Baxter International Inc. (NYSE:BAX)

Inventory Turnover

The inventory turnover ratio exhibited a declining trend from 2.61 in 2011 to 2.19 in 2013, indicating slower inventory movement. However, there was a recovery in 2014 followed by a significant increase to 3.63 in 2015, suggesting improved efficiency in inventory management in the latter year.

Receivables Turnover

This ratio remained relatively stable over the period, fluctuating slightly between 5.24 and 5.95. The slight dip in 2013 was followed by a recovery, indicating consistent effectiveness in collecting receivables.

Payables Turnover

The payables turnover ratio showed some variability, peaking at 8.99 in 2012, then declining notably to 6.74 in 2014 before rebounding to 8.13 in 2015. This suggests fluctuations in the company's rate of paying suppliers, with a tendency to slow payments in 2013 and 2014.

Working Capital Turnover

The working capital turnover ratio declined from 3.66 in 2011 to 3.15 in 2012, then rose gradually to 3.87 in 2014 before sharply dropping to 1.65 in 2015. The abrupt fall in 2015 points to decreased efficiency in using working capital to generate sales in that year.

Average Inventory Processing Period

There was an increase in average inventory processing period from 140 days in 2011 to a peak of 167 days in 2013, indicating slower inventory turnover. This period then decreased to 101 days by 2015, reflecting faster inventory processing and alignment with the rise in inventory turnover ratio.

Average Receivable Collection Period

This metric fluctuated marginally, increasing to 70 days in 2013 and declining again thereafter. The overall range, between 61 and 70 days, suggests relatively steady credit collection terms and performance.

Operating Cycle

The operating cycle lengthened from 204 days in 2011 to 237 days in 2013, indicating slower conversion of inventory and receivables to cash. It then shortened significantly to 164 days by 2015, signaling improved operational efficiency towards the end of the period.

Average Payables Payment Period

The average payables payment period increased from 42 days in 2011 to 54 days in 2014, suggesting that the company took longer to pay its suppliers. This period then contracted to 45 days in 2015, indicating a quicker payment turnaround relative to previous years.

Cash Conversion Cycle

The cash conversion cycle lengthened from 162 days in 2011 to 184 days in 2013, reflecting extended cash tied up in the operating cycle. It then decreased to 119 days in 2015, signaling that the company improved its cash flow conversion efficiency substantially by the end of the analyzed period.

Cost of Sales

The cost of sales showed an increasing trend from 2011 to 2014, rising from $6,847 million to $8,514 million. However, in 2015, there was a significant decline to $5,822 million, which marks a substantial decrease compared to the previous year and the entire period under review.

Inventories

Inventories exhibited a rising pattern between 2011 and 2014, increasing steadily from $2,628 million to $3,559 million. In 2015, inventories experienced a notable reduction to $1,604 million, which is less than half of the inventory level in 2014.

Inventory Turnover Ratio

The inventory turnover ratio generally declined from 2.61 in 2011 to a low of 2.19 in 2013, indicating slower inventory movement during this period. It improved slightly in 2014 to 2.39 but then increased sharply in 2015 to 3.63, signaling a more efficient inventory management or faster sales relative to inventory held in that year.

Summary of Trends and Insights

From 2011 to 2014, both cost of sales and inventories grew, with inventory turnover ratio declining, which may suggest buildup of stock or slower sales relative to inventory. The year 2015 marked a clear shift, with steep reductions in both cost of sales and inventories, alongside a significant increase in inventory turnover ratio. This indicates a substantial change in operations, possibly involving inventory optimization or a change in sales dynamics resulting in improved inventory efficiency and reduced costs.

The financial data over the five-year period displays variations in key operational metrics, revealing shifts in sales volume, receivables management, and liquidity.

Net Sales

Net sales generally exhibited a growth trend from 2011 through 2014, increasing from $13,893 million to $16,671 million. However, this upward trajectory reversed sharply in 2015, with net sales declining significantly to $9,968 million, which is markedly lower than the previous four years.

Accounts and Other Current Receivables, Net

The balance of accounts and other current receivables showed a slight increase from 2011 ($2,420 million) to 2013 ($2,911 million), followed by a moderate decline in 2014 ($2,803 million) and a more pronounced decrease in 2015 ($1,731 million). This pattern suggests a reduction in outstanding receivables, particularly in the last year analyzed.

Receivables Turnover Ratio

The receivables turnover ratio fluctuated moderately across the years, starting at 5.74 in 2011, peaking slightly at 5.95 in 2014, and then decreasing to 5.76 in 2015. The ratios indicate some variability in how efficiently receivables were collected, with the highest efficiency in 2014 and a minor decline afterward.

In summary, while net sales grew steadily until 2014, they dropped considerably in 2015, which may have impacted the overall liquidity and operational efficiency. The decreasing trend in receivables balances during the final year aligns partially with the sales decline, implying tighter credit management or reduced sales on credit. The receivables turnover ratio stabilizes near historical values, indicating that despite fluctuations in sales and receivable balances, the company maintained relatively consistent collection efficiency.

Cost of Sales

The cost of sales exhibited an overall increasing trend from 2011 to 2014, rising from 6,847 million USD to 8,514 million USD. However, in 2015, there was a significant decline to 5,822 million USD, marking a reversal in the previous upward trajectory.

Accounts Payable

The accounts payable balance showed fluctuations throughout the period. After starting at 795 million USD in 2011, it decreased slightly to 766 million USD in 2012, then experienced a sharp increase to 1,103 million USD in 2013 and further growth to 1,264 million USD in 2014. This was followed by a notable reduction to 716 million USD in 2015, aligning with the drop observed in cost of sales during the same year.

Payables Turnover Ratio

The payables turnover ratio remained relatively stable in 2011 and 2012 at approximately 8.6 to 9.0. However, it decreased significantly in 2013 and 2014 to values around 6.95 and 6.74 respectively, suggesting a slower rate of settling payables during these years. This trend was somewhat reversed in 2015 when the ratio increased again to 8.13, indicating an improvement in the efficiency of payables management corresponding with reductions in both cost of sales and accounts payable reported for that year.

Working Capital

The working capital demonstrates an overall upward trend from 2011 to 2015. Starting at 3,793 million US dollars in 2011, it increased to 6,046 million US dollars by 2015. There was a notable dip in 2013 to 4,098 million US dollars following a peak in 2012, but the general trend remains positive with significant growth particularly evident in the last recorded year.

Net Sales

Net sales displayed a steady increase from 2011 through 2014, rising from 13,893 million US dollars to 16,671 million US dollars. However, in 2015, there was a sharp decline to 9,968 million US dollars, interrupting the previous growth trend and indicating a significant drop in revenue for that year.

Working Capital Turnover

The working capital turnover ratio fluctuated over the five-year period. It started at 3.66 in 2011 and decreased to 3.15 in 2012, then recovered slightly to 3.72 in 2013 and further improved to 3.87 in 2014. However, in 2015, the ratio sharply declined to 1.65, reflecting a reduced efficiency in using working capital to generate sales. This decline corresponds with the significant drop in net sales during the same year.

Summary of Key Insights

The data indicates that although working capital increased substantially over the period, the efficiency of using working capital to generate sales, as reflected by the turnover ratio, deteriorated notably in 2015. The sharp decline in net sales in that year likely influenced this decrease in turnover. Prior to 2015, the company showed steady improvement in sales along with relatively stable working capital turnover, suggesting effective management of working capital in relation to sales growth until the disruption in 2015.

The analysis of inventory-related financial metrics over the five-year period from December 31, 2011, to December 31, 2015, reveals notable trends in operational efficiency.

Inventory Turnover

The inventory turnover ratio exhibits a generally declining trend from 2.61 in 2011 to 2.19 in 2013, indicating a reduction in the frequency with which inventory is sold and replaced during those years. This decline suggests a potential slowdown in inventory movement. However, the ratio rebounds to 2.39 in 2014 and then significantly increases to 3.63 by the end of 2015. This sharp increase in 2015 implies an improvement in inventory management and possibly stronger sales performance, leading to more efficient use of inventory.

Average Inventory Processing Period

The average inventory processing period, measured in days, inversely correlates with the inventory turnover ratio. It increases from 140 days in 2011 to a peak of 167 days in 2013, reflecting a lengthening of the time inventory remains on hand before being sold or used. This elongation indicates potentially slower inventory movement or overstocking during that timeframe. The period then decreases to 153 days in 2014 and undergoes a marked reduction to 101 days in 2015. This significant decrease aligns with the rise in inventory turnover, demonstrating improved speed in inventory processing and likely enhanced operational efficiency in 2015 compared to previous years.

Overall, the data suggests a period of declining inventory efficiency between 2011 and 2013, followed by a recovery and clear improvement through 2014 and especially in 2015. The improvement in 2015 indicates better inventory management, likely contributing positively to working capital utilization and potentially reflecting favorable market or internal operational changes during that year.

Receivables Turnover

Over the five-year period, the receivables turnover ratio exhibited fluctuations without a consistent upward or downward trend. Initially, it increased slightly from 5.74 in 2011 to 5.85 in 2012, then declined noticeably to 5.24 in 2013. This was followed by a recovery to 5.95 in 2014 before a slight decrease to 5.76 in 2015. These variations indicate periodic changes in the efficiency with which the company collects its receivables, potentially reflecting shifts in sales terms or collection practices.

Average Receivable Collection Period

The average receivable collection period generally inversely mirrored the turnover ratio trends. It decreased from 64 days in 2011 to 62 days in 2012, suggesting improved collections, then lengthened significantly to 70 days in 2013, indicating slower collections during that year. Subsequently, it improved again to 61 days in 2014, the lowest period in the dataset, before slightly extending to 63 days in 2015. This pattern aligns with the movement in receivables turnover and underscores variability in the company's ability to convert receivables to cash promptly.

Overall Insights

The data points to cyclical shifts in the company's receivables management efficiency rather than a stable trend. The peaks and troughs in both turnover ratio and collection period suggest that external market conditions or internal credit policies might have influenced these metrics. Continuous monitoring and analysis are advisable to identify underlying causes and support strategies aimed at optimizing receivables performance.

Average Inventory Processing Period

The average inventory processing period exhibited an overall increasing trend from 140 days in 2011 to a peak of 167 days in 2013, indicating a lengthening duration for inventory turnover. This was followed by a slight decrease to 153 days in 2014 and a substantial reduction to 101 days in 2015, suggesting an improvement in inventory management efficiency during the last recorded year.

Average Receivable Collection Period

The average receivable collection period remained relatively stable over the analyzed period, fluctuating modestly between 61 and 70 days. The value was 64 days in 2011, declined slightly to 62 days in 2012, increased to 70 days in 2013, then decreased again to 61 days in 2014, and slightly increased to 63 days in 2015. This stability indicates consistent credit and collection practices throughout the period.

Operating Cycle

The operating cycle mirrored the trends observed in inventory and receivables management. It increased from 204 days in 2011 to a high of 237 days in 2013, reflecting the extended inventory processing and slightly longer receivable collection during that year. Subsequently, the operating cycle decreased to 214 days in 2014 and sharply dropped to 164 days in 2015, suggesting an overall enhancement in working capital efficiency, primarily driven by faster inventory turnover.

Payables Turnover

The payables turnover ratio exhibited fluctuations over the five-year period. Starting at 8.61 in 2011, the ratio increased slightly to 8.99 in 2012, indicating a marginal improvement in the company's efficiency in settling payables. However, in 2013 and 2014, the ratio declined to 6.95 and 6.74 respectively, suggesting a slower rate of payment to suppliers during these years. In 2015, the ratio rebounded to 8.13, moving closer to the initial higher turnover levels, which may reflect improved management of payables or changes in supplier payment terms.

Average Payables Payment Period

The average payables payment period, expressed in days, corresponds inversely with the payables turnover ratio. The period decreased slightly from 42 days in 2011 to 41 days in 2012, implying quicker payments to suppliers. Subsequently, the payment period extended significantly, reaching 53 days in 2013 and further to 54 days in 2014, indicating a slower settlement pace. In 2015, the payment period shortened to 45 days, aligning with the observed improvement in the payables turnover ratio. This pattern reflects variability in payment practices, with a notable slowdown mid-period followed by a partial return to shorter payment terms.

Overall Insights

Over the examined period, the data reveals a cyclical pattern in the management of payables. The initial efficiency observed in 2011 and 2012 deteriorated around 2013 and 2014, as evidenced by reduced turnover and longer payment periods. The partial recovery in 2015 suggests adjustments in accounts payable processes or renegotiation of payment terms, improving payment speed. Such fluctuations can impact supplier relationships and cash flow management, necessitating attention to maintain optimal payables performance.

Average Inventory Processing Period

The average inventory processing period demonstrates a fluctuating trend over the five-year span. It increased from 140 days in 2011 to a peak of 167 days in 2013, followed by a decrease to 101 days by the end of 2015. This indicates initial delays in processing inventory that were subsequently addressed, resulting in more efficient inventory management by 2015.

Average Receivable Collection Period

The average receivable collection period remained relatively stable throughout the period. It showed minor fluctuations, starting at 64 days in 2011, dipping slightly to 61 days in 2014, and returning to 63 days in 2015. This stability suggests consistent effectiveness in collecting receivables.

Average Payables Payment Period

The average payables payment period exhibits moderate variability. It began at 42 days in 2011, increased to 54 days by 2014, and decreased again to 45 days by 2015. This pattern reflects some shifts in the company's payment practices, with a tendency to extend payments during the middle years before returning closer to earlier payment timing.

Cash Conversion Cycle

The cash conversion cycle shows an overall decline after reaching its highest point in 2013. Specifically, it rose from 162 days in 2011 to 184 days in 2013, then decreased markedly to 119 days by 2015. This reduction indicates improving operational efficiency and liquidity management, suggesting better synchronization between inventory processing, receivables collection, and payables payment towards the later years.