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Analyzing Baxter International’s Stock Repurchases and Cash Flows

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Stock repurchases

Baxter International (BAX) has been regularly carrying out stock repurchases, a positive sign for investors. The company adopted a $2 billion stock repurchase program in 2012 and subsequently increased it by $1.5 billion each in November 2016 and February 2018. In the first quarter of 2018, it repurchased 7.7 million shares for $522 million. At the end of the quarter, Baxter had $2.1 billion remaining in its current repurchase program.

Cash flows

Baxter International generated $447 million from operating activities in the first quarter of 2018 compared to $206 million in Q1 2017. The increase was attributable to higher net income in Q1 2018 compared to Q1 2017. The outflow from accounts payable and accrued liabilities changed from $262 million in Q1 2017 to $103 in Q1 2018 due to the timing of supplier payments. Baxter’s days payable outstanding increased from 48.6 days in Q1 2017 to 57.8 days in Q1 2018. During that period, its days of sales outstanding increased from 52.4 days in Q1 2017 to 54.4 days in Q1 2018.

The company used $374 million in investing activities in Q2 2018 compared to $117 million in Q2 2017. It incurred capex of $155 million in Q1 2018 compared to $123 million in Q1 2017. The increase was due to targeted investments in projects to support the production of peritoneal dialysis and intravenous solutions. The company spent $218 million in Q1 2018 on acquisitions and investments, primarily for two products from Mallinckrodt for $148 million and two products from Celerity for $72 million.

Baxter used $545 million in financing activities in Q1 2018 compared to $37 million in Q1 2017. Its cash dividend payments were $87 million in Q1 2018 and $70 million in Q1 2017. Its proceeds from stock issued under employee benefit plans decreased from $111 million in Q1 2017 to $82 million in Q1 2018, mainly due to decreased option exercises in Q1 2018.

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