bax-8k_20171231.htm

 

 

 

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 11-K

 

 

ANNUAL REPORT PURSUANT TO SECTION 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the year ended December 31, 2017

OR

 

TRANSITION REPORT PURSUANT TO SECTION 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission file number 1-4448

 

A.

Full title of the plan and the address of the plan, if different from that of the issuer named below:

Baxter Healthcare of Puerto Rico Savings and Investment Plan

B.

Name of issuer of the securities held pursuant to the plan and the address of its principal executive office:

Baxter International Inc.

One Baxter Parkway

Deerfield, IL 60015

(224) 948-2000

 

 

 

 

 

 


Baxter Healthcare of Puerto Rico

Savings and Investment Plan

Index

December 31, 2017 and 2016

 

 

 

Page(s)

 

 

 

Report of Independent Registered Public Accounting Firm

 

1

 

 

 

Financial Statements

 

 

 

 

 

Statements of Net Assets Available for Benefits as of December 31, 2017 and 2016

 

2

 

 

 

Statements of Changes in Net Assets Available for Benefits for the years ended December 31, 2017 and 2016

 

3

 

 

 

Notes to Financial Statements

 

4-13

 

 

 

Schedule H, Line 4i:  Schedule of Assets (Held at End of Year) as of December 31, 2017

 

14-36

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1

 


Baxter Healthcare of Puerto Rico

Savings and Investment Plan

Index

December 31, 2017 and 2016

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

 

 

To the Participants and Administrative Committee of

the Baxter Healthcare of Puerto Rico Savings and Investment Plan

Deerfield, Illinois

 

Opinion on the Financial Statements

 

We have audited the accompanying statements of net assets available for benefits of the Baxter Healthcare of Puerto Rico Savings and Investment Plan (the Plan) as of December 31, 2017 and 2016, and the related statements of changes in net assets available for benefits for the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the net assets available for benefits of the Plan as of December 31, 2017 and 2016, and the changes in net assets available for benefits for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

 

Basis for Opinion

 

These financial statements are the responsibility of the Plan's management. Our responsibility is to express an opinion on the Plan's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Plan in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Plan is not required to have nor were we engagement to perform, an audit of its internal control over financial reporting in accordance with the standards of the PCAOB. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of  the Plan’s internal control over financial reporting. Accordingly, we expressed no such opinion in accordance with the standards of the PCAOB.

 

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial  statements. We believe that our audits provide a reasonable basis for our opinion.

 

Supplemental Information

 

The supplemental Schedule H, Line 4i – Schedule of Assets (Held at End of Year) as of December 31, 2017 has been subjected to audit procedures performed in conjunction with the audit of the Baxter Healthcare of Puerto Rico Savings and Investment Plan’s financial statements. The supplemental schedule is the responsibility of the Plan’s management. Our audit procedures included  etermining whether the information presented in the supplemental schedule reconciles to the financial statements or the underlying accounting and other records, as applicable, and performing procedures to test the completeness and accuracy of the information presented in the supplemental schedule. In forming our opinion on the supplemental schedule, we evaluated whether the supplemental schedule, including its form and content, is presented in conformity with the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. In our opinion, the supplemental schedule is fairly stated in all material respects in relation to the financial statements as a whole.

 

 

/s/ Crowe Horwath LLP

 

We have served as the Plan's auditor since 2010.

 

Oak Brook, Illinois

June 29, 2018

 

 

 

 

1

 


Baxter Healthcare of Puerto Rico

Savings and Investment Plan

Statements of Net Assets Available for Benefits

December 31, 2017 and 2016 (in thousands)

 

 

 

2017

 

 

2016

 

Assets

 

 

 

 

 

 

 

 

Investments

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

3,003

 

 

$

617

 

Common stock (including securities on loan of $3 in 2017 and zero

   in 2016)

 

 

14,391

 

 

 

11,753

 

U.S. government and government agency issues (including securities on

   loan of $69 in 2017 and $88 in 2016)

 

 

466

 

 

 

376

 

Corporate and other obligations (including securities on loan of $27

   in 2017 and $11 in 2016)

 

 

289

 

 

 

320

 

Common-collective trusts

 

 

29,913

 

 

 

23,740

 

Collateral held on loaned securities

 

 

101

 

 

 

100

 

        Total investments at fair value

 

 

48,163

 

 

 

36,906

 

Synthetic guaranteed investment contracts at contract value

 

 

21,357

 

 

 

22,133

 

        Total investments

 

 

69,520

 

 

 

59,039

 

Receivables

 

 

 

 

 

 

 

 

Sponsor contribution

 

 

1,120

 

 

 

1,051

 

        Note receivables from participants

 

 

4,098

 

 

 

4,404

 

Accrued interest and dividends

 

 

35

 

 

 

83

 

        Due from brokers for securities sold

 

 

78

 

 

 

140

 

       Total receivables

 

 

5,331

 

 

 

5,678

 

       Total assets

 

 

74,851

 

 

 

64,717

 

Liabilities

 

 

 

 

 

 

 

 

Accounts payable

 

 

766

 

 

 

542

 

Due to brokers for securities purchased

 

 

127

 

 

 

242

 

Collateral to be paid on loaned securities

 

 

101

 

 

 

100

 

Total liabilities

 

 

994

 

 

 

884

 

Net assets available for benefits

 

$

73,857

 

 

$

63,833

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these financial statements.

 

2

 


Baxter Healthcare of Puerto Rico

Savings and Investment Plan

Statements of Changes in Net Assets Available for Benefits

For the Years Ended December 31, 2017 and 2016 (in thousands)

 

 

 

 

2017

 

 

2016

 

Additions to net assets attributed to

 

 

 

 

 

 

 

 

Investment income

 

 

 

 

 

 

 

 

Net appreciation in fair value of investments

 

$

8,822

 

 

$

3,644

 

Interest

 

 

614

 

 

 

627

 

Dividends

 

 

150

 

 

 

115

 

 

 

 

9,586

 

 

 

4,386

 

Participant loan interest

 

 

187

 

 

 

173

 

Contributions

 

 

 

 

 

 

 

 

Sponsor

 

 

2,538

 

 

 

2,800

 

Participant

 

 

3,977

 

 

 

4,077

 

Total contributions

 

 

6,515

 

 

 

6,877

 

Total additions

 

 

16,288

 

 

 

11,436

 

Deductions from net assets attributed to

 

 

 

 

 

 

 

 

Benefits paid

 

 

5,737

 

 

 

7,035

 

Plan expenses

 

 

527

 

 

 

472

 

Total deductions

 

 

6,264

 

 

 

7,507

 

Net increase

 

 

10,024

 

 

 

3,929

 

Net assets available for benefits

 

 

 

 

 

 

 

 

Beginning of year

 

 

63,833

 

 

 

59,904

 

End of year

 

$

73,857

 

 

$

63,833

 

 

The accompanying notes are an integral part of these financial statements.

 

3

 


Baxter Healthcare of Puerto Rico

Savings and Investment Plan

Notes to Financial Statements

December 31, 2017 and 2016

1.

General Description of the Plan

The following description of the Baxter Healthcare of Puerto Rico Savings and Investment Plan (the Plan) is provided for general information purposes only.  Participants should refer to the Plan document and summary plan description for more complete information.  The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA).

The Plan is a defined contribution plan which became effective on January 1, 1998.  The Plan was created for the purpose of providing retirement benefits to Puerto Rico employees of Baxter Healthcare S.A. (the Sponsor or the Company), a subsidiary of Baxter International Inc. (Baxter) and to encourage and assist employees in adopting a regular savings program by means of payroll deductions through a plan that qualifies under the applicable laws of both the Puerto Rico and the United States Internal Revenue Codes.  Plan participants may authorize the Company to make payroll deductions under the Plan ranging from 1% to 50% of their pre-tax monthly compensation, limited to a maximum of $15,000 a year in both 2017 and 2016. Participants who have attained the age of 50 by the end of the year may contribute up to an additional $1,500 per year in “catch-up” contributions.  Newly hired employees are deemed to have elected to contribute 3% of compensation unless they make a contrary election.  The Company matches a participant’s savings contributions at the rate of 50 cents for each dollar of a participant’s pre-tax contribution, up to a maximum of 6% of a participant’s compensation, so that the maximum matching contribution for participants who contribute at least 6% of their compensation is 3% of compensation.  The Company also contributes an additional non-matching 3% of compensation for employees that are not eligible to participate in the Company’s Puerto Rico defined benefit pension plan, which includes all new employees hired on or after January 1, 2008.  Participants are immediately vested in their elective contributions plus actual earnings thereon.  Vesting in the Company’s matching and non-matching contributions plus actual earnings thereon is based on years of service.  The matching contributions vest in accordance with the following vesting schedule:

 

Years of Service

 

Vesting %

 

1

 

 

20

%

2

 

 

40

%

3

 

 

60

%

4

 

 

80

%

5 or more

 

 

100

%

 

 

The additional non-matching contributions become fully vested after three years of service.  Employees are fully vested in the Company’s matching contributions and non-matching account, regardless of years of service with the Company, upon attaining age 65, upon becoming disabled in accordance with the provisions of the Plan or upon dying while employed by the Company.  Forfeitures of nonvested accounts are used to reduce future Company contributions.

Participants may borrow from their vested accounts a minimum of $500 up to a maximum equal to the lesser of $50,000 or 50% of their vested account balance.  The loans are secured by the balance in the participant’s account and bear interest at the prime rate at the last day of the month prior to loan request, plus one percent.  

Participants or their beneficiaries may elect lump-sum benefit payments, or benefits may be paid in installments.  Shares of Baxter common stock may also be distributed in kind at the participant’s election.  Subject to certain provisions specified in the Plan agreement, employed participants may withdraw their pre-tax contributions (but not the earnings on the contributions) in cases of financial hardship.  In the case of a participant termination by reason of death or disability, the entire vested amount is paid to the person or persons legally entitled thereto.

Each participant’s account is credited with the participant’s contributions and an allocation of the Company’s contributions and Plan earnings, and is charged with his or her withdrawals and an allocation of Plan-related expenses.  Allocations are based on participant earnings or account balances, as defined in the Plan document.  

 

 

4

 


Baxter Healthcare of Puerto Rico

Savings and Investment Plan

Notes to Financial Statements

December 31, 2017 and 2016

 

The net income of the Plan is posted to the participant’s accounts on a daily basis.  Each participant directs the investment of his or her account to any of the investment options available under the Plan.

Upon enrollment in the Plan, a participant may direct contributions into any of 17 investment options: Stable Income Fund, Baxter Common Stock Fund, State Street S&P 500 Index Non-Lending Series Fund, State Street International Index Non-Lending Series Fund, State Street Russell Small Cap Index Non-Lending Series Fund, Northern Trust Domestic Mid Cap Fund, State Street Global Advisors Emerging Markets Fund (SSgA Emerging Markets Fund) and ten different Target Date Retirement Funds.  However, non-matching contributions may not be invested in the Baxter Common Stock Fund. In addition, certain participants maintain shares in Edwards Lifesciences Corporation.  These shares were placed into the Edwards Lifesciences Common Stock Fund in connection with Baxter’s 2000 spin-off of its cardiovascular business. Certain participants obtained shares in Baxalta Incorporated (Baxalta), in connection with Baxter’s 2015 spin-off of its biopharmaceutical business. These shares were placed in the Baxalta Common Stock Fund, which were subsequently converted into American Depository Shares of Shire plc (Shire) upon Shire’s acquisition of Baxalta in 2016. These shares are maintained in the Shire Common Stock Fund. Participants are not able to make contributions or transfer existing account balances to the Edwards Lifesciences Common Stock Fund or the Shire Common Stock Fund (f/k/a the Baxalta Common Stock Fund), but may make transfers out of these funds at any time.  As of December 31, 2017, investments in shares of Edwards Lifesciences and Shire were liquidated and balances in these funds consisted of cash balances only.  Refer to Note 10 for more information. Starting in 2013, participants are no longer able to make contributions to the Composite Fund and General Equity Fund, but may make transfers out of these funds at any time.

On June 3, 2016, a wholly-owned subsidiary of Shire plc (Shire) merged with and into Baxalta, with Baxalta as the surviving company (the Merger). In connection with the closing of the Merger, each Baxalta stockholder received a combination of cash and Shire American Depository Shares. Participants invested in the Baxalta Common Stock Fund at the closing of the Merger were able to direct the investment of the cash portion of the related merger consideration into certain investment alternatives within the Plan.  In the event that a participant did not make an investment election, the cash portion was invested in the Plan’s qualified default investment alternative.

Additionally, in connection with the Merger, the Baxalta Common Stock Fund became the Shire Stock Fund, holding Shire American Depository Shares and cash (for liquidity purposes).

2.

Summary of Significant Accounting Policies

Basis of Accounting

The accompanying financial statements of the Plan have been prepared on the accrual basis of accounting.  Accordingly, investment income is recognized when earned and expenses are recognized when incurred.

Valuation of Investments and Collateral

The fair value of Plan investments and collateral is determined as follows:

 

5

 


Baxter Healthcare of Puerto Rico

Savings and Investment Plan

Notes to Financial Statements

December 31, 2017 and 2016

 

 

 

 

 

Cash and cash equivalents

 

These largely consist of a short-term investment fund and a money market fund, the fair value of which is based on the net asset value. The investment objectives for these funds are to provide safety for principal, daily liquidity and a competitive yield by investing in high quality instruments.

 

 

 

 

 

 

Common stock

 

Value based on closing prices on the valuation date in an active market on national securities exchanges.

 

 

 

 

 

 

U.S. government and government agency issues

 

Value based on reputable pricing vendors that typically use pricing matrices or models.

 

 

 

 

 

 

Corporate and other obligations

 

Value based on reputable pricing vendors that typically use pricing matrices or models.

 

 

 

 

 

 

Common-collective trust

 

Value based on net asset values reported by the fund managers as of the Plan’s financial statement dates and recent transaction prices.  Each fund provides for daily redemptions by the Plan at reported net asset values per share, with no advance notice requirement.

 

 

 

 

 

 

Collateral held on loaned securities

 

Value based upon the net asset value per unit of the short-term investment funds where the collateral is invested.  Refer to Note 6 for more information on the securities lending program.

 

 

 

 

 

Collateral to be paid on loaned securities

 

Value based on the fair value of the underlying securities loaned on the valuation date, plus an incremental margin

6

 


Baxter Healthcare of Puerto Rico

Savings and Investment Plan

Notes to Financial Statements

December 31, 2017 and 2016

Income Recognition

Plan investment return includes dividend and interest income, gains and losses on sales of investments and unrealized depreciation or appreciation of investments.  Purchases and sales of investments are recorded on a trade date basis.  Dividends are recorded on the ex-dividend date. Interest is earned on an accrual basis.

The financial statements reflect the net depreciation or appreciation in the fair value of the Plan’s investments.  This net depreciation or appreciation consists of realized gains and losses calculated as the difference between proceeds from a sales transaction and cost determined on a moving average basis, and unrealized gains and losses calculated as the change in the fair value between beginning of the year (or purchase date if later) and the end of the year.

Fully Benefit-responsive Investment Contracts

The Plan holds synthetic guaranteed investment contracts (GICs) as part of the Stable Income Fund.  The synthetic GICs provide for a fixed return on principal over a specified time through fully benefit-responsive contracts issued by Transamerica, Prudential and MetLife. The portfolio of assets underlying the synthetic GICs primarily includes cash and cash equivalents, U.S. government and government agency issues, and corporate and other obligations.  

These Plan investments are presented at contract value on the Statements of Net Assets Available for Benefits. Contract value represents contributions, plus earnings, less participant withdrawals and administrative expenses.  The wrapper contracts used by the Plan are fully benefit-responsive because the wrapper contract issuers are contractually obligated to make up any shortfall in the event that the underlying asset portfolio has been liquidated and is inadequate to cover participant withdrawals and transfers at contract value.  There are currently no reserves against contract values for credit risk of the contract issuers or any other risk.  

Events that lead to market value withdrawals that exceed 15 percent of the contract value of the GIC’s of Prudential and Transamerica or 10 percent of the contract value of the GIC of MetLife would limit the ability of the Plan to transact at contract value with participants.  These events include restructurings, early retirement plans, divestitures, bankruptcies, or legal, tax or regulatory changes.  The Plan sponsor believes that the occurrence of any such event is remote.

The wrapper providers can only terminate at a value different than contract value under an event of default (that was not remedied) such as failure to follow the terms of the contract.  If a wrapper provider would like to exit the contract for another reason, the Plan can maintain the contract through an extended termination process designed to ensure continued benefit-responsive treatment for withdrawals.

Notes Receivables from Participants

Participant loans are reported at their unpaid principal balance plus any accrued but unpaid interest, with no allowance for credit losses, as repayments of principal and interest are received through payroll deductions and the notes are collateralized by the participant’s account balances. 

Payment of Benefits and Fees

Benefits are recorded when paid.  Loan origination fees associated with notes receivable from participants, the Plan’s record keeping and trustee fees, and certain legal and communication expenses are paid by the Plan and are reflected in the financial statements as Plan expenses.  Investment management fees are charged to the Plan as a reduction of investment return and included in the investment income (loss) reported by the Plan.  All other expenses of the Plan are paid by Baxter or one of its subsidiaries.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and related notes to the financial statements.  Changes in such estimates may affect amounts reported in future periods.

7

 


Baxter Healthcare of Puerto Rico

Savings and Investment Plan

Notes to Financial Statements

December 31, 2017 and 2016

 

Other

Due from brokers for securities sold represent the net cash value of security trades initiated but not yet settled at each respective year-end.

Risks and Uncertainties

The Plan provides for various investment options which invest in any combination of registered investment companies, U.S. government and government agency issues, corporate and other obligations, common stock, common-collective trusts, synthetic guaranteed investment contracts and short-term investments.  Investment securities are exposed to various risks, such as interest rate, market, liquidity and credit risks.  Due to the level of risk associated with certain investment securities and the level of uncertainty related to changes in the value of investment securities, it is at least reasonably possible that changes in risks in the near term could materially affect participants’ account balances and the amounts reported in the Statements of Net Assets Available for Benefits and the Statements of Changes in Net Assets Available for Benefits.  Individual participants’ accounts bear the risk of loss resulting from fluctuations in investment values.  

Investments in U.S. government and government agency issues and corporate and other obligations underlying the Plan’s synthetic GICs include securities with contractual cash flows, such as asset-backed securities, collateralized mortgage obligations and commercial mortgage-backed securities, including securities backed by subprime mortgage loans (corporate and other obligations).  The value, liquidity and related income of these securities are sensitive to changes in economic conditions, including real estate values, delinquencies and/or defaults, and may be adversely affected by shifts in the market’s perception of the issuers and changes in interest rates.

3.

Eligibility Requirements

Employees become eligible to participate in the Plan as of the first day of the month following the completion of thirty days of employment.  Eligible employees are those who meet the following requirements:

 

A.

Puerto Rico employees of the Company’s Puerto Rico Branch, or the Company, a Baxter subsidiary;

 

B.

Puerto Rico employees not covered by a collective bargaining agreement unless the agreement provides for coverage under the Plan; and

 

C.

Puerto Rico employees who are not leased employees.

4.

Administration of the Plan

Banco Popular de Puerto Rico (the Trustee) and State Street Bank and Trust Company (the Custodian) serve as trustee and custodian, respectively, for the Plan.  Voya Financial serves as recordkeeper for the Plan.

The Administrative Committee administers the Plan.  Members of the Administrative Committee are appointed by the Compensation Committee of the Board of Directors of Baxter and are employees of Baxter.  The Investment Committee has authority, responsibility and control over the management of the assets of the Plan.  Members of the Investment Committee are appointed by the Board of Directors of Baxter and are employees of Baxter.

Substantially all investment manager, trustee and administrative fees incurred in the administration of the Plan were paid from the assets of the Plan.


8

 


Baxter Healthcare of Puerto Rico

Savings and Investment Plan

Notes to Financial Statements

December 31, 2017 and 2016

 

5.

Fair Value of Measurements

The fair value hierarchy under the accounting standard for fair value measurements consists of the following three levels:

 

Level 1 - Quoted prices in active markets that the Plan has the ability to access for identical assets or liabilities;

 

Level 2 - Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuations in which all significant inputs are observable in the market; and

 

Level 3 - Valuations using significant inputs that are unobservable in the market and include the use of judgment by the Plan’s management about the assumptions market participants would use in pricing the asset or liability.

9

 


Baxter Healthcare of Puerto Rico

Savings and Investment Plan

Notes to Financial Statements

December 31, 2017 and 2016

The following tables summarize the bases used to measure the Plan’s financial instruments and liabilities that are carried at fair value on a recurring basis.

 

 

 

 

 

 

 

Basis of Fair Value Measurement

 

(in thousands)

 

Balance at

December 31, 2017

 

 

Quoted Prices

in Active

Markets for

Identical

Assets

(Level 1)

 

 

Significant

Other

Observable

Inputs

(Level 2)

 

 

Significant

Unobservable

Inputs

(Level 3)

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

3,003

 

 

$

 

 

$

3,003

 

 

$

 

Common stock

 

 

14,391

 

 

 

14,391

 

 

 

 

 

 

 

U.S. government and government agency issues

 

 

466

 

 

 

 

 

 

466

 

 

 

 

Corporate and other obligations

 

 

289

 

 

 

 

 

 

289

 

 

 

 

Common-collective trusts (A)

 

 

29,913

 

 

 

 

 

 

 

 

 

 

Collateral held on loaned securities

 

 

101

 

 

 

 

 

 

101

 

 

 

 

Total assets

 

$

48,163

 

 

$

14,391

 

 

$

3,859

 

 

 

 

Liability

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Collateral to be paid on loaned securities

 

$

101

 

 

$

 

 

$

101

 

 

$

 

 

 

 

 

 

 

 

 

Basis of Fair Value Measurement

 

(in thousands)

 

Balance at

December 31, 2016

 

 

Quoted Prices

in Active

Markets for

Identical

Assets

(Level 1)

 

 

Significant

Other

Observable

Inputs

(Level 2)

 

 

Significant

Unobservable

Inputs

(Level 3)

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

617

 

 

$

 

 

$

617

 

 

$

 

Common stock

 

 

11,753

 

 

 

11,753

 

 

 

 

 

 

 

U.S. government and government agency issues

 

 

376

 

 

 

 

 

 

376

 

 

 

 

Corporate and other obligations

 

 

320

 

 

 

 

 

 

320

 

 

 

 

Common-collective trusts (A)

 

 

23,740

 

 

 

 

 

 

 

 

 

 

Collateral held on loaned securities

 

 

100

 

 

 

 

 

 

100

 

 

 

 

Total assets

 

$

36,906

 

 

$

11,753

 

 

$

1,413

 

 

$

 

Liability

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Collateral to be paid on loaned securities

 

$

100

 

 

$

 

 

$

100

 

 

$

 

 

 

 

(A)

The common-collective trusts, which are measured at fair value using the net asset per share (or its equivalent) practical expedient have not been categorized in the fair value hierarchy. The fair value amounts presented in the above tables are intended to permit reconciliation of the fair value hierarchy to the amounts presented on the statements of net assets available for benefits. This category includes index funds and target date retirement funds for which the underlying investments may vary. These funds provide for daily redemptions by the Plan at reported net asset values per share and there are currently no redemption restrictions or unfunded commitments on these investments.


10

 


Baxter Healthcare of Puerto Rico

Savings and Investment Plan

Notes to Financial Statements

December 31, 2017 and 2016

 

Transfers between hierarchy measurement levels are recognized by the Plan as of the beginning of the reporting period. The Plan did not have any transfers between Levels 1 and 2 during 2017 and 2016. 

 

See Valuation of Investments and Collateral in Note 2 above for a discussion of the methodologies used to determine the fair values of the Plan’s investments and collateral.  These methods may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values.  Furthermore, while the Plan believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

 

6.

Securities Lending Transactions

The Plan participates in a securities lending program with the Custodian.  The program allows the Custodian to loan securities, which are assets of the Plan, to approved brokers (the Borrowers).  

The Custodian requires the Borrowers, pursuant to a security loan agreement, to deliver collateral to secure each loan in an amount that is at least equal to the fair value of the securities loaned.  The Plan bears the risk of loss with respect to any unfavorable change in fair value of the invested cash collateral.  However, the Borrowers bear the risk of loss related to the decrease in the fair value of the non-cash collateral and, therefore, would have to deliver additional securities to maintain the required collateral.  In the event of default by any of the Borrowers, the Custodian shall indemnify the Plan by purchasing replacement securities equal to the number of unreturned loaned securities, to the extent that such replacement securities are available on the open market and if to the extent that such proceeds are insufficient or the collateral is unavailable, the purchase of replacement securities shall be made at Trustee expense or, if replacement securities are not able to be purchased, the Custodian shall credit the Plan for the market value of the unreturned securities.  In each case, the Custodian would apply the proceeds from the collateral for such a loan to make the Plan whole.

The fair value of the investment of cash collateral received pursuant to securities lending transactions is reflected on the Statements of Net Assets Available for Benefits as an asset and the obligation to return the amount received is reflected as a liability.

As of December 31, 2017 and 2016, the Plan had securities on loan with a fair market value of $99 thousand, with cash collateral received of $101 thousand and $100 thousand, respectively, which was invested in the State Street Quality D Short-Term Investment Fund.  Investments underlying this fund primarily consisted of cash and cash equivalents and asset-backed securities as of both December 31, 2017 and 2016, and the net asset value of this fund was approximately $1.00 per unit. As of December 31, 2017 and 2016, the cash collateral received is reflected at its fair value of $101 thousand and $100 thousand in the 2017 and 2016 Statements of Net Assets Available for Benefits, respectively.

Non-cash collateral of $34 thousand and $58 thousand received for securities on loan at December 31, 2017 and December 31, 2016, respectively, consisted of U.S. government and government agency issues, equity securities, and corporate and other obligations held by the Custodian on behalf of the Plan.  Non-cash collateral is not included with the collateral balance on the 2017 and 2016 Statements of Net Assets Available for Benefits because it may not be sold or repledged.  A portion of the income generated upon investment of cash collateral is remitted to the Borrowers, and the remainder is allocated between the Plan and the Custodian in its capacity as a security agent.  Securities lending income allocated to the Plan amounted to $395 and $519 for 2017 and 2016, respectively.  Securities lending income is classified as interest income in the Statements of Changes in Net Assets Available for Benefits.


11

 


Baxter Healthcare of Puerto Rico

Savings and Investment Plan

Notes to Financial Statements

December 31, 2017 and 2016

 

7.

Plan Termination

Although it has not expressed any intent to do so, the Plan sponsor has the right under the Plan to reduce, suspend or discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA.  In the event the Plan terminates, the interest of each participating employee in the Plan shall become fully vested and such termination of the Plan would not reduce the interest of any participating employee or their beneficiaries accrued under the Plan up to the date of such termination.

8.

Tax Status of the Plan

As of August 13, 2012, the Puerto Rico Treasury Department has determined and informed the Plan sponsor that the Plan and the related trust are designed in accordance with applicable sections entitling exemption from income taxes.  The Plan sponsor has also obtained an updated favorable determination letter dated April 5, 2017, from the Internal Revenue Service (IRS) stating that the Plan is in compliance with IRS regulations.  

U.S. GAAP requires plan management to evaluate tax positions taken by the Plan and recognize a tax liability (or asset) if the Plan has taken an uncertain position that more likely than not would not be sustained upon examination by the IRS.  The plan administrator has analyzed the tax positions taken by the Plan, and has concluded that as of December 31, 2017 and 2016, there are no uncertain tax positions taken or expected to be taken that would require recognition of a liability (or asset) or disclosure in the financial statements.  The Plan is subject to routine audits by taxing jurisdictions; however there are currently no audits for any tax periods in progress.  The plan administrator believes it is no longer subject to income tax examinations for years prior to 2014.

9.

Parties-in-Interest Transactions

Parties-in-interest are defined under Department of Labor regulations as any fiduciary of the Plan, any party rendering service to the Plan, the employer, and certain others.

At December 31, 2017 and 2016, the Plan held participation units in common-collective trusts and short-term investment funds of State Street Bank and Trust Company, the Plan Custodian; shares of common stock of Baxter, the Plan sponsor; shares of common stock and bonds of Shire, as acquirer of operations that the Company previously spun off; loans with participants; shares of common stock and units of common-collective trusts managed by Northern Trust Corporation and Vanguard, investment managers for the Plan; shares of common stock, bonds, individual separate accounts or interest rate wrapper contracts of Prudential, Transamerica, and Metlife, issuers of the Plan’s fully benefit-responsive contracts; and shares of common stock of Edward Lifesciences Corporation, as a company affiliated with an entity the Company has previously spun off.  At December 31, 2017 and 2016, the Plan held 169,555 and 151,240 shares of common stock of Baxter, valued at $10,960,019 and $6,706,000, respectively. Approximately $100 thousand and $74 thousand of dividend income was received in 2017 and 2016, respectively, related to shares of Baxter common stock held by the Plan. Additionally, at December 31, 2017 and 2016, the Plan held notes receivable from participants of $4,098,001 and $4,403,830, respectively. These transactions are allowable party-in-interest transactions under ERISA and the regulations promulgated thereunder.

Fees paid by the Plan for investment management, recordkeeping and consulting services, also qualify as party-in-interest transactions and are included in Plan expenses in the accompanying financial statements. The Company pays certain expenses for the administration of the Plan. These transactions are exempt from the party-in interest transaction prohibitions of ERISA.

 

 

 

12

 


Baxter Healthcare of Puerto Rico

Savings and Investment Plan

Notes to Financial Statements

December 31, 2017 and 2016

 

10.

Subsequent Event

Effective January 1, 2018, the Plan eliminated the Edwards Lifesciences Common Stock Fund and the Shire Stock Fund (collectively the “Funds”). Any dollars that were invested in these funds were automatically liquidated on January 1, 2018 and reinvested in the Plan’s qualified default investment alternative. Actual common shares held in these funds were liquidated as of December 31, 2017 and the balances in these funds as of that date consisted of cash balances only.

Additionally, effective January 1, 2018, participant balances in the Baxter Common Stock Fund were limited to no more than 25 percent of the participant’s total Plan account balance, subject to certain grandfathering exceptions for those participants whose balance exceeded 25 percent as of the effective date.

Plan participants were given advance notice of the fund changes noted above and were allowed to reinvest their funds prior to the effective date.

Effective January 1, 2018, newly hired employees are deemed to have elected to contribute 6% of compensation (increased by 1% per year to a total of 10%) unless they make a contrary election.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

13

 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Supplemental Schedule


 


Baxter Healthcare of Puerto Rico

Savings and Investment Plan

Schedule H, Line 4i – Schedule of Assets (Held at End of Year)

Employer Identification Number: 66-0678126 and Plan Number 024

December 31, 2017

 

 

Identity of Issue

 

Description of Investment

 

Cost(1)

 

Current Value

 

 

 

Cash & Cash Equivalents:

 

 

 

 

 

 

 

 

 

 

 

Freddie Mac Discount Nt Discount Not

 

0.01% 21 Feb 2018

 

 

-

 

$

38,406

 

 

 

Freddie Mac Discount Nt Discount Not

 

0.01% 22 Feb 2018

 

 

-

 

 

14,114

 

 

 

Cash Mgmt Bill

 

0.01% 2 Jan 2018

 

 

-

 

 

24,941

 

 

 

US Dollar

 

Cash

 

 

-

 

 

(6,107

)

 

 

CAD Dollar

 

Cash

 

 

-

 

 

63

 

 

*

State Street Bank & Trust Co

 

Short-term Investment Fund

 

 

-

 

 

62,319

 

 

*

State Street Bank & Trust Co

 

Short-term Investment Fund

 

 

-

 

 

50,025

 

 

*

State Street Bank & Trust Co

 

Short-term Investment Fund

 

 

-

 

 

626

 

 

*

State Street Bank & Trust Co

 

Short-term Investment Fund

 

 

-

 

 

36,020

 

 

*

State Street Bank & Trust Co

 

Short-term Investment Fund

 

 

-

 

 

1,185

 

 

*

State Street Bank & Trust Co

 

Short-term Investment Fund

 

 

-

 

 

10,426

 

 

*

State Street Bank & Trust Co

 

Short-term Investment Fund

 

 

-

 

 

786,737

 

 

*

State Street Bank & Trust Co

 

Short-term Investment Fund

 

 

-

 

 

217,189

 

 

*

State Street Bank & Trust Co

 

Short-term Investment Fund

 

 

-

 

 

92,389

 

 

*

State Street Bank & Trust Co

 

Short-term Investment Fund

 

 

-

 

 

11,078

 

 

*

State Street Bank & Trust Co

 

Short-term Investment Fund

 

 

-

 

 

1,663,111

 

 

 

Cash & Cash Equivalents

 

 

 

 

-

 

 

3,002,521

 

 

 

Common Stock:

 

 

 

 

 

 

 

 

 

 

 

Abbvie Inc Common Stock

 

Common Stock

 

 

-

 

 

28,763

 

 

 

Activision Blizzard Inc Common Stock

 

Common Stock

 

 

-

 

 

39,864

 

 

 

Adidas Ag Sponsored

 

Common Stock

 

 

-

 

 

8,530

 

 

 

Adobe Systems Inc Common Stock

 

Common Stock

 

 

-

 

 

86,178

 

 

 

Albemarle Corp Common Stock

 

Common Stock

 

 

-

 

 

40,433

 

 

 

Alexion Pharmaceuticals Inc Common Stock

 

Common Stock

 

 

-

 

 

26,646

 

 

 

Alibaba Group Holdings Sp

 

Common Stock

 

 

-

 

 

130,343

 

 

 

Allergan Plc Common Stock

 

Common Stock

 

 

-

 

 

23,304

 

 

 

Alphabet Inc Cl A Common Stock

 

Common Stock

 

 

-

 

 

84,877

 

 

 

Alphabet Inc Cl A Common Stock

 

Common Stock

 

 

-

 

 

4,942

 

 

 

Alphabet Inc Cl C Common Stock

 

Common Stock

 

 

-

 

 

85,309

 

 

 

Amazon.Com Inc Common Stock

 

Common Stock

 

 

-

 

 

151,228

 

 

 

Antero Resources Corp Common Stock

 

Common Stock

 

 

-

 

 

7,532

 

 

 

Aon Plc Common Stock

 

Common Stock

 

 

-

 

 

4,920

 

 

 

Apple Inc Common Stock

 

Common Stock

 

 

-

 

 

180,524

 

 

 

Applied Materials Inc Common Stock

 

Common Stock

 

 

-

 

 

5,075

 

 

 

Bank of America Corp Common Stock

 

Common Stock

 

 

-

 

 

9,715

 

 

*

Baxter International Inc Common Stock

 

Common Stock

 

 

-

 

 

10,960,019

 

 

 

Berkshire Hathaway Inc Cl B Common Stock

 

Common Stock

 

 

-

 

 

6,065

 

 

 

Biomarin Pharmaceutical Inc Common Stock

 

Common Stock

 

 

-

 

 

37,123

 

 

 

Boeing Co/The Common Stock

 

Common Stock

 

 

-

 

 

85,917

 

 

 

Booking Holidngs Inc Common Stock

 

Common Stock

 

 

-

 

 

39,488

 

 

 

Bp Plc Spons

 

Common Stock

 

 

-

 

 

5,544

 

 

 

Bristol Myers Squibb Co Common Stock

 

Common Stock

 

 

-

 

 

66,799

 

 

 

Broadcom Ltd Common Stock

 

Common Stock

 

 

-

 

 

56,422

 

 

 

Capital One Financial Corp Common Stock

 

Common Stock

 

 

-

 

 

7,583

 

 

 

Caterpillar Inc Common Stock

 

Common Stock

 

 

-

 

 

17,388

 

 

15


Baxter Healthcare of Puerto Rico

Savings and Investment Plan

Schedule H, Line 4i – Schedule of Assets (Held at End of Year)

Employer Identification Number: 66-0678126 and Plan Number 024

December 31, 2017

 

 

Identity of Issue

 

Description of Investment

 

Cost(1)

 

Current Value

 

 

 

CBS Corp Class B Non Voting Common Stock

 

Common Stock

 

 

-

 

 

6,058

 

 

 

Celgene Corp Common Stock

 

Common Stock

 

 

-

 

 

47,347

 

 

 

Charter Communications Inc A Common Stock

 

Common Stock

 

 

-

 

 

46,432

 

 

 

Chubb Ltd Common Stock

 

Common Stock

 

 

-

 

 

6,459

 

 

 

Citigroup Inc Common Stock

 

Common Stock

 

 

-

 

 

8,804

 

 

 

Concho Resources Inc Common Stock

 

Common Stock

 

 

-

 

 

29,517

 

 

 

Corning Inc Common Stock

 

Common Stock

 

 

-

 

 

19,729

 

 

 

Costco Wholesale Corp Common Stock

 

Common Stock

 

 

-

 

 

53,993

 

 

 

Crown Castle Intl Corp Reit

 

Common Stock

 

 

-

 

 

19,230

 

 

 

Delta Air Lines Inc Common Stock

 

Common Stock

 

 

-

 

 

6,054

 

 

 

Eog resources Inc Common Stock

 

Common Stock

 

 

-

 

 

24,979

 

 

 

Estee Lauder Companies Cl A Common Stock

 

Common Stock

 

 

-

 

 

51,897

 

 

 

Exelon Corp Common Stock

 

Common Stock

 

 

-

 

 

4,448

 

 

 

Facebook Inc Common Stock

 

Common Stock

 

 

-

 

 

134,649

 

 

 

First Data Corp Class A Common Stock

 

Common Stock

 

 

-

 

 

7,385

 

 

 

Flex Ltd Common Stock

 

Common Stock

 

 

-

 

 

7,046

 

 

 

Fluor Corp Common Stock

 

Common Stock

 

 

-

 

 

6,497

 

 

 

Freeport McMoran Inc Common Stock

 

Common Stock

 

 

-

 

 

3,661

 

 

 

Goldman Sachs Group Inc Common Stock

 

Common Stock

 

 

-

 

 

54,846

 

 

 

Goodyear Tire + Rubber Co Common Stock

 

Common Stock

 

 

-

 

 

5,404

 

 

 

Home Depot Inc Common Stock

 

Common Stock

 

 

-

 

 

67,325

 

 

 

Illumina Inc Common Stock

 

Common Stock

 

 

-

 

 

33,647

 

 

 

Inditex Unspon

 

Common Stock

 

 

-

 

 

19,459

 

 

 

Intel Corp Common Stock

 

Common Stock

 

 

-

 

 

5,367

 

 

 

International Paper Co Common Stock

 

Common Stock

 

 

-

 

 

7,131

 

 

 

Jpmorgan Chage + Co Common Stock

 

Common Stock

 

 

-

 

 

65,424

 

 

 

Kering Unspondered

 

Common Stock

 

 

-

 

 

40,378

 

 

 

Keysight Technologies In Common Stock

 

Common Stock

 

 

-

 

 

5,176

 

 

 

Marriott International Cl A Common Stock

 

Common Stock

 

 

-

 

 

82,563

 

 

 

Marsh + Mclennan Cos Common Stock

 

Common Stock

 

 

-

 

 

3,985

 

 

 

Mastercard Inc A Common Stock

 

Common Stock

 

 

-

 

 

104,009

 

 

 

McDonald's Corp Common Stock

 

Common Stock

 

 

-

 

 

71,044

 

 

 

Merck + Co. Inc. Common Stock

 

Common Stock

 

 

-

 

 

6,466

 

 

 

Metlife Inc Common Stock

 

Common Stock

 

 

-

 

 

5,741

 

 

 

Micro Focus Intl Spn

 

Common Stock

 

 

-

 

 

5,116

 

 

 

Micron Technology Inc Common Stock

 

Common Stock

 

 

-

 

 

3,830

 

 

 

Microsoft Corp Common Stock

 

Common Stock

 

 

-

 

 

123,976

 

 

 

Microsoft Corp Common Stock

 

Common Stock

 

 

-

 

 

5,409

 

 

 

Monster Beverage Corp Common Stock

 

Common Stock

 

 

-

 

 

39,196

 

 

 

Morgan Stanley Common Stock

 

Common Stock

 

 

-

 

 

33,230

 

 

 

Netflix Inc Common Stock

 

Common Stock

 

 

-

 

 

107,933

 

 

 

Nvidia Corp Common Stock

 

Common Stock

 

 

-

 

 

62,325

 

 

 

Occidental Petroleum Corp Common Stock

 

Common Stock

 

 

-

 

 

7,112

 

 

 

Oracle Corp Common Stock

 

Common Stock

 

 

-

 

 

6,623

 

 

 

Parker Hannifin Corp Common Stock

 

Common Stock

 

 

-

 

 

62,316

 

 

 

Paypal Holdings Inc Common Stock

 

Common Stock

 

 

-

 

 

49,828

 

 

 

Pentair Plc Common Stock

 

Common Stock

 

 

-

 

 

6,723

 

 

16


Baxter Healthcare of Puerto Rico

Savings and Investment Plan

Schedule H, Line 4i – Schedule of Assets (Held at End of Year)

Employer Identification Number: 66-0678126 and Plan Number 024

December 31, 2017

 

<

 

Identity of Issue

 

Description of Investment

 

Cost(1)

 

Current Value

 

 

 

Pfizer Inc Common Stock

 

Common Stock

 

 

-

 

 

7,044

 

 

 

Red Hat Inc Common Stock

 

Common Stock

 

 

-

 

 

48,029

 

 

 

S+P Global Inc Common Stock

 

Common Stock

 

 

-

 

 

36,451

 

 

 

Sabre Corp Common Stock

 

Common Stock

 

 

-

 

 

3,652

 

 

 

Salesforce.Com Inc Common Stock

 

Common Stock

 

 

-

 

 

83,994

 

 

 

Splunk Inc Common Stock

 

Common Stock

 

 

-

 

 

29,692

 

 

 

Tencet Holdings Ltd

 

Common Stock

 

 

-

 

 

117,456

 

 

 

Tesla Inc Common Stock

 

Common Stock

 

 

-

 

 

52,875

 

 

 

Thermo Fisher Scientific Inc Common Stock

 

Common Stock

 

 

-

 

 

6,455

 

 

 

Total SA Spon

 

Common Stock

 

 

-

 

 

8,344

 

 

 

Unitedhealth Group Inc Common Stock

 

Common Stock

 

 

-

 

 

40,561

 

 

 

Vertex Pharmceuticals Inc Common Stock

 

Common Stock

 

 

-

 

 

32,783

 

 

 

Visa Inc Class A Shares Common Stock

 

Common Stock

 

 

-

 

 

98,387

 

 

 

Vodafone Group Plc Sp

 

Common Stock

 

 

-

 

 

6,442

 

 

 

Walmart Inc Common Stock

 

Common Stock

 

 

-

 

 

6,849

 

 

 

Workday Inc Class A Common Stock

 

Common Stock

 

 

-

 

 

35,541

 

 

 

Common Stock

 

 

 

 

-

 

 

14,390,853

 

 

 

U.S. Government and Government Agency Issues:

 

 

 

 

 

 

 

 

 

 

 

Abu Dhabi Govt Int L Sr Unsecured

 

2.5% 11 Oct 2022

 

 

-

 

 

2,997

 

 

 

Fed Hm Ln Pc Pool C48827 FG

 

6% 01 March 2031

 

 

-

 

 

12

 

 

 

Fed Hm Ln Pc Pool G12334 FG

 

5% 01 Sep 2021

 

 

-

 

 

254

 

 

 

Fed Hm Ln Pc Pool Q29797 Fg

 

3.5% 01 Nov 2044

 

 

-

 

 

1,032

 

 

 

Fed Hm Ln Pc Pool Q35223 FG

 

4% 01 Aug 2045

 

 

-

 

 

670

 

 

 

Fed Hm Ln Pc Pool Q39583 Fg

 

4.5% 11 Mar 2046

 

 

-

 

 

313

 

 

 

Fed Hm Ln Pc Pool Q45166 Fg

 

3.5% 01 Dec 2046

 

 

-

 

 

7,459

 

 

 

Fed Hm Ln PC Pool Q46343 FG

 

4% 01 Feb 2047

 

 

-

 

 

7,514

 

 

 

Fed Hm Ln Pc Pool Q46522 Fg

 

3.5% 01 Mar 2047

 

 

-

 

 

480

 

 

 

Fed Hm Ln PC Pool Q47881 FG

 

4% 01 May 2047

 

 

-

 

 

346

 

 

 

Fed Hm Ln PC Pool Q48185 FG

 

4% 01 May 2047

 

 

-

 

 

999

 

 

 

Fed Hm Ln PC Pool Q48734 FG

 

4% 01 Jun 2047

 

 

-

 

 

1,195

 

 

 

Fed Hm Ln PC Pool Q48748 FG

 

4% 01 Jun 2047

 

 

-

 

 

958

 

 

 

Fed Hm Ln Pc Pool Q50232 Fg

 

3.5% 01 Aug 2047

 

 

-

 

 

758

 

 

 

Fed Hm Ln Pc Pool Q50240 Fg

 

4.5% 01 Aug 2047

 

 

-

 

 

646

 

 

 

Fed Hm Ln Pc Pool Q51179 Fg

 

3.5% 01 Oct 2047

 

 

-

 

 

1,744

 

 

 

Fed Hm Ln Pc Pool Q51697 Fg

 

3.5% 01 Nov 2047