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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
[X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
OR
[_]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
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LOGO
Baxter International Inc.
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DELAWARE 36-0781620
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State of I.R.S. Employer
Incorporation Identification No.
ONE BAXTER PARKWAY, DEERFIELD, ILLINOIS 60015
(847) 948-2000
------------------------------------------
Address, including zip code, and telephone number,
including area code, of principal executive offices
Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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Common stock, $1 par value New York Stock Exchange
Chicago Stock Exchange
Preferred Stock Purchase Rights Pacific Stock Exchange
(currently traded with common stock) New York Stock Exchange
Chicago Stock Exchange
Pacific Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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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.
X
Yes No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein and will not be contained, to
the best of registrant's knowledge, in the definitive proxy statement
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [_]
The aggregate market value of the voting stock held by non-affiliates of the
registrant (based on the per share closing sale price of $47.63 on March 7,
1997, and for the purpose of this computation only, the assumption that all
registrant's directors and executive officers are affiliates) was
approximately $12.8 billion.
The number of shares of the registrant's common stock, $1 par value,
outstanding as of March 7, 1997, was 273,023,212.
DOCUMENTS INCORPORATED BY REFERENCE
Those sections or portions of the registrant's 1996 annual report to
stockholders and of the registrant's proxy statement for use in connection
with its annual meeting of stockholders to be held on May 5, 1997, described
in the cross reference sheet and table of contents attached hereto are
incorporated by reference in this report.
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CROSS REFERENCE SHEET
AND
TABLE OF CONTENTS
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Page Number or
(Reference)
(1)
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Item 1. Business
(a)General Development of Business................... 1(2)
(b)Financial Information about Industry Segments..... 1(3)
(c)Narrative Description of Business................. 1(4)
(d)Financial Information about Foreign and Domestic
Operations and
Export Sales......................................... 5(5)
Item 2. Properties........................................... 5
Item 3. Legal Proceedings.................................... 5(6)
Item 4. Submission of Matters to a Vote of Security Holders.. 5
Market for the Registrant's Common Equity and Related
Item 5. Stockholder Matters.................................. 6(7)
Item 6. Selected Financial Data.............................. 6(8)
Management's Discussion and Analysis of Financial
Item 7. Condition and Results of Operations.................. 6(9)
Item 8. Financial Statements and Supplementary Data.......... 6(10)
Changes in and Disagreements with Accountants on
Item 9. Accounting and Financial Disclosure.................. 6
Item 10. Directors and Executive Officers of the Registrant
(a)Identification of Directors....................... 7(11)
(b)Identification of Executive Officers.............. 7
(c)Compliance with Section 16(a) of the Securities
Exchange Act of 1934................................. 8(12)
Item 11. Executive Compensation............................... 8(13)
Security Ownership of Certain Beneficial Owners and
Item 12. Management........................................... 9(14)
Item 13. Certain Relationships and Related Transactions....... 9
Exhibits, Financial Statement Schedules and Reports
Item 14. on Form 8-K.......................................... 9
(a)Financial Statements.............................. 9
(a)Reports on Form 8-K............................... 9
(c)Exhibits.......................................... 9
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(1) Information incorporated by reference to the Company's Annual Report to
Stockholders for the year ended December 31, 1996 ("Annual Report") and
the board of directors' proxy statement for use in connection with the
Registrant's annual meeting of stockholders to be held May 5, 1997 ("Proxy
Statement").
(2) Annual Report, pages 31-46, section entitled "Notes to Consolidated
Financial Statements" and pages 17-24, section entitled "Management's
Discussion and Analysis."
(3) Annual Report, pages 44-45, section entitled "Notes to Consolidated
Financial Statements--Industry and Geographical Information."
(4) Annual Report, pages 17-24, section entitled "Management's Discussion and
Analysis" and pages 44-45, section entitled "Notes to Consolidated
Financial Statements--Industry and Geographical Information."
(5) Annual Report, pages 44-45, section entitled "Notes to Consolidated
Financial Statements--Industry and Geographical Information."
(6) Annual Report, pages 40-44, section entitled "Notes to Consolidated
Financial Statements--Legal Proceedings."
(7) Annual Report, page 46, section entitled "Notes to Consolidated Financial
Statements--Quarterly Financial Results and Market for the Company's
Stock."
(8) Annual Report, inside back cover, section entitled "Six-Year Summary of
Selected Financial Data."
(9) Annual Report, pages 17-24, section entitled "Management's Discussion and
Analysis."
(10) Annual Report, pages 26-46, sections entitled "Report of Independent
Accountants," "Consolidated Balance Sheets," "Consolidated Statements of
Income," "Consolidated Statements of Cash Flows," "Consolidated Statements
of Stockholders' Equity" and "Notes to Consolidated Financial Statements."
(11) Proxy Statement, pages 2-5, sections entitled "Board of Directors" and
"Election of Directors."
(12) Proxy Statement, page 19, section entitled "Section 16(a) Beneficial
Ownership Reporting Compliance."
(13) Proxy Statement, pages 6-17, sections entitled "Compensation of Directors"
and "Compensation of Named Executive Officers," and pages 18-19, section
entitled "Pension Plan, Excess Plans and Supplemental Plans."
(14) Proxy Statement, pages 20-21, section entitled "Ownership of Company
Securities."
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LOGO
Baxter International Inc., One Baxter Parkway, Deerfield. Illinois 60015.
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PART I
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ITEM 1. BUSINESS.
(a) General Development of Business.
Baxter International Inc. was incorporated under Delaware law in 1931. As
used in this report, except as otherwise indicated in information incorporated
by reference, "Baxter" means Baxter International Inc. and the "Company" means
Baxter and its subsidiaries.
The Company is engaged in the worldwide development, distribution and
manufacture of a diversified line of products, systems and services used
primarily in the health-care field. Products are manufactured by the Company in
25 countries and sold in approximately 100 countries. Health-care is concerned
with the preservation of health and with the diagnosis, cure, mitigation and
treatment of disease and body defects and deficiencies. The Company's products
are used by hospitals, clinical and medical research laboratories, blood and
dialysis centers, rehabilitation centers, nursing homes, doctors' offices and
at home under physician supervision. See "Recent Developments."
For information regarding acquisitions, investments in affiliates and
divestitures, see the Company's Annual Report to Stockholders for the year
ended December 31, 1996 (the "Annual Report"), page 32, section entitled "Notes
to Consolidated Financial Statements--Acquisitions and Investments in
Affiliates" which is incorporated by reference.
(b) Financial Information About Industry Segments.
Incorporated by reference from the Annual Report, pages 44-45, section
entitled "Notes to Consolidated Financial Statements--Industry and Geographical
Information."
(c) Narrative Description of Business.
Recent Developments
Spin-off of Allegiance Corporation
On September 30, 1996, Baxter stockholders of record on September 26, 1996,
received all of the outstanding stock of Allegiance Corporation ("Allegiance"),
its health-care cost management and distribution business, in a tax-free spin-
off. Additional information is incorporated by reference from the Annual
Report, page 32, section entitled "Notes to Consolidated Financial Statements--
Discontinued Operations."
Acquisition of Immuno International AG
In December 1996, Baxter commenced the acquisition of Immuno International AG
("Immuno"), a European manufacturer of biopharmaceutical products and services
for transfusion medicine. The Company will acquire Immuno in a three-part
transaction. The purchase price is valued at approximately $600 million. A
substantial portion of the Immuno purchase price will be allocated to Immuno's
in-process research and development which, under generally accepted accounting
principles, will be immediately expensed by the Company during the first
quarter of 1997 (the "Immuno Charge"). Excluding this charge, the transaction
is expected to be nondilutive to earnings in 1997 and accretive in 1998, as
both revenue and cost synergies are realized. The acquisition will be financed
with debt, temporarily raising the Company's net-debt-to-net-capital ratio into
the mid-40% range by year-end 1997. This ratio is expected to return to the
targeted 35% to 40% range over time as a result of ongoing operations.
Acquisition of Research Medical, Inc.
In December 1996, the Company and Research Medical, Inc. ("RMI"), a provider
of specialized products used in open-heart surgery, entered into a definitive
agreement for the Company to acquire RMI for
1
approximately $236 million of Company common stock. The acquisition was
completed on March 14, 1997. A substantial portion of the RMI purchase price
will be allocated to RMI's in-process research and development and immediately
expensed by the Company during the first quarter of 1997. This non-cash
charge, together with the Immuno Charge, will be approximately $360 million
(or $1.32 per share). The RMI charge represents approximately 35% of the
total, while the Immuno Charge comprises the remainder.
Company Overview
The Company operates in a single industry segment as a global medical-
products and services company that is a leader in technologies related to the
blood and circulatory system. It has market-leading positions in four
businesses: biotechnology, which develops therapies and products in
transfusion medicine; cardiovascular medicine, which develops products and
expands services to treat late-stage cardiovascular disease; renal therapy,
which develops products and services to improve therapies to fight kidney
disease; and intravenous systems/medical products, which develops technologies
and systems to improve intravenous medication delivery, and distributes
disposable medical products.
Information about operating results is incorporated by reference from the
Annual Report, pages 17-24, section entitled "Management's Discussion and
Analysis" and pages 44-45, section entitled "Notes to Consolidated Financial
Statements--Industry and Geographical Information."
United States Markets
The United States health-care marketplace continues to be competitive. There
has been consolidation in the Company's customer base and by its competitors
which has resulted in pricing and market share pressures. These industry
trends are expected to continue. The Company intends to manage these trends by
capitalizing on its market-leading positions and by leveraging its cost
structure.
International Markets
The Company generates more than 50% of its revenues outside the United
States and international sales are expected to grow at approximately twice the
rate of domestic sales for the foreseeable future. Worldwide demand for
health-care products and services continues to be strong, particularly in
developing markets such as Asia and Latin America. In the developed world--
especially in Western Europe and Japan--there continues to be strong demand
for more technologically advanced and cost-effective therapies, products and
services. The Company's strategy emphasizes international expansion and
technological innovation to capitalize on its strong global positions and the
needs of rapidly growing markets.
Joint Ventures
The Company conducts an immaterial portion of its business through joint
ventures. These joint venture are accounted for under the equity method of
accounting.
Methods of Distribution
The Company conducts its selling efforts through its subsidiaries and
divisions. Many subsidiaries and divisions have their own sales forces and
direct their own sales efforts. In addition, sales are made to independent
distributors, dealers and sales agents. The Company's distribution centers are
stocked with adequate inventories to facilitate prompt customer service. Sales
and distribution methods include frequent contact by sales representatives,
automated communications via various electronic purchasing systems,
circulation of catalogs and merchandising bulletins, direct mail campaigns,
trade publications and advertising.
International sales and distribution are made in approximately 100 countries
either on a direct basis or through independent local distributors.
International subsidiaries employ their own field sales forces in Argentina,
Australia, Austria, Belgium, Brazil, Brunei, Canada, Chile, China, Colombia,
Ecuador, Denmark, Finland, France, Germany, Hong Kong, India, Indonesia,
Italy, Japan, Malaysia, Mexico, the Netherlands, New Zealand, Norway,
Pakistan, Peru, the Philippines, Portugal, Singapore, Spain, Switzerland,
Taiwan, Thailand, the United Kingdom and Venezuela. In other countries, sales
are made through independent distributors or sales agents.
Raw Materials
Raw materials essential to the Company's business are purchased worldwide in
the ordinary course of business from numerous suppliers. The vast majority of
these materials are generally available, and no serious
2
shortages or delays have been encountered. Certain raw materials used in
producing some of the Company's products are available only from a small number
of suppliers. In addition, certain biomaterials for medical implant
applications (primarily polymers) are becoming more difficult to obtain due to
market withdrawals by biomaterial suppliers, primarily as a result of perceived
exposures to liability in the United States.
In some of these situations, the Company has long-term supply contracts with
its suppliers, although it does not consider its obligations under such
contracts to be material. The Company does not always recover cost increases
through customer pricing due to contractual limits and market pressure on such
price increases. See "Contractual Arrangements."
Patents and Trademarks
The Company owns a number of patents and trademarks throughout the world and
is licensed under patents owned by others. While it seeks patents on new
developments whenever feasible, the Company does not consider any one or more
of its patents, or the licenses granted to or by it, to be essential to its
business.
Products manufactured by the Company are sold primarily under its own
trademarks and trade names. Some products purchased and resold by the Company
are sold under the Company's trade names while others are sold under trade
names owned by its suppliers.
Competition
Historically, competition in the health-care industry has been characterized
by the search for technological and therapeutic innovations in the prevention,
diagnosis and treatment of disease. The Company believes that it has benefited
from the technological advantages of certain of its products. While others will
continue to introduce new products which compete with those sold by the
Company, the Company believes that its research and development effort will
permit it to remain competitive in all presently material product areas.
Although no single company competes with the Company in all of its businesses,
the Company is faced with substantial competition in all of its markets.
The changing health-care environment in recent years has led to increasingly
intense competition among United States health-care suppliers. Competition is
focused on price, service and product performance. Pressure in these areas is
expected to continue.
In part through its restructuring programs, the Company continues to increase
its efforts to minimize costs and better meet United States price competition.
The Company believes that its cost position will continue to benefit from
improvements in manufacturing technology and increased economies of scale. The
Company continues to emphasize its investments in innovative and cost-effective
technologies and the quality of its product and services.
Credit and Working Capital Practices
As of December 31, 1996, the Company's debt ratings were A3 on senior debt by
Moody's, A by Standard & Poor's and BBB+ by Duff & Phelps.
The Company's credit practices and related working capital needs are
comparable to those of other market participants. Collection periods tend to be
longer for sales outside the United States.
Quality Control
The Company places great emphasis on providing quality products and services
to its customers. An integrated network of quality systems, including control
procedures that are developed and implemented by technically trained
professionals, result in rigid specifications for raw materials, packaging
materials, labels, sterilization procedures and overall manufacturing process
control. The quality systems integrate the efforts of raw material and finished
goods suppliers to provide the highest value to customers. On a statistical
sampling basis, a quality assurance organization tests components and finished
goods at different stages in the manufacturing process to assure that exacting
standards are met. Customers may return defective merchandise for credit or
replacement. In recent years, such returns have been insignificant.
3
Research and Development
The Company is actively engaged in research and development programs to
develop and improve products, systems and manufacturing methods. These
activities are performed at 21 research and development centers located around
the world and include facilities in Australia, Belgium, Germany, Italy, Japan,
Malta, the Netherlands, Sweden, the United Kingdom and the United States.
Expenditures for Company-sponsored research and development activities were
$340 in 1996, $345 million in 1995 and $303 million in 1994.
The Company's research efforts emphasize self-manufactured product
development, and portions of that research relate to multiple product lines.
For example, many product categories benefit from the Company's research
effort as applied to the human body's circulatory systems. In addition,
research relating to the performance and purity of plastic materials has
resulted in advances that are applicable to a large number of the Company's
products. Principal areas of strategic focus for research are biotechnology,
renal therapy and transplantation, blood disorders and cardiovascular disease.
Government Regulation
Most products manufactured or sold by the Company in the United States are
subject to regulation by the Food and Drug Administration ("FDA"), as well as
by other federal and state agencies. The FDA regulates the introduction and
advertising of new drugs and devices as well as manufacturing procedures,
labeling and record keeping with respect to drugs and devices. The FDA has the
power to seize adulterated or misbranded drugs and devices or to require the
manufacturer to remove them from the market and the power to publicize
relevant facts. From time to time, the Company has removed products from the
market that were found not to meet acceptable standards. This may occur in the
future. Product regulatory laws exist in most other countries where the
Company does business.
Environmental policies of the Company mandate compliance with all applicable
regulatory requirements concerning environmental quality and contemplate,
among other things, appropriate capital expenditures for environmental
protection. Various non-material capital expenditures for environmental
protection were made by the Company during 1996 and similar expenditures are
planned for 1997. See Item 3.--"Legal Proceedings."
Employees
As of December 31, 1996, the Company employed approximately 37,000 people.
Contractual Arrangements
A substantial portion of the Company's products are sold through contracts
with purchasers, both international and domestic. Some of these contracts are
for terms of more than one year and include limits on price increases. In the
case of hospitals, clinical laboratories and other facilities, these contracts
may specify minimum quantities of a particular product or categories of
products to be purchased by the customer.
Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the
Private Securities Litigation Reform Act of 1995
Statements throughout this report that are not historical facts, including
but not limited to statements in the "Company Overview," "International
Markets" and "Recent Developments" sections of this report (including material
incorporated therein by reference) include forward looking statements. These
statements are based on the Company's current expectations and involve
numerous 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.
The factors below in some cases have affected and 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 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, the United States and global
regulatory and trade environment, continued price competition related to the
Company's United States operations, product development risks, including
technological difficulties, and unforeseen foreign commercialization and
regulatory factors.
4
Currency fluctuations are also a significant variable for global companies,
especially fluctuations in local currencies where hedging opportunities are
unreasonably expensive, or altogether unavailable. If the United States dollar
continues to strengthen against most foreign currencies, the Company's ability
to realize projected growth rates in its sales outside the United States
(expressed in United States dollars) could be negatively impacted. However, a
continued weakening in such non-United States currencies may correspondingly by
reduce costs (which are initially denominated in local currencies) associated
with Company product manufactured in those countries.
The Company believes that its expectations with respect to forward-looking
statements are based upon reasonable assumptions within the bounds of its
knowledge of its 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.
(d) Financial Information About Foreign and Domestic Operations and Export
Sales.
International operations are subject to certain additional risks inherent in
conducting business outside the United States, such as changes in currency
exchange rates, price and currency exchange controls, import restrictions,
nationalization, expropriation and other governmental action.
Financial information is incorporated by reference from the Annual Report,
pages 44-45, section entitled "Notes to Consolidated Financial Statements--
Industry and Geographical Information."
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ITEM 2. PROPERTIES.
The Company owns or has long-term leases on substantially all of its major
manufacturing facilities. The Company maintains 18 manufacturing facilities in
the United States, including seven in Puerto Rico, and also manufactures in
Australia, Belgium, Brazil, Canada, the Czech Republic, Chile, China, Colombia,
Costa Rica, the Dominican Republic, France, Indonesia, Ireland, Italy, Japan,
Malta, Mexico, the Netherlands, Russia, Singapore, Spain, Switzerland, Taiwan,
Turkey and the United Kingdom. The Company owns or operates distribution
facilities throughout the world, including 67 located in 24 foreign countries.
The Company maintains a continuing program for improving its properties,
including the retirement or improvement of older facilities and the
construction of new facilities. This program includes improvement of
manufacturing facilities to enable production and quality control programs to
conform with the current state of technology and government regulations.
Capital expenditures were $318 million in 1996, $309 million in 1995 and $308
million in 1994. In addition, the Company added to the pool of equipment leased
or rented to customers, spending $80 million in 1996, $90 million in 1995 and
$72 million in 1994.
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ITEM 3. LEGAL PROCEEDINGS.
Incorporated by reference from the Annual Report, pages 40-44, section
entitled "Notes to Consolidated Financial Statements--Legal Proceedings."
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
5
PART II
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ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
Incorporated by reference from the Annual Report, page 46, section entitled
"Notes to Consolidated Financial Statements--Quarterly Financial Results and
Market for the Company's Stock."
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ITEM 6. SELECTED FINANCIAL DATA.
Incorporated by reference from the Annual Report, inside back cover, section
entitled "Six Year Summary of Selected Financial Data."
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Incorporated by reference from the Annual Report, pages 17-24, section
entitled "Management's Discussion and Analysis."
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Incorporated by reference from the Annual Report, pages 26-46, sections
entitled "Report of Independent Accountants," "Consolidated Balance Sheets,"
"Consolidated Statements of Income," "Consolidated Statements of Cash Flows,"
"Consolidated Statements of Stockholders' Equity," and "Notes to Consolidated
Financial Statements."
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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
6
PART III
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ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
(a) Identification of Directors
Incorporated by reference from the board of directors' proxy statement for
use in connection with Baxter's annual meeting of stockholders to be held on
May 5, 1997 (the "Proxy Statement"), pages 2-5, sections entitled "Board of
Directors" and "Election of Directors."
(b) Identification of Executive Officers
Following are the names and ages, as of March 1, 1997, of the executive
officers of Baxter International Inc. ("Baxter"), and one or both of its two
principal direct subsidiaries, Baxter Healthcare Corporation ("Healthcare") and
Baxter World Trade Corporation ("World Trade"), their positions and summaries
of their backgrounds and business experience. All executive officers of Baxter
are elected or appointed by the board of directors and hold office until the
next annual meeting of directors and until their respective successors are
elected and qualified. The annual meeting of directors is held after the annual
meeting of stockholders. All executive officers of Healthcare and World Trade
are elected or appointed by the boards of directors of the applicable
subsidiary and hold office until their respective successors are elected and
qualified. As permitted by applicable law, actions by these boards (and their
sole stockholder, Baxter) may be taken by written consent in lieu of a meeting.
(1) Baxter International Inc. Executive Officers
Vernon R. Loucks Jr., age 62, has been chairman of the board of directors
since 1987 and chief executive officer of Baxter since 1980. Mr. Loucks was
first elected an officer of Baxter in 1971.
Harry M. Jansen Kraemer, Jr., age 42, has been a senior vice president and
chief financial officer of Baxter since 1993. Mr. Kraemer previously was the
vice president of finance and operations for a subsidiary of Baxter. Prior to
that he was employed as controller, group controller, and president of various
divisions of subsidiaries of Baxter.
Arthur F. Staubitz, age 57, has been senior vice president and general
counsel of Baxter since 1993. From 1993 to 1994, he was also secretary of
Baxter. Mr. Staubitz previously was vice president/general manager of the
ventures group of a subsidiary of Baxter. Prior to that he was senior vice
president, secretary and general counsel of Amgen, Inc. Prior to that he was a
vice president of a Baxter subsidiary, and prior to that he was a vice
president and deputy general counsel of Baxter.
Michael J. Tucker, age 44, has been senior vice president of Baxter since
1995. From 1994 to 1995, he was a corporate vice president of World Trade. Mr.
Tucker previously was a vice president of a division of World Trade, and prior
to that, was a vice president of another division of a subsidiary of Baxter.
Fabrizio Bonanni, age 50, has been a vice president of Baxter since 1995.
From 1994 to 1995, he was a corporate vice president of World Trade. Mr.
Bonanni previously was a vice president of a division of World Trade.
John F. Gaither, Jr., age 47, has been a vice president of Baxter since 1994.
Between 1991 and 1994, Mr. Gaither was vice president of law and strategic
planning for a subsidiary of Baxter, and prior to that, was secretary and
deputy general counsel of Baxter.
David C. McKee, age 49, has been a vice president of Baxter since 1996, and
secretary since February 1997. Since 1994, Mr. McKee has been deputy general
counsel of Baxter. Prior to that, he was associate general counsel of a
subsidiary of Baxter.
Kshitij Mohan, age 52, has been a vice president of Baxter since 1995. In
1995, Mr. Mohan also was a corporate vice president of World Trade. Mr. Mohan
previously was a vice president of a division of Healthcare.
7
John L. Quick, age 52, has been a vice president of Baxter since 1995. From
1994 to 1995, he was a corporate vice president of Healthcare. Mr. Quick
previously was a vice president of a division of Healthcare, and prior to
that, was a vice president of another division of that subsidiary.
Brian P. Anderson, age 46, has been controller of Baxter since 1993. Mr.
Anderson previously was the vice president of corporate audit of a subsidiary
of Baxter, and prior to that was a partner in the international accounting
firm of Deloitte & Touche.
Steven J. Meyer, age 40, has been treasurer of Baxter since February 1997.
From 1993 to 1997, Mr. Meyer was a vice president of international finance of
a business group of World Trade. Mr. Meyer previously was the international
controller of a business group of World Trade.
(2) Healthcare and World Trade Executive Officers
Timothy B. Anderson, age 50, has been a group vice president of Healthcare
and World Trade since 1994. Between 1992 and 1994, Mr. Anderson was a vice
president of Baxter. Mr. Anderson previously was president of several
divisions of a subsidiary of Baxter.
Donald W. Joseph, age 59, has been a group vice president of Healthcare and
World Trade since 1994. Between 1990 and 1994, Mr. Joseph was a vice president
of Baxter.
Jack L. McGinley, age 50, has been a group vice president of Healthcare
since 1994. Between 1992 and 1994, Mr. McGinley was a vice president of
Baxter. Mr. McGinley previously was president of a division of Healthcare, and
prior to that was president of the Japanese subsidiary of World Trade.
Michael A. Mussallem, age 44, has been a group vice president of Healthcare
since 1994. From 1993 to 1994, Mr. Mussallem was president of a division of
Healthcare, and prior to that, was president of another division of that
subsidiary.
Carlos Del Salto, age 54, has been a senior vice president of World Trade
since 1996. From 1994 to 1996, Mr. del Salto was a corporate vice president of
World Trade. Between 1992 and 1994, Mr. del Salto was a vice president of
Baxter. Mr. del Salto previously was president--Latin
America/Switzerland/Austria of a subsidiary of Baxter, and prior to that, he
was vice president--Latin America of that subsidiary.
David F. Drohan, age 58, has been a corporate vice president of Healthcare
since 1996. Between 1991 and 1996, Mr. Drohan was president of a division of
Healthcare.
James M. Gatling, age 47, has been a corporate vice president of Healthcare
since 1996. Between 1991 and 1996, Mr. Gatling was a vice president of a
division of Healthcare.
J. Robert Hurley, age 47, has been a corporate vice president of World Trade
since 1993. Mr. Hurley previously was vice president of a division of World
Trade.
Roberto E. Perez, age 47, has been a corporate vice president of Healthcare
and World Trade since 1995. Between 1992 and 1995, Mr. Perez was president of
a division of a subsidiary of Baxter, and prior to that, was a vice president
of that division.
(c) Compliance with Section 16(a) of the Securities Exchange Act of 1934.
Incorporated by reference from Proxy Statement, page 19, section entitled
"Section 16(a) Beneficial Ownership Reporting Compliance."
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ITEM 11. EXECUTIVE COMPENSATION.
Incorporated by reference from the Proxy Statement, pages 6-17, sections
entitled "Compensation of Directors" and "Compensation of Named Executive
Officers," and pages 18-19, section entitled "Pension Plan, Excess Plans and
Supplemental Plans."
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8
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Incorporated by reference from the Proxy Statement, pages 20-21, section
entitled "Ownership of Company Securities."
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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
None.
- --------------------------------------------------------------------------------
PART IV
- --------------------------------------------------------------------------------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a)The following documents are filed as a part of this report:
Financial Statements Location
Financial Statements Required by Item 8 of this Form
Consolidated Balance Sheets Annual Report, page 27
Consolidated Statements of Income Annual Report, page 28
Consolidated Statements of Cash Flows Annual Report, page 29
Consolidated Statements of Stockholders' Equity Annual Report, page 30
Notes to Consolidated Financial Statements Annual Report, pages 31-
Report of Independent Accountants 46
Annual Report, page 26
Schedules Required by Article 12 of Regulation S-X
Report of Independent Accountants on Financial
Statement Schedule page 10
II Valuation and Qualifying Accounts page 11
All other schedules have been omitted because they are not applicable or not
required.
(b)Reports on Form 8-K
A report on Form 8-K, dated December 6, 1996, was filed with the SEC under
Item 5, Other Events, to file a press release which announced Baxter's
agreement to acquire Research Medical, Inc.
A report on Form 8-K, dated January 29, 1997, was filed with the SEC under
Item 5, Other Events, to file amended exhibits and undertakings related to
a debt securities shelf registration statement on Form S-3.
A report on Form 8-K, dated March 18, 1997, was filed with the SEC under
Item 5, Other Events to file a press release disclosing charges related to
two transactions and a revision to first quarter 1997 sales projections.
(c) Exhibits required by Item 601 of Regulation S-K are listed in the Exhibit
Index, and incorporated herein by reference. Exhibits in the Exhibit Index
marked with a "C" in the left margin constitute management contracts or
compensatory plans or arrangements contemplated by Item 14(a)(3) of Form
10-K. The list of exhibits so designated is incorporated by reference in
this Part IV, Item 14.
9
REPORT OF INDEPENDENT ACCOUNTS ON THE FINANCIAL STATEMENT SCHEDULE
To the Board of Directors of
Baxter International Inc.
Our audits of the consolidated financial statements referred to in our
report dated February 10, 1997 appearing on page 26 of the 1996 Annual Report
to Stockholders of Baxter International Inc. (which report and consolidated
financial statements are incorporated by reference in the Annual Report on
Form 10-K) also included an audit of the Financial Statement Schedule listed
in Item 14(a) of this Form 10-K. In our opinion, this Financial Statement
Schedule presents fairly, in all material respects, the information set forth
therein when read in conjunction with the related consolidated financial
statements.
PRICE WATERHOUSE LLP
Chicago, Illinois
February 10, 1997
10
SCHEDULE II
- --------------------------------------------------------------------------------
VALUATION AND QUALIFYING ACCOUNTS
(In millions of dollars)
- --------------------------------------------------------------------------------
Additions
- --------------------------------------------------------------------------------
Balance at Charged to Charged to Deductions Balance
beginning costs and other from at end of
Description of period expenses accounts (A) reserves period
- --------------------------------------------------------------------------------
Year ended December 31,
1996:
Accounts receivable $22 $ 5 $(2) $(1) $24
- --------------------------------------------------------------------------------
Year ended December 31,
1995:
Accounts receivable $21 $ 9 $ 1 $(9) $22
- --------------------------------------------------------------------------------
Year ended December 31,
1994:
Accounts receivable $19 $ 7 $ 1 $(6) $21
- --------------------------------------------------------------------------------
(A) Valuation accounts of acquired or divested companies and foreign currency
translation adjustments. Reserves are deducted from assets to which they
apply.
11
SIGNATURES
Pursuant to the requirements of section 13 or 15(d) 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.
/s/ Vernon R. Loucks Jr.
By:____________________________________
Vernon R. Loucks Jr.
Chairman of the Board and
Chief Executive Officer
Date: March 18, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
(i) Principal Executive Officer:
(iv)A Majority of the Board of
Directors
/s/ Vernon R. Loucks Jr. Walter E. Boomer
Vernon R. Loucks Jr. Pei-yuan Chia
Director, Chairman of the Board John W. Colloton
and Chief Executive Officer Susan Crown
(ii) Principal Financial Officer: Mary Johnston Evans
/s/ Harry M. Jansen Kraemer, Jr. Frank R. Frame
Harry M. Jansen Kraemer, Jr. Martha R. Ingram
Senior Vice President and Harry M. Jansen Kraemer, Jr.
Chief Financial Officer Arnold J. Levine
(iii) Controller: Georges C. St. Laurent, Jr.
/s/ Brian P. Anderson Monroe E. Trout, M.D.
Brian P. Anderson Reed V. Tuckson, M.D.
Fred L. Turner
Controller
/s/ Vernon R. Loucks Jr.
By: ____________________________________
Vernon R. Loucks Jr.
Director and Attorney-in-Fact
12
- --------------------------------------------------------------------------------
APPENDICES
DESCRIPTION PAGE
- ----------- ----
Computation of Primary Earnings per Common Share (Exhibit 11.1) 16
Computation of Fully Diluted Earnings per Common Share (Exhibit 11.2) 17
Computation of Ratio of Earnings to Fixed Charges (Exhibit 12) 18
Subsidiaries of the Company (Exhibit 21) 19
- --------------------------------------------------------------------------------
EXHIBITS FILED WITH SECURITIES AND EXCHANGE COMMISSION
NUMBER AND DESCRIPTION OF EXHIBIT
---------------------------------
3. Certificate of Incorporation and Bylaws
3.1* Restated Certificate of Incorporation, filed as exhibit 3.1 to
the Company's annual report on Form 10-K for the year ended
December 31, 1992, file number 1-4448 (the "1992 Form
10-K").
3.2* Certificate of Designation of Series A Junior Participating
Preferred Stock, filed under the Securities Act of 1933 as
exhibit 4.3 to the Company's registration statement on Form S-8
(No. 33-28428).
3.3* Amended and Restated Bylaws, filed as exhibit 3.3 to the Form
10-Q for the quarter ended September 30, 1994, file number 1-
4448.
Instruments defining the rights of security holders, including
4. indentures
4.1* Indenture dated November 15, 1985 between the Company and
Bankers Trust Company, filed as exhibit 4.8 to the Company's
current report on Form 8-K dated December 16, 1985, file no. 1-
4448.
4.2* Amended and Restated Indenture dated November 15, 1985 (the
"Indenture"), between the Company and Continental Illinois
National Bank and Trust Company of Chicago ("Continental"),
filed under the Securities Act of 1933 as exhibit 4.1 to the
Company's registration statement on Form S-3 (No. 33-1665).
4.3* First Supplemental Indenture to the Indenture between the
Company and Continental, filed under the Securities Act of 1933
as exhibit 4.1(A) to the Company's registration statement on
Form S-3 (No. 33-6746).
4.4* Supplemental Indenture dated as of January 29, 1997, between the
Company and First Trust National Association (as successor to
Continental), filed under the Securities Act of 1933 as exhibit
4.1B to the Company's debt securities shelf registration
statement on Form S-3 (No. 333-19025) (the "1997 Shelf").
4.5* Fiscal and Paying Agency Agreement dated as of April 26, 1984,
among American Hospital Supply International Finance N.V., the
Company and The Toronto-Dominion Bank, as amended, filed as
exhibit 4.9 to the Company's annual report on Form 10-K for the
year ended December 31, 1985 (the "1985 Form 10-K").
4.6* Fiscal and Paying Agency Agreement dated as of November 15,
1984, between the Company and Citibank, N.A., as amended, filed
as exhibit 4.16 to the Company's annual report on Form 10-K for
the year ended December 31, 1987, file no. 1-4448 (the "1987
Form 10-K").
4.7* Specimen 9 1/2% Note, filed as exhibit 4.3(a) to the Company's
current report on Form 8-K dated June 23, 1988, file no. 1-4448.
4.8* Specimen 9 1/4% Note, filed as exhibit 4.3(a) to the Company's
current report on Form 8-K dated September 13, 1989, file number
1-4448.
4.9* Specimen 9 1/4% Note, filed as exhibit 4.3(a) to the Company's
current report on Form 8-K dated December 7, 1989, file number
1-4448.
4.10 Specimen 7.125% Note.
4.11 Specimen 7.65% Debenture.
13
10. Material Contracts
C 10.1* Form of Indemnification Agreement entered into with directors
and officers, filed as exhibit 19.4 to the Company's quarterly
report on Form 10-Q for the quarter ended September 30, 1986,
file no. 1-4448.
C 10.2* 1988 Long-Term Incentive Plan, filed as exhibit 10.12 to the
1987 Form 10-K.
C 10.3* 1987-1989 Long-Term Performance Incentive Plan, filed as
exhibit 10.15 to the Company's annual report on Form 10-K for
the year ended December 31, 1986 (the "1986 Form 10-K").
C 10.4* 1989 Long-Term Incentive Plan, filed as exhibit 10.12 to the
Company's annual report on Form 10-K for the year ended
December 31, 1988, file no. 1-4448 (the "1988 Form
10-K").
C 10.5* Stock Option Plan Adopted July 25, 1988, filed as exhibit 10.13
to the 1988 Form
10-K.
C 10.6* 1991 Officer Incentive Compensation Plan, filed as exhibit
10.11 to the Company's annual report on Form 10-K for the year
ended December 31, 1990, file number 1-4448 (the "1990 Form 10-
K").
C 10.7* Baxter International Inc. and Subsidiaries Incentive Investment
Excess Plan, filed as exhibit 10.17 to the 1988 Form 10-K.
C 10.8* Baxter International Inc. and Subsidiaries Supplemental Pension
Plan, filed as exhibit 10.18 to the 1988 Form 10-K.
C 10.9* Limited Rights Plan, filed as exhibit 19.6 to the Company's
quarterly report on Form 10-Q for the quarter ended September
30, 1989, file no. 1-4448 (the "September, 1989 Form 10-Q").
C 10.10* Amendments to various plans regarding disability, filed as
exhibit 19.9 to the September, 1989 Form 10-Q.
C 10.11* Amendments to 1987-1989 Long-Term Performance Incentive Plan
and 1988 Long-Term Incentive Plan, filed as exhibit 19.10 to
the September, 1989 Form 10-Q.
C 10.12* 1987 Incentive Compensation Program, filed as exhibit C to the
Company's proxy statement for use in connection with its May
13, 1987, annual meeting of stockholders, file no. 1-4448.
10.13* Rights Agreement between the Company and The First National
Bank of Chicago, filed as exhibit 1 to a registration statement
on Form 8-A dated March 21, 1989, file no. 1-4448.
C 10.14* Amendment to 1987 Incentive Compensation Program, filed as
exhibit 19.1 to September, 1989 Form 10-Q.
C 10.15* Restricted Stock Grant Terms and Conditions, filed as exhibit
10.25 to the Company's annual report on Form 10-K for the year
ended December 31, 1991, file number 1-4448 (the "1991 Form 10-
K").
C 10.16* Vernon R. Loucks Restricted Stock Grant Terms and Conditions,
filed as exhibit 10.26 to the 1991 Form 10-K.
C 10.17* Deferred Compensation Plan (1990), as amended in 1992, filed as
exhibit 10.27 to the 1992 Form 10-K.
C 10.18* Restricted Stock Plan for Non-Employee Directors (as amended
and restated in 1992), filed as exhibit 10.28 to the 1992 Form
10-K.
C 10.19* Restricted Stock Grant Terms and Conditions (as amended), filed
as exhibit 10.31 to the 1992 Form 10-K.
14
C 10.20* 1992 Officer Incentive Compensation Plan, filed as exhibit
10.29 to the 1992 Form 10-K.
C 10.21* 1993 Officer Incentive Compensation Plan, filed as exhibit
10.30 to the 1992 Form 10-K.
C 10.22* 1994 Officer Incentive Compensation Plan, filed as exhibit
10.31 to the Company's annual report on Form 10-K for the year
ended December 31, 1993, file number 1-4448 (the "1993 Form
10-K").
C 10.23* Corporate Aviation Policy, filed as exhibit 10.33 to the 1992
Form 10-K.
C 10.24* Plan and Agreement of Reorganization between Baxter and
Caremark International Inc., filed as exhibit 10.34 to the
1992 Form 10-K
C 10.25* 1994 Incentive Compensation Program, filed as exhibit A to the
Company's proxy statement for use in connection with its April
29, 1994 annual meeting of stockholders, file no. 1-4448.
C 10.26* 1994 Shared Investment Plan and Terms and Conditions, filed as
exhibit 10.1 to the Company's quarterly report on Form 10-Q
for the quarter ended June 30, 1994.
C 10.27* 1995 Officer Incentive Compensation Plan, filed as exhibit
10.31 to the Company's annual report on Form 10-K for the year
ended December 31, 1994 (the "1994 Form 10-K").
C 10.28* Baxter International Inc. Restricted Stock Plan for Non-
Employee Directors, as amended and restated effective May 8,
1995, filed as exhibit 10.32 to the 1994 Form 10-K.
C 10.29* 1996 Officer Incentive Compensation Plan, filed as exhibit
10.33 to the Company's annual report on Form 10-K for the year
ended December 31, 1995 (the "1995 Form 10-K").
C 10.30* 1995 Stock Option Grant Terms and Conditions, filed as exhibit
10.34 to the 1995 Form 10-K.
10.31* Reorganization Agreement between Baxter and Allegiance
Corporation, filed as exhibit 2 to the Form 10 registration
statement, file no. 1-11885, dated September 20, 1996.
C 10.32 Supplemental Pension Agreement: Jack L. McGinley.
C 10.33 November 1996 Stock Option Grant Terms and Conditions.
C 10.34 November 1996 Premium Price Stock Option Grant Terms and
Conditions.
C 10.35 Officer Incentive Compensation Plan.
11. Statement re: computation of per share earnings.
11.1 Computation of primary earnings per common share.
11.2 Computation of fully diluted earnings per common share.
12. Statements re: computation of ratios.
13. 1996 Annual Report to Stockholders (such report, except to the extent
incorporated herein by reference, is being furnished for the
information of the Securities and Exchange Commission only and is not
deemed to be filed as part of this annual report on Form 10-K).
21. Subsidiaries of the Company.
23. Consent of Price Waterhouse LLP.
24. Powers of Attorney.
27. Financial Statement Schedule.
- -------
*Incorporated herein by reference.
CExhibit contemplated by Item 14(a)(3) of Form 10-K.
(All other exhibits are inapplicable.)
15
APPENDIX OF GRAPHS
The following is a listing of the graphs contained within the Annual Report,
pages 17-24, section entitled "Management's Discussion and Analysis" which is
incorporated by reference.
DOMESTIC AND INTERNATIONAL SALES
U.S. INTERNATIONAL
----- -------------
1994.................................................. 2,292 2,187
1995.................................................. 2,492 2,556
1996.................................................. 2,665 2,773
NET INCOME
1994.................................................................. 596
1995.................................................................. 649
1996.................................................................. 669