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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 for the fiscal year ended December 31, 2000
OR
[_]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 for the transition period from to
Commission file number 1-4448
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Baxter International Inc.
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(Exact Name of Registrant in Its Charter)
Delaware 36-0781620
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(State or Other Jurisdiction of Incorporation or (I.R.S. Employer
Organization) Identification No.)
One Baxter Parkway, Deerfield, Illinois 60015
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code 847.948.2000
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Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
on which registered
New York Stock Exchange,
Title of each class Inc.
Common stock, $1 par value Chicago Stock Exchange,
Inc.
Pacific Exchange, Inc.
Preferred Stock Purchase Rights New York Stock Exchange,
(currently traded with common stock) Inc.
Chicago Stock Exchange,
Inc.
Pacific Exchange, Inc.
Securities registered pursuant to Section 12(g) of the Act: None
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [_]
The aggregate market value of the voting common equity held by non-
affiliates of the registrant (based on the per share closing sale price of
$92.61 on February 28, 2001, and for the purpose of this computation only, the
assumption that all registrant's directors and executive officers are
affiliates) was approximately $27.3 billion. There is no non-voting common
equity held by non-affiliates of the registrant.
The number of shares of the registrant's common stock, $1 par value,
outstanding as of February 28, 2001, was 295,263,214.
Documents Incorporated By Reference
Those sections or portions of the registrant's annual report to
stockholders for fiscal year ended December 31, 2000 and of the registrant's
proxy statement for use in connection with its annual meeting of stockholders
to be held on May 1, 2001, described in the cross reference sheet and table of
contents attached hereto are incorporated by reference in this report.
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CROSS REFERENCE SHEET
and
TABLE OF CONTENTS
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Page Number or
(Reference)
(1)
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Item 1. Business
(a) General Development of Business.................. 1(2)
(b) Financial Information about Segments............. 1(3)
(c) Narrative Description of Business................ 1(4)
(d) Financial Information about Foreign and Domestic
Operations and Export Sales...................... 7(5)
Item 2. Properties........................................... 8
Item 3. Legal Proceedings.................................... 8
Item 4. Submission of Matters to a Vote of Security Holders.. 11
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters................................. 12(6)
Item 6. Selected Financial Data.............................. 12(7)
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations................. 12(8)
Item 7A. Quantitative and Qualitative Disclosures about Market
Risk................................................ 12(9)
Item 8. Financial Statements and Supplementary Data.......... 12(10)
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure................. 12
Item 10. Directors and Executive Officers of the Registrant... 13
(a) Identification of Directors...................... 13(11)
(b) Identification of Executive Officers............. 13
(c) Compliance with Section 16(a) of the Securities
Exchange Act of 1934............................. 14(12)
Item 11. Executive Compensation............................... 15(13)
Item 12. Security Ownership of Certain Beneficial Owners and
Management.......................................... 15(14)
Item 13. Certain Relationships and Related Transactions....... 15
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K......................................... 15
(a) Financial Statements............................. 15
(b) Reports on Form 8-K.............................. 15
(c) Exhibits......................................... 15
(1) Information incorporated by reference to Baxter's Annual Report to
Stockholders for the year ended December 31, 2000 (Annual Report) and
Baxter's proxy statement for use in connection with its annual meeting of
stockholders to be held May 1, 2001 (Proxy Statement).
(2) Annual Report, pages 35-37, section entitled "Notes to Consolidated
Financial Statements--Acquisitions and Divestitures."
(3) Annual Report, pages 46-47, section entitled "Notes to Consolidated
Financial Statements--Segment Information."
(4) Annual Report, pages 19-27, section entitled "Management's Discussion and
Analysis" and pages 46-47, section entitled "Notes to Consolidated
Financial Statements--Segment Information."
(5) Annual Report, pages 46-47, section entitled "Notes to Consolidated
Financial Statements--Segment Information."
(6) Annual Report, page 48, section entitled "Notes to Consolidated Financial
Statements--Quarterly Financial Results and Market for the Company's
Stock (Unaudited)."
(7) Annual Report, inside back cover, section entitled "Five-Year Summary of
Selected Financial Data."
(8) Annual Report, pages 19-27, section entitled "Management's Discussion and
Analysis."
(9) Annual Report, page 26, section entitled "Financial Instrument Market
Risk."
(10) Annual Report, pages 28-48, sections entitled "Report of Independent
Accountants," "Consolidated Balance Sheets," "Consolidated Statements of
Income," "Consolidated Statements of Cash Flows," "Consolidated
Statements of Stockholders' Equity and Comprehensive Income" and "Notes
to Consolidated Financial Statements."
(11) Proxy Statement, page 12, section entitled "Board of Directors--Director
Biographies."
(12) Proxy Statement, page 29, section entitled "Section 16(2) Beneficial
Ownership Reporting Compliance."
(13) Proxy Statement, pages 16-17, section entitled "Board of Directors--
Compensation of Directors" and pages 23-27 section entitled "Executive
Compensation."
(14) Proxy Statement, pages 28-29, section entitled "Ownership of Baxter
Stock."
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[LOGO] BAXTER
Baxter International Inc., One Baxter Parkway, Deerfield, Illinois 60015
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PART I
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ITEM 1. BUSINESS.
(a) General Development of Business.
Baxter International Inc. was incorporated under Delaware law in 1931. As
used in this report, except as otherwise indicated in information incorporated
by reference, "Baxter International" means Baxter International Inc. and
"Baxter" or the "company" means Baxter International and its subsidiaries.
Baxter engages in the worldwide development, manufacture and distribution of
a diversified line of products, systems and services used primarily in the
health care field. We manufacture products in 27 countries and sell them in
over 100 countries. Health care is concerned with the preservation of health
and with the diagnosis, cure, mitigation and treatment of disease and body
defects and deficiencies. Our products are used by hospitals, clinical and
medical research laboratories, blood and blood dialysis centers, rehabilitation
centers, nursing homes, doctors' offices and by patients, at home, under
physician supervision.
For information regarding significant acquisitions, investments in
affiliates and divestitures, see our Annual Report to Stockholders for the year
ended December 31, 2000 (Annual Report), pages 35-37, section entitled "Notes
to Consolidated Financial Statements--Acquisitions and Divestitures" which is
incorporated by reference.
(b) Financial Information About Segments.
Incorporated by reference from the Annual Report, pages 46-47, section
entitled "Notes to Consolidated Financial Statements--Segment Information."
(c) Narrative Description of Business.
Recent Developments
On February 27, 2001, the Baxter International Board of Directors approved a
two-for-one split of the company's common stock, subject to stockholder
approval of an increase in the number of shares of common stock authorized to
be issued by Baxter International from the current 350 million to one billion
at the annual stockholders' meeting to be held May 1, 2001. If the increase in
authorized shares is approved, stockholders of record at the close of business
on May 9, 2001 will receive one additional share of Baxter International common
stock for each share they hold as of the record date. The additional shares of
common stock will be distributed on May 30, 2001.
On February 1, 2001, Baxter acquired Sera-Tec Biologicals, L.P., which owns
and operates approximately 80 plasmapheresis centers in 28 states, and a
central testing laboratory. This purchase brings the total number of plasma
collection centers owned by Baxter to approximately 110 worldwide and is
intended to help provide Baxter with a consistent, stable supply of source
plasma for processing into life-saving plasma-based products.
Company Overview
Baxter operates as a global leader in critical therapies for life-
threatening conditions. We develop, manufacture and market products and
technologies related to the blood and circulatory system. Our continuing
operations are comprised of three segments: Medication Delivery, which develops
technologies and systems to improve intravenous medication delivery and
distributes medical products; BioScience, which develops biopharmaceutical and
blood collection and separation products and technologies; and Renal, which
develops products and provides services to treat end-stage kidney disease. Our
three businesses enjoy leading positions in
1
the medical products and services fields. Unless otherwise indicated, each of
the factors discussed in this Part I do not materially differ in their impact
across each of our three segments.
Information about operating results is incorporated by reference from
Annual Report pages 19-27, section entitled "Management's Discussion and
Analysis" and pages 46-47, section entitled "Notes to Consolidated Financial
Statements--Segment Information."
Medication Delivery
Business Description. Baxter manufactures a range of products that deliver
fluids and drugs to patients. These include large- and small-volume
intravenous (IV) solutions, IV administration sets, premixed drugs for IV
administration, reconstitution devices, IV nutrition solutions and devices, IV
infusion pumps, anesthesia-delivery devices, anesthetic agents, acute-care
injectible pharmaceuticals, ambulatory infusion systems and pharmacy services.
Growth Strategy. Baxter continues to participate in the consolidation of
the global marketplace for medication-delivery products, particularly in
developing markets where there are still a large number of local and regional
players. The company will accelerate expansion of its higher-margin specialty
products outside the United States, where currently the business has a strong
base in IV sets and solutions, and will continue to develop new technologies
for medication delivery through internal product development and acquisitions
and alliances. Baxter also will leverage its strength in the anesthesia
marketplace to expand its position in medication delivery across the peri-
operative arena--pre-surgery, surgery and post-surgery.
Product Development. In 2000, Baxter upgraded its Colleague electronic
infusion pump for global use and added multiple languages for certain key
markets. Worldwide placements of the Colleague pump continue to rise, with
50,000 new channels placed in 2000. Also in 2000, the company introduced a new
pump for post-operative pain management, called the Ipump Pain Management
System, in the United States. Also programmed in multiple languages and
designed for global use, Baxter will launch the Ipump in Europe and Canada in
2001. In addition, the company launched several new premixed IV drugs in 2000,
including its first global premixed drug, called AGGRASTAT, a cardiac compound
developed by Merck.
Acquisitions and Alliances. Over the last two years, Baxter has made
several acquisitions intended to broaden its portfolio of medication-delivery
products. These include Ohmeda Pharmaceutical Products, enhancing Baxter's
offering in anesthesia; Pharmacia & Upjohn's German-based IV and nutrition
business; and the ambulatory infusion pump business of Sabratek Corporation.
Baxter also reacquired the distribution rights for the Ohmeda pharmaceutical
products in Europe and Canada to serve as a base to build its specialty-
product offerings in these key markets. Baxter acquired a French company
called Biodome, which has a technology for efficient, low-cost reconstitution
of drugs for both injection and infusion. The company also received exclusive
U.S. distribution rights from Physiometrix Inc. for the PSA 4000 anesthesia
monitoring system, which helps anesthesiologists monitor a patient's level of
consciousness during surgery.
BioScience
Business Description. Baxter is a leading producer of biopharmaceuticals
for the treatment of hemophilia, immune deficiencies and other life-
threatening disorders. These products include coagulation factors, immune
globulins, biosurgery products and vaccines. The company also is a leading
manufacturer of manual and automated blood-collection, processing and storage
systems. These products are used by hospitals, blood banks and plasma-
collection centers to collect and process blood components for therapeutic
use. Therapeutic blood components are used to treat patients undergoing
surgery, cancer therapy and other critical therapies.
Growth Strategy. Baxter will continue to grow its global leadership in
biopharmaceuticals for the treatment of hemophilia and immune deficiencies by
broadening its portfolio, advancing technology and increasing production
capacity. Growth opportunities are presented by the tremendous need for and
increasing use of these products around the world, and the continued growth of
both plasma-derived and recombinant-derived therapies. Baxter will continue to
expand its pipeline of innovative biopharmaceuticals and vaccines through both
internal development and acquisitions and alliances. Baxter also continues to
focus on increased production and safety of transfusion products through
advanced automation, leukoreduction and pathogen inactivation.
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Product Development. In 2000, Baxter received approval in the United Kingdom
for NeisVac-C, a new meningococcemia vaccine. The company also received
approval from the U.S. Food and Drug Administration (FDA) for a new application
device for its Tisseel fibrin sealant. In the next 12 months, Baxter expects
FDA approval for a liquid form of IGIV, and European approval for a new
therapeutic protein for protein C deficiency and pathogen-inactivation
technology for platelets. Other products in development include a next-
generation recombinant Factor VIII using a totally protein-free manufacturing
process; a cell culture-derived vaccine for influenza; a new tetanus,
diphtheria and acellular pertussis vaccine; a European vaccine for Lyme
Disease; pathogen-inactivation technology for plasma and red cells; and a
recombinant form of hemoglobin that may be used instead of blood to carry
oxygen to vital organs.
Acquisitions and Alliances. In 2000, Baxter completed its acquisition of
North American Vaccine Inc., based in Columbia, Maryland, broadening its
position in the global vaccines market. The company also established an equity
position in British vaccine developer Acambis (formerly known as Peptide
Therapeutics Group), which will better position each company to develop and
commercialize their respective vaccine pipelines. In addition, Baxter formed
alliances with XOMA Ltd. for the rights to a recombinant protein for treatment
of a range of diseases caused by bacteria; Arriva Pharmaceuticals (formerly
known as AlphaOne Pharmaceuticals, Inc.) to co-develop a recombinant alpha 1-
antitrypsin protein to treat hereditary emphysema and other respiratory
diseases; and Pharming Group N.V. to collaborate on the development of a
recombinant, transgenic C1 inhibitor to treat hereditary angioedema.
Renal
Business Description. Baxter provides a range of products and services for
the treatment of kidney disease. These include products for both peritoneal
dialysis (PD) and hemodialysis (HD) as well as research initiatives in
xenotransplantation. Baxter is the world's leading manufacturer of PD products,
which include dialysis solutions, container systems and automated cyclers. For
HD, Baxter manufactures dialyzers and HD machines. The company's Renal Therapy
Services (RTS) business operates dialysis clinics in partnership with local
physicians in 12 countries outside the United States, while RMS Disease
Management Inc. partners with U.S. nephrologists to provide a kidney disease
management program to health-care payers. Baxter's RMS Lifeline Inc. helps to
improve the delivery and outcomes of interventional renal care in the United
States through dedicated outpatient centers.
Growth Strategy. The company's strategy is to continue to drive PD growth
while also investing in significant expansion of HD products and services. New
products will come from internal development, acquisitions, alliances and e-
health initiatives. The company also continues to grow its RTS business and
expand its product lines globally, particularly in developing markets where
many people with end-stage renal disease are currently under-treated. In
addition, Baxter intends to continue developing technology-based products and
services that improve therapeutic outcomes.
Product Development. Baxter continues to develop new PD solutions to better
manage specific patient needs. One example is Extraneal, which improves the
removal of excess fluids and toxins from patients with end-stage renal disease.
Introduced in Europe in 1997 and approved in 28 countries, Extraneal today is
being used by more than 6,000 European patients--more than a third of Baxter's
European PD population--and is currently under regulatory review in the United
States. Another solution, Physioneal, was introduced in Europe and began
clinical trials in Japan in 2000. Also in 2000, as a result of Baxter's
acquisition of Althin Medical, the company began selling an HD machine globally
called the Tina. Baxter also introduced a new HD machine called Meridian in the
United States. Future products include several new HD dialyzers and the Aurora
home HD machine. The company also is continuing research in the area of
xenotransplantation.
Acquisitions and Alliances. In March 2000, Baxter completed its acquisition
of Althin Medical AB, a leading manufacturer of HD products, based in Ronneby,
Sweden. The acquisition greatly expands Baxter's product offering for HD and
strengthens its position in the global HD marketplace. The company's joint
venture with Gambro AB of Sweden for the manufacture of dialyzers for both
Baxter and Gambro at Baxter's renal-products plant in Mountain Home, Arkansas,
continues to perform well, with more than 3 million dialyzers manufactured in
2000.
3
United States Markets
The health care marketplace continues to be highly competitive. There has
been consolidation in the company's customer base, and by its competitors,
which has resulted in pricing and market share pressures. These industry
trends are expected to continue. The company intends to continue to manage
these issues by developing new products and services, leveraging its cost
structure, making acquisitions and entering alliances.
International Markets
Baxter generates more than 50 percent of its revenues outside the United
States. While health care cost containment continues to be a focus around the
world, demand for health care products and services continues to be strong
worldwide, particularly in developing markets. The company's strategies
emphasize global expansion and technological innovation to advance medical
care worldwide.
Joint Ventures and Affiliations
As described above, Baxter has entered into a United States-based
manufacturing joint venture with Gambro, an international medical technology
and health care company based in Sweden. The joint venture, named Tandem,
sources dialyzers from an existing Baxter production facility in Mountain
Home, Arkansas. Baxter manages the day-to-day operations on behalf of the
joint venture.
In addition, the company conducts a non-material amount of business through
other joint ventures. Many of these joint ventures are conducted by the
company's Medication Delivery and Renal businesses.
In March 2000, Baxter teamed with four of the largest, most experienced
companies in the health care industry to form the Global Healthcare Exchange
(GHX). GHX provides business-to-business procurement for the health care
industry. Utilizing Internet-based technology, GHX integrates hospitals and
suppliers, in an attempt to improve efficiencies and add value throughout the
supply chain. GHX was founded in March 2000 and now is comprised of more than
50 supplier members.
Baxter also owns minority positions in certain other publicly-traded
companies, including Cerus Corporation, with which it is jointly developing a
pathogen inactivation system for platelets, plasma and red blood cells for
transfusion, and Nexell Therapeutics Inc., which is developing and marketing
advanced technologies in the clinical use of blood-forming stem cells.
Methods of Distribution
Baxter conducts its selling efforts through its subsidiaries and divisions.
Many subsidiaries and divisions have their own sales forces and direct their
own sales efforts. In addition, sales are made to and through independent
distributors, dealers and sales agents. In the United States, Allegiance
Healthcare Corporation distributes a significant portion of the company's
products through its distribution centers. These distribution centers are
generally stocked with adequate inventories to facilitate prompt customer
service. Sales and distribution methods include frequent contact by sales
representatives, automated communications via various electronic purchasing
systems, circulation of catalogs and merchandising bulletins, direct-mail
campaigns, trade publications and advertising. Customers may return defective
merchandise for credit or replacement. In recent years, such returns have been
immaterial.
International sales and distribution are made in over 100 countries either
on a direct basis or through independent local distributors. International
subsidiaries employ their own field sales forces in Argentina, Australia,
Austria, Belgium, Brazil, Canada, Chile, China, Colombia, the Czech Republic,
Denmark, Ecuador, Finland, France, Germany, Greece, Guatemala, Hungary, India,
Ireland, Italy, Japan, Korea, Mexico, The Netherlands, New Zealand, Norway,
Panama, Peru, the Philippines, Portugal, Russia, Singapore, Spain, Sweden,
Switzerland, Taiwan, Thailand, Turkey, the United Kingdom and Venezuela. In
other countries, sales are made through independent distributors or sales
agents.
Raw Materials
Raw materials essential to the company's business are purchased worldwide
in the ordinary course of business from numerous suppliers. Although the vast
majority of these materials are generally available, the company has
experienced occasional shortages in supply of source plasma and of bulk
recombinant factor VIII used by Baxter in its BioScience business. In
addition, certain raw materials used in producing some of the company's
products are available only from a small number of suppliers. Baxter works
closely with its suppliers
4
to assure continuity of supply while maintaining high quality and reliability.
The company also continues to develop new sources of supply and does not
believe that periodic shortages in supply of raw materials will have a material
adverse effect on the company's business.
In some of these situations, the company has long-term supply contracts with
its suppliers, although it does not consider its obligations under such
contracts to be material. Baxter does not always recover cost increases through
customer pricing due to contractual limits and market pressure on such price
increases. See "Contractual Arrangements."
Patents and Trademarks
Products manufactured by Baxter are sold primarily under its own trademarks
and trade names. Some products purchased and resold by the company are sold
under the company's trade names while others are sold under trade names owned
by its suppliers.
Baxter owns a number of patents and trademarks throughout the world and is
licensed under patents owned by others. Baxter's policy is to protect its
products and technology through patents and trademarks on a worldwide basis.
This protection is sought in a manner that balances the cost of such protection
against obtaining the greatest value for the company. The company also
recognizes the need to promote the enforcement of its patents and trademarks.
Over the past few years, Baxter has increased its enforcement activities by
aggressively taking action in various countries to protect its patents and
trademarks, including action taken in Chile, Germany, Japan, Sweden, The
Netherlands and the United States. An example of Baxter's increased enforcement
activity includes several suits brought in Japan against two competitors
selling fibrin sealant product, which Baxter contends infringes one of its
Japanese patents. While Baxter will take all reasonable and necessary action to
enforce its trademarks and patents against potential infringers, there can be
no assurance that any such action will result in favorable decisions; however,
Baxter believes that its overall business position is not materially dependent
upon any single patent or trademark.
Competition
Historically, competition in the health care industry has been characterized
by the search for technological and therapeutic innovations in the prevention,
diagnosis and treatment of disease. The company believes that it has benefited
from the technological advantages of certain of its products. While competitors
will continue to introduce new products that compete with those sold by Baxter,
the company believes that its research and development efforts will permit it
to remain competitive in all presently material product areas. Although no
single company competes with Baxter in all of its businesses, Baxter is faced
with substantial competition in all of its markets.
The changing health care environment in recent years has led to increasingly
intense competition among United States and certain European health care
suppliers. Competition is focused on price, service and product performance.
Pressure in these areas is expected to continue.
The company continues to increase its efforts to minimize costs and meet
price competition. The company believes that its cost position will continue to
benefit from improvements in manufacturing technology and increased economies
of scale. The company intends to continue to develop new products and services,
invest in capital and human resources to upgrade and expand facilities,
leverage its cost structure and make selected acquisitions.
Credit and Working Capital Practices
As of March 1, 2001, Baxter's debt ratings on senior debt were A3 by
Moody's, A by Standard & Poor's and A by Duff & Phelps. The company's credit
practices and related working capital needs are comparable to those of other
market participants. Collection periods tend to be longer for sales outside the
United States.
Quality Management
Baxter places significant emphasis on providing quality products and
services to its customers. A major portion of the company's quality systems
relate to the design and development manufacturing, packaging,
5
sterilization, handling, distribution and labeling of the products by the
company. These quality systems, including control procedures that are
developed and implemented by technically trained professionals, result in
rigid specifications for product design, raw materials, components, packaging
materials, labels, sterilization procedures and overall manufacturing process
control. The quality systems integrate the efforts of suppliers of raw
materials, components and finished goods to ensure we meet customer and
regulatory requirements. These systems are designed to ensure that all
appropriate standards and requirements are met before goods are released. In
addition to other quality processes, Baxter initiated a Six Sigma Quality
process several years ago to train all appropriate individuals in statistical
process control and related subjects to ensure continuous improvement.
Research and Development
Baxter is actively engaged in research and development programs to develop
and improve products, systems and manufacturing methods. These activities are
performed at research and development centers located around the world and
include facilities in Australia, Austria, Belgium, France, Italy, Japan,
Malta, Singapore, Sweden and the United States. Expenditures for Baxter-
sponsored research and development activities were $379 million in 2000, $332
million in 1999 and $323 million in 1998.
Principal areas of strategic focus for research include next generation
recombinant, hemoglobin therapeutics, plasma-based therapies, vaccines,
xenotransplantation, pathogen inactivation, and medication-delivery systems.
The company's research efforts emphasize self-manufactured product
development, and portions of that research relate to multiple product lines.
For example, many product categories benefit from the company's research
effort as applied to the human body's circulatory systems. In addition,
research relating to the performance and purity of plastic materials has
resulted in advances that are applicable to a large number of the company's
products.
Government Regulation
Most products manufactured or sold by the company are subject to regulation
by numerous governmental agencies, both within and outside the United States.
In the United States, the federal agencies that regulate the company's
facilities, operations, personnel and products (their manufacture, sale,
import and export) include the Food and Drug Administration (FDA), the
Environmental Protection Agency, the Occupational Health & Safety
Administration, the Customs Service, the Department of Commerce, the Treasury
Department and others. State agencies also regulate the facilities,
operations, products and personnel of the company within their respective
states. Government agencies outside the United States also regulate public
health, environmental, employment, export, customs and other aspects of the
company's global operations.
With regard to the company's facilities and products, various governmental
agencies, including the FDA in the United States, regulate the manufacturing
procedures, labeling, recordkeeping, promotion and advertising. In addition,
the agencies have the authority to halt the distribution of medical products,
detain or seize adulterated or misbranded medical products, or order the
company to take other steps to correct issues surrounding the products. The
agencies may also require notification of health professionals and others with
regard to medical products that present risks of substantial harm to the
public health. From time to time, the company has removed products from the
market that were found not to meet acceptable standards.
Environmental policies of the company mandate compliance with all
applicable regulatory requirements concerning environmental quality and
contemplate, among other things, appropriate capital expenditures for
environmental protection. Various non-material capital expenditures for
environmental protection were made by Baxter during 2000 and similar
expenditures are planned for 2001. See Item 3.--"Legal Proceedings."
Employees
As of December 31, 2000, Baxter employed approximately 43,000 people.
Contractual Arrangements
A substantial portion of the company's products are sold through contracts
with customers, both within and outside the United States. Some of these
contracts have terms of more than one year and limits on price increases. In
the case of hospitals, clinical laboratories and other facilities, these
contracts may specify minimum quantities
6
of a particular product or categories of products to be purchased by the
customer. In keeping with the increased emphasis on cost-effectiveness in
health care delivery, the current trend among hospitals and other customers of
medical products manufacturers is to consolidate into larger purchasing groups
to enhance purchasing power. The medical products industry has also experienced
some consolidation, partly in order to offer a broader range of products to
large purchasers. As a result, transactions with customers are larger, more
complex and tend to involve more long-term contracts than in the past. The
enhanced purchasing power of these larger customers may also increase the
pressure on product pricing, although management is unable to estimate the
potential impact at this time.
Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the
Private Securities Litigation Reform Act of 1995
Statements throughout this report that are not historical facts, including,
but not limited to, statements in the "Company Overview," "International
Markets" and "Recent Acquisitions" sections of this report (including material
incorporated therein by reference) are forward-looking statements. These
statements are based on the company's current expectations and involve numerous
risks and uncertainties. Some of these risks and uncertainties are factors that
affect all international businesses, while some are specific to the company and
the health care arenas in which it operates.
The factors below in some cases have affected and could affect the company's
actual results, causing results to differ, and possibly differ materially, from
those expressed in any such forward-looking statements. These factors include
technological advances in the medical field, economic conditions, demand and
market acceptance risks for new and existing products, technologies and health
care services, the impact of competitive products and pricing, manufacturing
capacity, new plant start-ups, global regulatory, trade and tax policies,
continued price competition, on-going scrutiny from regulatory agencies,
product development risks, including technological difficulties, ability to
enforce patents and unforeseen commercialization and regulatory factors.
Additionally, as discussed in Item 3.-- "Legal Proceedings," upon the
resolution of certain legal matters, the company may incur charges in excess of
presently established reserves. Any such charge could have a material adverse
effect on the company's results of operations or cash flows in the period in
which it is recorded.
Currency fluctuations are also a significant variable for global companies,
especially fluctuations in local currencies where hedging opportunities are
unreasonably expensive or unavailable. If the United States dollar strengthens
significantly against most foreign currencies, the company's ability to realize
projected growth rates in its sales and net earnings outside the United States
could be negatively impacted.
The company believes that its expectations with respect to forward-looking
statements are based upon reasonable assumptions within the bounds of its
knowledge of its business and operations, but there can be no assurance that
the actual results or performance of the company will conform to any future
results or performance expressed or implied by such forward-looking statements.
(d) Financial Information About Foreign and Domestic Operations and Export
Sales.
International operations are subject to certain additional risks inherent in
conducting business outside the United States, such as changes in currency
exchange rates, price and currency exchange controls, import restrictions,
nationalization, expropriation and other governmental action.
Financial information is incorporated by reference from the Annual Report,
pages 46-47, section entitled "Notes to Consolidated Financial Statements--
Segment Information."
7
- -------------------------------------------------------------------------------
Item 2. Properties.
Baxter owns or has long-term leases on substantially all of its major
manufacturing facilities. With respect to its current operations, the company
maintains 24 manufacturing facilities in the United States and its
territories, including five in Puerto Rico. The company also manufactures in
Australia, Austria, Belgium, Brazil, Canada, Chile, China, Colombia, Costa
Rica, the Dominican Republic, France, Germany, Ireland, Italy, Japan, Malta,
Mexico, New Zealand, the Philippines, Poland, Singapore, Spain, Switzerland,
Turkey and the United Kingdom. While the majority of these facilities are
shared by more than one of the company's business segments, eleven domestic
facilities and eleven international facilities exclusively manufacture for the
Medication Delivery operations; nine domestic and thirteen international
facilities exclusively manufacture for BioScience operations; and the Renal
business is the exclusive operator of four international facilities. The
company also owns or operates shared distribution facilities throughout the
world, including eleven in the United States and Puerto Rico, and 109 located
in 32 foreign countries.
The company maintains a continuing program for improving its properties,
including the retirement or improvement of older facilities and the
construction of new facilities. This program includes improvement of
manufacturing facilities to enable production and quality control programs to
conform to the current state of technology and government regulations. Capital
expenditures relating to continuing operations were $547 million in 2000, $529
million in 1999 and $461 million in 1998. Additions to the installed base of
equipment leased to customers was $101 million in 2000, $102 million in 1999
and $95 million in 1998.
- -------------------------------------------------------------------------------
Item 3. Legal Proceedings.
Baxter International and certain of its subsidiaries are named as
defendants in a number of lawsuits, claims and proceedings, including product
liability claims involving products now or formerly manufactured or sold by
the company or by companies that were acquired by the company. These cases and
claims raise difficult and complex factual and legal issues and are subject to
many uncertainties and complexities, including, but not limited to, the facts
and circumstances of each particular case or claim, the jurisdiction in which
each suit is brought, and differences in applicable law. Accordingly, in many
cases, Baxter International is not able to estimate the amount of its
liabilities with respect to such matters.
Upon resolution of any of the legal matters discussed below, Baxter
International may incur charges in excess of presently established reserves.
While such a future charge could have a material adverse impact on the
company's net income and net cash flows in the period in which it is recorded
or paid, management believes that no such charge would have a material adverse
effect on Baxter International's consolidated financial position.
Mammary Implant Litigation
Baxter International, together with certain of its subsidiaries, is
currently a defendant in various courts in a number of lawsuits brought by
individuals, all seeking damages for injuries of various types allegedly
caused by silicone mammary implants previously manufactured by the Heyer-
Schulte division (Heyer-Schulte) of American Hospital Supply Corporation
(AHSC). AHSC, which was acquired by Baxter in 1985, divested its Heyer-Schulte
division in 1984. It is not known how many of these claims and lawsuits
involve products manufactured and sold by Heyer-Schulte, as opposed to other
manufacturers.
In December 1998, a panel of independent medical experts appointed by a
federal judge announced its findings that reported medical studies contained
no clear evidence of a connection between silicone mammary implants and
traditional or atypical systemic diseases. In June 1999, a similar conclusion
was announced by a committee of independent medical experts from the Institute
of Medicine, a part of the National Academy of Sciences.
As of December 31, 2000, Baxter International, together with certain of its
subsidiaries, had been named as a defendant or co-defendant in 651 lawsuits
and 216 claims relating to mammary implants, brought by approximately 1,696
plaintiffs, of which 1,266 are implant plaintiffs and the remainder are
consortium or second generation plaintiffs. Of those plaintiffs, 227 currently
are included in the Lindsey class action Revised Settlement described below,
which accounts for 134 of the pending lawsuits against the company.
Additionally, 934 plaintiffs have opted out of the Revised Settlement
(representing 444 pending lawsuits), and the status of the
8
remaining plaintiffs with pending lawsuits is unknown. Some of the opt-out
plaintiffs filed their cases naming multiple defendants and without product
identification; thus, not all of the opt-out plaintiffs will have viable claims
against the company. As of December 31, 2000, 395 of the opt-out plaintiffs had
confirmed Heyer-Schulte mammary implant product identification. Furthermore,
during 2000, Baxter obtained dismissals, or agreements for dismissals, with
respect to 2,753 plaintiffs.
In addition to the individual suits against the company, a class action on
behalf of all women with silicone mammary implants was filed on March 23, 1994
and is pending in the United States District Court (U.S.D.C.) for the Northern
District of Alabama involving most manufacturers of such implants, including
Baxter, as successor to AHSC (Lindsey, et al., v. Dow Corning, et al.,
U.S.D.C., N. Dist. Ala., CV 94-P-11558-S). The class action was certified for
settlement purposes only by the court on September 1, 1994, and the settlement
terms were subsequently revised and approved on December 22, 1995 (Revised
Settlement). The monetary provisions of the Revised Settlement provide
compensation for all present and future plaintiffs and claimants through a
series of specific funds and a disease-compensation program involving certain
specified medical conditions. All appeals directly challenging the Revised
Settlement have been dismissed.
On January 16, 1996, Baxter, Bristol-Myers Squibb Company and Minnesota
Mining and Manufacturing Company each paid $125 million into the court-
established fund as an initial fund to pay claims under the Revised Settlement.
Union Carbide Corporation and McGhan Medical Corporation also are parties to
the Revised Settlement.
In addition to the Lindsey class action, the company also has been named in
five other purported class actions in various state and provincial courts, only
one of which is certified: Harrington v. Dow Corning Corp., et al., Supreme
Court, British Columbia, C954330. The class action in British Columbia has been
certified solely with respect to the issue of whether silicone gel breast
implants are reasonably fit for their intended purpose.
The mammary implant litigation includes issues related to which of Baxter's
insurers are responsible for covering each matter and the extent of the
company's claims for contribution against third parties. Baxter believes that a
substantial portion of its liability and defense costs for mammary implant
litigation will be covered by insurance, subject to self-insurance retentions,
exclusions, conditions, coverage gaps, policy limits and insurer solvency. The
company has entered into "coverage-in-place" agreements with almost all of its
insurers, each of which issued or subscribed to policies of insurance between
1974 and 1985. These agreements resolve the signatory insurers' coverage
defenses and specify rules and procedures for allocation and payment of defense
and indemnity costs pursuant to which signatory insurers will reimburse Baxter
for mammary implant losses. Five of the company's claims-made insurers, which
issued policies subsequent to 1985, have agreed to pay under their policies
with respect to mammary implant claims. The combined total of the amount thus
far paid by insurers, committed for payment, and projected by Baxter to be paid
by insurers under these agreements is in excess of $800 million, based on the
company's current estimate of mammary implant expenditures.
Plasma-Based Therapies Litigation
Baxter currently is a defendant in a number of claims and lawsuits brought
by individuals who have hemophilia, all seeking damages for injuries allegedly
caused by anti-hemophilic factor concentrates VIII or IX derived from human
blood plasma (factor concentrates) processed by the company from the late 1970s
to the mid-1980s. The typical case or claim alleges that the individual was
infected with the HIV virus by factor concentrates, which contained the HIV
virus. None of these cases involves factor concentrates currently processed by
the company.
As of December 31, 2000, Baxter had been named in 188 lawsuits and 93 claims
in the United States, France, Ireland, Italy, Japan, Spain, Taiwan and The
Netherlands. All U.S. federal court factor concentrate cases were transferred
to the U.S.D.C. for the Northern District of Illinois for case management under
Multi District Litigation (MDL) rules (MDL Docket No. MDL-986), and were
remanded in 2000 to the courts in which they were filed. The company also has
been named in four purported class actions. None of these class actions has
been certified for trial.
In most states, Baxter's potential liability is limited by "blood shield"
laws that provide that the sale of blood or blood derivatives, including factor
concentrates, is not covered by the doctrine of strict liability. As a result,
each claimant must prove that his or her injuries were caused by the company's
negligence.
9
On May 6, 1997, the U.S.D.C. approved a class action settlement submitted
by the plaintiffs' steering committee for the MDL, Baxter, Alpha Therapeutic
Corporation, Armour Pharmaceutical and Bayer Corporation. The essential terms
of the settlement provide payments of $100,000 to each HIV-positive person
with hemophilia in the United States who can demonstrate use of factor
concentrates produced by one of the settling defendants between 1978 and 1985.
Additionally, the defendants have established a $40 million fund for payment
of attorneys' fees, costs and court-administration expenses. Baxter's agreed
contribution to the proposed settlement is 20 percent of the total settlement
proceeds.
Baxter and the other defendants have reached agreements to settle potential
subrogation and reimbursement claims with most private insurers, the federal
government and all 50 states, the District of Columbia and Puerto Rico. As of
December 31, 2000, approximately 6,500 claimant groups had been found eligible
to participate in the settlement, and approximately 300 claimants had opted
out of the settlement. Approximately 6,202 claimant groups had received
payments as of December 31, 2000, and payments are expected to continue
through the first quarter of 2001 as releases are received from the remaining
claimant groups.
In Japan, Baxter is a defendant, along with the Japanese government and
four other co-defendants, in factor concentrates cases in Osaka, Tokyo,
Nagoya, Tohoku, Fukuoka, Sapporo and Kumamoto. As of December 31, 2000, the
cases involved 1,335 plaintiffs, of whom 1,333 have settled their claims.
Based upon the Osaka and Tokyo courts' recommendations, the parties have
agreed to a settlement of all pending and future factor concentrate cases. In
general, the settlement provides for payment of an up-front, lump-sum amount
of approximately $360,000 per plaintiff to be funded 40 percent by the
Japanese government and 60 percent by the corporate defendants. The share of
the settlement to be paid by each corporate defendant was determined based
upon its market share, resulting in a contribution by Baxter of approximately
15.36 percent. The portion of the settlement to be funded by the corporate
defendants will include credits for certain prior payments made by the
corporate defendants under a separate Japanese government-administered
program, which pays monthly amounts to HIV-positive and AIDS-manifested people
with hemophilia and their survivors. Additionally, monthly payments will be
made to each plaintiff according to a set schedule.
In Spain, Baxter was notified in 1995 that approximately 1,370 HIV-positive
people with hemophilia wished to explore settlement possibilities with the
company in lieu of filing suit in both Spain and the United States. The
parties have reached agreement on the terms of a settlement whereby each
claimant will receive $25,000 (including attorneys' fees and costs) in return
for a general release and protection against contribution claims by other
defendants. As of December 31, 2000, all 1,370 claimants had agreed to the
settlement.
In addition, Immuno International AG (Immuno), acquired by Baxter in 1996,
has unsettled claims for damages for injuries allegedly caused by its plasma-
based therapies. The typical claim alleges that the individual with hemophilia
was infected with HIV by factor concentrates containing the HIV virus.
Additionally, Immuno faces multiple claims stemming from its vaccines and
other biologically-derived therapies. A portion of the liability and defense
costs related to these claims will be covered by insurance, subject to
exclusions, conditions, policy limits and other factors. In addition, pursuant
to the stock purchase agreement between the company and Immuno, approximately
84 million Swiss francs of the purchase price was withheld to cover these
contingent liabilities. In April 1999, the stock purchase agreement between
the company and Immuno was amended to revise the holdback amount from 84
million Swiss francs to 26 million Swiss francs (or approximately $15 million
at December 31, 2000) in consideration for an April 1999 payment by the
company of 29 million Swiss francs to Immuno as additional purchase price.
Baxter is also currently a defendant in a number of claims and lawsuits
brought by individuals who infused the company's Gammagard(R) IVIG
(intravenous immuno-globulin), all of whom are seeking damages for Hepatitis C
infections allegedly caused by infusing Gammagard(R) IVIG. As of December 31,
2000, Baxter was a defendant in 30 lawsuits and 40 claims in the United
States, Denmark, France, Germany, Italy, Spain and the United Kingdom. Two
suits currently pending in the United States have been filed as purported
class actions but only one has been certified. All U.S. federal court
Gammagard(R) IVIG cases have been transferred to the U.S.D.C. for the Central
District of California for case management under MDL rules. On February 21,
1996, the court certified a nationwide class of persons who had infused
Gammagard(R) IVIG (Geary, et al., v. Baxter Healthcare Corporation, U.S.D.C.,
C.D., CA, ML-95-160-R). On September 18, 2000, the U.S.D.C. for the Central
District of California approved a settlement of the class action that would
provide financial compensation for U.S. individuals who used Gammagard(R) IVIG
between January 1993 and February 1994.
10
Baxter has entered into coverage in place agreements covering factor
concentrates lawsuits with substantially all of its insurers that issued or
subscribed to pertinent policies of insurance between 1978 and 1985. These
agreements resolve the signatory insurers' coverage defenses and specify rules
and procedures for allocation and payment of defense and indemnity costs
pursuant to which the signatory insurers will reimburse the company for factor
concentrates losses. Baxter is engaged in negotiations with the remaining
insurers to resolve outstanding insurance coverage issues. The company believes
that a substantial portion of the liability and defense costs related to all of
its plasma-based therapies litigation will be covered by insurance, subject to
self-insurance retentions, exclusions, conditions, coverage gaps, policy limits
and insurer solvency.
Net Litigation Charges
Baxter began accruing for its estimated liability resulting from the
settlement of the mammary implant related class action and to litigate or
settle cases and claims involving opt-outs in 1993. In 1998, the company
accrued an additional $250 million for its estimated liability resulting from
the class action settlement and remaining opt-out cases and claims, and
recorded a receivable for related estimated insurance recoveries of $121
million, resulting in an additional net charge of $129 million.
Baxter began accruing for its estimated worldwide liability for litigation
and settlement costs involving plasma-based therapies cases in 1993. The
company revised its estimate of liabilities and insurance recoveries in 1998,
and accrued an additional $180 million for its estimated liability for plasma-
based therapies litigation and other litigation and recorded a receivable for
related estimated insurance recoveries of $131 million, for a net charge of $49
million.
In 2000, the company recorded $29 million of income relating to its mammary
implant and plasma-based therapies litigation. The income was principally a
result of favorable adjustments to the mammary implant insurance receivables
due to settlements negotiated with certain insurance companies during 2000.
Other
As of September 30, 1996, the date of the spin-off of Allegiance Corporation
("Allegiance") from Baxter International, Allegiance assumed the defense of
litigation involving claims related to Allegiance's businesses, including
certain claims of alleged personal injuries as a result of exposure to natural
rubber latex gloves. Allegiance has not been named in all of this litigation,
but it will be defending and indemnifying Baxter pursuant to certain
contractual obligations for all expenses and potential liabilities associated
with claims pertaining to latex gloves. As of December 31, 2000, the company
had been named as a defendant in 569 lawsuits, including the following
purported class action: Swartz v. Baxter Healthcare Corporation, et al., Court
of Common Pleas, Jefferson County, PA, 656-1997 C.D. On February 26, 1997, all
federal cases involving latex gloves were ordered to be transferred to the
U.S.D.C. for the Eastern District of Pennsylvania for case management under the
MDL rules (MDL Docket No. 1148).
Baxter has been named a potentially responsible party (PRP) for
environmental clean-up costs at 16 hazardous-waste sites. Under the United
States Superfund statute and many state laws, generators of hazardous waste
that is sent to a disposal or recycling site are liable for clean-up of the
site if contaminants from that property later leak into the environment. The
laws generally provide that a PRP may be held jointly and severally liable for
the costs of investigating and remediating the site. Allegiance has assumed
responsibility for 10 of these sites. The estimated exposure for Baxter's
remaining six sites is approximately $2 million, which has been accrued (and
not discounted) in the company's financial statements.
In addition to the cases discussed above, Baxter is a defendant in a number
of other claims, investigations and lawsuits. Based on the advice of counsel,
management does not believe that, individually or in the aggregate, these other
claims, investigations and lawsuits will have a material adverse effect on the
company's results of operations, cash flows or consolidated financial position.
- --------------------------------------------------------------------------------
Item 4. Submission of Matters to a Vote of Security Holders.
None.
11
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PART II
- -------------------------------------------------------------------------------
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters.
Incorporated by reference from the Annual Report, page 48, section entitled
"Notes to Consolidated Financial Statements--Quarterly Financial Results and
Market for the Company's Stock (Unaudited)."
- -------------------------------------------------------------------------------
Item 6. Selected Financial Data.
Incorporated by reference from the Annual Report, inside back cover,
section entitled "Five-Year Summary of Selected Financial Data."
- -------------------------------------------------------------------------------
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Incorporated by reference from the Annual Report, pages 19-27, section
entitled "Management's Discussion and Analysis."
- -------------------------------------------------------------------------------
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Incorporated by reference from the Annual Report, page 26, section entitled
"Financial Instrument Market Risk."
- -------------------------------------------------------------------------------
Item 8. Financial Statements and Supplementary Data.
Incorporated by reference from the Annual Report, pages 28-48, sections
entitled "Report of Independent Accountants," "Consolidated Balance Sheets,"
"Consolidated Statements of Income," "Consolidated Statements of Cash Flows,"
"Consolidated Statements of Stockholders' Equity and Comprehensive Income" and
"Notes to Consolidated Financial Statements."
- -------------------------------------------------------------------------------
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
12
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PART III
- --------------------------------------------------------------------------------
Item 10. Directors and Executive Officers of the Registrant.
(a) Identification of Directors
Incorporated by reference from Baxter's proxy statement for use in
connection with its annual meeting of stockholders to be held on May 1, 2001
(Proxy Statement), page 4, section entitled "Election of Directors--Proposal 1
on the Proxy Card."
(b) Identification of Executive Officers
Following are the names and ages, as of March 1, 2001, of the executive
officers of Baxter International, and one or both of its two principal direct
subsidiaries, Baxter Healthcare Corporation and Baxter World Trade Corporation,
their positions and summaries of their backgrounds and business experience. All
executive officers of Baxter International are elected or appointed by the
board of directors and hold office until the next annual meeting of directors
and until their respective successors are elected and qualified. The annual
meeting of directors is held on the date of the annual meeting of stockholders.
All executive officers of Baxter Healthcare Corporation and Baxter World Trade
Corporation are elected or appointed by the boards of directors of the
applicable subsidiary and hold office until their respective successors are
elected and qualified. As permitted by applicable law, actions by these boards
(and their sole stockholder, Baxter International) may be taken by written
consent in lieu of a meeting.
(1) Baxter International Inc. Executive Officers
Harry M. Jansen Kraemer, Jr., age 46, has been a director of Baxter
International since 1995 and chairman of the board since January 1, 2000. Mr.
Kraemer has been president of Baxter International since 1997 and chief
executive officer since January 1, 1999. From 1993 to 1997, he served as senior
vice president and chief financial officer of Baxter International. Mr. Kraemer
also serves as a director of Comdisco Inc. and Science Applications
International Corporation.
Brian P. Anderson, age 50, is senior vice president and chief financial
officer of Baxter International, having served in those capacities since
February 1998. Mr. Anderson previously was corporate vice president of finance
of Baxter International beginning in May 1997, and was the corporate controller
from 1993 to 1997.
Timothy B. Anderson, age 54, is group vice president, corporate strategy and
development, of Baxter International, having served in that capacity since
November 1999. Prior to that he served as group vice president of Baxter
Healthcare Corporation and Baxter World Trade Corporation.
J. Robert Hurley, age 51, is a corporate vice president, integration
management, of Baxter International. Prior to that from 1993 to 2000, he was a
corporate vice president of Baxter World Trade Corporation.
Neville J. Jaharajah, age 47, is a corporate vice president, financial
planning and investor relations, of Baxter International, having served in that
capacity since February 2001. Prior to that since 1982 he held various finance
positions with the company, the most recent of which was vice president,
financial planning and investor relations.
Steven J. Meyer, age 44, is treasurer of Baxter International, having served
in that capacity since February 1997. From 1993 to 1997, Mr. Meyer was a vice
president of international finance of a business group of Baxter World Trade
Corporation
John L. Quick, age 56, is a corporate vice president, quality/regulatory, of
Baxter International, having served in that capacity since 1996. Prior to that
he was corporate vice president of Baxter Healthcare Corporation.
Karen J. May, age 42, is a corporate vice president, human resources, of
Baxter International, having served in that capacity since February 2001. Prior
to her recent appointment she was vice president, human resources from 2000
until 2001, vice president, global planning and staffing from 1998 to 2000,
vice president, international finance from 1997 to 1998 and vice president,
corporate audit from 1994 to 1997.
13
Jan Stern Reed, age 41, is corporate secretary and associate general
counsel of Baxter International, having served in those capacities since
February 1998. Prior to that she was assistant corporate secretary and
assistant general counsel from February 1997 to February 1998. From 1995 to
1997, Ms. Reed was assistant corporate secretary of, and legal counsel to,
Wheelabrator Technologies Inc., a publicly-traded subsidiary of Waste
Management, Inc.
Thomas J. Sabatino, Jr., age 42, is corporate vice president and general
counsel of Baxter International, having served in those capacities since
December 1997. He was also assistant secretary from February 1997 to December
1997. From 1995 to December 1997, Mr. Sabatino was an associate general
counsel of Baxter Healthcare Corporation. Prior to that, he was vice president
and assistant general counsel of Tenet Healthcare Corporation.
Michael J. Tucker, age 48, is senior vice president, human resources and
communications, of Baxter International, having served as senior vice
president, human resources since October 1995 and of communications since May
2000. Prior to that, he was a corporate vice president of Baxter World Trade
Corporation.
(2) Baxter Healthcare Corporation and Baxter World Trade Corporation Executive
Officers
Eric A. Beard, age 49, is a corporate vice president of Baxter World Trade
Corporation and president-Baxter Europe, Africa and Middle East, having served
in those capacities since October 1998. Prior to that, he was president of a
division of a subsidiary of Baxter World Trade Corporation.
Carlos del Salto, age 58, is a senior vice president Intercontinental/Asia
of Baxter World Trade Corporation, having served in that capacity since 1996,
and president-Latin America. Prior to that, Mr. del Salto was a corporate vice
president of Baxter World Trade Corporation.
David F. Drohan, age 62, is a corporate vice president of Baxter Healthcare
Corporation and president- Medication Delivery, having served in those
capacities since 1996. Prior to that, Mr. Drohan was president of a division
of Baxter Healthcare Corporation.
James M. Gatling, age 51, is a corporate vice president, global
manufacturing operations, of Baxter Healthcare corporation, having served in
that capacity since December 1996. Prior to that, Mr. Gatling was a vice
president of a division of Baxter Healthcare Corporation.
Thomas H. Glanzmann, age 42, is a corporate vice president of Baxter World
Trade Corporation and Baxter Healthcare Corporation, having served in those
capacities since October 1998, and president-Hyland Immuno. Prior to that, Mr.
Glanzmann was president of a division of a subsidiary of Baxter World Trade
Corporation.
Alan L. Heller, age 47, is a group vice president of Baxter Healthcare
Corporation and Baxter World Trade Corporation, and president, Global Renal,
having served in those capacities since he joined the Company in October 2000.
Prior to that, Mr. Heller was co-president and chief operating officer of G.D.
Searle & Co.
David C. McKee, age 53, is a corporate vice president and deputy general
counsel of Baxter World Trade Corporation and Baxter Healthcare Corporation,
having served as corporate vice president since 1996 and 1997, respectively
and as deputy general counsel of both entities since 1996. Prior to that from
1994 through 1999, Mr. McKee was corporate vice president and deputy general
counsel of Baxter International, and was corporate secretary from February
1997 to February 1998.
Gregory P. Young, age 47, is a corporate vice president of Baxter
Healthcare Corporation since February 2001 and president of the Fenwal
division since 1999. Prior to that from 1985 to 1999, Mr. Young served in
roles of increasing responsibility within the Medication Delivery division of
Baxter Healthcare Corporation.
(c) Compliance with Section 16(a) of the Securities Exchange Act of 1934.
Incorporated by reference from the Proxy Statement, page 29, section
entitled "Section 16(a) Beneficial Ownership Reporting Compliance."
14
- --------------------------------------------------------------------------------
Item 11. Executive Compensation.
Incorporated by reference from the Proxy Statement, pages 16-17, section
entitled "Board of Directors--Compensation of Directors" and pages 23-27,
section entitled "Executive Compensation."
- --------------------------------------------------------------------------------
Item 12. Security Ownership of Certain Beneficial Owners and Management.
Incorporated by reference from the Proxy Statement, pages 28-29, section
entitled "Ownership of Baxter Stock."
- --------------------------------------------------------------------------------
Item 13. Certain Relationships and Related Transactions.
None.
- --------------------------------------------------------------------------------
PART IV
- --------------------------------------------------------------------------------
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
The following documents are filed as a part of this report:
(a) Financial Statements Location
Financial Statements Required By Item 8 of This Form
Consolidated Balance Sheets Annual Report, page 29
Consolidated Statements of Income Annual Report, page 30
Consolidated Statements of Cash Flows Annual Report, page 31
Consolidated Statements of Stockholders' Equity and Comprehensive Income
Annual Report, page 32
Notes to Consolidated Financial Statements Annual Report, pages 33-
Report of Independent Accountants 48
Annual Report, page 28
Schedules Required By Article 12 of Regulation S-X
Report of Independent Accountants on Financial Statement Schedule
page 17
II Valuation and Qualifying Accounts page 18
All other schedules have been omitted because they are not applicable or not
required.
(b) Reports on Form 8-K
On April 14, 2000, Baxter International filed a current report on Form
8-K, under Item 2., "Acquisition or Disposition of Assets" that related to
the completed distribution of Edwards Lifesciences Corporation common stock
to Baxter International shareholders of record on March 29, 2000.
On February 28, 2001, Baxter International filed a current report on
Form 8-K under Item 5., "Other Events" that related to the approval of a
two-for-one common stock split, subject to stockholder approval of an
increase in the number of shares of common stock authorized by the company.
(c) Exhibits required by Item 601 of Regulation S-K are listed in the Exhibit
Index, which is incorporated herein by reference. Exhibits in the Exhibit
Index marked with a "C" in the left margin constitute management contracts
or compensatory plans or arrangements contemplated by Item 14(a) of Form
10-K. The list of exhibits so designated is incorporated by reference in
this Part IV, Item 14.
15
REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors of
Baxter International Inc.
Our audits of the consolidated financial statements referred to in our
report dated February 16, 2001, except for Note 14, which is as of February
28, 2001, appearing in the 2000 Annual Report to Stockholders of Baxter
International Inc., (which report and consolidated financial statements are
incorporated by reference in this Annual Report on Form 10-K), also included
an audit of the financial statement schedule listed in Item 14(A) of this Form
10-K. In our opinion, this financial statement schedule presents fairly, in
all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Chicago, Illinois
February 16, 2001
16
SCHEDULE II
- --------------------------------------------------------------------------------
Valuation and Qualifying Accounts
(in million of dollars)
- -------------------------------------------------------------------------------
Additions
----------------------
Balance at Charged to Charged to Deductions Balance
beginning costs and other from at end of
of period expenses accounts(a) reserves period
- -------------------------------------------------------------------------------
Year ended December 31,
2000:
Allowance for doubtful
accounts 34 10 3 (4) 43
Inventory reserves 78 73 4 (45) 110
Litigation reserves 426 31 -- (131) 326
Deferred tax asset
valuation allowance 43 12 -- (5) 50
- -------------------------------------------------------------------------------
Year ended December 31,
1999:
Allowance for doubtful
accounts 37 6 -- (9) 34
Inventory reserves 97 68 -- (87) 78
Litigation reserves 698 -- -- (272) 426
Deferred tax asset
valuation allowance 34 14 -- (5) 43
- -------------------------------------------------------------------------------
Year ended December 31,
1998:
Allowance for doubtful
accounts 26 14 -- (3) 37
Inventory reserves 65 135 2 (105) 97
Litigation reserves 599 430 -- (331) 698
Deferred tax asset
valuation allowance 45 7 1 (19) 34
- -------------------------------------------------------------------------------
(a) Valuation accounts of acquired or divested companies and foreign currency
translation adjustments. Reserves are deducted form assets to which they
apply.
17
SIGNATURES
Pursuant to the requirements of section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
Baxter International Inc.
/s/ Harry M. Jansen Kraemer, Jr.
By: ____________________________________
Harry M. Jansen Kraemer, Jr.
Chairman and Chief Executive Officer
DATE: March 14, 2001
KNOW ALL BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints Harry M. Jansen Kraemer, Jr. and Jan Stern Reed, and
each of them, his or her true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution, in any and all capacities, to
sign any or all amendments to this Form 10-K, and to file the same with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he or she might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or their
substitutes, may lawfully do or cause to be done by virtue hereof.
Signature Title
--------- -----
/s/ Harry M. Hansen Kraemer, Jr. Chairman of the Board of Directors and
___________________________________________ Chief Executive Officer (principal
Harry M. Jansen Kraemer, Jr. executive officer)
/s/ Brian P. Anderson Senior Vice President and Chief Financial
___________________________________________ Officer (principal financial officer and
Brian P. Anderson principal accounting officer)
/s/ Walter E. Boomer Director
___________________________________________
Walter E. Boomer
/s/ Pei-yuan Chia Director
___________________________________________
Pei-yuan Chia
/s/ John W. Colloton Director
___________________________________________
John W. Colloton
/s/ Susan Crown Director
___________________________________________
Susan Crown
/s/ Brian D. Finn Director
___________________________________________
Brian D. Finn
/s/ Frank R. Frame Director
___________________________________________
Frank R. Frame
18
Signature Title
--------- -----
/s/ Martha R. Ingram Director
___________________________________________
Martha R. Ingram
/s/ Arnold J. Levine Director
___________________________________________
Arnold J. Levine
/s/ Thomas T. Stallkamp Director
___________________________________________
Thomas T. Stallkamp
/s/ Monroe E. Trout, M.D. Director
___________________________________________
Monroe E. Trout, M.D.
/s/ Fred L. Turner Director
___________________________________________
Fred L. Turner
19
- --------------------------------------------------------------------------------
APPENDICES
Description Page
- ----------- ----
Computation of Ratio of Earnings to Fixed Charges (Exhibit 12) 36
Subsidiaries of the Company (Exhibit 21) 37
- --------------------------------------------------------------------------------
EXHIBITS FILED WITH SECURITIES AND EXCHANGE COMMISSION
Number and Description of Exhibit
---------------------------------
3. Certificate of Incorporation and Bylaws
3.1* Restated Certificate of Incorporation, filed as exhibit 3.1
to the company's annual report on Form 10-K for the year
ended December 31, 1992, file number 1-4448 (the "1992
Form 10-K").
3.2* Certificate of Designation of Series A Junior Participating
Preferred Stock, filed under the Securities Act of 1933 as
Exhibit 4.3 to the company's registration statement on Form
S-8 (No. 33-28428).
3.3 Amended and Restated Bylaws dated February 27, 2001.
3.4* Certificate of Designation of Series B Junior Participating
Preferred Stock filed as Exhibit 3.4 to the company's annual
report on Form 10-K for the year ended December 31, 1988,
file number 1-4448 (the "1998 Form 10-K").
3.5* Certificate of Elimination of Series A Junior Participating
Preferred Stock filed under the Securities Act of 1933 as
Exhibit 4.1A to the company's registration statement on Form
S-3 (No. 333-94889).
Instruments defining the rights of security holders, including
4. indentures
4.1* Amended and Restated Indenture dated November 15, 1985 (the
"Indenture"),
between the company and First Trust N.A. ("First Trust") as
successor in interest to Continental Illinois National Bank
and Trust Company of Chicago ("Continental"), filed under
the Securities Act of 1933 as exhibit 4.1 to the company's
registration statement on Form S-3 (No. 33-1665).
4.2* First Supplemental Indenture to the Indenture between the
company and First Trust (as successor in interest to
Continental), filed under the Securities Act of 1933 as
exhibit 4.1(A) to the company's registration statement on
Form S-3 (No. 33-6746).
4.3* Supplemental Indenture dated as of January 29, 1997, between
the company and First Trust (as successor to Continental),
filed under the Securities Act of 1933 as exhibit 4.1B to
the company's debt securities shelf registration statement
on Form S-3 (No. 333-19025) (the "1997 Shelf").
4.4* Fiscal and Paying Agency Agreement dated as of November 15,
1984, between the company and Citibank, N.A., as amended,
filed as exhibit 4.16 to the company's annual report on Form
10-K for the year ended December 31, 1987, file no. 1-4448
(the "1987 Form 10-K").
4.5* Specimen 9 1/2% Note, filed as exhibit 4.3(a) to the
company's current report on Form 8-K dated June 23, 1988,
file no. 1-4448.
4.6* Specimen 9 1/4% Note, filed as exhibit 4.3(a) to the
company's current report on Form 8-K dated September 13,
1989, file number 1-4448.
4.7* Specimen 9 1/4% Note, filed as exhibit 4.3(a) to the
company's current report on Form 8-K dated December 7, 1989,
file number 1-4448.
4.8* Specimen 7.125% Note, filed as exhibit 4.10 to the company's
annual report on Form 10-K for the year ended December 31,
1996 (the "1996 Form 10-K").
4.9* Specimen 7.65% Debenture, filed as exhibit 4.11 to the 1996
Form 10-K.
4.10* Contingent Payment Rights Agreement, filed under the
Securities Act of 1933 as exhibit 4.2 to the Company's
registration statement on Form S-4 (No. 333-47927).
20
Number and Description of Exhibit
---------------------------------
4.11* Rights Agreement dated as of December 9, 1998, between the
company and First Chicago Trust Company of New York, filed
as Exhibit 1 to a registration statement on Form 8-A dated
February 23, 1999, file No. 1-4448.
10. Material Contracts
C 10.1* Form of Indemnification Agreement entered into with
directors and officers, filed as exhibit 19.4 to the
company's quarterly report on Form 10-Q for the quarter
ended September 30, 1986, file no. 1-4448.
C 10.2 Baxter International Inc. and Subsidiaries Incentive
Investment Excess Plan, effective January 1, 1999.
C 10.3* Baxter International Inc. and Subsidiaries Supplemental
Pension Plan, filed as exhibit 10.18 to the 1988 Form 10-K.
C 10.4* Limited Rights Plan, filed as exhibit 19.6 to the Company's
quarterly report on Form 10-Q for the quarter ended
September 30, 1989, file no. 1-4448 (the "September 1989
Form 10-Q").
C 10.5* Amendments to various plans regarding disability, filed as
exhibit 19.9 to the September 1989 Form 10-Q.
C 10.6* 1987 Incentive Compensation Program, filed as exhibit C to
the company's proxy statement for use in connection with
its May 13, 1987, annual meeting of stockholders, file no.
1-4448.
C 10.7* Amendment to 1987 Incentive Compensation Program, filed as
exhibit 19.1 to September, 1989 Form 10-Q, file No. 1-4448.
C 10.8* Restricted Stock Grant Terms and Conditions, filed as
exhibit 10.25 to the company's annual report on Form 10-K
for the year ended December 31, 1991, file number 1-4448
(the "1991 Form 10-K").
C 10.9* Deferred Compensation Plan, amended and restated effective
January 1, 1998, filed as exhibit 10.17 to 1997 Form 10-K.
C 10.10* Restricted Stock Plan for Non-Employee Directors (as
amended and restated in 1992), filed as exhibit 10.28 to
the 1992 Form 10-K.
C 10.11* Restricted Stock Grant Terms and Conditions (as amended),
filed as exhibit 10.31 to the 1992 Form 10-K.
C 10.12* Corporate Aviation Policy, filed as exhibit 10.33 to the
1992 Form 10-K.
C 10.13* 1994 Incentive Compensation Program, filed as exhibit A to
the company's proxy statement for use in connection with
its April 29, 1994 annual meeting of stockholders, file no.
1-4448.
C 10.14* 1999 Shared Investment Plan, filed as exhibit 10.1 to the
company's quarterly report on Form 10-Q for the quarter
ended June 30, 1999, file No. 1-4448.
C 10.15 Officer Incentive Compensation Plan.
C 10.16* Baxter International Inc. Restricted Stock Plan for Non-
Employee Directors, as amended and restated effective May
8, 1995, filed as exhibit 10.32 to the 1994 Form 10-K.
C 10.17* 1995 Stock Option Grant Terms and Conditions, filed as
exhibit 10.34 to the 1995 Form 10-K.
C 10.18* Supplemental Pension Agreement: Jack L. McGinley, filed as
exhibit 10.32 to the 1996 Form 10-K.
21
Number and Description of Exhibit
---------------------------------
C 10.19* November 1996 Stock Option Grant Terms and Conditions,
filed as exhibit 10.33 to the 1996 Form 10-K.
C 10.20* November 1996 Premium Price Stock Option Grant Terms and
Conditions, filed as exhibit 10.34 to the 1996 Form 10-K.
C 10.21* November 1997 Stock Option Grant Terms and Conditions,
filed as exhibit 10.36 to the 1997 Form 10-K.
C 10.22* 1998 Incentive Compensation Program, filed as exhibit 10.37
to the 1997 Form 10-K.
C 10.23* Long Term Incentive Plan, filed as exhibit 10.38 to the
1997 Form 10-K.
C 10.24* 1997 Scientific Advisory Board Option Plan, filed as
exhibit 4.4 to the company's registration statement on Form
S-8 (No. 333-71533).
C 10.25* 2000 Incentive Compensation Program, filed as Exhibit A to
the company's proxy statement for use in connection with
its May 2, 2000 annual meeting of stockholders, file No. 1-
4448.
C 10.26* Employee Stock Purchase Plan for United States Employees
(as amended and restated effective October 1, 1999), filed
as exhibit 10 to the company's quarterly report on Form 10-
Q for the quarter ended September 30, 1999, file No. 1-
4448.
C 10.27* 2001 Incentive Compensation Program, filed as Exhibit A to
the company's proxy statement for use in connection with
its May 1, 2001 annual meeting of stockholders, file no. 1-
4448.
12. Computation of Ratio of Earnings to Fixed Charges.
13. Selections from the 2000 Annual Report to Stockholders (such
report, except to the extent incorporated herein by reference,
is being furnished for the information of the Securities and
Exchange Commission only and is not deemed to be filed as part
of this annual report on Form 10-K).
21. Subsidiaries of Baxter International Inc.
23. Consent of PricewaterhouseCoopers LLP.
24. Powers of Attorney (included on signature page)
- -------
* Incorporated herein by reference.
C Exhibit contemplated by Item 14(a)(3) of Form 10-K.
(All other exhibits are inapplicable or not required.)
Copies of the above exhibits are available at a charge of 35 cents
per page upon written request to the Stockholder Services Department,
Baxter International Inc., One Baxter Parkway, Deerfield, Illinois
60015. Copies are also available at a charge of at least 25 cents per
page from the Public Reference Section of the Securities and Exchange
Commission, 450 Fifth Street, N.W., Washington, D.C., 20549.
22