Baxter International Inc. (NYSE:BAX)

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Segment Profit Margin: Renal

Baxter International Inc.; Renal; segment profit margin calculation

	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013	Dec 31, 2012	Dec 31, 2011
Selected Financial Data (US$ in millions)
EBITDA	566)	666)	670)	—)	—)
Net sales	3,789)	4,172)	3,089)	—)	—)
Segment Profitability Ratio
Segment profit margin¹	14.94%	15.96%	21.69%	—	—

Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).

¹ 2015 Calculation
Segment profit margin = 100 × EBITDA ÷ Net sales
= 100 × 566 ÷ 3,789 = 14.94%

The Renal segment exhibited a period of declining profitability and margin compression between 2013 and 2015. While revenue experienced a significant temporary increase, operational earnings failed to scale proportionally, leading to a steady erosion of the segment's profit margin.

Revenue and EBITDA Divergence: Between 2013 and 2014, net sales grew substantially from US$ 3,089 million to US$ 4,172 million. Despite this increase in top-line revenue, EBITDA remained nearly stagnant, decreasing slightly from US$ 670 million to US$ 666 million. This indicates that the growth in sales was offset by a corresponding increase in operating costs, preventing the conversion of higher revenues into increased earnings.
Profit Margin Contraction: The segment profit margin followed a consistent downward trajectory over the three-year period. The margin decreased from 21.69% in 2013 to 15.96% in 2014, and further declined to 14.94% by December 31, 2015. The most pronounced contraction occurred between 2013 and 2014, where the margin fell by 573 basis points.
Performance Decline in 2015: In 2015, a simultaneous decline in both revenue and earnings was observed. Net sales decreased to US$ 3,789 million and EBITDA dropped to US$ 566 million. This synchronized decline in top and bottom-line figures contributed to the continued compression of the segment profit margin to its lowest point in the period at 14.94%.

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Segment Profit Margin: Hospital Products

Baxter International Inc.; Hospital Products; segment profit margin calculation

	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013	Dec 31, 2012	Dec 31, 2011
Selected Financial Data (US$ in millions)
EBITDA	1,998)	2,237)	2,242)	—)	—)
Net sales	6,179)	6,547)	6,324)	—)	—)
Segment Profitability Ratio
Segment profit margin¹	32.34%	34.17%	35.45%	—	—

Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).

¹ 2015 Calculation
Segment profit margin = 100 × EBITDA ÷ Net sales
= 100 × 1,998 ÷ 6,179 = 32.34%

The financial performance of the Hospital Products segment from 2013 to 2015 is characterized by a gradual erosion of profitability and a decline in operational earnings, despite a temporary increase in sales volume in 2014.

Net Sales Trends: Net sales exhibited volatility over the three-year period, increasing from US$ 6,324 million in 2013 to a peak of US$ 6,547 million in 2014, before contracting to US$ 6,179 million in 2015. This trajectory indicates that the segment failed to maintain its 2014 growth levels, ending the period with lower sales than the 2013 baseline.
EBITDA Trajectory: EBITDA followed a consistent downward trend, declining slightly from US$ 2,242 million in 2013 to US$ 2,237 million in 2014, and then decreasing more significantly to US$ 1,998 million in 2015. The steady drop in EBITDA suggests a reduction in operational cash flow generation within the segment.
Segment Profit Margin Contraction: A continuous decline is observed in the segment profit margin, which fell from 35.45% in 2013 to 34.17% in 2014, and further to 32.34% in 2015. This consistent compression of margins indicates that costs grew at a faster rate than revenues, or that the segment faced pricing pressures that diminished overall profitability.

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Baxter International Inc., ROA by reportable segment

	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013	Dec 31, 2012	Dec 31, 2011
Renal	12.28%	13.51%	12.24%	—	—
Hospital Products	30.13%	32.35%	31.85%	—	—

Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).

The segment return on assets (ROA) for both the Renal and Hospital Products divisions exhibited a similar trajectory between 2013 and 2015, characterized by a moderate increase in 2014 followed by a contraction in 2015.

Renal Segment ROA: Asset efficiency within the Renal segment began at 12.24% in 2013, increased to 13.51% in 2014, and subsequently declined to 12.28% in 2015. The performance in 2015 effectively returned to the levels observed at the start of the period, suggesting a period of relative stability with minor volatility.
Hospital Products Segment ROA: The Hospital Products segment maintained a significantly higher return on assets than the Renal segment. The ROA rose from 31.85% in 2013 to a peak of 32.35% in 2014, before decreasing to 30.13% in 2015. Despite the decline in the final year, the segment continued to demonstrate high capital efficiency.
Comparative Segment Analysis: A substantial disparity in asset productivity is evident, as the Hospital Products segment consistently delivered an ROA more than double that of the Renal segment across all reported years. While the scale of returns differs greatly, both segments experienced a synchronized peak in 2014, indicating a common trend in operational performance or asset utilization during that fiscal year.

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Segment ROA: Renal

Baxter International Inc.; Renal; segment ROA calculation

	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013	Dec 31, 2012	Dec 31, 2011
Selected Financial Data (US$ in millions)
EBITDA	566)	666)	670)	—)	—)
Total assets	4,609)	4,928)	5,475)	—)	—)
Segment Profitability Ratio
Segment ROA¹	12.28%	13.51%	12.24%	—	—

Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).

¹ 2015 Calculation
Segment ROA = 100 × EBITDA ÷ Total assets
= 100 × 566 ÷ 4,609 = 12.28%

The Renal segment demonstrated a period of asset contraction and fluctuating profitability between 2013 and 2015. While asset efficiency improved mid-period, a decline in earnings in 2015 offset the benefits of a reduced asset base.

Segment ROA: The return on assets showed a non-linear trend, starting at 12.24% in 2013 and peaking at 13.51% in 2014 before reverting to 12.28% in 2015. The increase observed in 2014 indicates a temporary improvement in the efficiency of asset utilization, despite a slight decline in absolute earnings.
EBITDA Performance: Earnings remained relatively stable between 2013 and 2014, moving from 670 million USD to 666 million USD. However, a significant contraction occurred in 2015, with EBITDA falling to 566 million USD, representing a decrease of approximately 15% from the previous year.
Total Asset Trend: A consistent downward trend in total assets is observed throughout the three-year period. Total assets decreased from 5,475 million USD in 2013 to 4,928 million USD in 2014, and further declined to 4,609 million USD by the end of 2015. This sustained reduction in the asset base contributed to the ROA expansion seen in 2014, as the decrease in assets outpaced the marginal decline in EBITDA.

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Segment ROA: Hospital Products

Baxter International Inc.; Hospital Products; segment ROA calculation

	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013	Dec 31, 2012	Dec 31, 2011
Selected Financial Data (US$ in millions)
EBITDA	1,998)	2,237)	2,242)	—)	—)
Total assets	6,632)	6,915)	7,039)	—)	—)
Segment Profitability Ratio
Segment ROA¹	30.13%	32.35%	31.85%	—	—

Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).

¹ 2015 Calculation
Segment ROA = 100 × EBITDA ÷ Total assets
= 100 × 1,998 ÷ 6,632 = 30.13%

The Hospital Products segment exhibited a trajectory of contraction in both operational earnings and its asset base between 2013 and 2015, although the return on assets remained at a high level throughout the period.

Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA): A downward trend is observed in EBITDA over the three-year period. After remaining relatively stable between 2013 and 2014, with values of 2,242 million and 2,237 million respectively, there was a significant decline in 2015 to 1,998 million, representing a reduction of approximately 10.6% from the previous year.
Total Asset Base: Total assets showed a consistent year-over-year decrease, falling from 7,039 million in 2013 to 6,915 million in 2014, and further to 6,632 million in 2015. This steady reduction indicates a contraction in the capital utilized by the segment.
Segment Return on Assets (ROA): The Segment ROA experienced a slight increase from 31.85% in 2013 to 32.35% in 2014, suggesting that the reduction in total assets occurred at a faster rate than the marginal decline in EBITDA. However, this trend reversed in 2015, with the ROA dropping to 30.13%. This decline is attributable to the sharper decrease in EBITDA during that year, which outweighed the continued reduction in the asset base.

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Baxter International Inc., asset turnover by reportable segment

	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013	Dec 31, 2012	Dec 31, 2011
Renal	0.82	0.85	0.56	—	—
Hospital Products	0.93	0.95	0.90	—	—

Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).

The analysis of segment asset turnover from 2013 to 2015 indicates a general trend of improvement in asset utilization efficiency across both reportable segments, characterized by a peak in 2014 followed by a marginal decline in 2015.

Renal Segment: A substantial increase in asset turnover is observed in the Renal segment, which rose from 0.56 in 2013 to 0.85 in 2014. This indicates a significant improvement in the segment's capacity to generate revenue relative to its asset base. A slight contraction occurred in 2015, with the ratio retreating to 0.82.
Hospital Products Segment: The Hospital Products segment exhibited a higher and more stable asset turnover ratio than the Renal segment. The ratio grew from 0.90 in 2013 to a peak of 0.95 in 2014, before experiencing a slight decrease to 0.93 in 2015. This performance suggests a consistently efficient utilization of assets to drive sales.
Comparative Performance: The Hospital Products segment consistently outperformed the Renal segment in asset turnover throughout the recorded period. While the Renal segment demonstrated greater volatility and a more pronounced growth trajectory between 2013 and 2014, the Hospital Products segment maintained a more steady operational efficiency profile.

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Segment Asset Turnover: Renal

Baxter International Inc.; Renal; segment asset turnover calculation

	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013	Dec 31, 2012	Dec 31, 2011
Selected Financial Data (US$ in millions)
Net sales	3,789)	4,172)	3,089)	—)	—)
Total assets	4,609)	4,928)	5,475)	—)	—)
Segment Activity Ratio
Segment asset turnover¹	0.82	0.85	0.56	—	—

Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).

¹ 2015 Calculation
Segment asset turnover = Net sales ÷ Total assets
= 3,789 ÷ 4,609 = 0.82

The financial performance of the Renal segment from 2013 to 2015 is characterized by a significant increase in asset utilization efficiency, driven by a combination of revenue growth and a strategic reduction in the asset base. While the segment experienced a decline in sales in the final year, the overall efficiency remained substantially higher than the 2013 baseline.

Net Sales Trends: Net sales experienced a sharp increase between 2013 and 2014, rising from US$ 3,089 million to US$ 4,172 million. This growth was followed by a contraction in 2015, where net sales decreased to US$ 3,789 million.
Total Asset Management: A consistent downward trend in total assets is observed throughout the analyzed period. Assets were reduced from US$ 5,475 million in 2013 to US$ 4,928 million in 2014, and further declined to US$ 4,609 million by December 31, 2015.
Segment Asset Turnover Analysis: The asset turnover ratio rose significantly from 0.56 in 2013 to a peak of 0.85 in 2014, reflecting a period of high efficiency where revenue growth coincided with asset reduction. In 2015, the ratio declined slightly to 0.82, mirroring the decrease in net sales, though the continued reduction in the asset base prevented a more substantial drop in efficiency.

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Segment Asset Turnover: Hospital Products

Baxter International Inc.; Hospital Products; segment asset turnover calculation

	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013	Dec 31, 2012	Dec 31, 2011
Selected Financial Data (US$ in millions)
Net sales	6,179)	6,547)	6,324)	—)	—)
Total assets	6,632)	6,915)	7,039)	—)	—)
Segment Activity Ratio
Segment asset turnover¹	0.93	0.95	0.90	—	—

Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).

¹ 2015 Calculation
Segment asset turnover = Net sales ÷ Total assets
= 6,179 ÷ 6,632 = 0.93

The Hospital Products segment exhibited fluctuating revenue streams alongside a consistent reduction in its asset base between 2013 and 2015. The interplay between these two variables resulted in a peak in asset utilization efficiency during the 2014 fiscal year.

Net Sales Volatility: Net sales increased from 6,324 million USD in 2013 to 6,547 million USD in 2014, representing a growth phase, followed by a decrease to 6,179 million USD in 2015. This indicates a lack of sustained revenue growth over the observed period.
Asset Base Contraction: A continuous downward trend in total assets is observed, moving from 7,039 million USD in 2013 to 6,632 million USD in 2015. This suggests a strategic reduction in the capital employed or a steady depreciation of assets within the segment.
Asset Turnover Analysis: The segment asset turnover ratio rose from 0.90 in 2013 to 0.95 in 2014, indicating an improvement in the ability to generate sales per unit of asset. However, the ratio retreated to 0.93 in 2015, as the contraction in net sales outpaced the reduction in total assets, thereby marginally reducing operational efficiency.

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Baxter International Inc., net sales by reportable segment

US$ in millions

	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013	Dec 31, 2012	Dec 31, 2011
Renal	3,789)	4,172)	3,089)	—)	—)
Hospital Products	6,179)	6,547)	6,324)	—)	—)
Total	9,968)	10,719)	9,413)	—)	—)

Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).

Between 2013 and 2015, total net sales exhibited a fluctuating trend, characterized by a significant increase in 2014 followed by a contraction in 2015. Total revenue rose from US$ 9,413 million in 2013 to a peak of US$ 10,719 million in 2014, before declining to US$ 9,968 million by the end of 2015.

Renal Segment Performance: The Renal segment demonstrated the highest volatility among the reportable segments. Net sales grew sharply by approximately 35% between 2013 and 2014, rising from US$ 3,089 million to US$ 4,172 million. However, this growth was not sustained, as sales decreased to US$ 3,789 million in 2015, representing a decline of approximately 9% from the previous year's peak.
Hospital Products Segment Performance: The Hospital Products segment served as the primary revenue driver, maintaining a higher volume of sales than the Renal segment throughout the period. Sales increased modestly from US$ 6,324 million in 2013 to US$ 6,547 million in 2014. A downward trend occurred in 2015, with net sales falling to US$ 6,179 million, marking a decrease of roughly 5.6% compared to 2014 levels.
Aggregate Segment Contribution: The overall growth observed in 2014 was predominantly driven by the Renal segment, which contributed the vast majority of the US$ 1,306 million increase in total net sales. Conversely, the decline in total sales in 2015 was a result of simultaneous contractions in both the Renal and Hospital Products segments, leading to a total reduction of US$ 751 million in annual net sales.

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Baxter International Inc., ebitda by reportable segment

US$ in millions

	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013	Dec 31, 2012	Dec 31, 2011
Renal	566)	666)	670)	—)	—)
Hospital Products	1,998)	2,237)	2,242)	—)	—)
Total	2,564)	2,903)	2,912)	—)	—)

Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).

The total EBITDA for the reportable segments exhibited a downward trajectory between 2013 and 2015. While the decline was marginal between 2013 and 2014, a more pronounced contraction occurred in 2015, resulting in a total reduction of 348 million US dollars over the three-year period.

Total EBITDA Performance: Consolidated EBITDA remained relatively stable from 2013 to 2014, decreasing slightly from 2,912 million US dollars to 2,903 million US dollars. However, a significant decline was recorded in 2015, with the value falling to 2,564 million US dollars, representing an approximately 11.6% decrease from the previous year.
Renal Segment Trends: The Renal segment followed a similar pattern of stability followed by a sharp decline. After a minimal decrease from 670 million US dollars in 2013 to 666 million US dollars in 2014, EBITDA for this segment dropped to 566 million US dollars in 2015, a reduction of approximately 15% year-over-year.
Hospital Products Segment Trends: The Hospital Products segment served as the primary driver of total EBITDA throughout the period. Performance remained nearly flat between 2013 and 2014, moving from 2,242 million US dollars to 2,237 million US dollars. In 2015, the segment experienced a notable decrease to 1,998 million US dollars, reflecting a decline of approximately 10.7%.

The data indicates that the contraction in 2015 was systemic across both reportable segments, although the Renal segment experienced a more severe percentage decline relative to its size than the Hospital Products segment.

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Baxter International Inc., total assets by reportable segment

US$ in millions

	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013	Dec 31, 2012	Dec 31, 2011
Renal	4,609)	4,928)	5,475)	—)	—)
Hospital Products	6,632)	6,915)	7,039)	—)	—)
Total	11,241)	11,843)	12,514)	—)	—)

Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).

A consistent downward trend in total reportable segment assets was observed between 2013 and 2015. The total asset base decreased from 12,514 million US dollars in 2013 to 11,241 million US dollars by the end of 2015, representing a cumulative reduction of approximately 10.2% over the period.

Renal Segment Asset Trend: The Renal segment experienced a significant contraction, with assets falling from 5,475 million US dollars in 2013 to 4,609 million US dollars in 2015. This represents a total decrease of approximately 15.8%, with the most pronounced decline occurring between 2013 and 2014.
Hospital Products Segment Asset Trend: The Hospital Products segment also showed a decline in assets, though the trajectory was more gradual than that of the Renal segment. Assets moved from 7,039 million US dollars in 2013 to 6,632 million US dollars in 2015, reflecting a total reduction of approximately 5.8%.
Comparative Segment Impact: While the Hospital Products segment maintained a higher absolute asset value throughout the period, the Renal segment contributed disproportionately to the overall reduction in total assets. The rate of asset attrition in the Renal segment was nearly three times higher than that of the Hospital Products segment over the three-year interval.

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