BAXTER INTERNATIONAL INC - FORM 8-K - EX-99.1

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8-K - FORM 8-K - BAXTER INTERNATIONAL INC	c57655e8vk.htm




		Baxter International Inc. One Baxter Parkway Deerfield, IL 60015

FOR IMMEDIATE RELEASE

Media Contact:
Deborah Spak, (847) 948-2349

Investor Contacts:
Mary Kay Ladone, (847) 948-3371
Clare Trachtman, (847) 948-3085

BAXTER REPORTS FIRST QUARTER 2010 FINANCIAL RESULTS
IN-LINE WITH GUIDANCE

Company Lowers Full-Year Outlook

DEERFIELD, Ill., April 22, 2010 — Baxter International Inc. (NYSE:BAX) today reported first quarter net income of $525 million, an increase of 2 percent from $516 million reported in the first quarter of 2009. Earnings per diluted share of $0.86 increased 4 percent from $0.83 per diluted share reported in the prior-year period. Baxter’s first quarter financial results included a one-time, non-cash special charge of $39 million (or $0.07 per diluted share) related to a change in the tax treatment of post-retirement prescription drug benefits under recent U.S. healthcare reform legislation.

On an adjusted basis, excluding the special item, Baxter’s net income of $564 million increased 9 percent from $516 million reported in 2009. Adjusted earnings per diluted share of $0.93 increased 12 percent from $0.83 per diluted share reported in the prior-year period and were in-line with the guidance the company previously provided of $0.92 to $0.94 per diluted share.

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BAXTER REPORTS 1^st QUARTER RESULTS — Page 2

Baxter’s global sales of $3.1 billion advanced 11 percent from the $2.8 billion reported in the same period last year. Excluding the impact of foreign currency, worldwide sales increased 5 percent. Sales within the United States increased 4 percent to $1.3 billion in the first quarter, while international sales grew 17 percent to $1.8 billion. Excluding the impact of foreign currency, international sales grew 5 percent.

By business, BioScience revenues totaled $1.4 billion and advanced 9 percent (and excluding foreign currency, BioScience sales increased 3 percent) as a result of continued growth of recombinant therapies, such as ADVATE [Antihemophilic Factor (Recombinant), Plasma/Albumin-Free Method] for the treatment of hemophilia, biosurgery products and shipments of CELVAPAN, the company’s H1N1 pandemic vaccine. This performance was partially offset by an increase in Medicaid rebates required by manufacturers of drugs and biologics under the new U.S. healthcare reform legislation, as well as weaker sales of antibody therapies and certain plasma proteins.

Renal sales of $584 million grew 13 percent (and excluding foreign currency increased 5 percent). Medication Delivery sales of $1.2 billion increased 14 percent (and excluding foreign currency increased 8 percent). Sales results from these two businesses were driven by growth across core components of the portfolios, including the peritoneal dialysis (PD) franchise, the newly acquired continuous renal replacement therapy business, anesthesia products, parenteral nutrition products, intravenous therapies and global injectables.

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BAXTER REPORTS 1^st QUARTER RESULTS — Page 3

Baxter also improved cash flows from operations, generating $279 million, after contributing $300 million to its pension plan in the United States. This represents an improvement of more than $40 million in cash flows from operations from the first quarter of 2009.

“Despite a challenging global macro-environment and the impact from U.S. healthcare reform, we reported quarterly financial results in-line with our expectations,” said Robert L. Parkinson, Jr., chairman and chief executive officer. “As we look to the future, we believe the diversified and medically-necessary nature of our portfolio, broad geographic reach, and strong new product pipeline provide a foundation for continued leadership in an evolving marketplace, both in the U.S. and abroad.”

Recent Highlights

Baxter continues to advance its pipeline, business development initiatives and commercialization efforts, resulting in a number of recent achievements, including:

	•		The acquisition of ApaTech, a private equity backed, U.K.-based orthobiologic products company, which will enhance Baxter’s position in the rapidly growing orthobiologics space. Through this transaction, Baxter acquired ACTIFUSE, a silicate substituted calcium phosphate synthetic bone graft material that is currently marketed in the U.S., Europe and other select markets around the world.

	•		The U.S. approval of TachoSil (Absorbable Fibrin Sealant Patch) for use as an adjunct to hemostasis in cardiovascular surgery. TachoSil is the first and only adjunctive hemostatic agent available in the U.S. that combines a collagen patch with a coating of human coagulation factors. Baxter, which was granted exclusive U.S. commercial rights by its partner Nycomed, plans to launch TachoSil during the second half of 2010.

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BAXTER REPORTS 1^st QUARTER RESULTS — Page 4

	•		The announcement by Baxter and New York-Presbyterian Hospital/Weill Cornell Medical Center of 18-month data from a Phase II clinical study of GAMMAGARD LIQUID and GAMMAGARD S/D [Immune Globulin Intravenous (Human)] (marketed as KIOVIG outside of the U.S.) for mild-to-moderate Alzheimer’s disease. The Phase II results represent the first study in Alzheimer’s disease where all three measures — cognitive, functional and neuroimaging — had positive data and were statistically significant. Baxter also announced plans to initiate a second, concurrent Phase III study of GAMMAGARD for mild-to-moderate Alzheimer’s disease to complement its ongoing Phase III trial and to confirm the Phase II results in more patients.

	•		The initiation of a Phase I dosing study in healthy subjects of BAX 513, an oral non-anticoagulant sulfated polysaccharide (NASP) being investigated for adjunctive therapy for hemophilia patients. BAX 513 involves a novel pharmaceutical approach for improving hemostasis in bleeding disorders.

	•		Resolution of the warning letter issued by the U.S. Food and Drug Administration (FDA) related to Baxter’s production facility located in Lessines, Belgium.

Second Quarter and Full-Year 2010 Outlook

Baxter also announced today its guidance for the second quarter of 2010 and lowered its guidance for the full year.

Previously, Baxter expected full-year 2010 sales growth, excluding the impact of foreign exchange, of 5 to 7 percent (or 7 to 9 percent including foreign exchange); full-year earnings per diluted share of $4.20 to $4.28, before any special items; and cash flow from operations of approximately $2.9 billion.

For full-year 2010, Baxter’s revised outlook includes sales growth, excluding the impact of foreign exchange, of 1 to 3 percent (or 3 to 5 percent including the benefit of foreign exchange) and earnings, before any special items, of $3.92 to $4.00 per diluted share. This outlook now includes the full-

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BAXTER REPORTS 1^st QUARTER RESULTS — Page 5

year impact of U.S. healthcare reform legislation enacted in the first quarter. In addition, Baxter now expects to generate cash flows from operations of approximately $2.7 billion.

“Our revised financial guidance primarily reflects the impact of recent healthcare reform legislation in the U.S. and our outlook for continued plasma market pressures,” explained Robert M. Davis, chief financial officer. “Despite these factors, we will continue to pursue opportunities to enhance growth through the development of new products and business development initiatives, while maintaining an intense focus on managing costs throughout the company.”

For the second quarter of 2010, the company expects sales growth, excluding the impact of foreign exchange, of 0 to 2 percent (or 3 to 5 percent including the benefit of foreign exchange), and earnings, before any special items, of $0.90 to $0.93 per diluted share.

A webcast of Baxter’s first quarter conference call for investors can be accessed live from a link on the company’s website at www.baxter.com beginning at 7:30 a.m. CDT on April 22, 2010. Please visit Baxter’s website for more information regarding this and future investor events and webcasts, including the company’s Annual Meeting of Shareholders on May 4, 2010.

Baxter International Inc., through its subsidiaries, develops, manufactures and markets products that save and sustain the lives of people with hemophilia, immune disorders, infectious diseases, kidney disease, trauma, and other chronic and acute medical conditions. As a global, diversified healthcare company, Baxter applies a unique combination of

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BAXTER REPORTS 1^st QUARTER RESULTS — Page 6

expertise in medical devices, pharmaceuticals and biotechnology to create products that advance patient care worldwide.

This release includes forward-looking statements concerning the company’s financial results and outlook for 2010. The statements are based on assumptions about many important factors, including the following, which could cause actual results to differ materially from those in the forward-looking statements: demand for and market acceptance risks for new and existing products, such as ADVATE, and other technologies; future actions of regulatory bodies and other governmental authorities, including the FDA and foreign counterparts, that could delay, limit or suspend product development, manufacturing or sales or result in sanctions; product quality or patient safety concerns leading to product recalls, withdrawals, launch delays, litigation, or declining sales; future actions of governmental authorities and other third parties as recently adopted U.S. healthcare reform legislation is implemented; additional legislation, regulation and other governmental pressures, which may affect pricing, reimbursement and rebate policies of government agencies and private payers or other elements of the company’s business; production yields, regulatory clearances and customers’ final purchase commitments with respect to the company’s pandemic vaccine; product development risks; inventory reductions or fluctuations in buying patterns by wholesalers or distributors; the impact of geographic and product mix on the company’s sales; the impact of competitive products and pricing, including generic competition, drug reimportation and disruptive technologies; the availability of acceptable raw materials and component supply; the ability to enforce company patents; patents of third parties preventing or restricting the company’s manufacture, sale or use of affected products or technology; any impact of the commercial and credit environment on Baxter and its customers; foreign currency fluctuations and other risks identified in the company’s most recent filing on Form 10-K and other Securities and Exchange Commission filings, all of which are available on the company’s website. The company does not undertake to update its forward-looking statements. Financial schedules are attached to this release and available on the company’s website.

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BAXTER — PAGE 7

BAXTER INTERNATIONAL INC.
Consolidated Statements of Income
Three Months Ended March 31, 2010 and 2009
(unaudited)
(in millions, except per share and percentage data)


	Three Months Ended
	March 31,
	2010			2009		Change

NET SALES	$	3,140		$	2,824		11%

COST OF SALES		1,509			1,336		13%


GROSS MARGIN		1,631			1,488		10%

*% of Net Sales*		*51.9%*			52.7%		(0.8 pts	)

MARKETING AND ADMINISTRATIVE EXPENSES		683			611		12%
*% of Net Sales*		*21.8%*			21.6%		0.2 pts

RESEARCH AND DEVELOPMENT EXPENSES		227			212		7%
*% of Net Sales*		*7.2%*			7.5%		(0.3 pts	)

NET INTEREST EXPENSE		19			26		(27%	)

OTHER EXPENSE, NET		2			2		0%


PRE-TAX INCOME		700			637		10%


INCOME TAX EXPENSE		172	^A		119		45%

*% of Pre-Tax Income*		*24.6%*			18.7%		5.9 pts

NET INCOME		528			518		2%

LESS: NONCONTROLLING INTERESTS		3			2		50%

NET INCOME ATTRIBUTABLE TO BAXTER	$	525		$	516		2%


BASIC EPS	$	0.87		$	0.84		4%

DILUTED EPS	$	0.86		$	0.83		4%


WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
Basic		602			613
Diluted		609			621


ADJUSTED NET INCOME ATTRIBUTABLE TO BAXTER (excluding specified item)	$	564	^B	$	516		9%

ADJUSTED DILUTED EPS (excluding specified item)	$	0.93	^B	$	0.83		12%


^A		Income tax expense in 2010 included a charge of $39 million, or $0.07 per diluted share, to write off a deferred tax asset as a result of a change in the tax treatment of reimbursements under the Medicare Part D retiree prescription drug subsidy program.

^B		Refer to page 8 for a description of the adjustment and a reconciliation of GAAP (generally accepted accounting principles) measures.

BAXTER — PAGE 8

BAXTER INTERNATIONAL INC.
Note to Consolidated Statement of Income
Three Months Ended March 31, 2010
Description of Adjustment and Reconciliation of GAAP to Non-GAAP Measures
(unaudited)
(in millions, except per share and percentage data)

The company’s GAAP results for the three months ended March 31, 2010 included a tax charge related to the write-off of a deferred tax asset as a result of a change in the tax treatment of reimbursements under the Medicare Part D retiree prescription drug subsidy program. This charge impacted the GAAP results as follows:

Income

Net Income

Pre-tax

Tax

Attributable

Diluted

Income

Expense

to Baxter

EPS

GAAP

700

$172

525

0.86

Deferred tax charge

N/A

(39

)

0.07

Excluding specified item

700

$133

564

0.93

Effective tax rate

19.0%

For more information on the company’s use of non-GAAP financial measures in this press release, please see the company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on the date of this press release.

BAXTER — PAGE 9

BAXTER INTERNATIONAL INC.
Cash Flows from Operations and Changes in Net Debt
(unaudited)
($ in millions)

Cash Flows from Operations

(Brackets denote cash outflows)


		Three Months Ended
		March 31,
		2010			2009

	Net income	$	528		$	518
	Adjustments
	Depreciation and amortization		166			148
	Deferred income taxes		91	¹		59
	Stock compensation		30			38
	Realized excess tax benefits from stock issued under employee benefit plans		(31	)		(78	)
	Other		9			9
	Changes in balance sheet items
	Accounts and other current receivables		(33	)		45
	Inventories		(94	)		(86	)
	Accounts payable and accrued liabilities		(107	)		(304	)
	Restructuring and cost optimization payments		(17	)		(21	)
	Other		(263	) ²		(91	) ²

	Cash flows from operations	$	279		$	237


Changes in Net Debt Increase (decrease)

		Three Months Ended
		March 31,
		2010			2009

	Net debt, beginning of period	$	1,365		$	1,625

	Cash flows from operations		(279	)		(237	)
	Capital expenditures		230			171
	Dividends		174			160
	Proceeds from stock issued under employee benefit plans		(140	)		(61	)
	Purchases of treasury stock		435			566
	Acquisitions of and investments in businesses and technologies		234	³		—
	Other, including the effect of exchange rate changes		61			(17	)

	Increase in net debt		715			582


	Net debt, March 31	$	2,080		$	2,207


	Key statistics, March 31:
	Days sales outstanding		53.1			52.1
	Inventory turns		2.2			2.1



	Selected balance sheet information:	March 31, 2010			December 31, 2009
	Cash and equivalents	$	2,673		$	2,786
	Accounts and other current receivables	$	2,273		$	2,302
	Inventories	$	2,562		$	2,557
	Accounts payable and accrued liabilities	$	3,479		$	3,753


¹		Deferred income taxes in the first quarter of 2010 included a charge of $39 million to write off a deferred tax asset as a result of a change in the tax treatment of reimbursements under the Medicare Part D retiree prescription drug subsidy program.

²		Other cash flows from operations in the first quarters of 2010 and 2009 included planned contributions of $300 million and $100 million, respectively, to the company’s pension plan in the United States.

³		Acquisitions of and investments in businesses and technologies in 2010 principally related to the acquisition of ApaTech Limited, an orthobiologic products company based in the United Kingdom.

BAXTER — PAGE 10

BAXTER INTERNATIONAL INC.
Net Sales
Periods Ending March 31, 2010 and 2009
(unaudited)
($ in millions)



	Q1		Q1		%Growth @			% Growth @
	2010		2009		Actual Rates			Constant Rates



BioScience
United States	$	610	$	622		(2%	)		(2%	)
International		752		630		19%			8%
Total	$	1,362	$	1,252		9%			3%



Medication Delivery
United States	$	579	$	514		13%			13%
International		603		521		16%			3%
Total	$	1,182	$	1,035		14%			8%



Renal
United States	$	95	$	92		3%			3%
International		489		423		16%			5%
Total	$	584	$	515		13%			5%



Baxter excluding Transfusion Therapies
United States	$	1,284	$	1,228		5%			5%
International		1,844		1,574		17%			5%
Total	$	3,128	$	2,802		12%			5%



Transfusion Therapies ¹
United States	$	9	$	13		(31%	)		(31%	)
International		3		9		(67%	)		(67%	)
Total	$	12	$	22		(45%	)		(45%	)



Baxter International Inc.
United States	$	1,293	$	1,241		4%			4%
International		1,847		1,583		17%			5%
Total	$	3,140	$	2,824		11%			5%


¹		Represents revenues associated with manufacturing, distribution and other services provided by the company to the buyer of the Transfusion Therapies (TT) business after the February 2007 divestiture.

BAXTER — PAGE 11

BAXTER INTERNATIONAL INC.
Key Product Line Sales
Periods Ending March 31, 2010 and 2009
(unaudited)
($ in millions)



	Q1		Q1		% Growth @			% Growth @
	2010		2009		Actual Rates			Constant Rates



BioScience
Recombinants	$	510	$	451		13%			8%
Plasma Proteins		292		274		7%			(1%	)
Antibody Therapy		322		337		(4%	)		(7%	)
Regenerative Medicine		119		99		20%			14%
Other ¹		119		91		31%			20%

Total BioScience	$	1,362	$	1,252		9%			3%



Medication Delivery
IV Therapies	$	391	$	344		14%			6%
Global Injectables		451		371		22%			14%
Infusion Systems		209		199		5%			(1%	)
Anesthesia		127		109		17%			11%
Other		4		12		(67%	)		(50%	)

Total Medication Delivery	$	1,182	$	1,035		14%			8%



Renal
PD Therapy	$	474	$	420		13%			5%
HD Therapy		110		95		16%			5%

Total Renal	$	584	$	515		13%			5%



Baxter excluding Transfusion Therapies	$	3,128	$	2,802		12%			5%



Transfusion Therapies ²	$	12	$	22		(45%	)		(45%	)



Total Baxter	$	3,140	$	2,824		11%			5%


¹		Principally includes vaccines and sales of plasma to third parties.

²		Represents revenues associated with manufacturing, distribution and other services provided by the company to the buyer of the TT business after the February 2007 divestiture.

BAXTER — PAGE 12

BAXTER INTERNATIONAL INC.
Key Product Line Sales by US and International
Periods Ending March 31, 2010 and 2009
(unaudited)
($ in millions)



	Q1 2010							Q1 2009							% Growth
		US		International		Total			US		International		Total			US			International			Total



BioScience
Recombinants		$	222	$	288	$	510		$	211	$	240	$	451			5%			20%			13%
Plasma Proteins			94		198		292			98		176		274			(4%	)		13%			7%
Antibody Therapy			223		99		322			250		87		337			(11%	)		14%			(4%	)
Regenerative Medicine			62		57		119			55		44		99			13%			30%			20%
Other ¹			9		110		119			8		83		91			13%			33%			31%

Total BioScience		$	610	$	752	$	1,362		$	622	$	630	$	1,252			(2%	)		19%			9%



Medication Delivery
IV Therapies		$	124	$	267	$	391		$	108	$	236	$	344			15%			13%			14%
Global Injectables			250		201		451			208		163		371			20%			23%			22%
Infusion Systems			122		87		209			122		77		199			0%			13%			5%
Anesthesia			82		45		127			73		36		109			12%			25%			17%
Other			1		3		4			3		9		12			(67%	)		(67%	)		(67%	)

Total Medication Delivery		$	579	$	603	$	1,182		$	514	$	521	$	1,035			13%			16%			14%



Renal
PD Therapy		$	76	$	398	$	474		$	71	$	349	$	420			7%			14%			13%
HD Therapy			19		91		110			21		74		95			(10%	)		23%			16%

Total Renal		$	95	$	489	$	584		$	92	$	423	$	515			3%			16%			13%



Baxter excluding Transfusion Therapies		$	1,284	$	1,844	$	3,128		$	1,228	$	1,574	$	2,802			5%			17%			12%



Transfusion Therapies ²		$	9	$	3	$	12		$	13	$	9	$	22			(31%	)		(67%	)		(45%	)



Total Baxter		$	1,293	$	1,847	$	3,140		$	1,241	$	1,583	$	2,824			4%			17%			11%


¹		Principally includes vaccines and sales of plasma to third parties.

²		Represents revenues associated with manufacturing, distribution and other services provided by the company to the buyer of the TT business after the February 2007 divestiture.

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