EX-99.1 2 d244891dex991.htm EX-99.1 EX-99.1
  

Corporate News

 

  

Baxter International Inc.

One Baxter Parkway

Deerfield, IL 60015

LOGO

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 STRONG THIRD QUARTER FINANCIAL RESULTS

AND CONFIRMS FULL-YEAR GUIDANCE

Baxter Reinforces Commitment to Innovation with Increased Investment in

Research and Development and Advancements in New Product Pipeline

DEERFIELD, Ill., October 20, 2011 — Baxter International Inc. (NYSE:BAX) today reported third quarter net income of $576 million, an increase of 10 percent from $525 million reported in the third quarter of 2010. Earnings per diluted share of $1.01 advanced 13 percent from $0.89 per diluted share reported in the prior-year period. Baxter’s third quarter financial results included an after-tax special charge of $48 million (or $0.08 per diluted share) for the resolution of long-standing litigation pertaining to average wholesale prices (AWP) and certain historical rebate and discount adjustments. Baxter’s third quarter 2010 financial results included an after-tax special item of $70 million (or $0.12 per diluted share) related to the impairment of assets associated with the divestiture of the U.S. multi-source generic injectables business.

On an adjusted basis, excluding special items from both periods, Baxter’s third quarter net income of $624 million rose 5 percent from $595 million reported in 2010. Adjusted earnings per diluted share of $1.09 increased 8 percent from

 

BAXTER REPORTS 3rd QUARTER FINANCIAL RESULTS — Page 2

   

 

$1.01 per diluted share reported last year and were in-line with the guidance the company previously provided of $1.07 to $1.09 per diluted share.

Worldwide sales totaled $3.48 billion compared to sales of $3.22 billion in the third quarter of 2010, representing an increase of 8 percent (or 3 percent excluding the impact of foreign currency). Adjusting for the divestiture of the U.S. multi-source generic injectables business which was completed in the second quarter 2011, worldwide revenues advanced 10 percent (or 4 percent excluding the impact of foreign currency). Sales within the United States of $1.40 billion grew 1 percent (or 5 percent adjusting for the divestiture). International sales of $2.08 billion advanced 13 percent (or 4 percent excluding the impact of foreign currency), driven by solid performance across the portfolio, particularly in emerging markets.

BioScience revenues totaled $1.52 billion and rose 9 percent (or 4 percent excluding the impact of foreign currency), reflecting robust demand for GAMMAGARD LIQUID [Immune Globulin Intravenous (Human)] (marketed as KIOVIG outside of the United States), certain plasma-based therapeutics, and vaccines. Medical Products sales of $1.95 billion increased 7 percent (or 1 percent excluding the impact of foreign currency). Adjusting for the divestiture, Medical Products sales increased 10 percent (or 4 percent excluding the impact of foreign currency), reflecting strong growth of intravenous therapies and injectable drugs, as well as peritoneal dialysis therapy and anesthesia products in international markets.

 

BAXTER REPORTS 3rd QUARTER FINANCIAL RESULTS — Page 3

   

 

Nine-Month Results

For the first nine months of 2011, Baxter reported net income of $1.76 billion or $3.06 per diluted share, compared to net income of $997 million or $1.67 per diluted share in the same period last year. On an adjusted basis, excluding special items, Baxter’s net income for the nine-month period of $1.81 billion increased 5 percent from the $1.72 billion reported in the prior-year period, and earnings of $3.14 per diluted share increased 9 percent from $2.87 per diluted share reported in the same period last year.

Baxter’s worldwide revenues totaled $10.30 billion and increased 10 percent (or 7 percent excluding the impact of foreign currency) compared to sales of $9.35 billion in the same period of 2010. Excluding the prior-year COLLEAGUE revenue adjustment and the divestiture of the U.S. multi-source generic injectables business, Baxter’s worldwide sales increased 9 percent over the prior-year period (or 5 percent excluding the impact of foreign currency).

Through the first nine months of the year, Baxter generated strong cash flows from operations of $1.93 billion and has returned significant value to shareholders in the form of dividends and share repurchases. Through the third quarter 2011, Baxter has returned $1.95 billion to shareholders through dividends totaling $534 million and share repurchases of approximately $1.41 billion (or 26 million shares), a 9 percent increase versus the prior-year period.

“The evolving global macro-environment will exert ongoing pressures on our business, creating challenges that we will manage through disciplined execution of our strategies,” said Robert L. Parkinson, Jr., chairman and chief executive officer. “We continue to benefit from the diversified and medically-

 

BAXTER REPORTS 3rd QUARTER FINANCIAL RESULTS — Page  4

   

 

necessary nature of our portfolio, broad geographic reach and strong financial position, and remain committed to innovation through clinical differentiation, enhanced operational and cost effectiveness, improved earnings growth, and delivering sustained value for our shareholders.”

Recent Highlights

Baxter continued its commitment to innovation with further investments in research and development and advancements in the new product pipeline, augmented by business development initiatives. The company’s research and development expenditures accelerated 15 percent in the third quarter reflecting progress of investigational therapies in late-stage clinical development and success in obtaining approvals and launching innovative products to the global marketplace. Recent achievements include the following:

 

  •  

U.S. Food and Drug Administration (FDA) approval and launch of GAMMAGARD LIQUID 10% [Immune Globulin Infusion (Human)] for subcutaneous administration in patients with primary immunodeficiency (PI). This approval allows patients to self-administer their therapy at home on a weekly basis and offers patients an option to administer GAMMAGARD LIQUID therapy either intravenously or subcutaneously, depending on their individual needs. The subcutaneous clinical trial in PI patients demonstrated efficacy with limited adverse reactions (mostly local site reactions, which occurred in only 2.7% of infusions).

 

  •  

Submissions to the United States and European regulatory bodies seeking approval for HyQ, Baxter’s investigational immunoglobulin (IG) therapy administered subcutaneously and facilitated by recombinant human hyaluronidase for patients with PI. The filings were supported by the completion of the phase III clinical study which met both primary and secondary endpoints. Final data will be presented at the 2011 Annual Meeting of the American College of Allergy, Asthma and Immunology in Boston, MA in November.

 

BAXTER REPORTS 3rd QUARTER FINANCIAL RESULTS — Page  5

   

 

  •  

FDA approval of an expanded indication for ARTISS [Fibrin Sealant (Human)] to include adhering tissue flaps during facial rhytidectomy (face-lift) surgery. ARTISS is the only premixed, ready-to-use fibrin sealant specifically indicated for tissue adherence in both facial rhytidectomy and burn surgeries. It was first approved by the FDA in 2008 to adhere autologous skin grafts to surgically prepared wound beds resulting from burns in adult and pediatric populations one year of age or older.

 

  •  

Initiation of a global Phase III clinical trial to evaluate the safety and effectiveness of BAX 111, Baxter’s investigational recombinant von Willebrand factor (rVWF), for the treatment and prevention of bleeding episodes in patients with von Willebrand disease. This condition is the most common type of inherited bleeding disorder, affecting both men and women, the vast majority of whom are undiagnosed and not treated due to mild symptoms. BAX 111 is the first and only recombinant von Willebrand product in clinical development.

 

  •  

Clearance under the Hart-Scott-Rodino Antitrust Improvements Act for Baxter’s previously announced $380 million acquisition of Baxa Corporation. Baxter expects to close the acquisition before the end of 2011. Annual sales for Baxa were approximately $150 million in 2010, and Baxter expects the future top-line growth of this business to be accretive to the company’s future sales growth. Nutrition is recognized as an important element of patients’ therapy, and both Baxter and Baxa have sought to advance the delivery of IV nutrition with innovative technologies. The addition of Baxa’s product lines will complement Baxter’s portfolio of nutrition products and drug delivery systems and support patient safety.

Outlook for Fourth Quarter and Full-Year 2011

Baxter also confirmed previously-issued guidance and expects earnings, before special items, of $4.29 to $4.32 per diluted share for full-year 2011. Baxter continues to expect sales growth of 3 to 4 percent excluding the impact of foreign currency and the COLLEAGUE revenue adjustment in 2010 (or 5 to 6 percent including the impact of foreign currency). In addition, the company expects to generate cash flows from operations of approximately $2.8 billion.

For the fourth quarter of 2011, the company expects earnings per diluted share of $1.15 to $1.18, before any special items, and sales growth of 2 to 3 percent excluding the impact of foreign currency (or 1 to 2 percent including the impact of foreign currency).

 

BAXTER REPORTS 3rd QUARTER FINANCIAL RESULTS — Page  6

   

 

A webcast of Baxter’s third 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 October 20, 2011. Please visit Baxter’s website for more information regarding this and future investor events and webcasts.

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 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, outlook for 2011 and R&D pipeline. 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 with respect to the company’s implementation of the COLLEAGUE recall, 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; Sigma’s ability to build production capacity to meet customer demand; future actions of governmental authorities and other third parties as U.S. healthcare reform legislation and other austerity measures are 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; 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; fluctuations in supply and demand and the pricing of plasma-based therapies; 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 current economic conditions on Baxter

 

BAXTER REPORTS 3rd QUARTER FINANCIAL RESULTS — Page  7

   

 

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.

# # #

 

BAXTER — PAGE 8

 

BAXTER INTERNATIONAL INC.

Consolidated Statements of Income

Three Months Ended September 30, 2011 and 2010

(unaudited)

(in millions, except per share and percentage data)

 

Excluding Excluding Excluding
    Three Months Ended
September 30,		        
    2011     2010     Change  

NET SALES

     $   3,479        $  3,224        8%   

COST OF SALES

     1,708        1,565        9%   
   

GROSS MARGIN

     1,771        1,659        7%   
                         

% of Net Sales

     50.9%        51.5%        (0.6 pts ) 

MARKETING AND ADMINISTRATIVE EXPENSES

     787  A      670        17%   

% of Net Sales

     22.6%        20.8%        1.8 pts   

RESEARCH AND DEVELOPMENT EXPENSES

     239        207        15%   

% of Net Sales

     6.9%        6.4%        0.5 pts   

NET INTEREST EXPENSE

     14        24        (42% ) 

OTHER EXPENSE, NET

     4        117  B      (97% ) 
                         

PRE-TAX INCOME

     727        641        13%   
                         

INCOME TAX EXPENSE

     149        117        27%   
                         

% of Pre-Tax Income

     20.5%        18.3%        2.2 pts   

NET INCOME

     578        524        10%   
                         

LESS: NONCONTROLLING INTERESTS

     2        (1 )      N/M   
                         

NET INCOME ATTRIBUTABLE TO BAXTER

     $      576        $     525        10%   
                         
                         

BASIC EPS

     $     1.02        $    0.90        13%   
                         
                         

DILUTED EPS

     $     1.01        $    0.89        13%   
                         
                         

WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING

  

    

Basic

     566        584     

Diluted

     571        587     
                         

ADJUSTED PRE-TAX INCOME (excluding specified items)

    $     806  C      $     753  C      7%   

ADJUSTED NET INCOME ATTRIBUTABLE TO BAXTER (excluding specified items)

     $     624  C      $     595  C      5%   

ADJUSTED DILUTED EPS (excluding specified items)

     $     1.09  C      $     1.01  C      8%   

 

A 

Marketing and administrative expenses in 2011 included a charge totaling $79 million ($48 million, or $0.08 per diluted share, on an after-tax basis) related to the resolution of litigation pertaining to average wholesale prices (AWP) and certain historical rebate and discount adjustments.

 

B 

Other expense, net in 2010 included an impairment charge of $112 million ($70 million, or $0.12 per diluted share, on an after-tax basis) principally to write down assets associated with the company’s divestiture of its U.S. generic injectables business.

 

C 

Refer to page 9 for a description of the adjustments and a reconciliation to generally accepted accounting principles (GAAP) measures.

BAXTER — PAGE 9

 

BAXTER INTERNATIONAL INC.

Note to Consolidated Statements of Income

Three Months Ended September 30, 2011 and 2010

Description of Adjustments 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 September 30, 2011 and 2010 included specified items which impacted the GAAP results as follows:

 

Excluding Excluding Excluding Excluding Excluding Excluding Excluding
    Three Months Ended September 30,  
    2011     2010  
    GAAP       
 		 Specified
items		   
 1 		    
 
 		 Excluding
specified
items		   
  
  		     GAAP       
 		 Specified
item		   
 2 		    
 
 		 Excluding
specified
item		   
  
  		     Change  3 

NET SALES

     $   3,479        $  —        $   3,479        $   3,224        $  —        $   3,224        8%   

COST OF SALES

     1,708        —        1,708        1,565        —        1,565        9%   
                                                         

GROSS MARGIN

     1,771        —        1,771        1,659        —        1,659        7%   
                                                         

% of Net Sales

     50.9%          50.9%        51.5%          51.5%        (0.6 pts ) 

MARKETING AND ADMINISTRATIVE EXPENSES

     787        (79 )      708        670        —        670        6%   

% of Net Sales

     22.6%          20.4%        20.8%          20.8%        (0.4 pts ) 

RESEARCH AND DEVELOPMENT EXPENSES

     239        —        239        207        —        207        15%   

% of Net Sales

     6.9%          6.9%        6.4%          6.4%        0.5 pts   

NET INTEREST EXPENSE

     14        —        14        24        —        24        (42% ) 

OTHER EXPENSE, NET

     4        —        4        117        (112 )      5        (20% ) 
                                                         

PRE-TAX INCOME

     727        79        806        641        112        753        7%   
                                                         

INCOME TAX EXPENSE

     149        31        180        117        42        159        13%   
                                                         

% of Pre-Tax Income

     20.5%          22.3%        18.3%          21.1%        1.2 pts   

NET INCOME

     578        48        626        524        70        594        5%   
                                                         

LESS: NONCONTROLLING INTERESTS

     2        —        2        (1 )      —        (1 )      N/M   
                                                         

NET INCOME ATTRIBUTABLE TO BAXTER

     $      576        $    48        $      624        $      525        $    70        $      595        5%   
                                                         
                                                         

BASIC EPS

     $     1.02        $ 0.08        $     1.10        $     0.90        $ 0.12        $     1.02        8%   
                                                         
                                                         

DILUTED EPS

     $     1.01        $ 0.08        $     1.09        $     0.89        $ 0.12        $     1.01        8%   
                                                         
                                                         

WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING

  

Basic

     566          566        584          584     

Diluted

     571          571        587          587     
                                                         

 

1 

Marketing and administrative expenses in 2011 included a charge totaling $79 million ($48 million, or $0.08 per diluted share, on an after-tax basis) related to the resolution of litigation pertaining to AWP and certain historical rebate and discount adjustments.

 

2 

Other expense, net in 2010 included an impairment charge of $112 million ($70 million, or $0.12 per diluted share, on an after-tax basis) principally to write down assets associated with the company’s divestiture of its U.S. generic injectables business.

 

3 

Represents the percentage change between the 2011 and 2010 results, both excluding specified items.

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 10

 

BAXTER INTERNATIONAL INC.

Consolidated Statements of Income

Nine Months Ended September 30, 2011 and 2010

(unaudited)

(in millions, except per share and percentage data)

 

Excluding Excluding Excluding
    Nine Months Ended
September 30,		        
    2011     2010    

     Change

  

NET SALES

     $  10,299        $   9,345  A      10%   

COST OF SALES

     5,018        5,005  A      0%   
   

GROSS MARGIN

     5,281        4,340        22%   
   

% of Net Sales

       51.3%        46.4%        4.9 pts   

MARKETING AND ADMINISTRATIVE EXPENSES

     2,268  B      2,074  B      9%   

% of Net Sales

     22.0%        22.2%        (0.2 pts ) 

RESEARCH AND DEVELOPMENT EXPENSES

     692        653        6%   

% of Net Sales

     6.7%        7.0%        (0.3 pts ) 

NET INTEREST EXPENSE

     39        68        (43% ) 

OTHER EXPENSE, NET

     21        122  C      (83% ) 
   

PRE-TAX INCOME

     2,261        1,423        59%   
   

INCOME TAX EXPENSE

     477        422  D      13%   
   

% of Pre-Tax Income

     21.1%        29.7%        (8.6 pts ) 

NET INCOME

    1,784        1,001        78%   
   

LESS: NONCONTROLLING INTERESTS

    23        4        N/M   
   

NET INCOME ATTRIBUTABLE TO BAXTER

     $    1,761        $       997        77%   
   
   

BASIC EPS

     $      3.08        $      1.68        83%   
   
   

DILUTED EPS

     $      3.06        $      1.67        83%   
   
   

WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING

  

Basic

     571        593     

Diluted

     575        597     
   

ADJUSTED PRE-TAX INCOME (excluding specified items)

     $    2,340  E      $     2,151  E      9%   

ADJUSTED NET INCOME ATTRIBUTABLE TO BAXTER (excluding specified items)

     $    1,809  E      $     1,716  E      5%   

ADJUSTED DILUTED EPS (excluding specified items)

     $      3.14  E      $       2.87  E      9%   

 

A 

Net sales and cost of sales in the first quarter of 2010 included a charge totaling $588 million, or $0.98 per diluted share, which related to the recall of COLLEAGUE infusion pumps from the U.S. market and other actions the company is undertaking outside of the United States, for which there was no net tax benefit recognized.

 

B 

Marketing and administrative expenses in the third quarter of 2011 included a charge totaling $79 million ($48 million, or $0.08 per diluted share, on an after-tax basis) related to the resolution of litigation pertaining to AWP and certain historical rebate and discount adjustments. Marketing and administrative expenses in the second quarter of 2010 included a charge of $28 million ($22 million, or $0.03 per diluted share, on an after-tax basis) to write down accounts receivable in Greece, principally as a result of the anticipated settlement of certain accounts receivable with the Greek government.

 

C 

Other expense, net in the third quarter of 2010 included an impairment charge of $112 million ($70 million, or $0.12 per diluted share, on an after-tax basis) principally to write down assets associated with the company’s divestiture of its U.S. generic injectables business.

 

D 

Income tax expense in the first quarter of 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.

 

E 

Refer to page 11 for a description of the adjustments and a reconciliation to GAAP measures.

BAXTER — PAGE 11

 

BAXTER INTERNATIONAL INC.

Note to Consolidated Statements of Income

Nine Months Ended September 30, 2011 and 2010

Description of Adjustments and Reconciliation of GAAP to Non-GAAP Measures

(unaudited)

(in millions, except per share and percentage data)

The company’s GAAP results for the nine months ended September 30, 2011 and 2010 included specified items which impacted the GAAP results as follows:

 

Excluding Excluding Excluding Excluding Excluding Excluding Excluding
    Nine Months Ended September 30,        
    2011     2010        
    GAAP       
 		 Specified
items		   
 1 		    
 
 		 Excluding
specified
items		   
  
  		     GAAP       
 		 Specified
items		   
 2 		    
 
 		 Excluding
specified
items		   
  
  		     Change 3   

NET SALES

     $  10,299        $  —        $  10,299        $   9,345        $   213        $   9,558        8%   

COST OF SALES

     5,018        —        5,018        5,005        (375 )      4,630        8%   
                           

GROSS MARGIN

     5,281        —        5,281        4,340        588        4,928        7%   
                                                         

% of Net Sales

     51.3%          51.3%        46.4%          51.6%        (0.3 pts ) 

MARKETING AND ADMINISTRATIVE EXPENSES

     2,268        (79 )      2,189        2,074        (28 )      2,046        7%   

% of Net Sales

     22.0%          21.3%        22.2%          21.4%        (0.1 pt ) 

RESEARCH AND DEVELOPMENT EXPENSES

     692        —        692        653        —        653        6%   

% of Net Sales

     6.7%          6.7%        7.0%          6.8%        (0.1 pt ) 

NET INTEREST EXPENSE

     39        —        39        68        —        68        (43% ) 

OTHER EXPENSE, NET

     21        —        21        122        (112 )      10        110%   
                           

PRE-TAX INCOME

     2,261        79        2,340        1,423        728        2,151        9%   
                                                         

INCOME TAX EXPENSE

     477        31        508        422        9        431        18%   
                                                         

% of Pre-Tax Income

     21.1%          21.7%        29.7%          20.0%        1.7 pts   

NET INCOME

     1,784        48        1,832        1,001        719        1,720        7%   
                                                         

LESS: NONCONTROLLING INTERESTS

     23        —        23        4        —        4        N/M   
                                                         

NET INCOME ATTRIBUTABLE TO BAXTER

     $    1,761        $    48        $    1,809        $      997        $   719        $   1,716        5%   
                                                         
                                                         

BASIC EPS

     $      3.08        $ 0.09        $      3.17        $     1.68        $  1.22        $     2.90        9%   
                                                         
                                                         

DILUTED EPS

     $      3.06        $ 0.08        $      3.14        $     1.67        $  1.20        $     2.87        9%   
                                                         
                                                         

WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING

  

Basic

     571          571        593          593     

Diluted

     575          575        597          597     
                                                         

 

1 

Marketing and administrative expenses in the third quarter of 2011 included a charge totaling $79 million ($48 million, or $0.08 per diluted share, on an after-tax basis) related to the resolution of litigation pertaining to AWP and certain historical rebate and discount adjustments.

 

2 

Net sales and cost of sales in the first quarter of 2010 included a charge totaling $588 million, or $0.98 per diluted share, which related to the recall of COLLEAGUE infusion pumps from the U.S. market and other actions the company is undertaking outside of the United States, for which there was no net tax benefit recognized. Marketing and administrative expenses in the second quarter of 2010 included a charge of $28 million ($22 million, or $0.03 per diluted share, on an after-tax basis) to write down accounts receivable in Greece, principally as a result of the anticipated settlement of certain accounts receivable with the Greek government. Other expense, net in the third quarter of 2010 included an impairment charge of $112 million ($70 million, or $0.12 per diluted share, on an after-tax basis) principally to write down assets associated with the company’s divestiture of its U.S. generic injectables business. Income tax expense in the first quarter of 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.

 

3 

Represents the percentage change between the 2011 and 2010 results, both excluding specified items.

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 12

 

BAXTER INTERNATIONAL INC.

Cash Flows from Operations and Changes in Net Debt

(unaudited)

($ in millions)

 

September30,2011 September30,2011 September30,2011 September30,2011
Cash Flows from Operations        
   (Brackets denote cash outflows)        
    Three Months  Ended
September 30,		     Nine Months  Ended
September 30,		  
    2011     2010     2011     2010  

   Net income

     $   578        $     524        $ 1,784        $ 1,001   

   Adjustments

        

   Depreciation and amortization

     176        171        503        506   

   Deferred income taxes

     58        49        218        169  A 

   Stock compensation

     33        29        94        92   

   Realized excess tax benefits from stock issued under employee benefit plans

     (4 )      (1 )      (17 )      (35 ) 

   COLLEAGUE infusion pump charge

     —        —        —        588   

   Impairment charge

     —        112        —        112   

   Other

     85        23        103        56   

   Changes in balance sheet items

        

   Accounts and other current receivables

     55        11        (102 )      (27 ) 

   Inventories

     (58 )      25        (272 )      (94 ) 

   Accounts payable and accrued liabilities

     34        114        (90 )      (38 ) 

   Infusion pump and business optimization payments

     (111 )      (21 )      (258 )      (62 ) 

   Other

    76        (30 )      (38 ) B      (200 ) B 
                                 

   Cash flows from operations

     $   922        $  1,006        $ 1,925        $ 2,068   
   
       
Changes in Net Debt        
    Increase (decrease)        
    Three Months  Ended
September 30,		     Nine Months  Ended
September 30,		  
                             2011                              2010     2011     2010  

   Net debt, beginning of period

     $  2,382        $  2,514        $  1,702        $  1,365   

   Cash flows from operations

     (922 )      (1,006 )      (1,925 )      (2,068 ) 

   Capital expenditures

     235        232        643        699   

   Dividends

     176        171        534        519   

   Proceeds from stock issued under employee benefit plans

     (97 )      (33 )      (388 )      (234 ) 

   Purchases of treasury stock

     298        161        1,413        1,273   

   Acquisitions and investments

     27        20        229  C      274  C 

   Divestiture and other

     —        —        (106 )       —   

   Other, including the effect of exchange rate changes

     105        36        102        267   
                                 

   (Decrease) increase in net debt

     (178 )      (419 )      502        730   
                                 

   Net debt, September 30

     $  2,204        $  2,095        $  2,204        $  2,095   
                   
                   
   

Key statistics, September 30:

                                

Days sales outstanding

     54.5        56.2        54.5        56.2   

Inventory turns

     2.5        2.4        2.5        2.4   
       
Selected balance sheet information:                 September 30, 2011     December 31, 2010  

Cash and equivalents

         $2,338        $2,685   

Accounts and other current receivables

         $2,347        $2,265   

Inventories

         $2,621        $2,371   

Accounts payable and accrued liabilities

                     $4,070        $4,017   

 

A 

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.

 

B 

Other cash flows from operations included planned contributions to the company’s pension plan in the United States of $150 million and $300 million in the first quarters of 2011 and 2010, respectively.

 

C 

Acquisitions and investments in 2011 and 2010 principally related to the second quarter 2011 acquisition of Prism Pharmaceuticals, Inc., a specialty pharmaceutical company based in the United States, and the first quarter 2010 acquisition of ApaTech Limited, an orthobiologic products company based in the United Kingdom.

BAXTER — PAGE 13

 

BAXTER INTERNATIONAL INC.

Net Sales

Periods Ending September 30, 2011 and 2010

(unaudited)

($ in millions)

 

ConstantRates ConstantRates ConstantRates ConstantRates ConstantRates ConstantRates ConstantRates ConstantRates
    

Q3

2011

       

Q3

2010

     % Growth @
Actual Rates		    

% Growth @    

Constant Rates    

    

YTD

2011

     

YTD

2010

     % Growth @
Actual Rates		     % Growth @
Constant Rates		  
                                                                         

BioScience

                      

United States

     $    699           $    666        5%         5%             $   2,070         $ 1,912        8%         8%    

International

     818           721        13%         4%             2,408         2,195        10%         4%    

Total BioScience

     $1,517           $1,387        9%         4%             $  4,478         $4,107        9%         6%    

        

                                                                    

Medical Products 1

                      

United States 2,3

    $    692           $    713        (3%)        (3%)            $   2,144         $ 2,097        2%         2%    

International

     1,258           1,111        13%         4%             3,647         3,317        10%         4%    

Total Medical Products - Adjusted 2,3

     $1,950           $1,824        7%         1%             $  5,791         $5,414        7%         3%    

COLLEAGUE infusion pump charge 2

                                                (213 )                 

Total Medical Products - GAAP 2,3

     $1,950           $1,824        7%         1%             $  5,791         $5,201        11%         7%    

        

                                                                    

Transfusion Therapies 4

                      

United States

     $      12           $      10        20%         20%             $        29         $      28        4%         4%    

International

     —           3        N/M         N/M             1         9        (89%)        (89%)   

Total Transfusion Therapies

     $     12           $     13        (8%)        (8%)            $       30         $    37        (19%)        (19%)   

        

                                                                    

Baxter International Inc.

                     

United States 2,3

    $ 1,403           $ 1,389        1%         1%             $   4,243         $ 4,037        5%         5%    

International

     2,076           1,835        13%         4%             6,056         5,521        10%         4%    

Total Baxter - Adjusted 2,3

     $3,479           $3,224        8%         3%             $10,299         $9,558        8%         4%    

COLLEAGUE infusion pump charge 2

                                                (213 )                 

Total Baxter - GAAP 2,3

     $3,479           $3,224        8%         3%             $10,299         $9,345        10%         7%    
   
   

 

1         Medical Products represents the combination of the company’s former Medication Delivery and Renal businesses into a single global business unit. Effective January 1, 2011, the company changed its segment presentation to reflect this new structure, and recast all prior periods presented to conform to the new presentation.

 

2         GAAP net sales in the first quarter of 2010 included a charge of $213 million related to the recall of COLLEAGUE infusion pumps. Refer to page 17 for a reconciliation to GAAP measures.

 

3         Included net sales related to the U.S. generic injectables business through the May 2011 divestiture date. The impact on adjusted net sales for total Medical Products and total Baxter was as follows ($ in millions):

 

               

              

              

    

Q3

2011

       

Q3

2010

     % Growth @
Actual Rates		    

% Growth @    

Constant Rates    

    

YTD

2011

     

YTD

2010

     % Growth @
Actual Rates		     % Growth @
Constant Rates		  

Total Medical Products - Adjusted 2

     $1,950           $1,824        7%        1%             $  5,791         $5,414        7%        3%   

U.S. generic injectables business

                (57 )                      (58 )       (143 )                 

Total Medical Products - Adjusted (Excluding U.S. Generic Injectables)

     $1,950           $1,767        10%        4%             $  5,733         $5,271        9%        5%   

        

                                                                    

Total Baxter - Adjusted 2

     $3,479           $3,224        8%        3%             $10,299         $9,558        8%        4%   

U.S. generic injectables business

                (57 )                      (58 )       (143 )                 

Total Baxter - Adjusted (Excluding U.S. Generic Injectables)

     $3,479           $3,167        10%        4%             $10,241         $9,415        9%        5%   
   
   

 

4         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 14

 

BAXTER INTERNATIONAL INC.

GAAP Key Product Line Sales

Periods Ending September 30, 2011 and 2010

(unaudited)

($ in millions)

 

Constant Rates Constant Rates Constant Rates Constant Rates Constant Rates Constant Rates Constant Rates Constant Rates
      GAAP
Q3 2011		     GAAP
Q3 2010		     % Growth @
Actual Rates		    

% Growth @    

Constant Rates    

    

GAAP

YTD 2011

     GAAP
YTD 2010		     % Growth @
Actual Rates		     % Growth @
Constant Rates		  
                                                           

BioScience

                     

Recombinants

      $   552        $   526        5%        (1%)          $  1,634        $1,561        5%        1%   

Plasma Proteins

     372        346        8%        4%           1,043        952        10%        7%   

Antibody Therapy

      380        336        13%        11%           1,135        968        17%        17%   

Regenerative Medicine

      143        130        10%        5%           430        382        13%        10%   

Other 1

      70        49        43%        15%           236        244        (3% )      (12% ) 

Total BioScience

      $1,517        $1,387        9%        4%           $  4,478        $4,107        9%        6%   

        

                                                                 

Medical Products 2

                     

Renal

      $   646        $   594        9%        2%           $  1,866        $1,763        6%        1%   

Global Injectables

      494        469        5%        0%           1,517        1,392        9%        6%   

IV Therapies

      453        417        9%        3%           1,333        1,226        9%        5%   

Infusion Systems 3

      222        213        4%        1%           666        425        57%        53%   

Anesthesia

     129        127        2%        (2%)          390        384        2%        (1% ) 

Other

      6        4        40%        (4%)          19        11        73%        13%   

Total Medical Products 3

      $1,950        $1,824        7%        1%           $  5,791        $5,201        11%        7%   

        

                                                                 

Transfusion Therapies 4

      $     12        $     13        (8% )      (8%)          $       30        $     37        (19% )      (19% ) 

        

                                                                 

Total Baxter 3

      $3,479        $3,224        8%        3%           $10,299        $9,345        10%        7%   
                                   
                                   

 

 1

Principally includes vaccines and sales of plasma to third parties.

 

 2

Medical Products represents the combination of the company’s former Medication Delivery and Renal businesses into a single global business unit. Effective January 1, 2011, the company changed its segment presentation to reflect this new structure, and recast all prior periods presented to conform to the new presentation.

 

 3

GAAP net sales in the first quarter of 2010 included a charge of $213 million related to the recall of COLLEAGUE infusion pumps. Refer to page 17 for a reconciliation to GAAP measures.

 

 4

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 15

 

BAXTER INTERNATIONAL INC.

Adjusted Key Product Line Sales

Periods Ending September 30, 2011 and 2010

(unaudited)

($ in millions)

 

ConstantRates ConstantRates ConstantRates ConstantRates ConstantRates ConstantRates ConstantRates ConstantRates
     

 

GAAP

Q3  2011

  

 1 

   
 		 GAAP
Q3 2010		   
 1 		    
 		 % Growth @
Actual Rates		   
  		    
 		 % Growth @    
Constant Rates     		   
  		    
 		 GAAP
YTD 2011		   
 1 		    
 		 Adjusted
YTD 2010		   
  		    
 		 % Growth @
Actual Rates		   
  		    
 		 % Growth @
Constant Rates		   
  
                                                                

BioScience

                    

Recombinants

     $   552        $   526        5%        (1%)          $  1,634        $1,561        5%        1%   

Plasma Proteins

    372        346        8%        4%           1,043        952        10%        7%   

Antibody Therapy

     380        336        13%        11%           1,135        968        17%        17%   

Regenerative Medicine

     143        130        10%        5%           430        382        13%        10%   

Other 2

     70        49        43%        15%           236        244        (3% )      (12% ) 

Total BioScience

     $1,517        $1,387        9%        4%           $  4,478        $4,107        9%        6%   

        

                                                                

Medical Products 3

                    

Renal

     $   646        $   594        9%        2%           $  1,866        $1,763        6%        1%   

Global Injectables

     494        469        5%        0%           1,517        1,392        9%        6%   

IV Therapies

     453        417        9%        3%           1,333        1,226        9%        5%   

Infusion Systems - Adjusted 4

     222        213        4%        1%           666        638        4%        2%   

Anesthesia

    129        127        2%        (2%)          390        384        2%        (1% ) 

Other

     6        4        40%        (4%)          19        11        73%        13%   

Total Medical Products - Adjusted 4

     $1,950        $1,824        7%        1%           $  5,791        $5,414        7%        3%   

        

                                                                

Transfusion Therapies 5

     $     12        $     13        (8% )      (8%)          $       30        $     37        (19% )      (19% ) 

        

                                                                

Total Baxter - Adjusted 4

     $3,479        $3,224        8%        3%           $10,299        $9,558        8%        4%   
                                   
                                   

 

 1

There were no adjustments included in the 2011 GAAP results or the Q3 2010 GAAP results.

 

 2

Principally includes vaccines and sales of plasma to third parties.

 

 3

Medical Products represents the combination of the company’s former Medication Delivery and Renal businesses into a single global business unit. Effective January 1, 2011, the company changed its segment presentation to reflect this new structure, and recast all prior periods presented to conform to the new presentation.

 

 4

Adjusted net sales in the first quarter of 2010 excluded a charge of $213 million related to the recall of COLLEAGUE infusion pumps. Refer to page 17 for a reconciliation to GAAP measures.

 

 5

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 16

 

BAXTER INTERNATIONAL INC.

Key Product Line Sales by U.S. and International

Three-Month Periods Ending September 30, 2011 and 2010

(unaudited)

($ in millions)

 

$1,403 $1,403 $1,403 $1,403 $1,403 $1,403 $1,403 $1,403 $1,403
        Q3 2011        Q3 2010      % Growth  
         U.S.         International           Total           U.S.        International           Total         U.S.        International           Total   

    

                                                                                         

BioScience

                                         

Recombinants

        $   246         $   306           $   552           $   237        $   289           $   526         4%        6%           5%   

Plasma Proteins

       104         268           372           113        233           346         (8% )      15%           8%   

Antibody Therapy

        267         113           380           230        106           336         16%        7%           13%   

Regenerative Medicine

        78         65           143           79        51           130         (1% )      27%           10%   

Other 1

        4         66           70           7        42           49         (43% )      57%           43%   

Total BioScience

        $   699         $   818           $1,517           $   666        $   721           $1,387         5%        13%           9%   
                                                  

    

                                                                                         

Medical Products 2

                                         

Renal

        $     96         $   550           $   646           $     99        $   495           $   594         (3% )      11%           9%   

Global Injectables 3

       237         257           494           257        212           469         (8% )      21%           5%   

IV Therapies

        148         305           453           144        273           417         3%        12%           9%   

Infusion Systems

        133         89           222           127        86           213         5%        3%           4%   

Anesthesia

       77         52           129           84        43           127         (8% )      21%           2%   

Other

        1         5           6           2        2           4         (57% )      150%           40%   
                                                  

Total Medical Products 3

        $   692         $1,258           $1,950           $   713        $1,111           $1,824         (3% )      13%           7%   
                                                  

    

                                                                                         

Transfusion Therapies 4

        $     12         $   —             $     12           $     10        $       3           $     13         20%        N/M           (8% ) 
                                                  

    

                                                                                         

Total Baxter 3

        $1,403         $2,076           $3,479           $1,389        $1,835           $3,224         1%        13%           8%   
                                                  
                                                  

 

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

 

2          Medical Products represents the combination of the company’s former Medication Delivery and Renal businesses into a single global business unit. Effective January 1, 2011, the company changed its segment presentation to reflect this new structure, and recast all prior periods presented to conform to the new presentation.

 

3          Included net sales related to the U.S. generic injectables business through the May 2011 divestiture date. The impact on GAAP net sales for total Medical Products and total Baxter was as follows ($ in millions):

 

            

               

              

        Q3 2011        Q3 2010      % Growth  
         U.S.         International               Total               U.S.        International                 Total             U.S.        International                 Total   

    

                                                                                         

Total Medical Products

        $   692         $1,258           $1,950           $  713        $1,111           $1,824         (3% )         13%              7%   

U.S. generic injectables business

                       (57 )           (57 )             
                                                                                          

Total Medical Products (Excluding U.S. Generic Injectables)

        $   692         $1,258           $1,950           $  656        $1,111           $1,767         6%          13%            10%   
                                                                                          

    

                                                                                         

Total Baxter

        $1,403         $2,076           $3,479           $1,389        $1,835           $3,224         1%           13%             8%   
                                                                                          

U.S. generic injectables business

                       (57 )           (57 )             
                                                                                          

Total Baxter (Excluding U.S. Generic Injectables)

        $1,403         $2,076           $3,479           $1,332        $1,835           $3,167         5%           13%           10%   
                                                                                          
                                                                                          

 

4         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 17

 

BAXTER INTERNATIONAL INC.

Reconciliation of GAAP to Non-GAAP Net Sales Measures

Periods Ending September 30, 2011 and 2010

(unaudited)

($ in millions)

The company’s GAAP net sales results for the nine months ended September 30, 2010 included a $213 million charge related to the recall of COLLEAGUE infusion pumps, which impacted GAAP net sales as follows:

 

000000 000000 000000 000000 000000 000000 000000 000000 000000 000000 000000 000000
     2011 YTD     2010 YTD    

% Growth @
Actual Rates

     % Growth @ Constant
Rates		  
      U.S.        International        Total          U.S.        International        Total          U.S.        International           Total          U.S.        International           Total   

Infusion Systems - GAAP

         $     666              $   425              57%              53%   

COLLEAGUE infusion pump charge

               213                   

Infusion Systems - Adjusted

                     $     666                          $   638                          4%                          2%   

    

                                                                                                

Total Medical Products - GAAP

     $2,144        $3,647        $  5,791          $1,884        $3,317        $5,201          14%        10%        11%          14%        4%        7%   

COLLEAGUE infusion pump charge

                             213                213                                                     

Total Medical Products - Adjusted

     $2,144        $3,647        $  5,791          $2,097        $3,317        $5,414          2%        10%        7%          2%        4%        3%   

    

                                                                                                

Total Baxter - GAAP

     $4,243        $6,056        $10,299          $3,824        $5,521        $9,345          11%        10%        10%          11%        4%        7%   

COLLEAGUE infusion pump charge

                             213                213                                                     

Total Baxter - Adjusted

     $4,243        $6,056        $10,299          $4,037        $5,521        $9,558          5%        10%        8%          5%        4%        4%   
                                                                                                 

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.