Baxter Posts Strong Sales and Earnings for Third Quarter 2008

DEERFIELD, Ill.--(BUSINESS WIRE)--Oct 16, 2008 - Baxter International Inc. (NYSE:BAX) posted strong financial results for the third quarter of 2008, which compared favorably to the guidance previously provided, and raised its full-year 2008 earnings outlook.

Baxter reported third quarter net income of $472 million, an increase of 19 percent compared to $395 million reported in the third quarter of 2007. Earnings per diluted share of $0.74 increased 21 percent from $0.61 per diluted share in the prior year period. The third quarter results include after-tax special charges totaling $91 million (or $0.14 per diluted share) for fixed asset write-offs associated with the discontinuation of the company's CLEARSHOT pre-filled syringe program, additional remediation costs associated with the company's COLLEAGUE infusion pump, and costs for in-process research and development (IPR&D) related to the company's recently announced collaboration with Innocoll Pharmaceuticals Ltd. The company recorded after-tax special charges in the third quarter of 2007 totaling $63 million (or $0.09 per diluted share).

On an adjusted basis, excluding special charges, Baxter reported third quarter net income of $563 million and net earnings per diluted share of $0.88, an increase of 23 percent and 26 percent respectively, which compared favorably to the earnings guidance previously provided of $0.81 to $0.83 per diluted share. Strong financial performance was the result of accelerating sales, continued margin improvement, and a lower tax rate.

Baxter's worldwide sales totaled $3.2 billion in the third quarter, an increase of 15 percent (or 9 percent excluding the impact of foreign exchange), driven by particularly strong performance from the company's international businesses. Renal sales increased 6 percent to approximately $600 million due to the expanded use of peritoneal dialysis in many developed and emerging markets around the world, while Medication Delivery sales of approximately $1.2 billion increased 11 percent as a result of strong international sales.

Sales in Baxter's BioScience business totaled approximately $1.4 billion, with record growth of 23 percent. Sales accelerated across the portfolio, resulting in double-digit sales increases for all major product categories. This performance can be attributed to robust growth from several products, including ADVATE (Antihemophilic Factor (Recombinant), Plasma/Albumin-Free Method (rAHF-PFM)) and GAMMAGARD LIQUID (Immune Globulin Intravenous (IGIV)), marketed as KIOVIG in the European Union, as well as accelerated growth from other plasma-based therapies and biosurgery products.

"In addition to delivering strong sales and earnings for the third quarter, we continue to leverage our diversified healthcare model and capitalize on our broad global presence, while remaining committed to our strategic objective of accelerating the pace of R&D spending," said Robert L. Parkinson, Jr., chairman and chief executive officer.

The company continues to increase investments in R&D, which totaled $230 million and increased 13 percent (or 30 percent excluding the impact of special charges taken for IPR&D in both the current and prior year periods). The company continues to make progress on a number of R&D and new product initiatives, including:

-- Agreement with Innocoll Pharmaceuticals Ltd., a division of Innocoll, Inc., granting Baxter exclusive rights to market and distribute in the United States the company's investigational gentamicin surgical implant. If approved by the U.S. Food and Drug Administration (FDA), the gentamicin surgical implant will be the first biodegradable, leave-behind antibiotic surgical sponge used as an adjunct (add-on) therapy for prevention and treatment of surgical site infections in the United States.

-- Submission of an Investigational New Drug (IND) Application to the FDA for the evaluation of GAMMAGARD LIQUID combined with ENHANZE, Halozyme's proprietary drug delivery technology that facilitates the absorption and dispersion of drugs subcutaneously.

-- Initiation of a Phase III clinical trial evaluating the use of GAMMAGARD LIQUID for the treatment of multifocal motor neuropathy (MMN). Multifocal motor neuropathy is a rare neurological disorder characterized by progressive limb weakness, primarily affecting the upper extremities.

-- Clearance by the FDA for expanded labeling of V-Link with VitalShield based on V-Link's ability to combat three additional pathogens: vancomycin-resistant Enterococcus faecalis (VRE), Escherichia coli (E. coli) and Staphylococcus epidermidis (coagulase negative). These three pathogens improve upon the previously cleared labeling, which included methicillin-resistant Staphylococcus aureus (MRSA), Pseudomonas aeruginosa and Enterobacter cloacae.

Nine-Month Results

For the first nine months of 2008, Baxter's net income totaled $1.4 billion and increased 18 percent, with earnings per diluted share increasing 21 percent to $2.26. On an adjusted basis, excluding special items for both 2007 and 2008, Baxter's net income of $1.6 billion increased 18 percent from $1.3 billion in the same period last year. Adjusted earnings per diluted share for the nine-month period increased 22 percent to $2.47 from $2.03 per diluted share in the prior year period.

Baxter's worldwide sales grew 12 percent in the first three quarters of the year to $9.2 billion, an increase from $8.3 billion in the same period last year. Excluding the impact of foreign exchange, sales growth for the first nine months of the year was 5 percent.

Cash flows from operations totaled $1.9 billion for the nine-month period, an improvement of more than $300 million compared to $1.6 billion in the same period in 2007.

"The medically-necessary nature of our product offering, our diversified portfolio and global presence, and our financial strength and flexibility, provide us with a solid foundation in this uncertain global economy," continued Parkinson. "We remain committed to providing enhanced value to our shareholders through predictable and sustainable operational growth, commensurate with our competencies and long-range strategies."

Fourth Quarter and Full-Year 2008 Outlook

Baxter raised its full-year 2008 earnings outlook and for the first time provided fourth quarter guidance. For the full year, the company continues to expect sales growth, excluding the impact of foreign exchange, of 5 to 6 percent, and now expects earnings per diluted share of $3.35 to $3.37, before any special items. In addition, the company now expects cash flow from operations to exceed $2.6 billion.

For the fourth quarter of 2008, Baxter expects sales growth of approximately 7 percent, excluding the impact of foreign exchange, and earnings per diluted share, before any special items, of $0.88 to $0.90.

A webcast of Baxter's third quarter conference call for investors can be accessed live from a link on the company's website at www.baxter.com beginning at 7:30 a.m. CDT on October 16, 2008. Please visit Baxter's website for more information regarding this and future investor events and webcasts, including investor presentations.

Baxter International Inc. develops, manufactures and markets products that save and sustain the lives of people with hemophilia, immune disorders, cancer, infectious diseases, kidney disease, trauma, and other chronic and acute medical conditions. As a global, diversified healthcare company, Baxter applies a unique combination of expertise in medical devices, pharmaceuticals and biotechnology to create products that advance patient care worldwide.

This release includes forward-looking statements concerning the company's financial results. The statements are based on assumptions about many important factors, including the following, which could cause actual results to differ materially from those in the forward-looking statements: demand for and market acceptance risks for new and existing products, such as ADVATE, and other technologies; future actions of regulatory bodies and other governmental authorities, including the FDA and foreign counterparts, that could delay, limit or suspend product development, manufacturing or sales or result in sanctions; product quality or patient safety concerns leading to product recalls, withdrawals, launch delays, litigation, or declining sales; product development risks; inventory reductions or fluctuations in buying patterns by wholesalers or distributors; the impact of geographic and product mix on the company's sales; the impact of competitive products and pricing, including generic competition, drug reimportation and disruptive technologies; reimbursement policies of government agencies and private payers; the availability of acceptable raw materials and component supply; the ability to enforce company patents; patents of third parties preventing or restricting the company's manufacture, sale or use of affected products or technology; any impact of the commercial and credit environment on Baxter and its customers; foreign currency fluctuations and other risks identified in the company's most recent filing on Form 10-K and other Securities and Exchange Commission filings, all of which are available on the company's website. The company does not undertake to update its forward-looking statements. Financial schedules are attached to this release and available on the company's website. -0-

                      BAXTER INTERNATIONAL INC.
                  Consolidated Statements of Income
            Three Months Ended September 30, 2008 and 2007
                             (unaudited)
         (in millions, except per share and percentage data)


                                          Three Months
                                              Ended
                                          September 30,
                                         ---------------
                                          2008     2007       Change
                                         ------   ------     ---------

NET SALES                                $3,151   $2,750           15%

COST OF GOODS SOLD                        1,630(1) 1,374           19%

----------------------------------------------------------------------
GROSS PROFIT                              1,521    1,376           11%
----------------------------------------------------------------------
% of Net Sales                            48.3%    50.0%     (1.7 pts)

MARKETING AND ADMINISTRATIVE EXPENSES       681      663(2)         3%
% of Net Sales                            21.6%    24.1%     (2.5 pts)

RESEARCH AND DEVELOPMENT EXPENSES           230(3)   203(3)        13%
% of Net Sales                             7.3%     7.4%      (0.1 pt)

NET INTEREST EXPENSE                         20        6           N/M

OTHER EXPENSE, NET                           32(4)    21           52%

----------------------------------------------------------------------
PRE-TAX INCOME                              558      483           16%
----------------------------------------------------------------------

INCOME TAX EXPENSE                           86(5)    88(5)       (2%)
----------------------------------------------------------------------
% of Pre-Tax Income                       15.4%    18.2%     (2.8 pts)

NET INCOME                                 $472     $395           19%
======================================================================

BASIC EPS                                 $0.76    $0.62           23%
======================================================================
DILUTED EPS                               $0.74    $0.61           21%
======================================================================

WEIGHTED AVERAGE NUMBER OF COMMON SHARES
 OUTSTANDING
 Basic                                      625      641
 Diluted                                    638      651
----------------------------------------------------------------------

ADJUSTED PRE-TAX INCOME (excluding
 specified items)                          $673(6)  $574(6)        17%
ADJUSTED NET INCOME (excluding specified
 items)                                    $563(6)  $458(6)        23%
ADJUSTED DILUTED EPS (excluding
 specified items)                         $0.88(6) $0.70(6)        26%

1 Cost of goods sold in 2008 included a charge of $72 million ($65
 million on an after-tax basis, or $0.10 per diluted share) related to
 COLLEAGUE infusion pumps.
2 Marketing and administrative expenses in 2007 included a charge of
 $56 million ($34 million on an after-tax basis, or $0.05 per diluted
 share) related to the company's Average Wholesale Pricing (AWP)
 litigation.
3 Research and development (R&D) expenses in 2008 included an in-
 process R&D (IPR&D) charge of $12 million ($7 million on an after-tax
 basis, or $0.01 per diluted share) related to the company's licensing
 agreement with Innocoll Pharmaceuticals Ltd. (Innocoll) to market and
 distribute Innocoll's gentamicin surgical implant in the United
 States. R&D expenses in 2007 included IPR&D charges of $25 million
 related to the company's collaboration with HHD, LLC and $10 million
 related to the company's in-licensing arrangement with Halozyme
 Therapeutics, Inc. The after-tax impact of these items was $29
 million, or $0.04 per diluted share, in 2007.
4 Other expense, net in 2008 included an impairment charge of $31
 million ($19 million on an after-tax basis, or $0.03 per diluted
 share) associated with the discontinuation of the CLEARSHOT pre-
 filled syringe program.
5 Income tax expense included a benefit of $15 million, or $0.02 per
 diluted share, in 2008 and expense of $15 million, or $0.02 per
 diluted share, in 2007, related primarily to the reversal of
 valuation allowances and tax expense associated with foreign earnings
 that the company planned to repatriate to the United States.
6 Refer to page 8 for a description of the adjustments and a
 reconciliation to GAAP (generally accepted accounting principles)
 measures.

Non-GAAP Financial Measures: The non-GAAP financial measures contained
 in this press release (pre-tax income, income tax expense, net
 income, and diluted EPS, excluding specified items) adjust for
 factors that are unusual or nonrecurring. Unusual or nonrecurring
 items can be highly variable, difficult to predict, and of a size
 that may substantially impact the company's reported operations for a
 period. Management believes that non-GAAP financial measures can
 facilitate a fuller analysis of the company's results of operations,
 particularly in evaluating performance period over period. Management
 uses these non-GAAP financial measures internally in financial
 planning, to monitor business unit performance, and in evaluating
 management performance. Refer to the company's filing on Form 8-K of
 today's date for additional information.

-0-


                      BAXTER INTERNATIONAL INC.
              Notes to Consolidated Statements of Income
            Three Months Ended September 30, 2008 and 2007
  Description of Adjustments and Reconciliation of GAAP to Non-GAAP
                               Measures
                             (unaudited)
         (in millions, except per share and percentage data)


2008 description of adjustments and reconciliation
 of GAAP to Non-GAAP
---------------------------------------------------
The company's GAAP results for the three months ended September 30,
 2008 included a charge related to COLLEAGUE infusion pumps, an
 impairment charge associated with the discontinuation of the
 CLEARSHOT pre-filled syringe program, and an IPR&D charge related to
 the company's licensing agreement with Innocoll, which impacted the
 GAAP results as follows:

                                             Income
                                    Pre-tax     Tax    Net
                                     Income Expense Income Diluted EPS
                                    ----------------------------------
   GAAP                                $558     $86   $472       $0.74
   COLLEAGUE infusion pump charge
    (A)                                  72       7     65        0.10
   Impairment charge                     31      12     19        0.03
   IPR&D charge (B)                      12       5      7        0.01
                                    ----------------------------------
   Excluding specified items           $673    $110   $563       $0.88
                                    ==================================

   Effective tax rate                         16.3%

(A) Included in the Cost of Goods Sold line within the accompanying
 consolidated statement of income. Excluding this item, adjusted gross
 profit was $1.59 billion and the adjusted gross profit percentage was
 50.6%.
(B) Included in the R&D Expenses line within the accompanying
 consolidated statement of income. Excluding this item, adjusted R&D
 expenses were $218 million, or 6.9% of net sales, which represented a
 29.8% increase over 2007 adjusted R&D expenses of $168 million.


2007 description of adjustments and reconciliation
 of GAAP to Non-GAAP
---------------------------------------------------
The company's GAAP results for the three months ended September 30,
 2007 included a charge related to the AWP litigation and IPR&D
 charges related to the company's collaboration with HHD, LLC and the
 company's in-licensing arrangement with Halozyme Therapeutics, Inc.
 These charges impacted the GAAP results as follows:

                                             Income
                                    Pre-tax     Tax    Net
                                     Income Expense Income Diluted EPS
                                    ----------------------------------
   GAAP                                $483     $88   $395       $0.61
   Litigation-related charge (A)         56      22     34        0.05
   IPR&D charges (B)                     35       6     29        0.04
                                    ----------------------------------
   Excluding specified items           $574    $116   $458       $0.70
                                    ==================================

   Effective tax rate                         20.2%

(A) Included in the Marketing and Administrative Expenses line within
 the accompanying consolidated statement of income. Excluding this
 item, adjusted marketing and administrative expenses were $607
 million, or 22.1% of net sales.
(B) Included in the R&D Expenses line within the accompanying
 consolidated statement of income. Excluding this item, adjusted R&D
 expenses were $168 million, or 6.1% of net sales.

-0-


                      BAXTER INTERNATIONAL INC.
                  Consolidated Statements of Income
            Nine Months Ended September 30, 2008 and 2007
                             (unaudited)
         (in millions, except per share and percentage data)


                                            Nine Months
                                                Ended
                                            September 30,
                                           ---------------
                                            2008     2007     Change
                                           ------   ------   ---------

NET SALES                                  $9,217   $8,254         12%

COST OF GOODS SOLD                          4,689(1) 4,220         11%

----------------------------------------------------------------------
GROSS PROFIT                                4,528    4,034         12%
----------------------------------------------------------------------
% of Net Sales                              49.1%    48.9%     0.2 pts

MARKETING AND ADMINISTRATIVE EXPENSES       2,024    1,867(2)       8%
% of Net Sales                              22.0%    22.6%   (0.6 pts)

RESEARCH AND DEVELOPMENT EXPENSES             642(3)   539(3)      19%
% of Net Sales                               7.0%     6.5%     0.5 pts

RESTRUCTURING CHARGE                            -       70(4)   (100%)

NET INTEREST EXPENSE                           62       10         N/M

OTHER EXPENSE, NET                             36(5)    28(5)      29%

----------------------------------------------------------------------
PRE-TAX INCOME                              1,764    1,520         16%
----------------------------------------------------------------------

INCOME TAX EXPENSE                            319(6)   291         10%
----------------------------------------------------------------------
% of Pre-Tax Income                         18.1%    19.1%    (1.0 pt)

NET INCOME                                 $1,445   $1,229         18%
======================================================================

BASIC EPS                                   $2.30    $1.90         21%
======================================================================
DILUTED EPS                                 $2.26    $1.87         21%
======================================================================

WEIGHTED AVERAGE NUMBER OF COMMON SHARES
 OUTSTANDING
 Basic                                        628      647
 Diluted                                      640      657
----------------------------------------------------------------------

ADJUSTED PRE-TAX INCOME (excluding
 specified items)                          $1,932(7)$1,681(7)      15%
ADJUSTED NET INCOME (excluding specified
 items)                                    $1,581(7)$1,338(7)      18%
ADJUSTED DILUTED EPS (excluding specified
 items)                                     $2.47(7) $2.03(7)      22%

1 Cost of goods sold in 2008 included charges totaling $125 million
 ($110 million on an after-tax basis, or $0.17 per diluted share)
 related to COLLEAGUE infusion pumps.
2 Marketing and administrative expenses in 2007 included a charge of
 $56 million ($34 million on an after-tax basis, or $0.05 per diluted
 share) related to the company's AWP litigation.
3 R&D expenses in 2008 included an IPR&D charge of $12 million ($7
 million on an after-tax basis, or $0.01 per diluted share) related to
 the company's licensing agreement with Innocoll to market and
 distribute Innocoll's gentamicin surgical implant in the United
 States. R&D expenses in 2007 included IPR&D charges of $25 million
 related to the company's collaboration with HHD, LLC and $10 million
 related to the company's in-licensing arrangement with Halozyme
 Therapeutics, Inc. The after-tax impact of these items was $29
 million, or $0.04 per diluted share, in 2007. Also included in R&D
 expenses in 2007 was an IPR&D charge of $11 million ($7 million on an
 after-tax basis, or $0.01 per diluted share) related to the
 acquisition of MAAS Medical, LLC.
4 A restructuring charge in 2007 of $70 million ($46 million on an
 after-tax basis, or $0.07 per diluted share) was primarily for costs
 and asset impairments associated with the consolidation of certain
 commercial and manufacturing operations outside of the United States.
5 Other expense, net in 2008 included an impairment charge of $31
 million ($19 million on an after-tax basis, or $0.03 per diluted
 share) associated with the discontinuation of the CLEARSHOT pre-
 filled syringe program. Additionally, other expense, net in 2007
 included income of $23 million, reflecting a gain on the sale of the
 Transfusion Therapies business of $58 million less related charges of
 $35 million. The after-tax impact of these items was $6 million of
 income, or $0.01 per diluted share, in 2007.
6 Income tax expense in 2008 included a benefit of $15 million, or
 $0.02 per diluted share, related primarily to the reversal of a
 valuation allowance and tax expense associated with foreign earnings
 that the company planned to repatriate to the United States.
7 Refer to page 10 for a description of the adjustments and a
 reconciliation to GAAP measures.

Non-GAAP Financial Measures: The non-GAAP financial measures contained
 in this press release (pre-tax income, income tax expense, net
 income, and diluted EPS, excluding specified items) adjust for
 factors that are unusual or nonrecurring. Unusual or nonrecurring
 items can be highly variable, difficult to predict, and of a size
 that may substantially impact the company's reported operations for a
 period. Management believes that non-GAAP financial measures can
 facilitate a fuller analysis of the company's results of operations,
 particularly in evaluating performance period over period. Management
 uses these non-GAAP financial measures internally in financial
 planning, to monitor business unit performance, and in evaluating
 management performance. Refer to the company's filing on Form 8-K of
 today's date for additional information.

-0-


                      BAXTER INTERNATIONAL INC.
              Notes to Consolidated Statements of Income
            Nine Months Ended September 30, 2008 and 2007
  Description of Adjustments and Reconciliation of GAAP to Non-GAAP
                               Measures
                             (unaudited)
         (in millions, except per share and percentage data)


2008 description of adjustments and reconciliation
 of GAAP to Non-GAAP
---------------------------------------------------
The company's GAAP results for the nine months ended September 30,
 2008 included charges related to COLLEAGUE infusion pumps, an
 impairment charge associated with the discontinuation of the
 CLEARSHOT pre-filled syringe program, and an IPR&D charge related to
 the company's licensing agreement with Innocoll, which impacted the
 GAAP results as follows:

                                             Income
                                    Pre-tax     Tax    Net
                                     Income Expense Income Diluted EPS
                                    ----------------------------------
   GAAP                              $1,764    $319 $1,445       $2.26
   COLLEAGUE infusion pump charges
    (A)                                 125      15    110        0.17
   Impairment charge                     31      12     19        0.03
   IPR&D charge (B)                      12       5      7        0.01
                                    ----------------------------------
   Excluding specified items         $1,932    $351 $1,581       $2.47
                                    ==================================

   Effective tax rate                         18.2%

(A) Included in the Cost of Goods Sold line within the accompanying
 consolidated statement of income. Excluding this item, adjusted gross
 profit was $4.65 billion and the adjusted gross profit percentage was
 50.5%.
(B) Included in the R&D Expenses line within the accompanying
 consolidated statement of income. Excluding this item, adjusted R&D
 expenses were $630 million, or 6.8% of net sales, which represented a
 25.0% increase over 2007 adjusted R&D expenses of $504 million.

2007 description of adjustments and reconciliation
 of GAAP to Non-GAAP
---------------------------------------------------
The company's GAAP results for the nine months ended September 30,
 2007 included a restructuring charge, primarily for costs and asset
 impairments associated with the consolidation of certain commercial
 and manufacturing operations outside of the United States, a charge
 related to the AWP litigation, and IPR&D charges related to the
 company's collaboration with HHD, LLC and the company's in-licensing
 arrangement with Halozyme Therapeutics, Inc. These charges impacted
 the GAAP results as follows:

                                             Income
                                    Pre-tax     Tax    Net
                                     Income Expense Income Diluted EPS
                                    ----------------------------------
   GAAP                              $1,520    $291 $1,229       $1.87
   Restructuring charge                  70      24     46        0.07
   Litigation-related charge (A)         56      22     34        0.05
   IPR&D charges (B)                     35       6     29        0.04
                                    ----------------------------------
   Excluding specified items         $1,681    $343 $1,338       $2.03
                                    ==================================

   Effective tax rate                         20.4%

(A) Included in the Marketing and Administrative Expenses line within
 the accompanying consolidated statement of income. Excluding this
 item, adjusted marketing and administrative expenses were $1.81
 billion, or 21.9% of net sales.
(B) Included in the R&D Expenses line within the accompanying
 consolidated statement of income. Excluding this item, adjusted R&D
 expenses were $504 million, or 6.1% of net sales.

-0-


                      BAXTER INTERNATIONAL INC.
                Condensed Consolidated Balance Sheets
                             (unaudited)
                           ($ in millions)



                                            September 30, December 31,
                                                 2008         2007
                                            ------------- ------------

Assets
--------------------------------------------
Cash and equivalents                               $2,191       $2,539
Receivables                                         2,101        2,026
Inventories                                         2,520        2,334
Other current assets                                  625          656
                                            --------------------------
   Total current assets                             7,437        7,555
                                            --------------------------
Property, plant and equipment, net                  4,598        4,487
Other long-term assets                              3,174        3,252
----------------------------------------------------------------------
 Total assets                                     $15,209      $15,294
======================================================================

Liabilities and Shareholders' Equity
--------------------------------------------
Short-term debt                                      $235         $425
Other current liabilities                           3,089        3,387
Long-term debt                                      3,185        2,664
Other long-term liabilities                         1,641        1,902
Shareholders' equity                                7,059        6,916
----------------------------------------------------------------------
 Total liabilities and shareholders' equity       $15,209      $15,294
======================================================================

-0-


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


----------------------------------------------------------------------
Cash Flows from Operations
----------------------------------------------------------------------
(Brackets denote cash outflows)         Three Months    Nine Months
                                            Ended           Ended
                                        September 30,   September 30,
                                       --------------- ---------------
                                        2008    2007    2008    2007
                                       ------- ------- ------- -------

Net income                               $472    $395  $1,445  $1,229
Adjustments
 Depreciation and amortization            165     141     481     428
 Deferred income taxes                     54      14     164      32
 Stock compensation                        38      36     111      99
 Restructuring and infusion pump
  charges                                  72       -     125      70
 Impairment charge                         31       -      31       -
 Litigation-related charge                  -      56       -      56
 IPR&D charges                             12      35      12      46
 Other                                      4      27      27      53
Changes in balance sheet items
 Receivables                                7      40     (86)   (114)
 Inventories                              (52)    (91)   (207)   (261)
 Accounts payable and accrued
  liabilities                              18       6    (236)    (85)
 Restructuring payments                    (9)    (14)    (35)    (20)
 Other                                      1     (37)     63      21
----------------------------------------------------------------------
Cash flows from operations               $813    $608  $1,895  $1,554
======================================================================

----------------------------------------------------------------------
Changes in Net Debt
----------------------------------------------------------------------
Increase (decrease)                     Three Months    Nine Months
                                            Ended           Ended
                                        September 30,   September 30,
                                       --------------- ---------------
                                        2008    2007    2008    2007
                                       ------- ------- ------- -------

Net debt, beginning of period          $1,087    $231    $550    $316

Cash flows from operations               (813)   (608) (1,895) (1,554)
Capital expenditures                      251     166     615     424
Dividends                                 136     109     411     598
Proceeds from sale of Transfusion
 Therapies business                         -       -       -    (421)
Proceeds and excess tax benefits from
 stock issued under employee benefit
 plans                                   (302)    (72)   (547)   (500)
Purchases of treasury stock               589     827   1,522   1,641
Acquisitions of and investments in
 businesses and technologies               12      40      73      83
Payments relating to settlements of
 cross-currency swaps                     241      49     542     196
Other, including the effect of exchange
 rate changes                              28      10     (42)    (31)
----------------------------------------------------------------------
Increase in net debt                      142     521     679     436
----------------------------------------------------------------------

Net debt, September 30                 $1,229    $752  $1,229    $752
======================================================================


----------------------------------------------------------------------
Key statistics, September 30:
Days sales outstanding                   55.6    58.7    55.6    58.7
Inventory turns                           2.4     2.3     2.4     2.3
----------------------------------------------------------------------

-0-


                      BAXTER INTERNATIONAL INC.
                              Net Sales
              Periods Ending September 30, 2008 and 2007
                             (unaudited)
                           ($ in millions)


----------------------------------------------------------------------
                              Q3        Q3   % Growth @     % Growth @
                            2008      2007 Actual Rates Constant Rates
----------------------------------------------------------------------

----------------------------------------------------------------------
  BioScience(1)
  United States             $617      $556          11%            11%
  International              737       543          36%            23%
  Total                   $1,354    $1,099          23%            17%
----------------------------------------------------------------------

----------------------------------------------------------------------
  Medication Delivery
  United States             $527      $528           0%             0%
  International              630       519          21%            12%
  Total                   $1,157    $1,047          11%             6%
----------------------------------------------------------------------

----------------------------------------------------------------------
  Renal
  United States              $95       $96         (1%)           (1%)
  International              498       464           7%           (1%)
  Total                     $593      $560           6%           (1%)
----------------------------------------------------------------------

----------------------------------------------------------------------
Baxter excluding
 Transfusion Therapies
United States             $1,239    $1,180           5%             5%
International              1,865     1,526          22%            12%
Total                     $3,104    $2,706          15%             9%
----------------------------------------------------------------------

----------------------------------------------------------------------
  Transfusion
   Therapies(1)
  United States              $33       $31           6%             6%
  International               14        13           8%             8%
  Total                      $47       $44           7%             7%
----------------------------------------------------------------------

----------------------------------------------------------------------
Baxter International
 Inc.
United States             $1,272    $1,211           5%             5%
International              1,879     1,539          22%            12%
Total                     $3,151    $2,750          15%             9%
======================================================================


----------------------------------------------------------------------
                             YTD       YTD   % Growth @     % Growth @
                            2008      2007 Actual Rates Constant Rates
----------------------------------------------------------------------

----------------------------------------------------------------------
  BioScience(1)
  United States           $1,754    $1,572          12%            12%
  International            2,195     1,789          23%            10%
  Total                   $3,949    $3,361          17%            11%
----------------------------------------------------------------------

----------------------------------------------------------------------
  Medication Delivery
  United States           $1,555    $1,578         (1%)           (1%)
  International            1,831     1,498          22%            11%
  Total                   $3,386    $3,076          10%             5%
----------------------------------------------------------------------

----------------------------------------------------------------------
  Renal
  United States             $290      $288           1%             1%
  International            1,459     1,350           8%           (2%)
  Total                   $1,749    $1,638           7%           (1%)
----------------------------------------------------------------------

----------------------------------------------------------------------
Baxter excluding
 Transfusion Therapies
United States             $3,599    $3,438           5%             5%
International              5,485     4,637          18%             7%
Total                     $9,084    $8,075          12%             6%
----------------------------------------------------------------------

----------------------------------------------------------------------
  Transfusion
   Therapies(1)
  United States              $93      $108        (14%)          (14%)
  International               40        71        (44%)          (48%)
  Total                     $133      $179        (26%)          (27%)
----------------------------------------------------------------------

----------------------------------------------------------------------
Baxter International
 Inc.
United States             $3,692    $3,546           4%             4%
International              5,525     4,708          17%             6%
Total                     $9,217    $8,254          12%             5%
======================================================================


(1) The results of operations of the Transfusion Therapies (TT)
 business were previously reported in the BioScience business. The TT
 business was sold on February 28, 2007. The TT totals above include
 sales of TT products through the date of divestiture, as well as
 revenues associated with manufacturing, distribution and other
 services provided by the company to the buyer of the TT business
 post-divestiture.

-0-


                      BAXTER INTERNATIONAL INC.
                        Key Product Line Sales
              Periods Ending September 30, 2008 and 2007
                             (unaudited)
                           ($ in millions)


----------------------------------------------------------------------
                              Q3        Q3   % Growth @     % Growth @
                            2008      2007 Actual Rates Constant Rates
----------------------------------------------------------------------

----------------------------------------------------------------------
BioScience
Recombinants                $516      $432          19%            14%
Plasma Proteins              338       246          37%            26%
Antibody Therapy             307       245          25%            22%
Regenerative
 Medicine(1)                 104        82          27%            21%
Other(2)                      89        94         (5%)          (13%)
----------------------------------------------------------------------
Total BioScience(3)       $1,354    $1,099          23%            17%
----------------------------------------------------------------------

----------------------------------------------------------------------
Medication Delivery
IV Therapies                $403      $346          16%            10%
Global Injectables           403       372           8%             5%
Infusion Systems             235       207          14%            11%
Anesthesia                   112       111           1%           (1%)
Other                          4        11        (64%)          (82%)
----------------------------------------------------------------------
Total Medication
 Delivery                 $1,157    $1,047          11%             6%
----------------------------------------------------------------------

----------------------------------------------------------------------
Renal
PD Therapy                  $480      $448           7%             0%
HD Therapy                   113       112           1%           (5%)
----------------------------------------------------------------------
Total Renal                 $593      $560           6%           (1%)
----------------------------------------------------------------------

----------------------------------------------------------------------
Baxter excluding
 Transfusion Therapies    $3,104    $2,706          15%             9%
----------------------------------------------------------------------

----------------------------------------------------------------------
Transfusion
 Therapies(3)                $47       $44           7%             7%
----------------------------------------------------------------------

----------------------------------------------------------------------
TOTAL BAXTER              $3,151    $2,750          15%             9%
======================================================================


----------------------------------------------------------------------
                             YTD       YTD   % Growth @     % Growth @
                            2008      2007 Actual Rates Constant Rates
----------------------------------------------------------------------

----------------------------------------------------------------------
BioScience
Recombinants              $1,460    $1,251          17%            11%
Plasma Proteins              889       714          25%            16%
Antibody Therapy             908       705          29%            25%
Regenerative
 Medicine(1)                 307       251          22%            16%
Other(2)                     385       440        (13%)          (22%)
----------------------------------------------------------------------
Total BioScience(3)       $3,949    $3,361          17%            11%
----------------------------------------------------------------------

----------------------------------------------------------------------
Medication Delivery
IV Therapies              $1,182    $1,012          17%             9%
Global Injectables         1,164     1,114           4%             0%
Infusion Systems             684       624          10%             6%
Anesthesia                   333       296          13%             9%
Other                         23        30        (23%)          (33%)
----------------------------------------------------------------------
Total Medication
 Delivery                 $3,386    $3,076          10%             5%
----------------------------------------------------------------------

----------------------------------------------------------------------
Renal
PD Therapy                $1,404    $1,310           7%           (1%)
HD Therapy                   345       328           5%           (3%)
----------------------------------------------------------------------
Total Renal               $1,749    $1,638           7%           (1%)
----------------------------------------------------------------------

----------------------------------------------------------------------
Baxter excluding
 Transfusion Therapies    $9,084    $8,075          12%             6%
----------------------------------------------------------------------

----------------------------------------------------------------------
Transfusion
 Therapies(3)               $133      $179        (26%)          (27%)
----------------------------------------------------------------------

----------------------------------------------------------------------
TOTAL BAXTER              $9,217    $8,254          12%             5%
======================================================================


(1) Previously referred to as BioSurgery.
(2) Principally includes vaccines, sales of plasma to third parties,
 and recombinant FIX (BeneFIX). Sales of BeneFIX ceased as of June 30,
 2007.
(3) The results of operations of the TT business were previously
 reported in the BioScience business. The TT business was sold on
 February 28, 2007. The TT totals above include sales of TT products
 through the date of divestiture, as well as revenues associated with
 manufacturing, distribution and other services provided by the
 company to the buyer of the TT business post-divestiture.

-0-


                      BAXTER INTERNATIONAL INC.
            Key Product Line Sales by US and International
        Three-Month Periods Ending September 30, 2008 and 2007
                             (unaudited)
                           ($ in millions)


----------------------------------------------------------------------
                                                    Q3 2008
                                          ----------------------------
                                              US  International  Total
----------------------------------------------------------------------
BioScience
Recombinants                                $220           $296   $516
Plasma Proteins                              108            230    338
Antibody Therapy                             217             90    307
Regenerative Medicine(1)                      55             49    104
Other(2)                                      17             72     89
----------------------------------------------------------------------
Total BioScience(3)                         $617           $737 $1,354
----------------------------------------------------------------------

----------------------------------------------------------------------
Medication Delivery
IV Therapies                                $115           $288   $403
Global Injectables                           209            194    403
Infusion Systems                             133            102    235
Anesthesia                                    70             42    112
Other                                          0              4      4
----------------------------------------------------------------------
Total Medication Delivery                   $527           $630 $1,157
----------------------------------------------------------------------

----------------------------------------------------------------------
Renal
PD Therapy                                   $73           $407   $480
HD Therapy                                    22             91    113
----------------------------------------------------------------------
Total Renal                                  $95           $498   $593
----------------------------------------------------------------------

----------------------------------------------------------------------
Baxter excluding Transfusion Therapies    $1,239         $1,865 $3,104
----------------------------------------------------------------------

----------------------------------------------------------------------
Transfusion Therapies(3)                     $33            $14    $47
----------------------------------------------------------------------

----------------------------------------------------------------------
TOTAL BAXTER                              $1,272         $1,879 $3,151
======================================================================


----------------------------------------------------------------------
                                                    Q3 2007
                                         -----------------------------
                                              US  International  Total
----------------------------------------------------------------------
BioScience
Recombinants                                $205           $227   $432
Plasma Proteins                              101            145    246
Antibody Therapy                             178             67    245
Regenerative Medicine(1)                      44             38     82
Other(2)                                      28             66     94
----------------------------------------------------------------------
Total BioScience(3)                         $556           $543 $1,099
----------------------------------------------------------------------

----------------------------------------------------------------------
Medication Delivery
IV Therapies                                $109           $237   $346
Global Injectables                           217            155    372
Infusion Systems                             123             84    207
Anesthesia                                    75             36    111
Other                                          4              7     11
----------------------------------------------------------------------
Total Medication Delivery                   $528           $519 $1,047
----------------------------------------------------------------------

----------------------------------------------------------------------
Renal
PD Therapy                                   $69           $379   $448
HD Therapy                                    27             85    112
----------------------------------------------------------------------
Total Renal                                  $96           $464   $560
----------------------------------------------------------------------

----------------------------------------------------------------------
Baxter excluding Transfusion Therapies    $1,180         $1,526 $2,706
----------------------------------------------------------------------

----------------------------------------------------------------------
Transfusion Therapies(3)                     $31            $13    $44
----------------------------------------------------------------------

----------------------------------------------------------------------
TOTAL BAXTER                              $1,211         $1,539 $2,750
======================================================================


----------------------------------------------------------------------
                                            % Growth @ Actual Rates
                                         -----------------------------
                                              US  International  Total
----------------------------------------------------------------------
BioScience
Recombinants                                  7%            30%    19%
Plasma Proteins                               7%            59%    37%
Antibody Therapy                             22%            34%    25%
Regenerative Medicine(1)                     25%            29%    27%
Other(2)                                   (39%)             9%   (5%)
----------------------------------------------------------------------
Total BioScience(3)                          11%            36%    23%
----------------------------------------------------------------------

----------------------------------------------------------------------
Medication Delivery
IV Therapies                                  6%            22%    16%
Global Injectables                          (4%)            25%     8%
Infusion Systems                              8%            21%    14%
Anesthesia                                  (7%)            17%     1%
Other                                     (100%)          (43%)  (64%)
----------------------------------------------------------------------
Total Medication Delivery                     0%            21%    11%
----------------------------------------------------------------------

----------------------------------------------------------------------
Renal
PD Therapy                                    6%             7%     7%
HD Therapy                                 (19%)             7%     1%
----------------------------------------------------------------------
Total Renal                                 (1%)             7%     6%
----------------------------------------------------------------------

----------------------------------------------------------------------
Baxter excluding Transfusion Therapies        5%            22%    15%
----------------------------------------------------------------------

----------------------------------------------------------------------
Transfusion Therapies(3)                      6%             8%     7%
----------------------------------------------------------------------

----------------------------------------------------------------------
TOTAL BAXTER                                  5%            22%    15%
======================================================================


(1) Previously referred to as BioSurgery.
(2) Principally includes vaccines and sales of plasma to third
 parties.
(3) The results of operations of the TT business were previously
 reported in the BioScience business. The TT business was sold on
 February 28, 2007. The TT totals above include sales of TT products
 through the date of divestiture, as well as revenues associated with
 manufacturing, distribution and other services provided by the
 company to the buyer of the TT business post-divestiture.

Contact

Baxter International Inc.
Media Contact:
Deborah Spak, (847) 948-2349
Investor Contacts:
Mary Kay Ladone, (847) 948-3371
Clare Trachtman, (847) 948-3085

 

Posted: October 2008


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