UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
---
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2002
________ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____ to ____
Commission file number 1-4448
BAXTER INTERNATIONAL INC.
------------------------
(Exact name of registrant as specified in its charter)
Delaware 36-0781620
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Baxter Parkway, Deerfield, Illinois 60015-4633
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(Address of principal executive offices) (Zip Code)
(847) 948-2000
-------------------------------
(Registrant's telephone number,
including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
The number of shares of the registrant's Common Stock, par value $1.00 per
share, outstanding as of April 25, 2002 was 601,093,841 shares.
BAXTER INTERNATIONAL INC.
FORM 10-Q
For the quarterly period ended March 31, 2002
TABLE OF CONTENTS
Page Number
-----------
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statements of Income ............. 2
Condensed Consolidated Balance Sheets ................... 3
Condensed Consolidated Statements of Cash Flows ......... 4
Notes to Condensed Consolidated Financial Statements .... 5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations ................................ 10
Item 3. Quantitative and Qualitative Disclosures About Market Risk 17
Review by Independent Accountants .................................. 17
Report of Independent Accountants .................................. 18
Part II. OTHER INFORMATION
Item 1. Legal Proceedings ......................................... 19
Item 6. Exhibits and Reports on Form 8-K .......................... 22
Signature .......................................................... 23
Exhibits ........................................................... 24
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Baxter International Inc. and Subsidiaries
Condensed Consolidated Statements of Income (unaudited)
(in millions, except per share data)
Three months ended
March 31,
2002 2001
------------------
Net sales $1,950 $1,757
Costs and expenses
Cost of goods sold 1,064 986
Marketing and administrative expenses 400 343
Research and development expenses 115 103
Goodwill amortization -- 12
Interest, net 16 19
Other expense 13 7
- --------------------------------------------------------------------------------
Total costs and expenses 1,608 1,470
- --------------------------------------------------------------------------------
Income before income taxes and cumulative
effect of accounting change 342 287
Income tax expense 89 73
- --------------------------------------------------------------------------------
Income before cumulative effect of accounting change 253 214
Cumulative effect of accounting change, net of
income tax benefit of $32 -- (52)
- --------------------------------------------------------------------------------
Net income $253 $162
================================================================================
Earnings per basic common share
Before cumulative effect of accounting change $.42 $.36
Cumulative effect of accounting change -- (.09)
- --------------------------------------------------------------------------------
Net income $.42 $.27
================================================================================
Earnings per diluted common share
Before cumulative effect of accounting change $.41 $.35
Cumulative effect of accounting change -- (.08)
- --------------------------------------------------------------------------------
Net income $.41 $.27
================================================================================
Weighted average number of common shares outstanding
Basic 600 590
================================================================================
Diluted 622 606
================================================================================
The accompanying notes are an integral part of these condensed consolidated
financial statements.
2
Baxter International Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in millions, except shares)
- ---------------------------------------------------------------------------------------------------------------------
March 31, December 31,
2002 2001
(unaudited)
-------------------------------------
Current assets Cash and equivalents $522 $582
Accounts receivable 1,619 1,493
Notes and other current receivables 122 129
Inventories 1,462 1,341
Short-term deferred income taxes 40 82
Prepaid expenses 396 350
---------------------------------------------------------------------------------------------------
Total current assets 4,161 3,977
- ---------------------------------------------------------------------------------------------------------------------
Property, At cost 5,788 5,732
plant and Accumulated depreciation and amortization (2,462) (2,426)
equipment ---------------------------------------------------------------------------------------------------
Net property, plant and equipment 3,326 3,306
- ---------------------------------------------------------------------------------------------------------------------
Other assets Goodwill and other intangibles 1,695 1,698
Insurance receivables 82 93
Other 1,353 1,269
---------------------------------------------------------------------------------------------------
Total other assets 3,130 3,060
- ---------------------------------------------------------------------------------------------------------------------
Total assets $10,617 $10,343
=====================================================================================================================
Current Short-term debt $490 $149
liabilities Current maturities of long-term debt and lease obligations 52 52
Accounts payable and accrued liabilities 2,004 2,432
Income taxes payable 626 661
---------------------------------------------------------------------------------------------------
Total current liabilities 3,172 3,294
- ---------------------------------------------------------------------------------------------------------------------
Long-term debt and lease obligations 2,677 2,486
- ---------------------------------------------------------------------------------------------------------------------
Long-term deferred income taxes 201 218
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Long-term litigation liabilities 131 140
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Other long-term liabilities 496 448
- ---------------------------------------------------------------------------------------------------------------------
Commitments and contingencies
- ---------------------------------------------------------------------------------------------------------------------
Stockholders' Common stock, $1 par value, authorized 1,000,000,000
equity shares, issued 608,817,449 shares in 2002
and 608,817,449 shares in 2001 609 609
Common stock in treasury, at cost, 7,943,249 shares
in 2002 and 9,924,459 shares in 2001 (271) (328)
Additional contributed capital 2,813 2,815
Retained earnings 1,346 1,093
Accumulated other comprehensive loss (557) (432)
---------------------------------------------------------------------------------------------------
Total stockholders' equity 3,940 3,757
- ---------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $10,617 $10,343
=====================================================================================================================
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
Baxter International Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (unaudited)
(in millions)
- ---------------------------------------------------------------------------------------------------------------------
Three months ended March 31,
(brackets denote cash outflows) 2002 2001
----------------------------
Cash flows Income before cumulative effect of non-cash
from accounting change $253 $214
operations Adjustments
Depreciation and amortization 105 108
Deferred income taxes 34 80
Other (16) 15
Changes in balance sheet items
Accounts receivable (181) (11)
Inventories (128) (100)
Accounts payable and other accrued liabilities (124) (256)
Net litigation payable and other (43) (83)
---------------------------------------------------------------------------------------------------
Cash flows from operations (100) (33)
- ---------------------------------------------------------------------------------------------------------------------
Cash flows Capital expenditures (139) (131)
from investing Acquisitions (net of cash received)
activities and investments in affiliates (49) (49)
Divestitures and other asset dispositions -- 19
---------------------------------------------------------------------------------------------------
Cash flows from investing activities (188) (161)
- ---------------------------------------------------------------------------------------------------------------------
Cash flows Issuances of debt and lease obligations 53 767
from financing Redemptions of debt and lease obligations (285) (168)
activities Increase in debt with maturities
of three months or less, net 749 32
Common stock cash dividends (348) (340)
Stock issued under employee benefit plans 91 64
Purchases of treasury stock (35) --
---------------------------------------------------------------------------------------------------
Cash flows from financing activities 225 355
- ---------------------------------------------------------------------------------------------------------------------
Effect of currency exchange rate changes on cash and equivalents 3 (17)
- ---------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and equivalents (60) 144
Cash and equivalents at beginning of period 582 579
- ---------------------------------------------------------------------------------------------------------------------
Cash and equivalents at end of period $522 $723
=====================================================================================================================
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
Baxter International Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited)
1. FINANCIAL INFORMATION
The unaudited interim condensed consolidated financial statements of Baxter
International Inc. and its subsidiaries (the company or Baxter) have been
prepared pursuant to the rules and regulations of the Securities and Exchange
Commission. Accordingly, certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles (GAAP) have been condensed or omitted. These interim
condensed consolidated financial statements should be read in conjunction with
the consolidated financial statements and notes included in the company's 2001
Annual Report to Stockholders.
In the opinion of management, the interim condensed consolidated financial
statements reflect all adjustments necessary for a fair presentation of the
interim periods. All such adjustments, unless otherwise noted herein, are of a
normal, recurring nature. The results of operations for the interim period are
not necessarily indicative of the results of operations to be expected for the
full year.
Comprehensive income
Total comprehensive income was $128 million and $340 million for the three
months ended March 31, 2002 and 2001, respectively. The decline in comprehensive
income in the quarter was principally related to unfavorable foreign currency
fluctuations, partially offset by increased net income.
Allowance for doubtful accounts
In the normal course of business, the company provides credit to customers in
the health-care industry, performs credit evaluations of these customers and
maintains reserves for potential credit losses. In determining the amount of the
allowance for doubtful accounts, management considers historical credit losses,
the past due status of receivables, payment history and other customer-specific
information, and any other relevant factors or considerations. The past due
status of a receivable is based on its contractual terms. Receivables are
written off when management determines they are uncollectible. Credit losses,
when realized, have been within the range of management's allowance for doubtful
accounts.
2. CHANGE IN ACCOUNTING PRINCIPLE IN 2001
Effective at the beginning of 2001, the company adopted Statement of Financial
Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and
Hedging Activities," and its amendments. In accordance with the transition
provisions of SFAS No. 133, upon adoption the company recorded a cumulative
effect after-tax reduction to earnings of $52 million and a cumulative effect
after-tax increase to other comprehensive income of $8 million.
5
3. INVENTORIES
Inventories consisted of the following.
- -------------------------------------------------------------------------------
March 31, December 31,
(in millions) 2002 2001
- -------------------------------------------------------------------------------
Raw materials $387 $353
Work in process 287 244
Finished products 788 744
- -------------------------------------------------------------------------------
Total inventories $1,462 $1,341
===============================================================================
4. INTEREST, NET
Net interest expense consisted of the following.
- -------------------------------------------------------------------------------
Three months ended
March 31,
(in millions) 2002 2001
- -------------------------------------------------------------------------------
Interest expense $18 $28
Interest income (2) (9)
- -------------------------------------------------------------------------------
Interest expense, net $16 $19
===============================================================================
5. STOCK SPLIT
On February 27, 2001, Baxter's board of directors approved a two-for-one stock
split of the company's common shares. On May 1, 2001, the split was approved by
the company's shareholders. On May 30, 2001, shareholders of record on May 9,
2001 received one additional share of Baxter common stock for each share held on
May 9, 2001. All share and per share data in the condensed consolidated
financial statements and notes have been adjusted and restated to reflect the
stock split.
6. EARNINGS PER SHARE
The numerator for both basic and diluted earnings per share (EPS) is net
earnings available to common shareholders. The denominator for basic EPS is the
weighted-average number of common shares outstanding during the period. The
following is a reconciliation of the shares (denominator) of the basic and
diluted per-share computations.
- -------------------------------------------------------------------------------
Three months ended
March 31,
(in millions) 2002 2001
- -------------------------------------------------------------------------------
Basic EPS shares 600 590
- -------------------------------------------------------------------------------
Effect of dilutive securities
Employee stock options 21 15
Employee stock purchase plans and equity
forward agreements 1 1
- -------------------------------------------------------------------------------
Diluted EPS shares 622 606
===============================================================================
6
7. ACQUISITIONS AND INTANGIBLE ASSETS
Adoption of new accounting standards
SFAS No. 141, "Business Combinations," and SFAS No. 142, "Goodwill and Other
Intangible Assets," were issued in July 2001. SFAS No. 141 requires that all
business combinations initiated after June 30, 2001 be accounted for using the
purchase method of accounting. The amortization provisions of SFAS No. 142,
including nonamortization of goodwill, apply to goodwill and intangible assets
acquired after June 30, 2001. With the adoption of SFAS No. 142 in its entirety
on January 1, 2002, all of the company's goodwill is no longer being amortized,
but is subject to periodic impairment reviews, beginning on January 1, 2002.
In performing the reviews, potential impairment is to be identified by comparing
the fair value of a reporting unit with its carrying amount, and if the fair
value is less than the carrying amount, an impairment loss is recorded as the
excess of the carrying amount of the goodwill over its implied fair value. The
implied fair value is determined by allocating the fair value of the entire unit
to all of its assets and liabilities, with any excess of fair value over the
amount allocated representing the implied fair value of that unit's goodwill.
The company's reporting units are the same as its reportable operating segments,
and are referred to as Medication Delivery, BioScience and Renal. While the
company is still in the process of performing the initial goodwill impairment
review by reporting unit as of January 1, 2002, it is management's preliminary
assessment that a goodwill impairment charge will not be recorded as of the date
of adoption.
Goodwill
The carrying amount of goodwill as of March 31, 2002 was $646 million, $488
million and $210 million for Medication Delivery, BioScience and Renal,
respectively. The change in goodwill during the three months ended March 31,
2002 was not significant. There was no impairment of goodwill during the
quarter.
Other intangible assets
Intangible assets other than goodwill are separated into two categories.
Intangible assets with finite useful lives are recorded on the condensed
consolidated balance sheet and amortized over the estimated useful life of the
asset. Intangible assets with indefinite useful lives are recorded on the
condensed consolidated balance sheet, are not amortized, and are subject to
periodic impairment tests. The amount of intangible assets with indefinite lives
is immaterial. The following is a summary of the company's intangible assets
subject to amortization at March 31, 2002.
- ----------------------------------------------------------------------------------------------
As of March 31, 2002
---------------------------------------------
Weighted-
Average
Accumulated Amortization
($ in millions) Gross Amortization Net Period
- ----------------------------------------------------------------------------------------------
Amortized intangible assets
Developed technology, including patents $492 $212 $280 14
Manufacturing, distribution and
other contracts 33 7 26 12
Other 43 6 37 18
- ----------------------------------------------------------------------------------------------
Total amortized intangible assets $568 $225 $343 14
==============================================================================================
The amortization expense for these intangible assets was $8 million for the
three months ended March 31, 2002. The anticipated annual amortization expense
for these intangible assets is
7
$32 million, $33 million, $31 million, $28 million, $27 million and $24 million
in 2002, 2003, 2004, 2005, 2006 and 2007, respectively.
Earnings and per share earnings in 2001 excluding amortization
Net-of-tax amortization expense relating to goodwill and indefinite-lived assets
was $10 million, or $.02 per basic and diluted common share for the three months
ended March 31, 2001. Adjusted for this amortization expense, income before
cumulative effect of accounting change, net income, net income per basic common
share and net income per diluted common share were $224 million, $172 million,
$.29 and $.29, respectively, for the three months ended March 31, 2001.
Acquisitions
Acquisitions during the three months ended March 31, 2002 and 2001 were
accounted for under the purchase method. Results of operations of acquired
companies are included in the company's results of operations as of the
respective acquisition dates. The purchase price of each acquisition is
allocated to the net assets acquired based on estimates of their fair values at
the date of the acquisition. The excess of the purchase price over the fair
values of the tangible assets and identifiable intangible assets acquired and
liabilities assumed is allocated to goodwill. The allocation of purchase price
in certain cases may be subject to revision based on the final determination of
fair values.
Fusion Medical Technologies, Inc.
In February 2002, the company entered into an agreement to acquire Fusion
Medical Technologies, Inc. (Fusion), subject to shareholder and regulatory
approvals. The acquisition of Fusion, a business that develops and
commercializes proprietary products used to control bleeding during surgery,
supports the company's strategic initiative to expand and enhance the portfolio
of innovative therapeutic solutions for biosurgery and tissue regeneration. The
acquisition of Fusion, which will be included in the BioScience segment, is
expected to close during the second quarter of 2002.
Pro forma information
The following pro forma information presents a summary of the company's
consolidated results of operations as if acquisitions during the first quarter
of 2002 and the first quarter of 2001 had taken place as of the beginning of the
current and preceding fiscal year, giving effect to purchase accounting
adjustments. No adjustments were made for charges for in-process research and
development and acquisition-related costs.
- -------------------------------------------------------------------------------
Three months ended
March 31,
(in millions, except per share data) 2002 2001
- -------------------------------------------------------------------------------
Net sales $1,950 $1,836
Income before cumulative effect of accounting change $253 $211
Net income $253 $159
Net income per diluted common share $0.41 $0.26
- -------------------------------------------------------------------------------
These pro forma results of operations have been presented for comparative
purposes only and do not purport to be indicative of the results of operations
which actually would have resulted had the acquisitions occurred on the date
indicated, or which may result in the future. The pro forma earnings above
relating to acquisitions completed after June 30, 2001 do not include
amortization of goodwill.
8. LEGAL PROCEEDINGS, COMMITMENTS AND CONTINGENCIES
Refer to "Part II - Item 1. Legal Proceedings" below.
8
9. SEGMENT INFORMATION
The company operates in three segments, each of which are strategic businesses
that are managed separately because each business develops, manufactures and
sells distinct products and services. The segments and a description of their
businesses are as follows: Medication Delivery: medication delivery products and
therapies, including intravenous infusion pumps and solutions,
anesthesia-delivery devices and pharmaceutical agents, and oncology therapies;
BioScience: biopharmaceuticals and blood-collection, separation and storage
products and technologies; and Renal: products and services to treat end-stage
kidney disease.
Certain items are maintained at corporate headquarters (Corporate) and are not
allocated to the segments. They primarily include most of the company's debt and
cash and equivalents and related net interest expense, corporate headquarters
costs, certain non-strategic investments and related income and expense,
deferred income taxes, the majority of hedging activities, and certain
litigation liabilities and related insurance receivables.
Financial information for the company's segments for the quarter ended March 31
is as follows.
Medication
(in millions) Delivery BioScience Renal Other Total
- -------------------------------------------------------------------------------------------------------------------
For the three months ended
March 31,
2002
Net sales $739 $746 $465 -- $1,950
Pretax income 120 171 56 ($5) 342
2001
Net sales $669 $631 $457 -- $1,757
Pretax income 102 113 66 $6 287
- -------------------------------------------------------------------------------------------------------------------
The following are reconciliations of total segment amounts to amounts per the
condensed consolidated income statements.
Three months
ended March 31,
------------------
(in millions) 2002 2001
- -------------------------------------------------------------------------------------------------------------------
Pretax income
Total pretax income from segments $347 $281
Unallocated amounts
Interest expense, net (16) (19)
Other Corporate items 11 25
- -------------------------------------------------------------------------------------------------------------------
Income before income taxes and cumulative effect of
accounting change $342 $287
- -------------------------------------------------------------------------------------------------------------------
9
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Baxter International Inc.'s (the company or Baxter) 2001 Annual Report to
Stockholders (Annual Report) contains management's discussion and analysis of
financial condition and results of operations for the year ended December 31,
2001. In the Annual Report, management outlined its key financial objectives for
2002. The table below reflects these objectives and the company's results
through March 31, 2002.
- --------------------------------------------------------------------------------------
RESULTS THROUGH
FULL YEAR 2002 OBJECTIVES MARCH 31, 2002
- --------------------------------------------------------------------------------------
... Accelerate sales growth to the low- . Net sales for the quarter ended March 31,
teens. 2002 increased 11 percent. Excluding the
effects of changes in currency exchange
rates, net sales increased 14 percent.
- --------------------------------------------------------------------------------------
... Grow earnings per share in the . Diluted earnings per share increased 17
mid-teens. percent for the first quarter of the year,
excluding the first quarter 2001 cumulative
effect of a change in accounting principle.
- --------------------------------------------------------------------------------------
... Generate at least $500 million in . The company had operational cash outflow
operational cash flow, after of $217 million during the quarter ended
investing more than $1.3 billion in March 31, 2002. The company typically
capital expenditures and research generates the majority of its annual cash
and development. flow during the second half of the year. The
total of capital expenditures and research
and development expenses for the quarter
ended March 31, 2002 was $254 million.
- --------------------------------------------------------------------------------------
10
RESULTS OF OPERATIONS
NET SALES
- ------------------------------------------------------------------------
Three months ended
March 31, Percent
(in millions) 2002 2001 increase
- ------------------------------------------------------------------------
International $991 $902 10%
United States 959 855 12%
- ------------------------------------------------------------------------
Total net sales $1,950 $1,757 11%
========================================================================
Excluding the effect of fluctuations in currency exchange rates, which impacted
sales growth unfavorably for all three segments, total net sales growth was 14
percent for the quarter ended March 31, 2002. The United States dollar
strengthened principally relative to the Euro and the Japanese Yen. Refer to
Note 9 to the condensed consolidated financial statements for a summary of net
sales by segment.
Medication Delivery
The Medication Delivery segment generated 10 percent sales growth during the
three months ended March 31, 2002. Excluding the impact of fluctuations in
currency exchange rates, sales growth was 12 percent for the quarter, with the
strongest sales growth in the international market. Of the constant-currency
sales growth, seven points of growth were generated by the October 2001
acquisition of a subsidiary of Degussa AG, ASTA Medica Onkologie GmbH & CoKG
(ASTA), which develops, produces and markets oncology products worldwide, and
the August 2001 acquisition of Cook Pharmaceutical Solutions, formerly a unit of
Cook Group Incorporated (Cook), which provides contract filling of syringes and
vials. The drug delivery business, excluding the impact of the acquisition of
Cook, contributed two points of sales growth, primarily driven by increased
sales of frozen premixed products. The remaining sales growth for the quarter
was principally driven by increased sales of specialty products, particularly
outside the United States.
BioScience
Sales in the BioScience segment increased 18 percent for the three months ended
March 31, 2002. Excluding the impact of fluctuations in currency exchange rates,
sales growth was 21 percent for the quarter, with sales in both the domestic and
international markets contributing strongly to the growth rate. The
constant-currency sales growth was driven by increased sales of recombinant
products, particularly Recombinate Antihemophilic Factor (rAHF) (Recombinate),
with such growth principally a result of increased capacity, improved pricing,
and continued strong demand for this product, as well as strong sales of
vaccines. Sales of plasma-derived products for hemophilia and other conditions
and sales of products that provide for leukoreduction, which is the removal of
white blood cells from blood products used for transfusion, also contributed
strongly to the segment's growth rate for the quarter.
Renal
The Renal segment generated sales growth of two percent during the three months
ended March 31, 2002. Excluding the impact of fluctuations in currency exchange
rates, sales growth was seven percent for the quarter. Of the constant-currency
sales growth, approximately five points of growth were due to increased
penetration of products for peritoneal dialysis. The penetration continues to be
strongest in emerging markets such as Latin America and Asia, where many people
with end-stage renal disease are currently under-treated. The remaining growth
in the Renal segment was driven principally by the segment's Renal Therapy
Services business, which operates dialysis clinics in partnership with local
physicians in international markets, and the Renal Management Strategies
business, which is a renal-disease
11
management organization, with revenues from these businesses increasing
approximately $6 million in the first quarter of 2002 as compared to the prior
year quarter.
The following tables show key ratios of certain income statement items as a
percent of sales.
GROSS MARGIN AND EXPENSE RATIOS
- --------------------------------------------------------------------------
Three months ended
March 31,
2002 2001 Increase
- --------------------------------------------------------------------------
Gross profit margin 45.4% 43.9% 1.5 pts
Marketing and
administrative expenses 20.5% 19.5% 1.0 pt
- ----------------------------------------------------------------------------
The improvement in the gross profit margin during the quarter was primarily due
to a change in the products and services mix in all three segments, and
particularly as a result of increased sales of higher-margin products in the
BioScience segment.
Marketing and administrative expenses increased as a percent of sales in the
current quarter as compared to the prior year quarter. The company has been
increasing its investments in sales and marketing programs in conjunction with
the launch of new products, and to continue to drive overall sales growth.
Management is also making other investments, including enhancing the
technological infrastructure of the company and attracting and retaining a
highly talented workforce. To offset these investments, management is
aggressively managing expenses and leveraging recent acquisitions. Management
expects the expense ratio to decline during the remainder of the year.
RESEARCH AND DEVELOPMENT
- --------------------------------------------------------------------------
Three months ended
March 31, Percent
(in millions) 2002 2001 increase
- --------------------------------------------------------------------------
Research and
development expenses $115 $103 12%
As a percent of sales 5.9% 5.9%
- --------------------------------------------------------------------------
The increase in research and development (R&D) expenses for the quarter was due
to increased spending in all three segments. Contributing to the growth rate was
the Medication Delivery segment's October 2001 acquisition of ASTA, as well as
increased spending relating to the development of a next-generation recombinant
clotting factor for hemophilia, a next-generation oxygen-therapeutics program,
initiatives in the wound management and plasma-based products area, as well as
other R&D projects across the three segments. Management expects to
significantly increase its growth rate in R&D spending during the remainder of
the year.
GOODWILL AMORTIZATION
In accordance with Statement of Financial Accounting Standards (SFAS) No. 142,
"Goodwill and Other Intangible Assets," effective January 1, 2002, goodwill is
no longer amortized, but is subject to periodic impairment reviews. Management
expects to significantly increase R&D spending, offsetting the reduced expense
due to the elimination of goodwill amortization.
12
INTEREST, NET AND OTHER EXPENSE
Net interest expense decreased for the three months ended March 31, 2002 as
compared to the prior year period principally due to the May 2001 issuance of
convertible debt, which bears a lower interest rate than the debt balances
repaid with the proceeds from the issuance.
Other expense in both the current and prior year quarter primarily consisted of
amounts relating to minority interests and fluctuations in currency exchange
rates.
PRETAX INCOME
Refer to Note 9 to the condensed consolidated financial statements for a summary
of financial results by segment. Certain items are maintained at the company's
corporate headquarters and are not allocated to the segments. They primarily
include the majority of the hedging activities, certain foreign currency
fluctuations, net interest expense, income and expense related to certain
non-strategic investments, corporate headquarters costs, and certain
nonrecurring gains and losses. The following is a summary of the significant
factors impacting the segments' financial results.
Medication Delivery
Pretax income increased 18 percent for the three months ended March 31, 2002.
The growth in pretax income was primarily the result of solid sales growth, the
close management of costs, the leveraging of expenses in conjunction with recent
acquisitions, and decreased pump service costs, partially offset by the
unfavorable impact of fluctuations in currency exchange rates and increased R&D
spending, which was primarily related to the acquisition of ASTA.
BioScience
Pretax income increased 51 percent for the three months ended March 31, 2002.
The growth in pretax income was primarily a result of strong sales growth, an
improved gross margin due to a change in product mix, and the leveraging of
expenses. Partially offsetting these increases was the unfavorable impact of
fluctuations in currency exchange rates, as well as increased R&D investments in
the business.
Renal
Pretax income decreased 15 percent for the three months ended March 31, 2002.
The decrease in pretax income during the quarter was principally due to the
unfavorable impact of fluctuations in currency exchange rates and increased R&D
spending, partially offset by an improved sales mix and the close management of
expenses.
INCOME TAXES
The effective income tax rate for the three months ended March 31, 2002 was
substantially unchanged as compared to the prior year quarter. Management does
not expect a significant change in the effective tax rate during the remainder
of the year.
CHANGES IN ACCOUNTING PRINCIPLES
Refer to Note 7 to the condensed consolidated financial statements regarding the
company's adoption in 2002 of Statement of Financial Accounting Standards (SFAS)
No. 141, "Business Combinations," and SFAS No. 142, "Goodwill and Other
Intangible Assets."
The company adopted SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities," and its amendments at the beginning of 2001. In accordance
with the transition provisions of SFAS No. 133, upon adoption the company
recorded a cumulative effect reduction to earnings of approximately $52 million
(net of tax benefit of approximately $32 million), and a cumulative effect
increase to other comprehensive income of approximately $8 million (net of tax
of approximately $5 million).
13
LIQUIDITY AND CAPITAL RESOURCES
Cash flows from operations per the company's condensed consolidated statements
of cash flows decreased for the three months ended March 31, 2002. The effect of
increased earnings in 2002, improved cash flows relating to accounts payable and
accrued liabilities, and decreased net cash payments relating to the company's
litigation was more than offset by the effect of increases in accounts
receivable and inventories, as the company continues to grow its businesses.
Cash flows from investing activities decreased for the three months ended March
31, 2002. Capital expenditures increased modestly during the three months ended
March 31, 2002 as compared to the prior year quarter as the company increased
its investments in various capital projects across the three segments. The
increased investments principally pertained to the BioScience segment, as the
company is in the process of increasing manufacturing capacity for vaccines, and
plasma-based and recombinant products. The company plans to increase its level
of capital expenditures during the remainder of the year. Net cash outflows
relating to acquisitions remained constant during the first three months of 2002
as compared to the prior year period. Approximately $24 million of the 2002
total related to the Medication Delivery segment's January 2002 acquisition of
Autros Healthcare Solutions Inc., a developer of automated patient information
and medication management systems designed to reduce medication errors, with the
remainder pertaining to individually insignificant acquisitions. Approximately
$11 million of the 2001 total related to acquisitions of dialysis centers in
international markets, with the remainder pertaining to individually
insignificant acquisitions. In February 2001, the company acquired Sera-Tec
Biologicals, L.P., which owned and operated 80 plasma centers in 28 states, and
a central testing laboratory. The purchase price of this acquisition, which is
included in the BioScience segment, was paid with Baxter International Inc.
common stock. The cash flows relating to divestitures and other asset
dispositions in 2001 principally related to the sale and leaseback of certain
assets.
Cash flows from financing activities decreased for the three months ended March
31, 2002. Debt issuances, net of redemptions and other payments of debt,
decreased in the current quarter as compared to the prior year quarter. Cash
outflows relating to common stock dividends increased for the three-month period
due to an increase in the number of shares outstanding. Cash received for stock
issued under employee benefit plans increased due to a higher level of stock
option exercises coupled with a higher average exercise price. In conjunction
with the early termination of an equity forward agreement, the company purchased
one million shares of common stock for $35 million during the first quarter of
2002. The company's net-debt-to-capital ratio was 40.6 percent and 35.9 percent
at March 31, 2002 and December 31, 2001, respectively.
Management assesses the company's liquidity in terms of its overall ability to
mobilize cash to support ongoing business levels and to fund its growth.
Management uses an internal performance measure called operational cash flow
that evaluates each operating business and geographic region on all aspects of
cash flow under its direct control. Operational cash flow, as defined, reflects
all litigation payments and related insurance recoveries except for those
payments and recoveries relating to mammary implants, which the company never
manufactured or sold.
The following table reconciles cash flow provided by operations, as determined
by generally accepted accounting principles (GAAP), to operational cash flow,
which is not a measure defined by GAAP.
14
- ---------------------------------------------------------------------------------------
Three months ended March 31,
(in millions) 2002 2001
- ---------------------------------------------------------------------------------------
Cash flows from operations per the company's
condensed consolidated statements of cash flows ($100) ($33)
Capital expenditures (139) (131)
Net interest after tax 12 11
Other, including mammary implant litigation 10 42
- ---------------------------------------------------------------------------------------
Operational cash flow ($217) ($111)
=======================================================================================
As authorized by the board of directors, the company repurchases its stock to
optimize its capital structure depending upon its operational cash flows, net
debt level and current market conditions. In July 2001, the board of directors
authorized the repurchase of $500 million of common stock. The company began
repurchasing under this program in the third quarter of 2001, and, as discussed
above, repurchased one million shares of common stock during the first quarter
of 2002. Stock repurchases totaled $111 million under this program at March 31,
2002.
On February 27, 2001, Baxter's board of directors approved a two-for-one stock
split of the company's common shares. On May 1, 2001, the split was approved by
the company's shareholders. On May 30, 2001, shareholders of record on May 9,
2001 received one additional share of Baxter common stock for each share held on
May 9, 2001. All share and per share data in the condensed consolidated
financial statements and notes have been adjusted and restated to reflect the
stock split.
The company intends to fund its short-term and long-term obligations as they
mature through cash flow from operations, by issuing additional debt, by
entering into other financing arrangements or by issuing common stock. In April
2002, the company issued $500 million of term debt, maturing in May 2007, and
bearing a 5.25% coupon rate. The net proceeds will be used for working capital,
to repay certain existing debt, for capital expenditures and for general
corporate purposes. The company believes it has lines of credit
adequate to support ongoing operational requirements. Beyond that, the company
believes it has sufficient financial flexibility to attract long-term capital on
acceptable terms as may be needed to support its growth objectives. The
company's ability to generate cash flows from operations could be adversely
affected in the event there is a material decline in the demand for the
company's products, deterioration in the company's key financial ratios or
credit ratings, or other significantly unfavorable change in conditions. With
respect to the company's credit arrangements and debt outstanding at March 31,
2002, while a deterioration in the company's credit rating could unfavorably
impact the financing costs associated with the credit arrangements, such a
downgrade would not affect the company's ability to draw on the credit
arrangements, and would not result in an acceleration of the scheduled
maturities of the outstanding debt.
See "Part II - Item 1. Legal Proceedings" for a discussion of the company's
legal contingencies and related insurance coverage with respect to cases and
claims relating to the company's plasma-based therapies and mammary implants
manufactured by the Heyer-Schulte division of American Hospital Supply
Corporation, as well as other matters. Upon resolution of any of these matters,
the company may incur charges in excess of presently established reserves. While
such future charges could have a material adverse impact on the company's net
income or cash flows in the period in which they are recorded or paid,
management believes that the outcomes of these actions, individually or in the
aggregate, will not have a material adverse effect on the company's consolidated
financial position.
FORWARD-LOOKING INFORMATION
The matters discussed above that are not historical facts include
forward-looking statements. These statements are based on the company's current
expectations and involve numerous
15
risks and uncertainties. Some of these risks and uncertainties are factors that
affect all international businesses, while some are specific to the company and
the health-care arenas in which it operates. Many factors could affect the
company's actual results, causing results to differ, and possibly differ
materially, from those expressed in any such forward-looking statements. These
factors include, but are not limited to, interest rates; technological advances
in the medical field; economic conditions; demand and market acceptance risks
for new and existing products, technologies and health-care services; the impact
of competitive products and pricing; manufacturing capacity; new plant
start-ups; global regulatory, trade and tax policies; regulatory, legal or other
developments relating to the company's Series A, AF and AX dialyzers; continued
price competition; product development risks, including technological
difficulties; ability to enforce patents; actions of regulatory bodies and other
government authorities; reimbursement policies of government agencies;
commercialization factors; results of product testing; and other factors
described in this report or in the company's other filings with the Securities
and Exchange Commission. Additionally, as discussed in "Legal Proceedings"
below, upon the resolution of certain legal matters, the company may incur
charges in excess of presently established reserves. Any such charge could have
a material adverse effect on the company's results of operations or cash flows
in the period in which it is recorded.
Currency fluctuations are also a significant variable for global companies,
especially fluctuations in local currencies where hedging opportunities are
unreasonably expensive or unavailable. If the United States dollar strengthens
against most foreign currencies, the company's growth rates in its sales and net
earnings could be negatively impacted.
Management believes that its expectations with respect to forward-looking
statements are based upon reasonable assumptions within the bounds of its
knowledge of the company's business and operations, but there can be no
assurance that the actual results or performance of the company will conform to
any future results or performance expressed or implied by such forward-looking
statements.
16
Item 3. Quantitative and Qualitative Disclosures About Market Risk
For a complete discussion, refer to the caption "Financial Instrument Market
Risk" in the company's 2001 Annual Report to Stockholders on Form 10-K. As part
of its risk-management program, the company performs sensitivity analyses to
assess potential changes in fair value relating to hypothetical movements in
currency exchange rates. A sensitivity analysis of changes in the fair value of
foreign exchange option and forward contracts outstanding at March 31, 2002, the
total of which did not change significantly from that at December 31, 2001,
indicated that, if the U.S. Dollar uniformly fluctuated unfavorably by 10
percent against all currencies, the fair value of those contracts would decrease
by approximately $139 million. With respect to the company's cross-currency swap
agreements used to hedge net investments in foreign affiliates, if the U.S.
Dollar uniformly weakened by 10 percent, the fair value of the contracts would
decrease by approximately $249 million as of March 31, 2002. These sensitivity
analyses disregard the possibility that currency exchange rates can move in
opposite directions and that gains from one currency may or may not be offset by
losses from another currency. The analyses also disregard the offsetting change
in value of the underlying hedged transactions and balances.
Review by Independent Accountants
Reviews of the interim condensed consolidated financial information included in
this Quarterly Report on Form 10-Q for the three months ended March 31, 2002 and
2001 have been performed by PricewaterhouseCoopers LLP, the company's
independent accountants. Their report on the interim condensed consolidated
financial information follows. This report is not considered a report within the
meaning of Sections 7 and 11 of the Securities Act of 1933 and therefore, the
independent accountants' liability under Section 11 does not extend to it.
17
Report of Independent Accountants
To the Board of Directors and Stockholders of
Baxter International Inc.:
We have reviewed the accompanying condensed consolidated balance sheet of Baxter
International Inc. and its subsidiaries as of March 31, 2002, and the related
condensed consolidated statements of income for the three-month periods ended
March 31, 2002 and 2001 and the condensed consolidated statements of cash flows
for the three-month periods ended March 31, 2002 and 2001. These financial
statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying condensed consolidated interim financial statements
for them to be in conformity with accounting principles generally accepted in
the United States of America.
We previously audited, in accordance with auditing standards generally accepted
in the United States of America, the consolidated balance sheet as of December
31, 2001 and the related consolidated statements of income, cash flows and
stockholders' equity for the year then ended (not presented herein), and in our
report dated February 14, 2002 we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the information set forth in
the accompanying condensed consolidated balance sheet as of December 31, 2001,
is fairly stated in all material respects in relation to the consolidated
balance sheet from which it has been derived.
PricewaterhouseCoopers LLP
Chicago, Illinois
April 30, 2002
18
PART II. OTHER INFORMATION
Baxter International Inc. and Subsidiaries
Item 1. Legal Proceedings
Baxter International Inc. (Baxter or the company) and certain of its
subsidiaries are named as defendants in a number of lawsuits, claims and
proceedings, including product liability claims involving products now or
formerly manufactured or sold by the company or by companies that were acquired
by the company. The most significant of these are reported in the company's
Annual Report on Form 10-K for the year ended December 31, 2001, and material
developments in such matters for the quarter ended March 31, 2002 are described
below. Upon resolution of any such matters, Baxter may incur charges in excess
of presently established reserves. While such a future charge could have a
material adverse impact on the company's net income and net cash flows in the
period in which it is recorded or paid, management believes that no such charge
would have a material adverse effect on Baxter's consolidated financial
position.
Mammary implant litigation
As previously reported in the company's Annual Report on Form 10-K, the company,
together with certain of its subsidiaries, is currently a defendant in various
courts in a number of lawsuits brought by individuals, all seeking damages for
injuries of various types allegedly caused by silicone mammary implants formerly
manufactured by the Heyer-Schulte division of American Hospital Supply
Corporation (AHSC). AHSC, which was acquired by the company in 1985, divested
its Heyer-Schulte division in 1984. It is not known how many of these claims and
lawsuits involve products manufactured and sold by Heyer-Schulte, as opposed to
other manufacturers. In December 1998, a panel of independent medical experts
appointed by a federal judge announced its findings that reported medical
studies contained no clear evidence of a connection between silicone mammary
implants and traditional or atypical systemic diseases. In June 1999, a similar
conclusion was announced by a committee of independent medical experts from the
Institute of Medicine, an arm of the National Academy of Sciences.
As of March 31, 2002, Baxter, together with certain of its subsidiaries, was
named as a defendant or co-defendant in 231 lawsuits and one claim relating to
mammary implants, brought by approximately 480 plaintiffs, of which 385 are
implant plaintiffs and the remainder are consortium or second generation
plaintiffs. Of those plaintiffs, 12 currently are included in the Lindsey class
action Revised Settlement described below, which accounts for approximately 11
of the pending lawsuits against the company. Additionally, 283 plaintiffs have
opted out of the Revised Settlement (representing approximately 176 pending
lawsuits), and the status of the remaining plaintiffs with pending lawsuits is
unknown. Some of the opt-out plaintiffs filed their cases naming multiple
defendants and without product identification; thus, not all of the opt-out
plaintiffs will have viable claims against the company. As of March 31, 2002,
147 of the opt-out plaintiffs had confirmed Heyer-Schulte mammary implant
product identification. Furthermore, during the first quarter of 2002, Baxter
obtained dismissals, or agreements for dismissals, with respect to 112
plaintiffs.
In addition to the individual suits against the company, a class action on
behalf of all women with silicone mammary implants is pending in the United
States District Court (U.S.D.C.) for the Northern District of Alabama involving
most manufacturers of such implants, including Baxter, as successor to AHSC
(Lindsey, et al., v. Dow Corning, et al., U.S.D.C., N. Dist. Ala., CV
94-P-11558-S). The class action was certified for settlement purposes only by
the court on September 1, 1994, and the settlement terms were subsequently
revised and approved on December 22, 1995 (the Revised Settlement). All appeals
directly challenging the Revised Settlement have been dismissed.
19
In addition to the Lindsey class action, the company also has been named in
three other purported class actions in various state and provincial courts, only
one of which is certified.
On March 31, 2000, the United States Department of Justice filed an action in
the federal district court in Birmingham, Alabama against Baxter and other
manufacturers of breast implants, as well as the escrow agent for the revised
settlement fund, seeking reimbursement under various federal statutes for
medical care provided to various women with mammary implants. On September 26,
2001 the district court granted the motion of all defendants, including Baxter,
to dismiss the action. The federal government has appealed the dismissal.
Plasma-based therapies litigation
As previously reported in the company's Annual Report on Form 10-K, Baxter
currently is a defendant in a number of claims and lawsuits brought by
individuals who have hemophilia, all seeking damages for injuries allegedly
caused by anti-hemophilic factor concentrates VIII or IX derived from human
blood plasma (factor concentrates) processed by the company from the late 1970s
to the mid-1980s. The typical case or claim alleges that the individual was
infected with the HIV virus by factor concentrates, which contained the HIV
virus. None of these cases involves factor concentrates currently processed by
the company.
As of March 31, 2002, Baxter was named in 37 lawsuits and 91 claims in the
United States, France, Ireland, Italy, Japan and Taiwan. The U.S.D.C. for the
Northern District of Illinois has approved a settlement of all U.S. federal
court factor concentrates cases. As of March 31, 2002, approximately 6,500
claimant groups had been found eligible to participate in the settlement, and
approximately 350 claimants had opted out of the settlement. Approximately 6,236
of the claimant groups had received payments as of March 31, 2002.
In Japan, Baxter is a defendant, along with the Japanese government and four
other co-defendants, in factor concentrates cases in Osaka, Tokyo, Nagoya,
Tohoku, Fukuoka, Sapporo and Kumamoto. As of March 31, 2002, the cases involved
1,351 plaintiffs, of whom 1,340 have settled their claims.
In addition, Immuno International AG (Immuno), a company acquired by Baxter in
fiscal year 1997, has unsettled claims for damages for injuries allegedly caused
by its plasma-based therapies. The typical claim alleges that the individual
with hemophilia was infected with HIV by factor concentrates containing the HIV
virus. Additionally, Immuno faces multiple claims stemming from its vaccines and
other biologically derived therapies. A portion of the liability and defense
costs related to these claims will be covered by insurance, subject to
exclusions, conditions, policy limits and other factors. Pursuant to the stock
purchase agreement between the company and Immuno, as revised in April 1999 in
consideration for payment by the company of 29 million Swiss Francs to Immuno as
additional purchase price, approximately 26 million Swiss Francs of the purchase
price is being withheld to cover these contingent liabilities.
As previously reported in the company's Annual Report on Form 10-K, Baxter is
currently a defendant in a number of claims and lawsuits brought by individuals
who infused the company's Gammagard(R) IVIG (intravenous immuno-globulin), all
of whom are seeking damages for Hepatitis C infections allegedly caused by
infusing Gammagard(R) IVIG. As of March 31, 2002, Baxter was a defendant in 17
lawsuits and 26 claims in the United States, Denmark, France, Germany, Italy,
Spain and the United Kingdom. One class action in the United States has been
certified. In September 2000, the U.S.D.C. for the Central District of
California approved a settlement of the class action that would provide
financial compensation for U.S. individuals who used Gammagard(R) IVIG between
January 1993 and February 1994.
20
Other
As of March 31, 2002, Baxter International Inc. and certain of its subsidiaries
were named as defendants in three civil lawsuits, one of which is a purported
class action, seeking damages on behalf of persons who allegedly died or were
injured as a result of exposure to Baxter's A, AF and AX series dialyzers. One
of these cases, which is pending in the Superior Court of San Bernardino County,
California, was filed during the first quarter of 2002. The company has reached
settlements with a number of the families of patients who died in Spain and
Croatia after undergoing hemodialysis on Baxter Althane series dialyzers.
Government criminal investigations concerning the patient deaths are pending in
Spain and Croatia. Other lawsuits and claims may be filed in the United States
and elsewhere.
Baxter International Inc. and certain of its subsidiaries have been named as
defendants, along with others, in six lawsuits brought in U.S. federal courts on
behalf of various classes of purchasers of Medicare and Medicaid eligible drugs
alleged to have been injured by Baxter and other defendants as a result of
pricing practices for such drugs, which are alleged to be artificially inflated.
One of these cases was filed during the first quarter of 2002 in the U.S.D.C.
for the Western District of Louisiana and another was filed in April 2002 in the
U.S.D.C. for the Eastern District of Pennsylvania. All six of these U.S. federal
court cases have been transferred to the U.S.D.C. for the District of
Massachusetts for consolidated pretrial case management under Multi District
Litigation rules. Claimants seek damages and declaratory and injunctive relief
under various state and/or federal statutes. In addition, in January 2002, the
Attorney General of Nevada filed a civil suit in the Second Judicial District
Court of Washoe County, Nevada. In February 2002, the Attorney General of
Montana filed a civil suit in the First Judicial District Court of Lewis and
Clark County, Montana. These lawsuits in Nevada and Montana, which each name a
subsidiary of Baxter International as a defendant and seek damages, injunctive
relief, civil penalties, disgorgement, forfeiture and restitution, allege that
prices for Medicare and Medicaid eligible drugs were artificially inflated in
violation of various state laws. Various state and federal agencies are
conducting civil investigations into the marketing and pricing practices of
Baxter and others with respect to Medicare and Medicaid reimbursement.
As of September 30, 1996, the date of the spin-off of Allegiance Corporation
(Allegiance) from Baxter, Allegiance assumed the defense of litigation involving
claims related to Allegiance's businesses, including certain claims of alleged
personal injuries as a result of exposure to natural rubber latex gloves.
Allegiance has not been named in most of this litigation but will be defending
and indemnifying Baxter pursuant to certain contractual obligations for all
expenses and potential liabilities associated with claims pertaining to latex
gloves. As of March 31, 2002, the company was named as a defendant in 494
lawsuits, including the following purported class action: Swartz v. Baxter
Healthcare Corporation, et al. Court of Common Pleas, Jefferson County, PA,
656-1997 C.D.
In connection with the spin-off of its cardiovascular business, Baxter obtained
a ruling from the Internal Revenue Service to the effect that the distribution
should qualify as a tax-free spin-off in the United States. In many countries
throughout the world, Baxter has not sought similar rulings from the local tax
authorities and has taken the position that the spin-off was a tax-free event to
Baxter. In the event that this position was successfully challenged by one or
more countries' taxing authorities, Baxter would be liable for any resulting
liability. Baxter believes that it has established adequate reserves to cover
the expected tax liabilities. There can be no assurance, however, that Baxter
will not incur losses in excess of such reserves.
21
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibits required by Item 601 of Regulation S-K are listed in the
Exhibit Index hereto.
(b) Reports on Form 8-K
None.
22
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BAXTER INTERNATIONAL INC.
-----------------------------------
(Registrant)
Date: May 3, 2002 By: /s/ Brian P. Anderson
-------------------------------
Brian P. Anderson
Senior Vice President and Chief
Financial Officer
(Chief Accounting Officer)
23
EXHIBITS FILED WITH SECURITIES AND EXCHANGE COMMISSION
- --------------------------------------------------------------------------------
Number Description of Exhibit
- ------ ----------------------
10.3 Baxter International Inc. and Subsidiaries Supplemental Pension Plan,
as amended and restated effective January 1, 2002
10.9 Baxter International Inc. and Subsidiaries Deferred Compensation Plan,
as amended and restated effective January 1, 2002
12 Computation of Ratio of Earnings to Fixed Charges
15 Letter Re Unaudited Interim Financial Information
24