Baxter Reports Solid First Quarter Financial Results and Raises Full-Year Outlook

Company Continues to Advance Product Pipeline with Increased Investment in Research & Development

DEERFIELD, 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


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