EXHIBIT 99
| | |
Media contacts: | | Deborah Spak, (847) 948-2349 Cindy Resman, (847) 948-2815 |
| |
Investor contacts: | | Mary Kay Ladone, (847) 948-3371 Clare Sullivan, (847) 948-3085 |
|
BAXTER REPORTS EARNINGS PER SHARE OF $0.51 AND 8 PERCENT INCREASE IN SALES IN SECOND QUARTER DEERFIELD, Ill., July 21, 2005 – Baxter International Inc. (NYSE:BAX) today reported its results for the second quarter of 2005. Earnings per diluted share from continuing operations were $0.51, compared to a loss of $0.28 reported last year. Baxter’s income from continuing operations totaled $324 million for the quarter, compared to a loss of $169 million reported in the same period last year. The second quarter 2005 results include a $65 million (or $0.10 per diluted share) after-tax charge associated with the COLLEAGUE® Volumetric Infusion Pump remediation efforts announced today. If additional remediation efforts are necessary in the future, further charges may be required. The second quarter results also include an $80 million (or $0.12 per diluted share) after-tax benefit from adjustments to Baxter’s restructuring charges, which were recorded originally in 2003 and 2004. On an adjusted basis, excluding the charge and restructuring benefit, earnings from continuing operations were $309 million in the second quarter, or $0.49 per diluted share. Contributing to the growth in earnings was strong operational performance, including improved sales, gross and operating margin, and lower taxes. |
—more— |
BAXTER REPORTS SECOND QUARTER RESULTS/Page 2
The second-quarter results include a $0.03 per diluted share benefit from a year-to-date tax adjustment, as the company adjusted its income tax rate to the anticipated 2005 full-year rate of 22 percent. This rate reflects savings related to a change in estimate of the company’s tax rate due to ongoing improvements to the company’s geographic product sourcing strategy.
Worldwide sales in the second quarter totaled $2.6 billion, an increase of 8 percent over the same period last year (including a 3 percentage point benefit from foreign exchange). Domestic sales increased 6 percent to $1.2 billion, while international sales grew 11 percent (including a 7 percentage point benefit from foreign exchange) to $1.4 billion. In addition to the positive impact of foreign exchange, strong performance from the company’s recombinant and drug delivery businesses contributed to sales growth in the quarter. Sales of Baxter’s recombinant products grew 24 percent to $397 million, including $148 million in sales of ADVATE®, the company’s Antihemophilic Factor (Recombinant), Plasma/Albumin Free Method (rAHF-PFM) product for the treatment of hemophilia A.
Cash flow from continuing operations totaled $508 million for the quarter, compared to $305 million in the same period last year. Free cash flow (cash flow from continuing operations, less capital expenditures of $98 million in 2005 and $139 million in 2004) was $410 million for the quarter, an improvement of $244 million from the second quarter last year.
“We are pleased with the improvement in our operational and financial performance. We’ve continued to meet our commitments with solid improvement in operating margin, earnings and cash flow,” said Robert L. Parkinson, Jr., chairman
—more—
BAXTER REPORTS SECOND QUARTER RESULTS/Page 3
and chief executive officer. “We are committed to improve our business processes and product quality, continue to execute upon our long-term business strategies, and leverage the value inherent within our business portfolio.”
Six-Month Results
For the first six months of 2005, Baxter’s worldwide sales grew 8 percent to $5.0 billion, up from $4.6 billion in the same period last year. Foreign exchange favorably impacted sales growth by 3 percentage points year-to-date. Domestic sales totaled $2.2 billion, an increase of 4 percent over the same period last year, while international sales increased 12 percent (including a 6 percentage point benefit from foreign exchange), to $2.8 billion.
Baxter’s income from continuing operations totaled $548 million, or $0.88 per diluted share, in the first six months of the year, including the charge and restructuring benefit recorded in the second quarter. Excluding these items, the company reported year-to-date income from continuing operations of $533 million, and earnings per diluted share from continuing operations of $0.85.
Cash flow from continuing operations totaled $779 million for the first six months of the year, compared to $252 million in the same period in 2004. Free cash flow (cash flow from continuing operations, less capital expenditures of $163 million in 2005 and $229 million in 2004) was $616 million for the first half of 2005, an improvement of $593 million from the same period last year.
—more—
BAXTER REPORTS SECOND QUARTER RESULTS/Page 4
Third Quarter and Full-Year 2005 Outlook
For the third quarter of 2005, the company expects organic sales growth of 2 to 4 percent, and earnings per diluted share from continuing operations of $0.45 to $0.47.
For full-year 2005, Baxter expects organic sales growth of 2 to 4 percent and adjusted earnings per diluted share from continuing operations of $1.86 to $1.90. Baxter also expects cash flow from continuing operations to exceed $1.6 billion, and to generate free cash flow of at least $1.0 billion in 2005 (after approximately $550 million of anticipated capital expenditures).
The company’s guidance above excludes the $0.02 per diluted share net benefit from the second-quarter charge and restructuring adjustment, future pre-tax charges expected to total $40 to $50 million related to the rationalization of its hemodialysis instrument manufacturing capacity, and the cost to repatriate foreign earnings under the American Jobs Creation Act of 2004. Including the $0.02 per diluted share net benefit of the second-quarter items, Baxter’s full-year earnings guidance under Generally Accepted Accounting Principles (GAAP) is expected to be $1.88 to $1.92 per diluted share.
A webcast of Baxter’s second 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 July 21, 2005. Please visit Baxter’s website for more information regarding this and future investor events and webcasts, including investor presentations.
—more—
BAXTER REPORTS SECOND QUARTER RESULTS/Page 5
Baxter International Inc., through its subsidiaries, assists healthcare professionals and their patients with the treatment of complex medical conditions, including cancer, hemophilia, immune disorders, kidney disease and trauma. The company applies its expertise in medical devices, pharmaceuticals and biotechnology to make a meaningful difference in patients’ lives.
This release includes forward-looking statements concerning the company’s financial results for the third quarter and full year, as well as developments with respect to the COLLEAGUE infusion pump. 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: timely realization of the benefits of the company’s restructuring initiatives; the impact of geographic and product mix on the company’s sales; actions of regulatory bodies and other governmental authorities, including the Food and Drug Administration and foreign counterparts that could delay, limit or suspend product sales and distribution, including with respect to the COLLEAGUE infusion pump; product quality or patient safety concerns leading to product recalls, withdrawals, launch delays or declining sales; product development risks; interest rates; demand for and market acceptance risks for new and existing products, such as ADVATE, and other technologies; the impact of competitive products and pricing, including generic competition, drug reimportation and disruptive technologies; inventory reductions or fluctuations in buying patterns by wholesalers or distributors; foreign currency exchange rates; the availability of acceptable raw materials and component supply; global regulatory, trade and tax policies; regulatory, legal or other developments relating to the company’s A, AF and AX series dialyzers; the ability to enforce patents; patents of third parties preventing or restricting the company’s manufacture, sale or use of affected products or technology; reimbursement policies of government agencies and private payers; results of product testing; and other risks identified in the company’s most recent filing on Form 10-Q and other SEC filings, all of which are available on the company’s web site. The company does not undertake to update its forward-looking statements. Financial schedules, including additional reconciliations of non-GAAP measures, are attached to this release and available on the company’s website.
# # #
BAXTER – PAGE 6
GAAP
BAXTER INTERNATIONAL INC.
Consolidated Statements of Income
(unaudited)
(in millions, except per share data)
| | | | | | | | | | | | | | | | | | |
| | | Three Months Ended
June 30,
| | | | | | Six Months Ended
June 30,
| | | | |
| | | 2005
| | | 2004
| | | Change
| | | 2005
| | | 2004
| | | Change
| |
CONTINUING OPERATIONS: | | | | | | | | | | | | | | | | | | |
| | | | | | |
NET SALES | | $2,577 | | | $2,379 | | | 8% | | | $4,960 | | | $4,588 | | | 8% | |
| | | | | | |
GROSS PROFIT | | 1,113 | | | 939 | | | 19% | | | 2,082 | | | 1,832 | | | 14% | |
% to Sales | | 43.2% | | | 39.5% | | | 3.7 pts | | | 42.0% | | | 39.9% | | | 2.1 pts | |
| | | | | | |
MARKETING AND ADMINISTRATIVE EXPENSES | | 537 | | | 532 | | | 1% | | | 1,020 | | | 998 | | | 2% | |
% to Sales | | 20.8% | | | 22.4% | | | (1.6 pts | ) | | 20.6% | | | 21.8% | | | (1.2 pts | ) |
| | | | | | |
RESEARCH AND DEVELOPMENT EXPENSES | | 133 | | | 129 | | | 3% | | | 266 | | | 265 | | | -% | |
| | | | | | |
SPECIAL CHARGES, NET | | (27 | ) | | 543 | | | NM | | | (27 | ) | | 543 | | | NM | |
| | | | | | | | | | | | | | | | | | | |
OPERATING INCOME (LOSS) | | 470 | | | (265 | ) | | NM | | | 823 | | | 26 | | | NM | |
% to Sales | | 18.2% | | | (11.1% | ) | | NM | | | 16.6% | | | 0.6% | | | 16.0 pts | |
| | | | | | |
INTEREST, NET | | 33 | | | 25 | | | 32% | | | 64 | | | 46 | | | 39% | |
| | | | | | |
OTHER EXPENSE, NET | | 25 | | | 42 | | | (40% | ) | | 49 | | | 63 | | | (22% | ) |
| | | | | | |
INCOME (LOSS) BEFORE INCOME TAXES | | 412 | | | (332 | ) | | NM | | | 710 | | | (83 | ) | | NM | |
| | | | | | |
INCOME TAX EXPENSE (BENEFIT) | | 88 | | | (163 | ) | | NM | | | 162 | | | (101 | ) | | NM | |
| | | | | | |
INCOME (LOSS) FROM CONTINUING OPERATIONS | | $324 | | | ($169 | ) | | NM | | | $548 | | | $18 | | | NM | |
| | | | | | |
BASIC EPS FROM CONTINUING OPERATIONS | | $0.52 | | | ($0.28 | ) | | NM | | | $0.88 | | | $0.03 | | | NM | |
| | | | | | |
DILUTED EPS FROM CONTINUING OPERATIONS | | $0.51 | | | ($0.28 | ) | | NM | | | $0.88 | | | $0.03 | | | NM | |
| | | | | | |
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING | | | | | | | | | | | | | | | | | | |
Basic | | 621 | | | 613 | | | | | | 620 | | | 613 | | | | |
Diluted | | 626 | | | 613 | | | | | | 624 | | | 617 | | | | |
| | | | | | | |
RECONCILIATION TO NET INCOME | | | | | | | | | | | | | | | | | | |
| | | | | | |
Income (loss) from continuing operations | | $324 | | | ($169 | ) | | | | | $548 | | | $18 | | | | |
Discontinued operations | | (2 | ) | | (1 | ) | | | | | — | | | (12 | ) | | | |
Net income (loss) | | $322 | | | ($170 | ) | | | | | $548 | | | $6 | | | | |
NM—Not meaningful | | | | | | | | | | | | | | | | | | |
BAXTER – PAGE 7
ADJUSTED
BAXTER INTERNATIONAL INC.
Adjusted Consolidated Statements of Income
(unaudited)
(in millions, except per share data)
| | | | | | | | | | | | | | | | |
| | | Three Months
Ended June 30,
| | | | | | Six Months Ended
June 30,
| | | |
| | | 2005
| | | 2004
| | | Change
| | | 2005
| | 2004
| | | Change
|
CONTINUING OPERATIONS: | | | | | | | | | | | | | | | | |
| | | | | | |
NET SALES | | $2,577 | | | $2,379 | | | 8% | | | $4,960 | | $4,588 | | | 8% |
| | | | | | |
GROSS PROFIT | | 1,113 | | | 984 | | | 13% | | | 2,082 | | 1,877 | | | 11% |
% to Sales | | 43.2% | | | 41.4% | | | 1.8 pts | | | 42.0% | | 40.9% | | | 1.1 pts |
| | | | | | |
MARKETING AND ADMINISTRATIVE EXPENSES | | 537 | | | 477 | | | 13% | | | 1,020 | | 943 | | | 8% |
% to Sales | | 20.8% | | | 20.1% | | | 0.7 pts | | | 20.6% | | 20.6% | | | — pts |
| | | | | | |
RESEARCH AND DEVELOPMENT EXPENSES | | 133 | | | 129 | | | 3% | | | 266 | | 265 | | | —% |
| | | | | | |
OPERATING INCOME | | 443 | | | 378 | | | 17% | | | 796 | | 669 | | | 19% |
% to Sales | | 17.2% | | | 15.9% | | | 1.3 pts | | | 16.0% | | 14.6% | | | 1.4 pts |
| | | | | | |
INTEREST, NET | | 33 | | | 25 | | | 32% | | | 64 | | 46 | | | 39% |
| | | | | | |
OTHER EXPENSE, NET | | 25 | | | 27 | | | (7% | ) | | 49 | | 48 | | | 2% |
| | | | | | |
INCOME BEFORE INCOME TAXES | | 385 | | | 326 | | | 18% | | | 683 | | 575 | | | 19% |
| | | | | | |
INCOME TAX EXPENSE | | 76 | | | 81 | | | (6% | ) | | 150 | | 143 | | | 5% |
| | | | | | |
INCOME FROM CONTINUING OPERATIONS | | $309 | | | $245 | | | 26% | | | $533 | | $432 | | | 23% |
| | | | | | |
BASIC EPS FROM CONTINUING OPERATIONS | | $0.50 | | | $0.40 | | | 25% | | | $0.86 | | $0.70 | | | 23% |
| | | | | | |
DILUTED EPS FROM CONTINUING OPERATIONS | | $0.49 | | | $0.40 | | | 23% | | | $0.85 | | $0.70 | | | 21% |
| | | | | | |
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING | | | | | | | | | | | | | | | | |
Basic | | 621 | | | 613 | | | | | | 620 | | 613 | | | |
Diluted | | 626 | | | 613 | | | | | | 624 | | 617 | | | |
| | | | | | |
RECONCILIATION OF ADJUSTED AMOUNTS TO GAAP AMOUNTS | | | | | | | | | | | | | | | | |
| | | | | | |
Net Income | | | | | | | | | | | | | | | | |
Adjusted net income from continuing operations | | $309 | | | $245 | | | | | | $533 | | $432 | | | |
Special charges, net | | 15 | | | (414 | ) | | | | | 15 | | (414 | ) | | |
Discontinued operations | | (2 | ) | | (1 | ) | | | | | — | | (12 | ) | | |
GAAP net income (loss) | | $322 | | | ($170 | ) | | | | | $548 | | $6 | | | |
| | | | | | |
Diluted EPS | | | | | | | | | | | | | | | | |
Adjusted net income from continuing operations | | $0.49 | | | $0.40 | | | | | | $0.85 | | $0.70 | | | |
Special charges, net | | 0.02 | | | (0.68 | ) | | | | | 0.03 | | (0.67 | ) | | |
Discontinued operations | | — | | | — | | | | | | — | | (0.02 | ) | | |
GAAP net income (loss) | | $0.51 | | | ($0.28 | ) | | | | | $0.88 | | $0.01 | | | |
Non-GAAP Financial Measures: The non-GAAP (generally accepted accounting principles) financial measures contained in this press release (including the presentation above of earnings and per-share earnings, excluding certain items) adjust for factors that are unusual or nonrecurring. Unusual or nonrecurring items can be highly variable, difficult to predict, and of a size that may substantially impact the company’s reported operations for a period. Management believes that non-GAAP financial measures can facilitate a fuller analysis of the company’s results of operations, particularly in evaluating performance period over period. Management uses these non-GAAP financial measures internally in financial planning, to monitor performance, and in setting performance compensation targets.
BAXTER – PAGE 8
GAAP to ADJUSTED
RECONCILIATION - Quarter
BAXTER INTERNATIONAL INC.
Consolidated Statements of Income
Reconciliation of GAAP to Adjusted
Three Months Ended June 30, 2005 and 2004
(unaudited)
(in millions, except per share data)
| | | | | | | | | | | | | | | | |
| | | Three Months Ended
June 30, 2005
| | Three Months Ended
June 30, 2004
|
| | | GAAP
| | | Special
Items
| | | Adjusted
| | GAAP
| | | Special
Items
| | | Adjusted
|
CONTINUING OPERATIONS: | | | | | | | | | | | | | | | | |
| | | | | | |
NET SALES | | $2,577 | | | | | | $2,577 | | $2,379 | | | | | | $2,379 |
| | | | | | |
GROSS PROFIT | | 1,113 | | | | | | 1,113 | | 939 | | | $45 | (C) | | 984 |
| | | | | | |
MARKETING AND ADMINISTRATIVE EXPENSES | | 537 | | | | | | 537 | | 532 | | | 55 | (D) | | 477 |
| | | | | | |
RESEARCH AND DEVELOPMENT EXPENSES | | 133 | | | | | | 133 | | 129 | | | | | | 129 |
| | | | | | |
SPECIAL CHARGES, NET | | (27 | ) | | (27 | ) (A) | | — | | 543 | | | 543 | (E) | | — |
| | | | | | | | | | | | | | | | | |
OPERATING INCOME (LOSS) | | 470 | | | (27 | ) | | 443 | | (265 | ) | | 643 | | | 378 |
| | | | | | |
INTEREST, NET | | 33 | | | | | | 33 | | 25 | | | | | | 25 |
| | | | | | |
OTHER EXPENSE, NET | | 25 | | | | | | 25 | | 42 | | | 15 | (F) | | 27 |
| | | | | | |
INCOME (LOSS) BEFORE INCOME TAXES | | 412 | | | (27 | ) | | 385 | | (332 | ) | | 658 | | | 326 |
| | | | | | |
INCOME TAX EXPENSE (BENEFIT) | | 88 | | | 12 | (B) | | 76 | | (163 | ) | | (244 | ) (G) | | 81 |
| | | | | | |
INCOME (LOSS) FROM CONTINUING OPERATIONS | | $324 | | | ($15 | ) | | $309 | | ($169 | ) | | $414 | | | $245 |
| | | | | | |
BASIC EPS FROM CONTINUING OPERATIONS | | $0.52 | | | ($0.02 | ) | | $0.50 | | ($0.28 | ) | | $0.68 | | | $0.40 |
| | | | | | |
DILUTED EPS FROM CONTINUING OPERATIONS | | $0.51 | | | ($0.02 | ) | | $0.49 | | ($0.28 | ) | | $0.68 | | | $0.40 |
| | | | | | |
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING | | | | | | | | | | | | | | | | |
Basic | | 621 | | | | | | 621 | | 613 | | | | | | 613 |
Diluted | | 626 | | | | | | 626 | | 613 | | | | | | 613 |
| | | | | | | | | | | | | | | | |
(A) | | Pump repairs and replacements | | $77 | | | | | | | (C) | | Inventory reserves | | $28 | |
| | | Restructuring reserve adjustments | | (104 | ) | | | | | | | | Excess cash flow hedges | | 17 | |
| | | | |
|
| | | | | | | | | |
|
|
| | | Total | | ($27 | ) | | | | | | | | Total | | $45 | |
| | | | |
|
| | | | | | | | | |
|
|
(B) | | Tax expense on special charges, net | | $12 | | | | | | | (D) | | Loan and receivable reserves | | $55 | |
| | | | |
|
| | | | | | | | | |
|
|
| | | | | | | | | | | | (E) | | Restructuring and asset impairment charges | | $543 | |
| | | | | | | | | | | | | | | |
|
|
| | | | | | | | | | | | (F) | | Asset impairments | | $15 | |
| | | | | | | | | | | | | | | |
|
|
| | | | | | | | | | | | (G) | | Tax benefit of restructuring charge | | ($149 | ) |
| | | | | | | | | | | | | | Reversal of tax reserves | | (55 | ) |
| | | | | | | | | | | | | | Tax benefit of other charges | | (40 | ) |
| | | | | | | | | | | | | | | |
|
|
| | | | | | | | | | | | | | Total | | ($244 | ) |
| | | | | | | | | | | | | | | |
|
|
BAXTER – PAGE 9
GAAP to ADJUSTED
RECONCILIATION - Year-to-Date
BAXTER INTERNATIONAL INC.
Consolidated Statements of Income
Reconciliation of GAAP to Adjusted
Six Months Ended June 30, 2005 and 2004
(unaudited)
(in millions, except per share data)
| | | | | | | | | | | | | | | | |
| | | Six Months Ended June 30, 2005
| | Six Months Ended June 30, 2004
|
| | | GAAP
| | | Special
Items
| | | Adjusted
| | GAAP
| | | Special
Items
| | | Adjusted
|
CONTINUING OPERATIONS: | | | | | | | | | | | | | | | | |
| | | | | | |
NET SALES | | $4,960 | | | | | | $4,960 | | $4,588 | | | | | | $4,588 |
| | | | | | |
GROSS PROFIT | | 2,082 | | | | | | 2,082 | | 1,832 | | | $45 | (C) | | 1,877 |
| | | | | | |
MARKETING AND ADMINISTRATIVE EXPENSES | | 1,020 | | | | | | 1,020 | | 998 | | | 55 | (D) | | 943 |
| | | | | | |
RESEARCH AND DEVELOPMENT EXPENSES | | 266 | | | | | | 266 | | 265 | | | | | | 265 |
| | | | | | |
SPECIAL CHARGES, NET | | (27 | ) | | (27 | )(A) | | — | | 543 | | | 543 | (E) | | — |
| | | | | | | | | | | | | | | | | |
OPERATING INCOME | | 823 | | | (27 | ) | | 796 | | 26 | | | 643 | | | 669 |
| | | | | | |
INTEREST, NET | | 64 | | | | | | 64 | | 46 | | | | | | 46 |
| | | | | | |
OTHER EXPENSE, NET | | 49 | | | | | | 49 | | 63 | | | 15 | (F) | | 48 |
| | | | | | |
INCOME (LOSS) BEFORE INCOME TAXES | | 710 | | | (27 | ) | | 683 | | (83 | ) | | 658 | | | 575 |
| | | | | | |
INCOME TAX EXPENSE (BENEFIT) | | 162 | | | 12 | (B) | | 150 | | (101 | ) | | (244 | )(G) | | 143 |
| | | | | | |
INCOME FROM CONTINUING OPERATIONS | | $548 | | | ($15 | ) | | $533 | | $18 | | | $414 | | | $432 |
| | | | | | |
BASIC EPS FROM CONTINUING OPERATIONS | | $0.88 | | | ($0.02 | ) | | $0.86 | | $0.03 | | | $0.67 | | | $0.70 |
| | | | | | |
DILUTED EPS FROM CONTINUING OPERATIONS | | $0.88 | | | ($0.03 | ) | | $0.85 | | $0.03 | | | $0.67 | | | $0.70 |
| | | | | | |
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING | | | | | | | | | | | | | | | | |
Basic | | 620 | | | | | | 620 | | 613 | | | | | | 613 |
Diluted | | 624 | | | | | | 624 | | 617 | | | | | | 617 |
| | | | | | | | | | | | | | | | | | | |
| | | (A) | | Pump repairs and replacements | | $77 | | | | | (C | ) | | Inventory reserves | | | | $28 | |
| | | | | Restructuring reserve adjustments | | (104 | ) | | | | | | | Excess cash flow hedges | | | | 17 | |
| | | | | | |
|
| | | | | | | | | | |
|
|
| | | | | Total | | ($27 | ) | | | | | | | Total | | | | $45 | |
| | | | | | |
|
| | | | | | | | | | |
|
|
| | | (B) | | Tax expense on special charges,
net | | $12 | | | | | (D | ) | | Loan and receivable reserves | | | | $55 | |
| | | | | | |
|
| | | | | | | | | | |
|
|
| | | | | | | | | | | | (E | ) | | Restructuring and asset
impairment charges | | | | $543 | |
| | | | | | | | | | | | | | | | | | |
|
|
| | | | | | | | | | | | (F | ) | | Asset impairments | | | | $15 | |
| | | | | | | | | | | | | | | | | | |
|
|
| | | | | | | | | | | | (G | ) | | Tax benefit of restructuring charge | | | | ($149 | ) |
| | | | | | | | | | | | | | | Reversal of tax reserves | | | | (55 | ) |
| | | | | | | | | | | | | | | Tax benefit of other charges | | | | (40 | ) |
| | | | | | | | | | | | | | | | | | |
|
|
| | | | | | | | | | | | | | | Total | | | | ($244 | ) |
| | | | | | | | | | | | | | | | | | |
|
|
BAXTER – PAGE 10
BAXTER INTERNATIONAL INC.
Cash Flows from Continuing Operations and Changes in Net Debt
(unaudited)
($ in millions)
| | | | | | | | | | | | |
Cash Flows from Continuing Operations | | | | | | | | | | | | |
| (Brackets denote cash outflows) | | Three Months
Ended June 30,
| | | Six Months Ended
June 30,
| |
| | | 2005
| | | 2004
| | | 2005
| | | 2004
| |
Income (loss) from continuing operations | | $324 | | | ($169 | ) | | $548 | | | $18 | |
Adjustments | | | | | | | | | | | | |
Depreciation and amortization | | 145 | | | 146 | | | 292 | | | 295 | |
Deferred income taxes | | 96 | | | (213 | ) | | 119 | | | (203 | ) |
Special charges, net | | (27 | ) | | 543 | | | (27 | ) | | 543 | |
Other | | 15 | | | 124 | | | 33 | | | 147 | |
Changes in balance sheet items | | | | | | | | | | | | |
Accounts receivable | | (24 | ) | | (66 | ) | | 20 | | | (162 | ) |
Inventories | | 71 | | | (9 | ) | | 90 | | | (75 | ) |
Accounts payable and accrued liabilities | | (80 | ) | | 23 | | | (325 | ) | | (229 | ) |
Restructuring payments | | (30 | ) | | (25 | ) | | (73 | ) | | (62 | ) |
Other | | 18 | | | (49 | ) | | 102 | | | (20 | ) |
|
|
Cash flows from continuing operations | | $508 | | | $305 | | | $779 | | | $252 | |
|
|
Changes in Net Debt | | | | | | | | | | | | |
| Increase (decrease) | | Three Months
Ended June 30,
| | | Six Months Ended
June 30,
| |
| | | 2005
| | | 2004
| | | 2005
| | | 2004
| |
Net debt, beginning of period | | $3,493 | | | $4,161 | | | $3,185 | | | $3,649 | |
Cash flows from continuing operations | | (508 | ) | | (305 | ) | | (779 | ) | | (252 | ) |
Capital expenditures | | 98 | | | 139 | | | 163 | | | 229 | |
Dividends | | — | | | — | | | 359 | | | 361 | |
Acquisitions, net | | — | | | 15 | | | — | | | 20 | |
Purchases of treasury stock | | — | | | 7 | | | — | | | 18 | |
Other, including the effect of exchange rate changes | | (22 | ) | | (143 | ) | | 133 | | | (151 | ) |
|
|
Increase (decrease) in net debt | | (432 | ) | | (287 | ) | | (124 | ) | | 225 | |
|
|
Net debt, June 30 | | $3,061 | | | $3,874 | | | $3,061 | | | $3,874 | |
|
|
Key statistics, June 30: | | | | | | | | | | | | |
Days sales outstanding | | 58.4 | | | 60.5 | | | 58.4 | | | 60.5 | |
Inventory turns | | 2.9 | | | 2.6 | | | 2.9 | | | 2.6 | |
Net-debt-to-capital ratio (A) | | 30.1% | | | 41.2% | | | 30.1% | | | 41.2% | |
| (A) | The net-debt-to-capital ratio was calculated in accordance with the company’s primary credit agreements, which give 70% equity credit to the company’s December 2002 $1.25 billion issuance of equity units. |
BAXTER – PAGE 11
BAXTER INTERNATIONAL INC.
Condensed Consolidated Balance Sheets
(unaudited)
($ in millions)
| | | | | | |
| | | June 30,
2005
| | | December 31,
2004
| |
ASSETS | | | | | | |
Cash and equivalents | | $1,428 | | | $1,109 | |
Receivables | | 1,959 | | | 2,091 | |
Inventories | | 1,944 | | | 2,135 | |
Other current assets (1) | | 508 | | | 684 | |
| | |
|
| |
|
|
Total current assets | | 5,839 | | | 6,019 | |
| | |
|
| |
|
|
Property, plant and equipment, net | | 4,157 | | | 4,369 | |
Other long-term assets (1) | | 3,630 | | | 3,759 | |
Total assets | | $13,626 | | | $14,147 | |
| | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | | |
| | |
|
| |
|
|
Short-term debt (2) | | $1,450 | | | $361 | |
Other current liabilities (1) | | 2,911 | | | 3,925 | |
Long-term debt | | 3,039 | | | 3,933 | |
Other long-term liabilities (1) | | 2,016 | | | 2,223 | |
Stockholders' equity | | 4,210 | | | 3,705 | |
Total liabilities and stockholders’ equity | | $13,626 | | | $14,147 | |
(1) The following is a summary of the company’s cross-currency swap assets (liabilities). | | | | | | |
Original swaps | | | | | | |
Other current liabilities | | ($67 | ) | | ($465 | ) |
Other long-term liabilities | | (577 | ) | | (831 | ) |
| | |
|
| |
|
|
Total | | (644 | ) | | (1,296 | ) |
| | |
|
| |
|
|
| | |
Mirror swaps | | | | | | |
Other current assets | | — | | | 109 | |
Other long-term assets | | — | | | 20 | |
Other current liabilities | | (4 | ) | | — | |
Other long-term liabilities | | (85 | ) | | (5 | ) |
| | |
|
| |
|
|
Total | | (89 | ) | | 124 | |
| | |
|
| |
|
|
Net total of all cross-currency swaps | | ($733 | ) | | ($1,172 | ) |
| | |
|
| |
|
|
Note: As further discussed in the company’s SEC filings, during the fourth quarter of 2004 the company executed offsetting or mirror swaps. These mirror swaps fix the net amount the company will ultimately pay to settle the swaps subject to this strategy. After execution of the mirror swaps, as the market value of the fixed portion of the original portfolio decreases, the market value of the mirror swaps increases, and vice versa. At June 30, 2005, approximately 55% of the net swaps liability has been fixed by the mirror swaps.
During the first half of 2005, the company settled certain swap agreements (and related mirror swaps, as applicable), and made net payments totaling $308 million. In accordance with GAAP, $363 million of outflows were classified in the financing section of the statement of cash flows, and $55 million of inflows were classified in the operating section of the statement of cash flows.
| (2) | The increase in short-term debt from December 31, 2004 to June 30, 2005 principally related to the reclassification of approximately $800 million of notes due in 2006 from long-term to short-term. |
BAXTER – PAGE 12
Baxter International Inc.
Net Sales from Continuing Operations
Period Ending June 30, 2005
(unaudited)
| | | | | | | | | | | | | | | | | | | | |
| ($ in millions) | | Q2 2005
| | Q2 2004
| | % Growth @
Actual
Rates
| | | % Growth @
Constant Rates
| | | YTD
2005
| | YTD
2004
| | % Growth @
Actual
Rates
| | | % Growth @
Constant Rates
| |
BioScience | | | | | | | | | | | | | | | | | | | | |
United States | | $438 | | $403 | | 9% | | | 9% | | | $836 | | $788 | | 6% | | | 6% | |
International | | 552 | | 490 | | 13% | | | 6% | | | 1,056 | | 915 | | 15% | | | 9% | |
Total | | $990 | | $893 | | 11% | | | 7% | | | $1,892 | | $1,703 | | 11% | | | 8% | |
| | | | | | | | |
Medication Delivery | | | | | | | | | | | | | | | | | | | | |
United States | | $619 | | $589 | | 5% | | | 5% | | | $1,171 | | $1,123 | | 4% | | | 4% | |
International | | 464 | | 417 | | 11% | | | 5% | | | 890 | | 809 | | 10% | | | 4% | |
Total | | $1,083 | | $1,006 | | 8% | | | 5% | | | $2,061 | | $1,932 | | 7% | | | 4% | |
| | | | | | | | |
Renal | | | | | | | | | | | | | | | | | | | | |
United States | | $99 | | $102 | | (3% | ) | | (3% | ) | | $193 | | $202 | | (4% | ) | | (4% | ) |
International | | 405 | | 378 | | 7% | | | 1% | | | 814 | | 751 | | 8% | | | 3% | |
Total | | $504 | | $480 | | 5% | | | —% | | | $1,007 | | $953 | | 6% | | | 1% | |
| | | | | | | | |
Baxter International Inc. | | | | | | | | | | | | | | | | | | | | |
United States | | $1,156 | | $1,094 | | 6% | | | 6% | | | $2,200 | | $2,113 | | 4% | | | 4% | |
International | | 1,421 | | 1,285 | | 11% | | | 4% | | | 2,760 | | 2,475 | | 12% | | | 6% | |
Total | | $2,577 | | $2,379 | | 8% | | | 5% | | | $4,960 | | $4,588 | | 8% | | | 5% | |
BAXTER – PAGE 13
Baxter International Inc.
Key Product Line Sales
Period Ending June 30, 2005
(unaudited)
| | | | | | | | | | | | | | | | | | | | |
| ($ in millions) | | Q2
2005
| | Q2
2004
| | % Growth @
Actual
Rates
| | | % Growth @
Constant
Rates
| | | YTD
2005
| | YTD
2004
| | % Growth @
Actual
Rates
| | | % Growth @
Constant
Rates
| |
BioScience | | | | | | | | | | | | | | | | | | | | |
Recombinants | | $397 | | $320 | | 24% | | | 20% | | | $741 | | $612 | | 21% | | | 17% | |
Plasma Proteins 1 | | 266 | | 267 | | -% | | | (3% | ) | | 525 | | 505 | | 4% | | | 1% | |
Antibody Therapy | | 93 | | 90 | | 3% | | | 1% | | | 182 | | 170 | | 7% | | | 4% | |
Transfusion Therapies | | 140 | | 136 | | 3% | | | 1% | | | 273 | | 276 | | (1% | ) | | (4% | ) |
Other2 | | 94 | | 80 | | 18% | | | 10% | | | 171 | | 140 | | 22% | | | 17% | |
Total BioScience | | $990 | | $893 | | 11% | | | 7% | | | $1,892 | | $1,703 | | 11% | | | 8% | |
| | | | | | | | |
Medication Delivery | | | | | | | | | | | | | | | | | | | | |
IV Therapies 3 | | $312 | | $288 | | 8% | | | 4% | | | $608 | | $570 | | 7% | | | 3% | |
Drug Delivery | | 226 | | 202 | | 12% | | | 11% | | | 430 | | 390 | | 10% | | | 9% | |
Infusion Systems | | 245 | | 233 | | 5% | | | 3% | | | 475 | | 421 | | 13% | | | 11% | |
Anesthesia | | 282 | | 259 | | 9% | | | 7% | | | 513 | | 501 | | 2% | | | 1% | |
Other4 | | 18 | | 24 | | (25% | ) | | (33% | ) | | 35 | | 50 | | (30% | ) | | (32% | ) |
Total Medication Delivery 5 | | $1,083 | | $1,006 | | 8% | | | 5% | | | $2,061 | | $1,932 | | 7% | | | 4% | |
| | | | | | | | |
Renal | | | | | | | | | | | | | | | | | | | | |
PD Therapy | | $385 | | $357 | | 8% | | | 3% | | | $759 | | $702 | | 8% | | | 4% | |
HD Therapy | | 114 | | 118 | | (3% | ) | | (8% | ) | | 240 | | 242 | | (1% | ) | | (6% | ) |
Other | | 5 | | 5 | | -% | | | -% | | | 8 | | 9 | | (11% | ) | | (11% | ) |
Total Renal | | $504 | | $480 | | 5% | | | -% | | | $1,007 | | $953 | | 6% | | | 1% | |
| | | | | | | | |
TOTAL BAXTER | | $2,577 | | $2,379 | | 8% | | | 5% | | | $4,960 | | $4,588 | | 8% | | | 5% | |
| 1 | Includes plasma-derived hemophilia (FVII, FVIII, FIX and FEIBA), albumin, biosurgery (Tisseel) and other plasma-based products. |
| 2 | Principally includes vaccines and non-plasma-based biosurgery products (FloSeal & CoSeal). |
| 3 | Principally includes intravenous solutions and nutritional products. |
| 4 | Principally includes other hospital-distributed products. |
| 5 | Sales of oncology products, which were previously included in Other, are now reported in Drug Delivery, Infusion Systems or Anesthesia, depending on the product. All prior year sales data has been reclassified to reflect this change. |
BAXTER – PAGE 14
Baxter International Inc.
Key Product Line Sales — US/International
Period Ending June 30, 2005
(unaudited)
| | | | | | | | | | | | | | | | | | | | | |
| | | Q2 2005 | | Q2 2004 | | % Growth | |
| ($ in millions) | | US | | International | | Total | | US | | International | | Total | | US | | | International | | | Total | |
BioScience | | | | | | | | | | | | | | | | | | | | | |
Recombinants | | $170 | | $227 | | $397 | | $146 | | $174 | | $320 | | 16% | | | 30% | | | 24% | |
Plasma Proteins1 | | 125 | | 141 | | 266 | | 121 | | 146 | | 267 | | 3% | | | (3% | ) | | -% | |
Antibody Therapy | | 50 | | 43 | | 93 | | 53 | | 37 | | 90 | | (6% | ) | | 16% | | | 3% | |
Transfusion Therapies | | 68 | | 72 | | 140 | | 65 | | 71 | | 136 | | 5% | | | 1% | | | 3% | |
Other2 | | 25 | | 69 | | 94 | | 18 | | 62 | | 80 | | 39% | | | 11% | | | 18% | |
Total BioScience | | $438 | | $552 | | $990 | | $403 | | $490 | | $893 | | 9% | | | 13% | | | 11% | |
| | | | | | | | | | | | | | | | | | | | | | |
Medication Delivery | | | | | | | | | | | | | | | | | | | | | |
IV Therapies3 | | $98 | | $214 | | $312 | | $99 | | $189 | | $288 | | (1% | ) | | 13% | | | 8% | |
Drug Delivery | | 148 | | 78 | | 226 | | 140 | | 62 | | 202 | | 6% | | | 26% | | | 12% | |
Infusion Systems | | 163 | | 82 | | 245 | | 159 | | 74 | | 233 | | 3% | | | 11% | | | 5% | |
Anesthesia | | 204 | | 78 | | 282 | | 187 | | 72 | | 259 | | 9% | | | 8% | | | 9% | |
Other4 | | 6 | | 12 | | 18 | | 4 | | 20 | | 24 | | 50% | | | (40% | ) | | (25% | ) |
Total Medication Delivery5 | | $619 | | $464 | | $1,083 | | $589 | | $417 | | $1,006 | | 5% | | | 11% | | | 8% | |
| | | | | | | | | | | | | | | | | | | | | | |
Renal | | | | | | | | | | | | | | | | | | | | | |
PD Therapy | | $63 | | $322 | | $385 | | $65 | | $292 | | $357 | | (3% | ) | | 10% | | | 8% | |
HD Therapy | | 34 | | 80 | | 114 | | 32 | | 86 | | 118 | | 6% | | | (7% | ) | | (3% | ) |
Other | | 2 | | 3 | | 5 | | 5 | | — | | 5 | | (60% | ) | | NM | | | -% | |
Total Renal | | $99 | | $405 | | $504 | | $102 | | $378 | | $480 | | (3% | ) | | 7% | | | 5% | |
| | | | | | | | | | | | | | | | | | | | | | |
TOTAL BAXTER | | $1,156 | | $1,421 | | $2,577 | | $1,094 | | $1,285 | | $2,379 | | 6% | | | 11% | | | 8% | |
1 Includes plasma-derived hemophilia (FVII, FVIII, FIX and FEIBA), albumin, biosurgery (Tisseel) and other plasma-based products.
2 Principally includes vaccines and non-plasma-based biosurgery products (FloSeal & CoSeal).
3 Principally includes intravenous solutions and nutritional products.
4 Principally includes other hospital-distributed products.
5 Sales of oncology products, which were previously included in Other, are now reported in Drug Delivery, Infusion Systems or Anesthesia, depending on the product. All prior year sales data has been reclassified to reflect this change.
