Executive Vice President & Chief Financial Officer at Baxter International
Thanks, Joe. And good morning, everyone. As Joe mentioned, we're continuing to navigate a dynamic and ever-changing macro environment. This near-term volatility has created certain challenges for our business, and led us to lowering our full-year outlook. But we're committed to working through these headwinds and delivering on our long-term commitments off this new base. Most importantly, demand for our Baxter products remain strong and our integrated supply chain and commercial teams are working tirelessly to get products in the hands of our customers and patients to fulfill our mission.
Turning to our financial performance. Second quarter 2022 global sales of $3.7 billion advanced 21% on a reported basis, 26% constant currency, and 3% operationally. As the US dollar strengthened over the quarter, foreign exchange negatively impacted reported sales by approximately 500 basis points. And as Joe mentioned, sales within the quarter were constrained due to lack of both raw materials and component availability, particularly as it relates to electromechanical components.
Second quarter sales were also impacted by a lack of hospital access, which is needed to install select products, particularly in our patient support systems product category. We estimate these constraints negatively impacted sales by over 300 basis points in the quarter. Compared to the prior-year period, operational sales grew 3%, reflecting a gradual recovery in hospital admission rates and elective surgeries, strength in our medication delivery and nutrition businesses and solid growth in PD. On the bottom line, adjusted earnings increased 9% to $0.87 per share, falling within our guidance range of $0.86 to $0.89 cents per share.
Now, I'll walk through performance by our regional segments and key product categories. Note that constant currency growth is equal to operational sales growth for all global businesses and Baxter's three legacy geographic regions.
Starting with sales by operational segment, sales in the Americas increased 2% on a constant currency basis. Sales in Europe, Middle East and Africa grew 6% on a constant currency basis, and sales in our APAC region increased 1% on a constant currency basis. Sales in our APAC region were negatively impacted in the quarter by the resurgence of COVID cases in the region, particularly in China, which we estimate was an impact of approximately $15 million.
Moving on to performance by key product category, global sales for renal care were $931 million, increasing 2% on a constant currency basis. Performance in the quarter was driven by solid growth in our PD business where we observe both a sequential and year-over-year improvement in global patient volumes. This growth was partially offset by lower in-center HD sales, partially due to HD monitor supply challenges due to component availability.
Sales and medication delivery of $710 million increased 4% on a constant currency basis. Growth in this business reflects strong global demand for our products and our IV therapy portfolio. This was partially offset by lower sales in APAC, driven by COVID-related lockdowns in China and the resulting impact on utilization. This product category was also impacted by lower sales of large volume pumps in the quarter due to constrained demand from the lack of component availability. Pharmaceutical sales of $528 million grew 3% on a constant currency basis. Performance in the quarter was driven by increased sales internationally for inhaled anesthetics, offsetting increased competition within our US generic injectables portfolio, as well as supply constraints for select molecules.
Moving to clinical nutrition. Total sales were $230 million, increasing 4% on a constant currency basis. Performance in the quarter was driven by demand for our broad multi-chamber product offering, vitamins and automated compounding. Sales in advanced surgery were $263 million, advancing 8% on a constant currency basis. Growth in the quarter reflects continued gradual recovery of elective procedures in the US and Europe, as well as strong demand for RECOTHROM given competitive constraints. Recovery in our APAC region remains subdued, with several countries experiencing somewhat depressed levels of surgical volumes.
Sales in our acute therapies business were $173 million, declining 4% on a constant currency basis, reflecting the difficult comparison to the prior-year period where we experienced elevated demand for CRRT, given the rising COVID cases.
Biopharma solutions in the quarter were $163 million, declining 5% on a constant currency basis and reflecting an expected step down in sales of COVID vaccines compared to the same period last year. COVID vaccine sales for the quarter totaled approximately $35 million. Hillrom contributed $715 million in sales in the quarter, which included $364 million of sales in patient support systems, $282 million of sales in frontline care and $69 million of sales in global surgical solutions. Hillrom grew 2% on a constant currency basis as compared to Q2 2021 when the company was a standalone entity.
Despite solid growth in the quarter, sales came in below our expectations largely due to the supply constraints for electromechanical parts, primarily implant packing frontline care, as well as select delays in product installations and patient support systems in global surgical solutions due to lack of hospital access. As a result, we're experiencing unprecedented levels of product backlog throughout these businesses. Demand remains strong, though, and we'll continue to monitor the situation and work this backlog as rapidly as possible.
And while to date, we haven't yet seen an impact on the flow of capital orders, we are taking a more conservative approach for the second half given delays related to hospital staffing challenges, as well as more cautious commentary from customers regarding hospital capex.
Moving through the rest of the P&L. Our adjusted gross margin of 42.5% decreased by 10 basis points over the prior year, reflecting the impact of increased expenses, primarily driven by inflation and freight.
Adjusted SG&A of $839 million represented 22.4% as a percent of sales, an increase of 150 basis points versus prior year, driven by the addition of Hillrom, as well as higher freight expenses, partially offset by lower bonus accruals under our annual employee incentive compensation plans. Adjusted R&D spending in the quarter of $148 million represents 4% as a percent of sales, a decrease of 50 basis points versus prior year.
Adjusted operating margin in the quarter was 16.2%, a decrease of 100 basis points versus the prior year, primarily driven by incremental freight expenses in the quarter, resulting from higher fuel prices and inflation, partly offset by actions we are taking to improve productivity and reduce spend. Adjusted net interest expense totaled $89 million in the quarter, an increase of $55 million versus the prior year, driven by higher outstanding debt balances related to the acquisition of Hillrom. Given the current interest rate environment, we now expect net interest expense to be slightly higher than we had previously forecasted.
Adjusted other non-operating income totaled $33 million in the quarter, an increase of $31 million compared to the prior-year period, driven by foreign exchange and equity investment gains, as well as amortization of pension benefits. The adjusted tax rate in the quarter was 18.8% as compared to 17.8% in the prior period. The year-over-year increase was driven by the addition of Hillrom as well as lower stock-based compensation award deductions as compared to the prior-year period. And as previously mentioned, adjusted earnings of $0.87 per diluted share advanced 9% versus the prior-year period.
Let me conclude my comments by discussing our outlook for the third quarter and full-year 2022, including some key assumptions underpinning our revised guidance. As discussed, throughout the second quarter, Baxter experienced increased inflationary pressure related to fuel commodity and labor prices. Our prior outlook did not assume the divergence we're experiencing between diesel and crude oil, but did assume an easing commodity pricing, in line with external indices forecasts.
Our current outlook now assumes pricing for these key raw materials remains at current levels for the remainder of the year. We anticipate component availability remains challenging through the second half of 2022, which will continue to impact our overall production volumes and absorption rates.
We anticipate our order backlog will stay at elevated levels, resulting in a phasing impact of top line sales, primarily for infusion pumps in the frontline care business. Our teams are working tirelessly to secure key electronic components to lower our backlog to more normalized levels. In addition, we project a potential slowdown in hospital capital spending in the second half of the year, which will impact our PSS and GSS businesses.
For the third quarter of 2022, we expect global sales growth of high teens on a reported basis, mid-20s on a constant currency basis and low-single digits operationally, and we expect adjusted earnings excluding special items of $0.79 to $0.83 per diluted share.
For full-year 2022, we now expect global sales growth of high teens on a reported basis, mid-20s constant currency, and 2% to 3% operationally. As mentioned earlier, operational growth for Baxter excludes the impact of foreign exchange and Hillrom. The reduction in our sales guidance reflects increased foreign exchange headwinds, a lower sales outlook for our pharmaceuticals business and the legacy Hillrom business.
Moving down the P&L, we expect full-year adjusted operating margin to be between 17% to 17.5%, reflecting the impact of all the various macroeconomic dynamics discussed today.
For the year, we now expect interest expense to total approximately $400 million, given rate increases and adjusted tax rate of approximately 19%, and a diluted average share count of approximately 510 million shares. In addition, we expect the incremental FX top line headwinds will negatively impact earnings per share by approximately $0.05 in the second half of the year. Based on these factors, we now expect 2022 adjusted earnings excluding special items of $3.60 to $3.70 per diluted share.
With that, we can now open the call up to Q&A.