Baxter Reports Solid First Quarter Financial Results and Raises Full-Year Outlook
Company Continues to Advance Product Pipeline with Increased Investment in Research & DevelopmentDEERFIELD, Ill., April 17, 2008 /PRNewswire-FirstCall/ -- Baxter International Inc. today reported solid financial results for the first quarter of 2008, and raised its financial outlook for the full year.
For the first quarter, Baxter reported net income of $429 million, a 6 percent increase compared to $403 million in the first quarter of 2007. Earnings per diluted share of $0.67 increased 10 percent from $0.61 per diluted share reported last year. These results include an after-tax charge of $45 million, or $0.07 per diluted share, for additional costs associated with the company's COLLEAGUE infusion pump remediation program due to an expected delay in recommercialization in the United States.
On an adjusted basis, Baxter's net income of $474 million increased 18 percent. Adjusted earnings per diluted share of $0.74 increased 21 percent versus the prior year period and compares favorably to the guidance previously provided of $0.71 to $0.73 per diluted share. This performance was the result of improved margins due to enhanced business and product mix, improved pricing, continued manufacturing cost improvements and favorable foreign exchange.
Baxter's worldwide sales totaled $2.9 billion in the first quarter, an increase of 8 percent (or 2 percent excluding the impact of foreign exchange). Excluding revenues from Transfusion Therapies, a business the company divested in the first quarter of 2007, Baxter's global sales increased 10 percent (or 4 percent excluding foreign exchange) versus the prior year.
In Baxter's BioScience business, positive momentum continued in the first quarter with revenues totaling $1.2 billion, an increase of 13 percent, reflecting strong double-digit sales growth across all product categories. Driving this performance was robust growth from several products used for the treatment of hemophilia and immune disorders, including ADVATE [Antihemophilic Factor (Recombinant), Plasma/Albumin-Free Method (rAHF-PFM)] and immune globulin intravenous (IGIV), as well as solid growth from other plasma-based therapies, biosurgery products and vaccines.
Medication Delivery sales grew 8 percent in the quarter to $1.1 billion, with strong global sales of intravenous and nutritional therapies, and significant growth in international sales of anesthesia products and injectable drugs. Renal sales increased 6 percent to $558 million.
Baxter's investment in research and development of $190 million increased 19 percent in the first quarter as the company continues to advance its product pipeline across its business portfolio.
"Our strong and improving financial position reflects the continuing momentum in our business," said Robert L. Parkinson, Jr., chairman and chief executive officer. "Our favorable outlook for the full year allows us to continue to accelerate our investments in research and development programs that will improve treatment for patients, expand access to care and enhance the quality of life for people around the world."
Since the beginning of the year, Baxter has achieved a number of commercial, clinical and regulatory milestones, including:
-- U.S. Food and Drug Administration (FDA) approval of ARTISS [Fibrin
Sealant (Human)], the first and only slow-setting fibrin sealant
indicated for use in adhering skin grafts in adult and pediatric burn
patients.
-- The launch of GELFOAM (R) Plus Hemostasis Kit (absorbable gelatin
sponge, USP and human thrombin), which is indicated as a hemostatic
device for surgical procedures when control of capillary, venous, and
arteriolar bleeding by pressure, ligature and conventional procedures
is ineffective or impractical.
-- The launch of the company's V-Link Luer-activated device (LAD) with
VitalShield protective coating, the first needleless IV connector
containing an antimicrobial coating. The protective coating has been
shown to kill on average 99.9 percent of specific common pathogens
(infection-causing microorganisms) within the device that are known to
cause catheter-related blood stream infections, including the highly
treatment-resistant bacteria called methicillin-resistant
Staphylococcus aureus, or MRSA.
-- The announcement of preliminary results of a Phase I/II clinical trial,
in which subcutaneous infusion (under the skin) of GAMMAGARD LIQUID
[Immune Globulin Intravenous (Human)] (IGIV) with Enhanze(TM)
Technology enabled administration of a full monthly dose via a single
site to patients with primary immunodeficiency (PID).
Second Quarter and Full-Year 2008 Outlook
Baxter also announced today that it is raising its earnings outlook for full-year 2008. The company continues to expect sales growth, excluding the impact of foreign exchange, of 5 to 6 percent. Excluding Transfusion Therapies from both 2007 and 2008 and excluding foreign exchange, the company expects sales growth of approximately 6 to 7 percent. Baxter now expects to achieve earnings per diluted share of $3.18 to $3.24, before any special items, and cash flow from operations of approximately $2.6 billion. Previously, the company had provided earnings guidance of $3.10 to $3.18 per diluted share, excluding special items, and expected to generate cash flow from operations of more than $2.5 billion.
For the second quarter of 2008, Baxter expects sales growth of 4 to 5 percent, excluding the impact of foreign exchange, and earnings per diluted share, before any special items, of $0.81 to $0.83.
A webcast of Baxter's first 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 April 17, 2008. Please visit Baxter's website for more information regarding this and future investor events and webcasts, including investor presentations, and the company's Annual Meeting of Shareholders to be held in Chicago on May 6, 2008.
Baxter International Inc., through its subsidiaries, assists healthcare professionals and their patients with the treatment of complex medical conditions, including hemophilia, immune disorders, cancer, infectious diseases, kidney disease, trauma and other conditions. The company applies its expertise in medical devices, pharmaceuticals and biotechnology to make a meaningful difference in patients' lives.
This release includes forward-looking statements concerning the company's financial results. 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; foreign currency fluctuations and other risks identified in the company's most recent filing on Form 10-K and other Securities and Exchange Commission filings, all of which are available on the company's website. The company does not undertake to update its forward-looking statements. Financial schedules are attached to this release and available on the company's website.
BAXTER INTERNATIONAL INC.
Consolidated Statements of Income
Three Months Ended March 31, 2008 and 2007
(unaudited)
(in millions, except per share and percentage data)
Three Months Ended
March 31,
--------------------
2008 2007 Change
------- ------- --------
NET SALES $2,877 $2,675 8%
COST OF GOODS SOLD 1,497 (1) 1,409 6%
------------------------------------------------------------------------
GROSS PROFIT 1,380 1,266 9%
------------------------------------------------------------------------
% of Sales 48.0% 47.3% 0.7 pts
MARKETING AND ADMINISTRATIVE EXPENSES 640 583 10%
% of Sales 22.2% 21.8% 0.4 pts
RESEARCH AND DEVELOPMENT EXPENSES 190 159 19%
% of Sales 6.6% 5.9% 0.7 pts
NET INTEREST EXPENSE 17 5 240%
OTHER INCOME, NET (1)(2) (10)(2) (90%)
------------------------------------------------------------------------
PRE-TAX INCOME 534 529 1%
------------------------------------------------------------------------
INCOME TAX EXPENSE 105 126 (17%)
------------------------------------------------------------------------
% of Pre-Tax Income 19.7% 23.8% (4.1 pts)
NET INCOME $429 $403 6%
========================================================================
BASIC EPS $0.68 $0.62 10%
========================================================================
DILUTED EPS $0.67 $0.61 10%
========================================================================
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING
Basic 632 650
Diluted 644 659
------------------------------------------------------------------------
ADJUSTED PRE-TAX INCOME (excluding
specified item) $587 (3) $529 11%
ADJUSTED NET INCOME (excluding
specified item) $474 (3) $403 18%
ADJUSTED DILUTED EPS (excluding
specified item) $0.74 (3) $0.61 21%
(1) Cost of Goods Sold in 2008 included charges of $53 million
($45 million, or $0.07 per diluted share, on an after-tax basis)
related to COLLEAGUE infusion pumps and $19 million ($11 million, or
$0.02 per diluted share, on an after-tax basis) related to the
company's recall of heparin sodium injection vial products in the
United States.
(2) Other Income, Net in 2008 included income of $16 million
($10 million, or $0.02 per diluted share, on an after-tax basis) due
to the finalization of the net assets transferred in the divestiture
of the Transfusion Therapies (TT) business. Other Income, Net in
2007 included income of $23 million, reflecting a gain on the sale
of the TT business of $58 million less related charges of
$35 million. The after-tax impact of the gain and related charges
in 2007 was $6 million of income, or $0.01 per diluted share.
(3) Refer to page 7 for a description of the adjustment 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, net income and per-share earnings,
excluding certain items) adjust for factors that are unusual or
nonrecurring. Unusual or nonrecurring items can be highly variable,
difficult to predict, and of a size that may substantially impact the
company's reported operations for a period. Management believes that
non-GAAP financial measures can facilitate a fuller analysis of the
company's results of operations, particularly in evaluating performance
period over period. Management uses these non-GAAP financial measures
internally in financial planning, to monitor 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.
BAXTER INTERNATIONAL INC.
Note to Consolidated Statement of Income
Three Months Ended March 31, 2008
Description of Adjustment and Reconciliation of GAAP to Non-GAAP Measures
(unaudited)
(in millions, except per share and percentage data)
The company's GAAP results for the three months ended March 31, 2008
included a charge related to COLLEAGUE infusion pumps, which impacted the
results as follows:
Income
Pre-tax Tax Net Diluted
Income Expense Income EPS
------------------------------------
GAAP $534 $105 $429 $0.67
COLLEAGUE infusion pump charge (A) 53 8 45 0.07
------------------------------------
Excluding specified item $587 $113 $474 $0.74
====================================
Effective tax rate 19.3%
(A) Included in the Cost of Goods Sold line in the accompanying
consolidated statement of income. Excluding this charge, adjusted
gross profit was $1,433 and the adjusted gross profit percentage was
49.8%.
BAXTER INTERNATIONAL INC.
Condensed Consolidated Balance Sheets
(unaudited)
($ in millions)
March 31, 2008 December 31, 2007
-------------- -----------------
Assets
------
Cash and equivalents $1,736 $2,539
Receivables 2,096 2,026
Inventories 2,536 2,334
Other current assets 645 656
--------------------------------
Total current assets 7,013 7,555
--------------------------------
Property, plant and equipment, net 4,633 4,487
Other long-term assets 3,326 3,252
-------------------------------------------------------------------------
Total assets $14,972 $15,294
=========================================================================
Liabilities and Shareholders' Equity
------------------------------------
Short-term debt $141 $425
Other current liabilities 3,095 3,387
Long-term debt 2,731 2,664
Other long-term liabilities 2,008 1,902
Shareholders' equity 6,997 6,916
-------------------------------------------------------------------------
Total liabilities and shareholders'
equity $14,972 $15,294
=========================================================================
BAXTER INTERNATIONAL INC.
Cash Flows from Operations and Changes in Net Debt
(unaudited)
($ in millions)
Cash Flows from Operations
(Brackets denote cash outflows)
Three Months Ended March 31,
----------------------------
2008 2007
---------- -----------
Net income $429 $403
Adjustments
Depreciation and amortization 156 140
Deferred income taxes 61 (13)
Stock compensation 38 27
Infusion pump charge 53 -
Other 9 4
Changes in balance sheet items
Receivables 18 (98)
Inventories (105) (128)
Accounts payable and accrued liabilities (341) (158)
Restructuring payments (12) (3)
Other 56 41
-------------------------------------------------------------------------
Cash flows from operations $362 $215
=========================================================================
Changes in Net Debt
Increase (decrease)
Three Months Ended March 31,
----------------------------
2008 2007
---------- -----------
Net debt, beginning of period $550 $316
Cash flows from operations (362) (215)
Capital expenditures 157 93
Dividends 138 380
Proceeds from sale of Transfusion Therapies
business - (421)
Proceeds from stock issued under employee
benefit plans (112) (201)
Purchases of treasury stock 545 270
Acquisitions of and investments in businesses
and technologies 61 31
Payments relating to settlements of
cross-currency swaps 169 147
Other, including the effect of exchange
rate changes (10) (64)
-------------------------------------------------------------------------
Increase in net debt 586 20
-------------------------------------------------------------------------
Net debt, March 31 $1,136 $336
=========================================================================
Key statistics, March 31:
Days sales outstanding 56.3 55.3
Inventory turns 2.3 2.6
BAXTER INTERNATIONAL INC.
Net Sales
Periods Ending March 31, 2008 and 2007
(unaudited)
($ in millions)
-------------------------------------------------------------------------
%Growth %Growth
@ @
Q1 Q1 Actual Constant
2008 2007 Rates Rates
-------------------------------------------------------------------------
-------------------------------------------------------------------------
BioScience (1)
United States $547 $484 13% 13%
International 663 588 13% 3%
Total $1,210 $1,072 13% 8%
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Medication Delivery
United States $503 $515 (2%) (2%)
International 562 475 18% 8%
Total $1,065 $990 8% 2%
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Renal
United States $98 $97 1% 1%
International 460 428 7% (2%)
Total $558 $525 6% (2%)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Baxter excluding Transfusion
Therapies
United States $1,148 $1,096 5% 5%
International 1,685 1,491 13% 3%
Total $2,833 $2,587 10% 4%
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Transfusion Therapies (2)
United States $31 $43 (28%) (28%)
International 13 45 (71%) (73%)
Total $44 $88 (50%) (51%)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Baxter International Inc.
United States $1,179 $1,139 4% 4%
International 1,698 1,536 11% 1%
Total $2,877 $2,675 8% 2%
-------------------------------------------------------------------------
(1) Prior year BioScience sales data has been reclassified as described in
Note 2.
(2) The Transfusion Therapies (TT) business was sold on February 28, 2007.
The results of operations of the TT business were previously reported
in the BioScience business. The TT totals above include sales of TT
products through the date of divestiture, as well as revenues
associated with manufacturing, distribution and other services
provided by the company to the buyer of the TT business
post-divestiture.
BAXTER INTERNATIONAL INC.
Key Product Line Sales
Periods Ending March 31, 2008 and 2007
(unaudited)
($ in millions)
--------------------------------------------------------------------------
%Growth %Growth
@ @
Q1 Q1 Actual Constant
2008 2007 Rates Rates
--------------------------------------------------------------------------
--------------------------------------------------------------------------
BioScience
Recombinants $436 $388 12% 8%
Plasma Proteins 260 225 16% 10%
Antibody Therapy 286 222 29% 25%
Regenerative Medicine (1) 94 82 15% 10%
Other (2) 134 155 (14%) (22%)
--------------------------------------------------------------------------
Total BioScience (3) $1,210 $1,072 13% 8%
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Medication Delivery
IV Therapies $371 $320 16% 8%
Global Injectables 368 361 2% (2%)
Infusion Systems 220 209 5% 1%
Anesthesia 99 89 11% 7%
Other 7 11 (36%) (36%)
--------------------------------------------------------------------------
Total Medication Delivery $1,065 $990 8% 2%
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Renal
PD Therapy $445 $419 6% (1%)
HD Therapy 113 106 7% (2%)
--------------------------------------------------------------------------
Total Renal $558 $525 6% (2%)
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Baxter excluding Transfusion
Therapies $2,833 $2,587 10% 4%
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Transfusion Therapies (4) $44 $88 (50%) (51%)
--------------------------------------------------------------------------
--------------------------------------------------------------------------
TOTAL BAXTER $2,877 $2,675 8% 2%
==========================================================================
(1) Previously referred to as BioSurgery.
(2) Principally includes vaccines, sales of plasma to third parties, and
recombinant FIX (BeneFIX). Sales of BeneFIX ceased as of June 30,
2007.
(3) Prior year BioScience sales data has been reclassified as described in
Note 4.
(4) The TT business was sold on February 28, 2007. The results of
operations of the TT business were previously reported in the
BioScience business. The TT totals above include sales of TT products
through the date of divestiture, as well as revenues associated with
manufacturing, distribution and other services provided by the company
to the buyer of the TT business post-divestiture.
BAXTER INTERNATIONAL INC.
Key Product Line Sales by US and International
Periods Ending March 31, 2008 and 2007
(unaudited)
($ in millions)
-------------------------------------------------------------------------
Q1 2008 Q1 2007
--------------------- ---------------------
Interna- Interna-
US tional Total US tional Total
-------------------------------------------------------------------------
BioScience
Recombinants $199 $237 $436 $179 $209 $388
Plasma Proteins 92 168 260 88 137 225
Antibody Therapy 199 87 286 159 63 222
Regenerative Medicine (1) 47 47 94 43 39 82
Other (2) 10 124 134 15 140 155
-------------------------------------------------------------------------
Total BioScience (3) $547 $663 $1,210 $484 $588 $1,072
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Medication Delivery
IV Therapies $111 $260 $371 $101 $219 $320
Global Injectables 200 168 368 227 134 361
Infusion Systems 131 89 220 122 87 209
Anesthesia 58 41 99 60 29 89
Other 3 4 7 5 6 11
-------------------------------------------------------------------------
Total
Medication Delivery $503 $562 $1,065 $515 $475 $990
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Renal
PD Therapy $71 $374 $445 $69 $350 $419
HD Therapy 27 86 113 28 78 106
-------------------------------------------------------------------------
Total Renal $98 $460 $558 $97 $428 $525
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Baxter excluding
Transfusion Therapies $1,148 $1,685 $2,833 $1,096 $1,491 $2,587
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Transfusion Therapies (4) $31 $13 $44 $43 $45 $88
-------------------------------------------------------------------------
-------------------------------------------------------------------------
TOTAL BAXTER $1,179 $1,698 $2,877 $1,139 $1,536 $2,675
=========================================================================
% Growth
-------------------------------
Interna-
US tional Total
--------------------------------------------------------------------------
BioScience
Recombinants 11% 13% 12%
Plasma Proteins 5% 23% 16%
Antibody Therapy 25% 38% 29%
Regenerative Medicine (1) 9% 21% 15%
Other (2) (33%) (11%) (14%)
--------------------------------------------------------------------------
Total BioScience (3) 13% 13% 13%
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Medication Delivery
IV Therapies 10% 19% 16%
Global Injectables (12%) 25% 2%
Infusion Systems 7% 2% 5%
Anesthesia (3%) 41% 11%
Other (40%) (33%) (36%)
--------------------------------------------------------------------------
Total Medication Delivery (2%) 18% 8%
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Renal
PD Therapy 3% 7% 6%
HD Therapy (4%) 10% 7%
--------------------------------------------------------------------------
Total Renal 1% 7% 6%
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Baxter excluding Transfusion Therapies 5% 13% 10%
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Transfusion Therapies (4) (28%) (71%) (50%)
--------------------------------------------------------------------------
--------------------------------------------------------------------------
TOTAL BAXTER 4% 11% 8%
==========================================================================
(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) Prior year BioScience sales data has been reclassified as described
in Note 4.
(4) The TT business was sold on February 28, 2007. The results of
operations of the TT business were previously reported in the
BioScience business. 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: Media, Deborah Spak, +1-847-948-2349, or Investors, Mary KayLadone, +1-847-948-3371, or Clare Trachtman, +1-847-948-3085, all of BaxterInternational Inc.
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Posted: April 2008
