, we had a U.S. Dollar-denominated term loan credit facility, which had two tranches of term loans outstanding, a U.S. Dollar-denominated revolving credit facility and a Euro-denominated revolving credit facility.
As of March 31, 2024, we had $130 million outstanding under one tranche of our U.S. Dollar-denominated term loan credit facility that matures in 2024 and $1.64 billion outstanding under the other tranche of our U.S. Dollar-denominated term loan credit facility that matures in 2026. Borrowings under the term loan credit facility bear interest on the principal amount outstanding at either Term SOFR plus an applicable margin plus a credit spread adjustment or a “base rate” plus an applicable margin. The term loan credit facility contains various covenants, including a maximum net leverage ratio. We have the option to prepay outstanding amounts under the term loan credit facility in whole or in part at any time.
As of March 31, 2024, our U.S. dollar-denominated revolving credit facility and Euro-denominated revolving credit facility had a maximum capacity of $2.50 billion and €200 million, respectively. There were no borrowings outstanding under these credit facilities as of March 31, 2024 or December 31, 2023. Our commercial paper borrowing arrangements require us to maintain undrawn borrowing capacity under our credit facilities for an amount at least equal to our outstanding commercial paper borrowings.
In the first quarter of 2024, we amended the credit agreements governing our U.S. dollar-denominated term loan credit facility and revolving credit facility and the guaranty agreement with respect to our Euro-denominated revolving credit facility, in each case to amend the net leverage ratio covenant to increase the maximum net leverage ratio for the six fiscal quarters ending June 30, 2024, September 30, 2024, December 31, 2024, March 31, 2025, June 30, 2025, and September 30, 2025. The amendment further provides for the reduction of the capacity under our U.S dollar-denominated revolving credit facility from $2.50 billion to $2.00 billion on the earlier of September 30, 2024 or the date of the sale or spinoff of our Kidney Care business. As of March 31, 2024, we were in compliance with the financial covenants in these agreements. Based on our covenant calculations as of March 31, 2024, we had capacity to draw on the full amounts under our credit facilities. The non-performance of any financial institution supporting either of the credit facilities would reduce the maximum capacity of these facilities by the institution’s respective commitment. Additionally, a deterioration in our financial performance may further reduce our ability to draw on our credit facilities.
We have a commercial paper program that currently enables us to borrow efficiently at short-term interest rates. Upon maturity of any commercial paper borrowings under this program, and to the extent old issuances are not repaid by cash on hand, we are exposed to the rollover risk of not being able to issue new commercial paper. Our commercial paper borrowing arrangements require us to maintain undrawn borrowing capacity under our revolving credit facilities for an amount at least equal to our outstanding commercial paper borrowings. If we were not able to issue new commercial paper, we have the option of drawing on the revolving credit facilities; however, electing to do so would result in higher interest expense. We had no commercial paper borrowings outstanding as of March 31, 2024.
Access to Capital and Credit Ratings
We intend to fund short-term and long-term obligations as they mature through cash on hand, including the proceeds from the recently completed sale of our BPS business, future cash flows from operations and potentially by issuing debt, which could include commercial paper, bond issuances, or other financing arrangements. We had $3.03 billion of cash and cash equivalents as of March 31, 2024, with adequate cash available to meet operating requirements in each jurisdiction in which we operate. We invest our excess cash in money market and other funds and diversify the concentration of cash among different financial institutions. As of March 31, 2024, we had approximately $13.73 billion of long-term debt and finance lease obligations, including current maturities, and no short-term debt. We currently expect to use substantially all of the remaining net after-tax cash proceeds from the BPS divestiture to continue to repay indebtedness through the first half of 2024. Subject to market conditions, we regularly evaluate opportunities with respect to our capital structure.
Our ability to generate cash flows from operations and issue debt on acceptable terms could be adversely affected if there is a material decline in the demand for our products or in the solvency of our customers or suppliers, deterioration in our key financial ratios or credit ratings or other significantly unfavorable changes in market conditions. However, we believe we have sufficient financial flexibility to issue debt, enter into other financing arrangements, and attract long-term capital on acceptable terms to support our growth objectives and reduce our post-Hillrom acquisition debt levels as we take actions consistent with our capital allocation priorities. In January 2024, Fitch revised our senior debt credit rating from BBB to BBB-, our senior debt credit rating outlook rating from rating watch negative to stable and our short-term debt credit rating from F2 to F3. There have been no changes to our investment grade credit ratings that we disclosed in our 2023 Annual Report.
CRITICAL ACCOUNTING POLICIES
The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses. A summary of our significant accounting policies is included in Note 1 to our consolidated financial statements in our 2023 Annual Report. Certain of our accounting policies are considered critical, as these policies are the most important to the depiction of our financial statements and require significant, difficult or complex judgments by us, often employing the use of estimates about the effects of matters that are inherently uncertain. Such policies are summarized in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section in our 2023 Annual Report.
The valuation of goodwill and other long-lived assets is one of our critical accounting policies. In connection with our November 1, 2023 annual goodwill impairment tests, we determined that no goodwill impairments had occurred. The fair values of the Front Line Care reporting unit within our Healthcare Systems and Technologies segment and the Chronic Therapies reporting unit within our Kidney Care segment exceeded their carrying values by approximately 5% and 6%, respectively. While no triggering events were identified during the three months ended March 31, 2024, we are continuing to closely monitor the performance of those reporting units, and if there is a significant adverse change in our outlook for those businesses in the future, a goodwill impairment could arise at that time. As of March 31, 2024, the carrying amounts of goodwill for our Front Line Care and Chronic Therapies reporting units were $2.41 billion and $430 million, respectively.
There have been no significant changes in the application of our critical accounting policies during the first three months of 2024.
RECENT ACCOUNTING PRONOUNCEMENTS
In November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires enhanced disclosures about segment expenses on an annual and interim basis. This standard is effective for our annual consolidated financial statements for the year ending December 31, 2024 and for interim periods beginning in 2025. We are currently evaluating the impact of this standard on our condensed consolidated financial statements.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvement to Income Tax Disclosures, which requires (1) disclosure of specific categories in the rate reconciliation and (2) additional information for reconciling items that meet a quantitative threshold. Additionally, the amendment requires disclosure of certain disaggregated information about income taxes paid, income from continuing operations before income tax expense (benefit) and income tax expense (benefit). The standard is effective for our annual consolidated financial statements for the year ending December 31, 2025. We are currently evaluating the impact of this standard on our consolidated financial statements.
LEGAL CONTINGENCIES
Refer to Note 6 within Item 1 for a discussion of our legal contingencies. Upon resolution of any of these uncertainties, we may incur charges in excess of presently established liabilities. While our liability in connection with certain claims cannot be estimated with any certainty, and although the resolution in any reporting period of one or more of these matters could have a significant impact on our results of operations and cash flows for that period, the outcome of these legal proceedings is not expected to have a material adverse effect on our consolidated financial position. While we believe that we have valid defenses in these matters, litigation is inherently uncertain, excessive verdicts do occur, and we may in the future incur material judgments or enter into material settlements of claims.
CERTAIN REGULATORY MATTERS
In July 2017, immediately prior to the closing of our acquisition of Claris Injectables Limited (Claris), the U.S. Food and Drug Administration (FDA) commenced an inspection of the Claris’ facilities in Ahmedabad, India. FDA completed the inspection and subsequently issued a Warning Letter based on observations identified in the 2017 inspection (2017 Warning Letter).¹ FDA re-inspected the facilities and issued a Form FDA 483 on May 17, 2022. On September 1, 2022, FDA notified us that the inspection had been classified as voluntary action indicated. From January 19, 2023 to January 27, 2023, FDA performed an inspection at the Ahmedabad site, concluding with the issuance of a Form FDA 483. On April 26, 2023, FDA notified us that the inspection had been classified as official action indicated. We received a Warning Letter on July 25, 2023 based on observations identified in the January 2023 inspection (2023 Warning Letter)2. Since the issuance of the 2017 Warning Letter, we have implemented corrective and preventive actions to address FDA's related observations, as well as other enhancements at the site. We have fully responded to the 2023 Warning Letter, have implemented additional corrective and preventive actions, and continue to engage with FDA regarding the agency's observations. In addition, since the issuance of the 2017 Warning Letter, we have secured other sites in our manufacturing network and have launched and distribute select products from those sites in the U.S.
1 Available online at https://www.fda.gov/ICECI/EnforcementActions/WarningLetters/ucm613538.htm
2 Available online at https://www.fda.gov/inspections-compliance-enforcement-and-criminal-investigations/warning-letters/baxter-healthcare-corporation-654136-07252023
FORWARD-LOOKING INFORMATION
Certain statements contained in this quarterly report on Form 10-Q may constitute “forward-looking statements,” as defined in the Private Securities Litigation Reform Act of 1995, that involve risks and uncertainties. Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact. These statements by their nature address matters that are uncertain to different degrees. Use of the words “may,” “will,” “would,” “could,” “should,” “believes,” “estimates,” “projects,” “potential,” “expects,” “plans,” “seeks,” “intends,” “evaluates,” “pursues,” “anticipates,” “continues,” “designs,” “impacts,” “affects,” “forecasts,” “target,” “outlook,” “initiative,” “objective,” “designed,” “priorities,” “goal,” or the negative of those words or other similar expressions may identify forward-looking statements, although not all forward-looking statements contain such words. These forward-looking statements may include statements with respect to the proposed separation of our Kidney Care business and other portfolio management activities we may undertake in the future, the costs, structure, and timing associated with strategic initiatives including the proposed separation, the viability and accuracy of anticipated benefits of our strategic actions, accounting estimates and assumptions (including with respect to goodwill and other intangible asset impairments), global economic conditions, litigation-related matters, future regulatory filings (or the withdrawal or resubmission of any pending submissions) and our R&D pipeline (including anticipated product approvals or clearances), sales from new product offerings, credit exposure to foreign governments, the adequacy of cash flows and credit facilities, potential developments with respect to credit ratings, investment of foreign earnings, estimates of liabilities including those related to uncertain tax positions, contingent payments, future pension plan contributions, costs, discount rates and rates of return, our exposure to financial market volatility and foreign currency, interest rate and credit risks, our net interest expense, the impact of inflation on our business, the impact of competition, future sales growth, business development activities, cost saving initiatives, future capital and R&D expenditures, future debt issuances and refinancings, the adequacy of tax provisions and reserves, the effective income tax rate, and all other statements that do not relate to historical facts.
These forward-looking statements are based on certain assumptions and analyses made in light of our experience and perception of historical trends, current conditions, and expected future developments as well as other factors that we believe are appropriate in the circumstances. While these statements represent our judgment on what the future may hold, and we believe these judgments are reasonable, these statements are not guarantees of any events or financial results. Whether actual future results and developments will conform to expectations and predictions is subject to a number of risks and uncertainties, including the following factors, many of which are beyond our control:
| • | our ability to execute and complete strategic initiatives, asset dispositions, and other transactions, including the proposed separation of our Kidney Care business, our plans to simplify our manufacturing footprint and the timing for such transactions, the ability to satisfy any applicable conditions, and the expected proceeds, consideration, and benefits; |
| • | failure to accurately forecast or achieve our short-and long-term financial performance and goals (including with respect to our strategic initiatives and other actions) and related impacts on our liquidity; | |||||||
| • | our ability to execute on our capital allocation plans, including our debt repayment plans, the timing and amount of any dividends, share repurchases and divestiture proceeds, and, if we proceed with the separation of the Kidney Care business in the form of a spinoff, the capital structure of the public company that would be formed (and the resulting capital structure for the remaining company); | |||||||
| • | our ability to successfully integrate acquisitions; | |||||||
| • | the impact of global economic conditions (including, among other things, inflation levels, interest rates, financial market volatility, banking crises, the potential for a recession, the war in Ukraine, the conflict in the Middle East (including recent attacks on merchant ships in the Red Sea), tensions amongst China, Taiwan, and the U.S. and the potential for escalation of these conflicts, the related economic sanctions being imposed globally in response to the conflicts and potential trade wars and global public health crises, pandemics and epidemics, such as the COVID-19 pandemic, or the anticipation of any of the foregoing, on our operations and our employees, customers, suppliers, and foreign governments in countries in which we operate; | |||||||
| • | downgrades to our credit ratings or ratings outlooks, and the related impact on our funding costs and liquidity; | |||||||
| • | product development risks, including satisfactory clinical performance and obtaining and maintaining required regulatory approvals (including as a result of evolving regulatory requirements or the withdrawal or resubmission of any pending applications), the ability to manufacture at appropriate scale, and the general unpredictability associated with the product development cycle; | |||||||
| • | product quality or patient safety issues leading to product recalls, withdrawals, launch delays, warning letters, import bans, sanctions, seizures, litigation, or declining sales, including the focus on evaluating product portfolios for the potential presence or formation of nitrosamines; | |||||||
| • | future actions of, or failures to act or delays in acting by FDA, the European Medicines Agency, or any other regulatory body or government authority (including the SEC, DOJ, or the Attorney General of any state) that could delay, limit, or suspend product development, manufacturing, or sale, or result in seizures, recalls, injunctions, monetary sanctions, or criminal or civil liabilities; | |||||||
| • | demand and market acceptance risks for, and competitive pressures related to, new and existing products, challenges with accurately predicting changing customer preferences and future expenditures and inventory levels and with being able to monetize new and existing products and services, the impact of those products on quality and patient safety concerns, and the need for ongoing training and support for our products; | |||||||
| • | breaches, including by cyber-attack, data leakage, unauthorized access or theft, or failures of or vulnerabilities in, our information technology systems, or products; | |||||||
| • | the continuity, availability, and pricing of acceptable raw materials and component parts, our ability to pass some or all of these costs to our customers through price increases or otherwise, and the related continuity of our manufacturing and distribution and those of our suppliers; | |||||||
| • | inability to create additional production capacity in a timely manner or the occurrence of other manufacturing, sterilization, or supply difficulties, including as a result of natural disaster, war, terrorism, global public health crises and epidemics/pandemics, regulatory actions, or otherwise; | |||||||
| • | our ability to finance and develop new products or enhancements on commercially acceptable terms or at all; | |||||||
| • | loss of key employees, the occurrence of labor disruptions (including as a result of labor disagreements under bargaining agreements or national trade union agreements or disputes with works councils) or the inability to attract, develop, retain, and engage employees; | |||||||
| • | failures with respect to our quality, compliance, or ethics programs; | |||||||
| • | future actions of third parties, including third-party payors and our customers and distributors (including GPOs and IDNs); |
| • | changes to legislation and regulation and other governmental pressures in the United States and globally, including the cost of compliance and potential penalties for purported noncompliance thereof, including new or amended laws, rules, and regulations, as well as the impact of healthcare reform and its implementation, suspension, repeal, replacement, amendment, modification, and other similar actions undertaken by the United States or foreign governments, including with respect to pricing, reimbursement, taxation, and rebate policies; | |||||||
| • | the outcome of pending or future litigation; | |||||||
| • | the impact of competitive products and pricing, including generic competition, drug reimportation, and disruptive technologies; | |||||||
| • | global regulatory, trade, and tax policies, including with respect to climate change and other sustainability matters; | |||||||
| • | the ability to protect or enforce our patents or other proprietary rights (including trademarks, copyrights, trade secrets, and know-how) or where the patents of third parties prevent or restrict our manufacture, sale, or use of affected products or technology; | |||||||
| • | the impact of any goodwill, intangible asset, or other long-lived asset impairments on our operating results; | |||||||
| • | fluctuations in foreign exchange and interest rates; | |||||||
| • | any changes in law concerning the taxation of income (whether with respect to current or future tax reform); | |||||||
| • | actions by tax authorities in connection with ongoing tax audits; | |||||||
| • | other factors identified elsewhere in this report and other filings with the SEC, including those factors described in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2023, all of which are available on our website. |
Actual results may differ materially from those projected in the forward-looking statements, which are more fully discussed in our Annual Report on Form 10-K for the year ended December 31, 2023. These forward-looking statements are not exclusive and are in addition to other factors discussed elsewhere in our Annual Report on Form 10-K for the year ended December 31, 2023. Further, other unknown or unpredictable factors could also have material adverse effects on future results. Any forward-looking statement in this Quarterly Report on Form 10-Q speaks only as of the date on which it is made. Except as required by law, we assume no obligation, and expressly disclaim any obligation, to update or revise any forward-looking statements, whether as a result of new information or future events.
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