Baxter International May Amend Results After Finding Accounting Errors

Baxter International Inc. disclosed errors in its financial statements related to foreign-currency transactions, which may force the company to restate results.
Baxter said Thursday that it has hired outside attorneys and consultants to help it with an investigation into the transactions, all of which occurred between different parts of the company.
Shares of Baxter fell more than 8% in Thursday morning trading.
When its investigation is complete, Baxter expects to either amend previous financial statements that it filed with the Securities and Exchange Commission to correct the errors, or to include in future reports restated results that permit comparisons.
Baxter, of Deerfield, Ill, sells everything from dialysis products to generic pharmaceutical drugs, and has customers in more than 100 countries, according to its latest annual report. The company said the transactions it is looking at were executed to generate gains or losses related to foreign currencies.
Between 2014 and last year, the company recorded a combined $272 million of gains related to foreign exchange, Baxter said.
In 2018, for example, the company recorded foreign-exchange gains of $73 million. That income related to various intracompany receivables, payables and other monetary assets, Baxter said in its latest annual report.
It also recorded a $22 million gain connected to foreign currencies during the first half of this year, according to a statement the company issued Thursday.
Baxter said it voluntarily told the SEC about its investigation and plans to provide information to the agency as it progresses. A spokesman for the SEC declined to comment.
As part of any corrections made to its prior results, Baxter also expects to correct certain operational items it has previously reported, Chief Executive José Almeida told analysts on a conference call.
He said those changes aren’t material to operational results that Baxter has reported.
Those potential corrections relate to the exchange-rate method the company used to translate results into U.S. dollars and the impact of faulty accounting for equipment it leases to customers, Mr. Almeida said.
“We’re taking steps to strengthen and enhance our internal controls,” he said.
The company released a limited set of financial results Thursday for the third quarter.
Global sales for the quarter rose 3% from last year to $2.85 billion, slightly lower than the average analyst estimate on FactSet.
The company also reported operating income of $503 million for the quarter. After adjustments, operating income totaled $555 million.

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