Baxter Reports First Quarter 2010 Financial Results In-Line With Guidance

http://www.businesswire.com/news/home/20100422005382/en

Company Lowers Full-Year Outlook
DEERFIELD, Ill.--(Business Wire)--
Baxter International Inc. (NYSE:BAX) today reported first quarter net income of
$525 million, an increase of 2 percent from $516 million reported in the first
quarter of 2009. Earnings per diluted share of $0.86 increased 4 percent from
$0.83 per diluted share reported in the prior-year period. Baxter`s first
quarter financial results included a one-time, non-cash special charge of $39
million (or $0.07 per diluted share) related to a change in the tax treatment of
post-retirement prescription drug benefits under recent U.S. healthcare reform
legislation.

On an adjusted basis, excluding the special item, Baxter`s net income of $564
million increased 9 percent from $516 million reported in 2009. Adjusted
earnings per diluted share of $0.93 increased 12 percent from $0.83 per diluted
share reported in the prior-year period and were in-line with the guidance the
company previously provided of $0.92 to $0.94 per diluted share.

Baxter`s global sales of $3.1 billion advanced 11 percent from the $2.8 billion
reported in the same period last year. Excluding the impact of foreign currency,
worldwide sales increased 5 percent. Sales within the United States increased 4
percent to $1.3 billion in the first quarter, while international sales grew 17
percent to $1.8 billion. Excluding the impact of foreign currency, international
sales grew 5 percent.

By business, BioScience revenues totaled $1.4 billion and advanced 9 percent
(and excluding foreign currency, BioScience sales increased 3 percent) as a
result of continued growth of recombinant therapies, such as ADVATE
[Antihemophilic Factor (Recombinant), Plasma/Albumin-Free Method] for the
treatment of hemophilia, biosurgery products and shipments of CELVAPAN, the
company`s H1N1 pandemic vaccine. This performance was partially offset by an
increase in Medicaid rebates required by manufacturers of drugs and biologics
under the new U.S. healthcare reform legislation, as well as weaker sales of
antibody therapies and certain plasma proteins.

Renal sales of $584 million grew 13 percent (and excluding foreign currency
increased 5 percent). Medication Delivery sales of $1.2 billion increased 14
percent (and excluding foreign currency increased 8 percent). Sales results from
these two businesses were driven by growth across core components of the
portfolios, including the peritoneal dialysis (PD) franchise, the newly acquired
continuous renal replacement therapy business, anesthesia products, parenteral
nutrition products, intravenous therapies and global injectables.

Baxter also improved cash flows from operations, generating $279 million, after
contributing $300 million to its pension plan in the United States. This
represents an improvement of more than $40 million in cash flows from operations
from the first quarter of 2009.

"Despite a challenging global macro-environment and the impact from U.S.
healthcare reform, we reported quarterly financial results in-line with our
expectations," said Robert L. Parkinson, Jr., chairman and chief executive
officer. "As we look to the future, we believe the diversified and
medically-necessary nature of our portfolio, broad geographic reach, and strong
new product pipeline provide a foundation for continued leadership in an
evolving marketplace, both in the U.S. and abroad."

Recent Highlights

Baxter continues to advance its pipeline, business development initiatives and
commercialization efforts, resulting in a number of recent achievements,
including:

* The acquisition of ApaTech, a private equity backed, U.K.-based orthobiologic
products company, which will enhance Baxter`s position in the rapidly growing
orthobiologics space. Through this transaction, Baxter acquired ACTIFUSE, a
silicate substituted calcium phosphate synthetic bone graft material that is
currently marketed in the U.S., Europe and other select markets around the
world.
* The U.S. approval of TachoSil (Absorbable Fibrin Sealant Patch) for use as an
adjunct to hemostasis in cardiovascular surgery. TachoSil is the first and only
adjunctive hemostatic agent available in the U.S. that combines a collagen patch
with a coating of human coagulation factors. Baxter, which was granted exclusive
U.S. commercial rights by its partner Nycomed, plans to launch TachoSil during
the second half of 2010.
* The announcement by Baxter and New York-Presbyterian Hospital/Weill Cornell
Medical Center of 18-month data from a Phase II clinical study of GAMMAGARD
LIQUID and GAMMAGARD S/D [Immune Globulin Intravenous (Human)] (marketed as
KIOVIG outside of the U.S.) for mild-to-moderate Alzheimer`s disease. The Phase
II results represent the first study in Alzheimer`s disease where all three
measures - cognitive, functional and neuroimaging - had positive data and were
statistically significant. Baxter also announced plans to initiate a second,
concurrent Phase III study of GAMMAGARD for mild-to-moderate Alzheimer`s disease
to complement its ongoing Phase III trial and to confirm the Phase II results in
more patients.
* The initiation of a Phase I dosing study in healthy subjects of BAX 513, an
oral non-anticoagulant sulfated polysaccharide (NASP) being investigated for
adjunctive therapy for hemophilia patients. BAX 513 involves a novel
pharmaceutical approach for improving hemostasis in bleeding disorders.
* Resolution of the warning letter issued by the U.S. Food and Drug
Administration (FDA) related to Baxter`s production facility located in
Lessines, Belgium.

Second Quarter and Full-Year 2010 Outlook

Baxter also announced today its guidance for the second quarter of 2010 and
lowered its guidance for the full year.

Previously, Baxter expected full-year 2010 sales growth, excluding the impact of
foreign exchange, of 5 to 7 percent (or 7 to 9 percent including foreign
exchange); full-year earnings per diluted share of $4.20 to $4.28, before any
special items; and cash flow from operations of approximately $2.9 billion.

For full-year 2010, Baxter`s revised outlook includes sales growth, excluding
the impact of foreign exchange, of 1 to 3 percent (or 3 to 5 percent including
the benefit of foreign exchange) and earnings, before any special items, of
$3.92 to $4.00 per diluted share. This outlook now includes the full-year impact
of U.S. healthcare reform legislation enacted in the first quarter. In addition,
Baxter now expects to generate cash flows from operations of approximately $2.7
billion.

"Our revised financial guidance primarily reflects the impact of recent
healthcare reform legislation in the U.S. and our outlook for continued plasma
market pressures," explained Robert M. Davis, chief financial officer. "Despite
these factors, we will continue to pursue opportunities to enhance growth
through the development of new products and business development initiatives,
while maintaining an intense focus on managing costs throughout the company."

For the second quarter of 2010, the company expects sales growth, excluding the
impact of foreign exchange, of 0 to 2 percent (or 3 to 5 percent including the
benefit of foreign exchange), and earnings, before any special items, of $0.90
to $0.93 per diluted share.

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 22, 2010. Please visit Baxter's website for more
information regarding this and future investor events and webcasts, including
the company`s Annual Meeting of Shareholders on May 4, 2010.

Baxter International Inc., through its subsidiaries, develops, manufactures and
markets products that save and sustain the lives of people with hemophilia,
immune disorders, 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 and outlook for 2010. 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 patientsafety concerns leading to product recalls,
withdrawals, launch delays, litigation, or declining sales; future actions of
governmental authorities and other third parties as recently adopted U.S.
healthcare reform legislation is implemented; additional legislation, regulation
and other governmental pressures, which may affect pricing, reimbursement and
rebate policies of government agencies and private payers or other elements of
the company`s business; production yields, regulatory clearances and customers`
final purchase commitments with respect to the company`s pandemic vaccine;
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;
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.

BAXTER INTERNATIONAL INC.
Consolidated Statements of Income
Three Months Ended March 31, 2010 and 2009
(unaudited)
(in millions, except per share and percentage data)

Three Months Ended
March 31,
2010 2009 Change

NET SALES $3,140 $2,824 11%

COST OF SALES 1,509 1,336 13%

GROSS MARGIN 1,631 1,488 10%
% of Net Sales 51.9% 52.7% (0.8 pts)

MARKETING AND ADMINISTRATIVE EXPENSES 683 611 12%
% of Net Sales 21.8% 21.6% 0.2 pts

RESEARCH AND DEVELOPMENT EXPENSES 227 212 7%
% of Net Sales 7.2% 7.5% (0.3 pts)

NET INTEREST EXPENSE 19 26 (27%)

OTHER EXPENSE, NET 2 2 0%

PRE-TAX INCOME 700 637 10%

INCOME TAX EXPENSE 172 A 119 45%
% of Pre-Tax Income 24.6% 18.7% 5.9 pts

NET INCOME 528 518 2%
LESS: NONCONTROLLING INTERESTS 3 2 50%
NET INCOME ATTRIBUTABLE TO BAXTER $525 $516 2%

BASIC EPS $0.87 $0.84 4%
DILUTED EPS $0.86 $0.83 4%

WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
Basic 602 613
Diluted 609 621

ADJUSTED NET INCOME ATTRIBUTABLE TO BAXTER (excluding specified item) $564 B $516 9%
ADJUSTED DILUTED EPS (excluding specified item) $0.93 B $0.83 12%

A Income tax expense in 2010 included a charge of $39 million, or $0.07 per diluted share, to write off a deferred tax asset as a result of a change in the tax treatment of reimbursements under the Medicare Part D retiree prescription drug subsidy program.
B Refer to page 8 for a description of the adjustment and a reconciliation of GAAP (generally accepted accounting principles) measures.

BAXTER INTERNATIONAL INC.
Note to Consolidated Statement of Income
Three Months Ended March 31, 2010
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, 2010 included a tax charge related to the write-off of a deferred tax asset as a result of a change in the tax treatment of reimbursements under the Medicare Part D retiree prescription drug subsidy program. This charge impacted the GAAP results as follows:

Income Net Income
Pre-tax Tax Attributable Diluted
Income Expense to Baxter EPS
GAAP $700 $172 $525 $0.86
Deferred tax charge N/A (39) 39 0.07
Excluding specified item $700 $133 $564 $0.93

Effective tax rate 19.0%

For more information on the company's use of non-GAAP financial measures in this press release, please see the company's Current Report on Form 8-K filed with the Securities and Exchange Commission on the date of this press release.

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,
2010 2009

Net income $528 $518
Adjustments
Depreciation and amortization 166 148
Deferred income taxes 91 1 59
Stock compensation 30 38
Realized excess tax benefits from stock issued under employee benefit plans (31) (78)
Other 9 9
Changes in balance sheet items
Accounts and other current receivables (33) 45
Inventories (94) (86)
Accounts payable and accrued liabilities (107) (304)
Restructuring and cost optimization payments (17) (21)
Other (263) 2 (91) 2
Cash flows from operations $279 $237

Changes in Net Debt
Increase (decrease) Three Months Ended
March 31,
2010 2009

Net debt, beginning of period $1,365 $1,625

Cash flows from operations (279) (237)
Capital expenditures 230 171
Dividends 174 160
Proceeds from stock issued under employee benefit plans (140) (61)
Purchases of treasury stock 435 566
Acquisitions of and investments in businesses and technologies 234 3 -
Other, including the effect of exchange rate changes 61 (17)
Increase in net debt 715 582

Net debt, March 31 $2,080 $2,207

Key statistics, March 31:
Days sales outstanding 53.1 52.1
Inventory turns 2.2 2.1

Selected balance sheet information: March 31, 2010 December 31, 2009
Cash and equivalents $2,673 $2,786
Accounts and other current receivables $2,273 $2,302
Inventories $2,562 $2,557
Accounts payable and accrued liabilities $3,479 $3,753

1 Deferred income taxes in the first quarter of 2010 included a charge of $39 million to write off a deferred tax asset as a result of a change in the tax treatment of reimbursements under the Medicare Part D retiree prescription drug subsidy program.
2 Other cash flows from operations in the first quarters of 2010 and 2009 included planned contributions of $300 million and $100 million, respectively, to the company's pension plan in the United States.
3 Acquisitions of and investments in businesses and technologies in 2010 principally related to the acquisition of ApaTech Limited, an orthobiologic products company based in the United Kingdom.

BAXTER INTERNATIONAL INC.
Net Sales
Periods Ending March 31, 2010 and 2009
(unaudited)
($ in millions)

Q1 Q1 % Growth @ % Growth @
2010 2009 Actual Rates Constant Rates

BioScience
United States $610 $622 (2%) (2%)
International 752 630 19% 8%
Total $1,362 $1,252 9% 3%

Medication Delivery
United States $579 $514 13% 13%
International 603 521 16% 3%
Total $1,182 $1,035 14% 8%

Renal
United States $95 $92 3% 3%
International 489 423 16% 5%
Total $584 $515 13% 5%

Baxter excluding
Transfusion Therapies
United States $1,284 $1,228 5% 5%
International 1,844 1,574 17% 5%
Total $3,128 $2,802 12% 5%

Transfusion Therapies 1
United States $9 $13 (31%) (31%)
International 3 9 (67%) (67%)
Total $12 $22 (45%) (45%)

Baxter International Inc.
United States $1,293 $1,241 4% 4%
International 1,847 1,583 17% 5%
Total $3,140 $2,824 11% 5%

1 Represents revenues associated with manufacturing, distribution and other services provided by the company to the buyer of the Transfusion Therapies (TT) business after the February 2007 divestiture.

BAXTER INTERNATIONAL INC.
Key Product Line Sales
Periods Ending March 31, 2010 and 2009
(unaudited)
($ in millions)

Q1 Q1 % Growth @ % Growth @
2010 2009 Actual Rates Constant Rates

BioScience
Recombinants $510 $451 13% 8%
Plasma Proteins 292 274 7% (1%)
Antibody Therapy 322 337 (4%) (7%)
Regenerative Medicine 119 99 20% 14%
Other1 119 91 31% 20%
Total BioScience $1,362 $1,252 9% 3%

Medication Delivery
IV Therapies $391 $344 14% 6%
Global Injectables 451 371 22% 14%
Infusion Systems 209 199 5% (1%)
Anesthesia 127 109 17% 11%
Other 4 12 (67%) (50%)
Total Medication Delivery $1,182 $1,035 14% 8%

Renal
PD Therapy $474 $420 13% 5%
HD Therapy 110 95 16% 5%
Total Renal $584 $515 13% 5%

Baxter excluding Transfusion Therapies $3,128 $2,802 12% 5%

Transfusion Therapies 2 $12 $22 (45%) (45%)

Total Baxter $3,140 $2,824 11% 5%

1 Principally includes vaccines and sales of plasma to third parties.
2 Represents revenues associated with manufacturing, distribution and other services provided by the company to the buyer of the TT business after the February 2007 divestiture.

BAXTER INTERNATIONAL INC.
Key Product Line Sales by US and International
Periods Ending March 31, 2010 and 2009
(unaudited)
($ in millions)

Q1 2010 Q1 2009 % Growth
US International Total US International Total US International Total
BioScience
Recombinants $222 $288 $510 $211 $240 $451 5% 20% 13%
Plasma Proteins 94 198 292 98 176 274 (4%) 13% 7%
Antibody Therapy 223 99 322 250 87 337 (11%) 14% (4%)
Regenerative Medicine 62 57 119 55 44 99 13% 30% 20%
Other 1 9 110 119 8 83 91 13% 33% 31%
Total BioScience $610 $752 $1,362 $622 $630 $1,252 (2%) 19% 9%

Medication Delivery
IV Therapies $124 $267 $391 $108 $236 $344 15% 13% 14%
Global Injectables 250 201 451 208 163 371 20% 23% 22%
Infusion Systems 122 87 209 122 77 199 0% 13% 5%
Anesthesia 82 45 127 73 36 109 12% 25% 17%
Other 1 3 4 3 9 12 (67%) (67%) (67%)
Total
Medication Delivery $579 $603 $1,182 $514 $521 $1,035 13% 16% 14%

Renal
PD Therapy $76 $398 $474 $71 $349 $420 7% 14% 13%
HD Therapy 19 91 110 21 74 95 (10%) 23% 16%
Total Renal $95 $489 $584 $92 $423 $515 3% 16% 13%

Baxter excluding
Transfusion Therapies $1,284 $1,844 $3,128 $1,228 $1,574 $2,802 5% 17% 12%

Transfusion Therapies 2 $9 $3 $12 $13 $9 $22 (31%) (67%) (45%)

Total Baxter $1,293 $1,847 $3,140 $1,241 $1,583 $2,824 4% 17% 11%

1 Principally includes vaccines and sales of plasma to third parties.
2 Represents revenues associated with manufacturing, distribution and other services provided by the company to the buyer of the TT business after the February 2007 divestiture.

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

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