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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, 2002
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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[LOGO]
Baxter
Baxter International Inc.
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(Exact Name of Registrant as Specified in its Charter)
Delaware 36-0781620
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(State or Other (I.R.S. Employer
Jurisdiction of Identification No.)
Incorporation or
Organization)
One Baxter Parkway, 60015
Deerfield, Illinois
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(Address of Principal (Zip Code)
Executive Offices)
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
Title of each class on which registered
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Common stock, $1 par value New York Stock Exchange,
Inc.
Chicago Stock Exchange,
Inc.
Pacific Exchange, Inc.
Preferred Stock Purchase New York Stock Exchange,
Rights Inc.
(currently traded with Chicago Stock Exchange,
common stock) Inc.
Pacific Exchange, Inc.
Corporate Units New York Stock 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 __(check mark) 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. [_]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act).
Yes __(check mark) No ____
The aggregate market value of the voting common equity held by
non-affiliates of the registrant as of June 28, 2002 (the last business day of
the registrant's most recently completed second fiscal quarter), based on the
per share closing sale price of $44.45 on that date and the assumption for the
purpose of this computation only that all of the registrant's directors and
executive officers are affiliates, was approximately $26.7 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, 2003, was 596,996,864.
Documents Incorporated By Reference
Portions of the registrant's annual report to stockholders for fiscal year
ended December 31, 2002 are incorporated by reference into Parts I, II and IV
of this report. Portions of the registrant's proxy statement for use in
connection with its annual meeting of stockholders to be held on May 6, 2003
are incorporated by reference into Part III of this report.
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TABLE OF CONTENTS
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Page
Number
------
Item 1. Business
(a) General Development of Business............................................... 1
(b) Financial Information about Segments.......................................... 1
(c) Narrative Description of Business............................................. 1
(d) Financial Information about Foreign and Domestic Operations and Export Sales.. 8
(e) Available Information......................................................... 8
Item 2. Properties.......................................................................... 9
Item 3. Legal Proceedings................................................................... 9
Item 4. Submission of Matters to a Vote of Security Holders................................. 14
Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters........... 15
Item 6. Selected Financial Data............................................................. 15
Item 7. Management's Discussion and Analysis of Financial Condition and Results of
Operations........................................................................ 15
Item 7A. Quantitative and Qualitative Disclosures about Market Risk.......................... 15
Item 8. Financial Statements and Supplementary Data......................................... 15
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure........................................................................ 15
Item 10. Directors and Executive Officers of the Registrant.................................. 16
(a) Identification of Directors................................................... 16
(b) Identification of Executive Officers.......................................... 16
(c) Compliance with Section 16(a) of the Securities Exchange Act of 1934.......... 18
Item 11. Executive Compensation.............................................................. 18
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters............................................................... 18
Item 13. Certain Relationships and Related Transactions...................................... 18
Item 14. Controls and Procedures............................................................. 19
Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K..................... 19
(a) Financial Statements.......................................................... 19
(b) Reports on Form 8-K........................................................... 19
(c) Exhibits...................................................................... 19
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Accura, ADVATE, Althane, Aralast, Arena, Baxter, COLLEAGUE CX, EPOMAX,
Extraneal, Gammagard, HomeChoice, INTERCEPT, Mesnex, NeisVac-C, Physioneal and
Syntra are trademarks of Baxter International Inc. and its affiliates.
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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. The company manufactures products in 29 countries and sells
them in over 100 countries. Health care is concerned with the preservation of
health and the diagnosis, cure, mitigation and treatment of disease and body
defects and deficiencies. Baxter's 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, see Baxter's Annual
Report to Stockholders for the year ended December 31, 2002 (Annual Report),
pages 54-57, section entitled "Notes to Consolidated Financial
Statements--Acquisitions, Intangible Assets and Research & Development Costs"
which is incorporated by reference.
(b) Financial Information About Segments.
Incorporated by reference from the Annual Report, pages 71-72, section
entitled "Notes to Consolidated Financial Statements--Segment Information."
(c) Narrative Description of Business.
Company Overview
Baxter operates as a global medical products and services company with
expertise in medical devices, pharmaceuticals and biotechnology to assist
health-care professionals and their patients with the treatment of complex
medical conditions, including hemophilia, immune disorders, infectious
diseases, cancer, kidney disease, trauma and other conditions. Continuing
operations are comprised of three segments: Medication Delivery, which provides
a range of intravenous solutions and specialty products that are used in
combination for fluid replenishment, nutrition therapy, pain management,
antibiotic therapy and chemotherapy; BioScience, which develops
biopharmaceuticals, biosurgery products, vaccines and blood collection,
processing and storage products and technologies for transfusion therapies; and
Renal, which develops products and provides services to treat end-stage kidney
disease. Unless otherwise indicated, each of the factors discussed in Part I do
not materially differ in their impact across each of the three segments.
Information about operating results is incorporated by reference from Annual
Report pages 25-41, section entitled "Management's Discussion and Analysis" and
pages 71-72, section entitled "Notes to Consolidated Financial
Statements--Segment Information."
1
Medication Delivery
Business Description. Baxter develops and manufactures a wide range of
products focused on delivering critical fluids and drugs to patients. These
include basic intravenous (IV) solutions as well as higher-margin specialty
products made up of pharmaceuticals and delivery devices. The pharmaceutical
portfolio includes premixed drugs, critical care generics, anesthetic agents,
nutrition and oncology products. These products work in combination with the
delivery devices, such as drug-reconstitution systems and infusion pumps, to
provide fluid replenishment, general anesthesia, nutrition therapy, pain
management, antibiotic therapy, chemotherapy and other therapies. Baxter also
is a pioneer in forming alliances with traditional pharmaceutical companies to
formulate and package their drugs for delivery, providing more than 50
different compounds in ready-to-use or ready-to-mix formulations.
Growth Strategy. This business expects continued growth through geographic
expansion of specialty products, building on its strong base in IV solutions;
reducing manufacturing costs to improve profitability; entering new market
segments; and launching new products through internal development, acquisitions
and alliances. In 2002, Baxter introduced bar-code technology and an advanced,
computerized patient-care system that will link with its COLLEAGUE CX infusion
pump to provide a comprehensive, integrated approach to the safe delivery of
medications in hospitals, and introduced Mesnex Tablets, an oral form of its
leading chemoprotectant drug Mesnex. Acquisitions included ESI Lederle, a
leading manufacturer and distributor of injectable drugs, and AUTROS Healthcare
Solutions, a developer of information technologies that enhance the safety of
medication delivery.
Product Development. Baxter continues to develop new products that promote
efficiency, ease-of-use and enhanced patient safety, and technologies that
enable its pharmaceutical partners to develop drugs with challenging
formulation or delivery needs. The company added controlled-release protein and
pulmonary-delivery formulation technologies with the acquisition of Epic
Therapeutics in 2002, increasing its portfolio of injectable formulation
technologies for poorly soluble drugs. Other delivery presentations include
prefilled syringes for intramuscular and subcutaneous injections, and
ready-to-mix reconstitution, vial filling and lyophilization technologies.
Baxter continually seeks to improve its plastics technology for IV containers
and sets to provide customers with a range of options, including non-polyvinyl
chloride, to best address the complexity of drug compatibility requirements.
BioScience
Business Description. Baxter is a leading producer of plasma-based and
recombinant clotting factor for hemophilia, and other biopharmaceuticals to
treat immune deficiencies and other blood-related disorders. The company also
develops and manufactures vaccines for the prevention of a variety of diseases,
biosurgery products used in hemostasis and wound-sealing in surgery, and manual
and automated blood-collection, processing and storage systems for transfusion
therapies. Baxter's longstanding leadership in this business is based on a
number of competitive advantages that distinguish the company from its
competitors. These include continued innovation of differentiated products and
services; cutting-edge technology platforms; global presence and
infrastructure; strong customer relationships; reliability and consistency of
supply; and an excellent track record in the safety and efficacy of its
products.
Growth Strategy. This business is focused on increasing production to meet
current and future demand for its plasma-based and recombinant therapeutic
products and vaccines, and on continuing to enhance production and safety in
the blood supply through automation, leukoreduction and pathogen inactivation.
The business also is focused on entering new markets for its therapeutic
products outside the United States and Europe, where patients have been
underserved, and on pursuing acquisitions and alliances to bring new
technologies to market. In 2002, Baxter announced an agreement to acquire Alpha
Therapeutic Corporation's Aralast, its plasma-derived Alpha-1 Antitrypsin
product, recently approved by the Food and Drug Administration (FDA) for
treatment of hereditary emphysema, and completed its acquisition of Fusion
Medical Technologies, which broadens the capabilities of the company in
hemostasis and tissue sealing.
2
Product Development. In 2002, Baxter received approval for its tick-borne
encephalitis vaccine in Germany; additional approvals for its NeisVac-C vaccine
for meningitis C in Europe and several other countries; approval in Europe for
the INTERCEPT Blood System for platelets, a pathogen-inactivation technology
for transfusable blood components; and clearance in the United States for its
ALYX Component Collection System. The company also filed for approval in the
United States, Canada and Europe for ADVATE, its next-generation recombinant
Factor VIII for the treatment of hemophilia A; began phase III clinical trials
in the United States and Europe on a new liquid immune globulin product for
people with immune deficiencies; and began the regulatory submission process
for the INTERCEPT Blood System for platelets in the United States.
Renal
Business Description. Baxter is a leading provider of dialysis-related
products and services designed to assist patients with kidney disease
throughout the continuum of their care. The company is the world's leading
manufacturer of products for peritoneal dialysis (PD), a self-administered
home-based therapy that Baxter helped pioneer in the early 1970s. PD offers a
number of lifestyle advantages over the more conventional hemodialysis (HD)
therapy, which generally requires patients to visit a hospital or clinic
several times each week to receive their therapy. Baxter's PD products include
solutions, container systems and automated cyclers. Baxter also has a
comprehensive portfolio of HD products, including HD machines and dialyzers,
and instruments for acute kidney care. Renal is Baxter's most global business,
with more than 70 percent of its sales outside the United States.
Growth Strategy. Increasing PD usage remains the top priority for the Renal
business. Baxter continues to introduce new products to improve PD therapy, and
to support and communicate new research on the benefits of PD. Baxter also is
growing its presence in renal care by providing pharmaceuticals for
renal-related conditions. In addition, the company expects to strengthen its HD
business through the introduction of new products, including Accura, a new
system approved by the FDA in 2002 for delivering continuous renal replacement
therapy (CRRT) to acute patients, the fastest-growing segment of the HD market.
Also in 2002, Baxter announced plans to divest most of its renal services
businesses, including U.S.-based RMS Disease Management and RMS Lifeline, as
well as most of its Renal Therapy Services dialysis centers, which are located
outside the United States.
Product Development. Baxter continues to develop new PD solutions for
special patient needs. In 2002, Baxter received approval from the FDA for
Extraneal (icodextrin) PD solution. Extraneal offers the potential for
increased fluid removal from the bloodstream during dialysis. Also in 2002,
Baxter launched its HomeChoice Pediatric System for PD patients who require low
fluid volume, and filed for European Union approval for Physioneal 35 PD
solution, which helps reduce pain on infusion in some patients. The company is
introducing its erythropoieten drug for treatment of anemia, called EPOMAX, in
Latin America and Asia, and is beginning the clinical trials to support the
registration of the drug in Western Europe and Japan. In 2003, the company
expects to launch Extraneal in the U.S. and Japan; and Arena, an advanced HD
machine, and Syntra Plus, a new synthetic dialyzer, in several countries.
Information regarding the net sales contributed by the company's principal
products is incorporated by reference from the Annual Report, pages 71-72,
section entitled "Notes to Consolidated Financial Statements--Segment
Information."
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 capitalizing on its market-leading positions, developing innovative
products and services, investing in human resources, upgrading and expanding
facilities, leveraging its cost structure, making acquisitions and entering
alliances.
International Markets
Baxter generates approximately 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
In March 2000, Baxter partnered with other 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. In
December 2002, GHX and Medibuy, Inc. combined their operations into a single,
comprehensive Internet-based exchange operating under the Global Healthcare
Exchange name. Since Baxter does not exercise significant influence over GHX,
Baxter's investment in GHX is accounted for on a cost basis in accordance with
generally accepted accounting principles.
Baxter also owns minority positions in certain 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 Acambis, a British vaccine developer with which Baxter is producing a
smallpox vaccine for the U.S. government.
Methods of Distribution
Baxter conducts its selling efforts through its subsidiaries and divisions,
many of which have their own sales forces and direct their own sales efforts.
In addition, sales are made to and through independent distributors and drug
wholesalers acting as sales agents. In the United States, Cardinal Health
warehouses and ships a significant portion of the company's products through
its distribution centers. These 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 are made and products are distributed on a direct basis
or through independent local distributors in over 100 countries. 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,
Italy, Japan, Korea, Mexico, The Netherlands, New Zealand, Norway, Panama,
Peru, the Philippines, Poland, 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 these suppliers to assure continuity of supply while maintaining
high quality and reliability. The company also continues to develop new sources
of supply.
4
In some of these situations, the company has long-term supply contracts with
its suppliers. 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. Baxter will continue taking all commercially reasonable steps to
enforce its patents and trademarks around the world against potential
infringers. However, there can be no assurance that any action will result in
favorable decisions. While the protection of its patents and trademarks is
important to Baxter's business strategy, Baxter believes that its overall
business position is not materially dependent upon any single patent or
trademark.
Competition
The changing health-care environment in recent years has led to increasingly
intense competition among United States, European and Japanese health-care
companies. Although no single company competes with Baxter in all of its
businesses, Baxter faces substantial competition in each of its segments,
generally from global and domestic health-care and pharmaceutical companies of
all sizes. Competition is focused on price, cost-effectiveness, service,
product performance, and technological innovation. Pressure in these areas is
expected to continue.
Baxter's Medication Delivery, BioScience and Renal businesses enjoy leading
positions based on a number of competitive advantages. The Medication Delivery
business benefits from the breadth and depth of its product offering, as well
as strong relationships with customers, including customer purchasing groups
and pharmaceutical companies. The BioScience business benefits from a number of
competitive advantages, such as continued innovation of products and services,
its strong customer relationships, and reliable and consistent supply of its
products. Baxter's Renal business capitalizes on its position as the world's
leading manufacturer of PD products, as well as its strong relationships with
customers and patients, including the many patients who self-administer the
home-based therapy supplied directly by Baxter.
The company believes that it benefits from technological advantages of many
of its products. For example, certain vaccines and recombinant therapeutic
proteins, including the influenza vaccine and Baxter's next generation
recombinant Factor VIII for the treatment of hemophilia, are produced without
the addition of human or animal protein in the cell-culture process,
purification or final therapeutic product. In addition, Baxter has introduced
bar coding technology and advanced automation that will link intravenous
containers and pumps to provide a comprehensive and integrated approach to the
safe delivery of medication in hospitals. Baxter's nanoedge and microsphere
technology platforms permit the formulation and administration of protein
therapeutics as well as insoluble small molecule drugs.
Baxter's competitors, large and small, will continue to introduce
competitive products. However, the company believes that its research and
development efforts will permit it to remain competitive in all three business
segments. Baxter believes that its cost position will continue to benefit from
improvements in manufacturing technology and increased economies of scale. The
company continues to focus on proper
5
prioritization and execution of research and development projects in order to
develop new and improved products, leveraging its cost structure, meeting price
competition, investing in human resources, upgrading and expanding
manufacturing facilities, and making selected acquisitions.
Credit and Working Capital Practices
As of March 1, 2003, Baxter's debt ratings on senior debt were A3 by
Moody's, A by Standard & Poor's and A by Fitch. 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. Quality management plays an essential role in
determining and meeting customer requirements, preventing defects and improving
the company's products and services. Baxter has implemented a network of
quality systems throughout the company's business units and facilities which
relate to the design, development, manufacturing, packaging, sterilization,
handling, distribution and labeling of the company's products. These quality
systems involve control procedures that result in rigid specifications.
Baxter's quality systems also include assessments of Baxter's suppliers of raw
materials, components and finished goods, and quality management reviews
designed to inform management of key issues that may affect the quality of
products and services, to assess the effectiveness of Baxter's quality systems
and to identify areas for improvement.
Technically trained professionals throughout the company develop and
implement Baxter's quality systems. Baxter's Quality Institute provides
training to Baxter's employees aimed at reinforcing Baxter's commitment to
quality and promoting continuous improvement of products and services. In
addition, the company has a Six Sigma Quality process to train all appropriate
individuals in statistical process control and related subjects.
Baxter's quality systems are designed to ensure that effective corrective
and preventive actions are taken in response to quality issues that arise with
respect to the company's products and services. From time to time, the company
takes corrective actions when it determines that products manufactured or
marketed by the company do not meet company specifications, published standards
such as those issued by the International Standards Organization (ISO), or
regulatory requirements. When a quality issue is identified, depending upon the
circumstances, the corrective action may take the form of a withdrawal of the
product from the market, correction of the product at the customer location,
notice to the customer of revised labeling, and/or other actions.
Research and Development
Baxter is actively engaged in research and development programs to develop
innovative 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, Canada, France, Germany,
Italy, Japan, Malta, Sweden, the United States and Venezuela. Expenditures for
Baxter-sponsored research and development activities relating to continuing
operations were $501 million in 2002, $426 million in 2001 and $378 million in
2000.
Principal areas of strategic focus for research and development include
recombinant therapeutics, plasma-based therapeutics, vaccines, small molecule
drugs, pathogen inactivation, drug formulation technologies, medication
delivery systems and kidney dialysis. 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.
6
Government Regulation
The operations of Baxter and many of the 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, employees,
products (their manufacture, sale, import and export) and services include: the
FDA, the Drug Enforcement Agency, the Environmental Protection Agency, the
Occupational Health & Safety Administration, the Department of Agriculture, the
Department of Labor, the Department of Defense, the Customs Service, the
Department of Commerce, the Treasury Department and others. Because Baxter
supplies products and services to health-care providers that are reimbursed by
Medicare, its activities are also subject to regulation by the Center for
Medicare/Medicaid Services and enforcement by the Office of the Inspector
General within the Department of Health and Human Services. State agencies also
regulate the facilities, operations, employees, products and services of the
company within their respective states. Government agencies outside the United
States also regulate public health, product registration, manufacturing,
environmental conditions, labor, exports, imports and other aspects of the
company's global operations.
With regard to the company's facilities and products, various governmental
agencies, including the FDA, regulate manufacturing, labeling, 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 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 2002 and similar expenditures are planned for 2003. See
Item 3.--"Legal Proceedings."
Employees
As of December 31, 2002, Baxter employed approximately 54,600 people.
Contractual Arrangements
A substantial portion of the company's products are sold through contracts
with customers, both within and outside the United States. Many 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 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 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
customers increases the pressure on product pricing.
Sales by various Baxter businesses to members of a hospital buying group,
Premier Purchasing Partners L.P., pursuant to various contracts with Premier
represented approximately 8.9%, 10.1% and 10.0% of the company's consolidated
net sales from continuing operations in 2002, 2001 and 2000, respectively. The
company has a number of contracts with Premier that expire on various dates in
2003 and 2004. Sales to members of Premier could be impacted if any of the
company's contracts with Premier are not renewed in part or in their entirety.
However, Baxter's contracts with Premier are independently negotiated, members
of the Premier group are free to purchase from the suppliers of their choice,
and a loss of any contract would not necessarily mean the loss of all sales
under that contract to all members of the group.
7
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 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.
Many factors 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, but are not limited to,
interest rates; 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; availability of acceptable raw materials and
component supply; new plant start-ups; global regulatory, trade and tax
policies; regulatory, legal or other developments relating to the company's
Series A, AF and AX dialyzers; the ability to obtain adequate insurance
coverage at reasonable cost; continued price competition; product development
risks, including technological difficulties; ability to enforce patents;
patents of third parties preventing or restricting the company's manufacture,
sale or use of affected products or technology; actions of regulatory bodies
and other government authorities; reimbursement policies of government agencies
and private payers; commercialization factors; results of product testing;
unexpected quality or safety concerns, whether or not justified, leading to
product launch delays, recalls, withdrawals, or declining sales; and other
factors described elsewhere in this report or in the company's other filings
with the Securities and Exchange Commission. 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.
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 71-72, section entitled "Notes to Consolidated Financial
Statements--Segment Information."
(e) Available Information.
Baxter makes available free of charge on its website at www.baxter.com its
annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on
Form 8-K, and amendments to those reports filed or furnished pursuant to
Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably practicable
after electronically filing or furnishing such material to the Securities and
Exchange Commission.
8
In addition, Baxter's Corporate Governance Guidelines, Global Business
Practice Standards, and the written charters for the committees of Baxter's
Board of Directors are available on Baxter's website at www.baxter.com under
Corporate Governance and in print upon request by writing to Baxter
International Inc., Corporate Secretary, One Baxter Parkway, Deerfield,
Illinois 60015.
- --------------------------------------------------------------------------------
Item 2. Properties.
Baxter owns or has long-term leases on substantially all of its major
manufacturing facilities. With respect to its continuing operations, the
company maintains 38 manufacturing facilities in the United States and its
territories, including five in Puerto Rico. The company also manufactures in
Argentina, Australia, Austria, Belgium, Brazil, Canada, Chile, China, Colombia,
Costa Rica, the Dominican Republic, France, Germany, India, Ireland, Italy,
Japan, Malta, Mexico, New Zealand, the Philippines, Poland, Singapore, Spain,
Switzerland, Tunisia, Turkey and the United Kingdom. While the majority of
these facilities are shared by more than one of the company's business
segments, seventeen domestic facilities and twenty-one international facilities
exclusively manufacture for the Medication Delivery operations; thirteen
domestic and twenty-two international facilities exclusively manufacture for
BioScience operations; and the Renal business is the exclusive operator of five
domestic and six international facilities. The company also owns or operates
shared distribution facilities throughout the world, including fifteen in the
United States and Puerto Rico and 120 located in 34 foreign countries.
The company maintains a continuous improvement program for 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 $734 million in 2002, $641
million in 2001 and $524 million in 2000. Additions to the pool of equipment
placed with or leased to customers relating to continuing operations were $114
million in 2002, $118 million in 2001 and $101 million in 2000.
- --------------------------------------------------------------------------------
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 and claim, the jurisdiction in which each
suit is brought, and differences in applicable law. Baxter has established
reserves in accordance with generally accepted accounting principles for
certain of the matters discussed below. For these matters, there is a
possibility that resolution of the matters could result in an additional loss
in excess of presently established reserves. Also, there is a possibility that
resolution of certain of the company's legal contingencies for which there is
no reserve could result in a loss. Management is not able to estimate the
amount of such loss or additional loss (or range of loss or additional loss).
However, management believes that, 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, no such charge would have a material
adverse effect on Baxter'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
9
silicone mammary implants previously manufactured by the Heyer-Schulte division
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, an arm of the National Academy of Sciences.
As of December 31, 2002, Baxter International, together with certain of its
subsidiaries, was named as a defendant or co-defendant in 129 lawsuits and
three claims relating to mammary implants, brought by approximately 285
plaintiffs, of which 238 are implant plaintiffs and the remainder are
consortium or second generation plaintiffs. Of those plaintiffs, ten currently
are included in the Lindsey class action Revised Settlement described below,
which accounts for approximately nine of the pending lawsuits against the
company. Additionally, 153 plaintiffs have opted out of the Revised Settlement
(representing approximately 88 pending lawsuits), and the status of the
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, 2002, 88 of the opt-out plaintiffs had
confirmed Heyer-Schulte mammary implant product identification. Furthermore,
during 2002, Baxter obtained dismissals, or agreements for dismissals, with
respect to 243 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 (the 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. Baxter, Bristol-Myers Squibb Company, Minnesota
Mining and Manufacturing Company, Union Carbide Corporation and McGhan Medical
Corporation are parties to the Revised Settlement.
In addition to the Lindsey class action, the company also has been named in
three 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.
On March 31, 2000, the United States Department of Justice filed an action
in the federal district court in Birmingham, Alabama against Baxter and other
manufacturers of breast implants, as well as the escrow agent for the revised
settlement fund, seeking reimbursement under various federal statutes for
medical care provided to various women with mammary implants. On September 26,
2001 the district court granted the motion of all defendants, including Baxter,
to dismiss the action. The federal government has appealed the dismissal.
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
10
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 $900 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, 2002, Baxter was named in 27 lawsuits and 85 claims in
the United States, Ireland, Italy, Japan, France and Taiwan. 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.
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.
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, 2002, approximately 6,241 claimant groups had been found eligible
to participate in the settlement. Approximately 6,238 of the claimant groups
had received payments as of December 31, 2002.
In Japan, Baxter is a defendant, along with the Japanese government and
other co-defendants, in factor concentrates cases in Osaka, Tokyo, Nagoya,
Tohoku, Fukuoka, Sapporo and Kumamoto. As of December 31, 2002, the cases
involved 1,359 plaintiffs, of whom 1,347 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 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 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
11
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. Pursuant to the stock purchase agreement between the company
and Immuno, as revised in April 1999, approximately 26 million Swiss Francs of
the purchase price is being withheld to cover these contingent liabilities.
Baxter is currently a defendant in a number of claims and lawsuits brought
by individuals who infused the company's Gammagard IVIG (intravenous
immuno-globulin), all of whom are seeking damages for Hepatitis C infections
allegedly caused by infusing Gammagard IVIG. As of December 31, 2002, Baxter
was a defendant in thirteen lawsuits and 24 claims in the United States,
Denmark, France, Germany, Italy, Spain and the United Kingdom. One class action
in the United States has been certified. All U.S. federal court Gammagard 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 IVIG (Geary,
et al., v. Baxter Healthcare Corporation, U.S.D.C., C.D., CA, ML-95-160-R). In
September 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 IVIG between January 1993 and February 1994.
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. 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.
Other
In August 2002, six purported class action lawsuits were filed in the
U.S.D.C. for the Northern District of Illinois naming Baxter and its Chief
Executive Officer and Chief Financial Officer as defendants. These lawsuits,
which have been consolidated and seek recovery of unspecified damages, allege
that the defendants violated the federal securities laws by making misleading
statements that allegedly caused Baxter common stock to trade at inflated
levels. In December 2002, plaintiffs filed their consolidated amended class
action complaint which named nine additional Baxter officers as defendants. On
January 24, 2003 all defendants moved for dismissal of the consolidated amended
complaint. In October 2002, Baxter and members of its Board of Directors were
named as defendants in a lawsuit filed in the U.S.D.C. for the Northern
District of Illinois by an alleged participant in the Baxter Incentive
Investment Plan (Plan), purportedly on behalf of the Plan and a class of Plan
participants who purchased shares of Baxter common stock. This lawsuit sets
forth claims for unspecified damages under the Employee Retirement Income
Security Act of 1974, as amended, and is based on allegations similar to those
made in the securities lawsuits described above. This action has been
consolidated with the other actions described above. The Company believes that
all of these lawsuits are without merit and intends to defend itself vigorously
against these claims.
As of December 31, 2002, Baxter International and certain of its
subsidiaries were defendants in six civil lawsuits seeking damages on behalf of
persons who allegedly died or were injured as a result of exposure to Baxter's
Althane series dialyzers. The company has reached settlements with a number of
the families of patients who died in Spain, Croatia and the United States after
undergoing hemodialysis on Baxter Althane series dialyzers. The U.S. Government
is investigating the matter and Baxter has received a subpoena to provide
documents. A government criminal investigation concerning the patient deaths is
pending in Spain. The Croatian government has closed its criminal investigation
without initiating any criminal action against the Company. Other lawsuits and
claims may be filed in the United States and elsewhere.
12
As of December 31, 2002, Baxter International and certain of its
subsidiaries have been named as defendants, along with others, in nine lawsuits
brought in U.S. federal courts on behalf of various classes of purchasers of
Medicare and Medicaid eligible drugs alleged to have been injured by Baxter and
other defendants as a result of pricing practices for such drugs, which are
alleged to be artificially inflated. All nine of these U.S. federal court cases
have been transferred to the U.S.D.C. for the District of Massachusetts for
consolidated pretrial case management under Multi District Litigation rules.
Claimants seek damages and declaratory and injunctive relief under various
state and/or federal statutes. In addition, in January 2002, the Attorney
General of Nevada filed a civil suit in the Second Judicial District Court of
Washoe County, Nevada. In February 2002, the Attorney General of Montana filed
a civil suit in the First Judicial District Court of Lewis and Clark County,
Montana. These two lawsuits, which each name a subsidiary of Baxter
International as a defendant and seek damages, injunctive relief, civil
penalties, disgorgement, forfeiture and restitution, allege that prices for
Medicare and Medicaid eligible drugs were artificially inflated in violation of
various state laws. In October 2002, the Judicial Panel on Multi District
Litigation issued an order denying plaintiffs' motions to vacate orders
transferring the actions brought in Nevada and Montana to the U.S.D.C. for the
District of Massachusetts for consolidated pretrial case management under the
Multi District Litigation rules. In December 2002, Baxter International and a
subsidiary were named along with others in a lawsuit filed in the Superior
Court of Maricopa County, Arizona, on behalf of a class of individuals and
entities alleged to have been injured as the result of artificially inflated
prices of prescription drugs. The complaint seeks civil damages, injunctive
relief and costs. In January 2003, a subsidiary of Baxter International was
named along with others in a lawsuit filed in the Circuit Court of Tennessee
for the 30/th/ Judicial District on behalf of a class of individuals alleged to
have been injured as the result of artificially inflated prices of prescription
drugs. The complaint seeks treble damages, attorneys' fees, interest and
restitution of alleged losses. Various state and federal agencies are
conducting civil investigations into the marketing and pricing practices of
Baxter and others with respect to Medicare and Medicaid reimbursement.
As of December 31, 2002, Baxter International and certain of its
subsidiaries have been served as defendants, along with others, in 85 lawsuits
filed in various state and U.S. federal courts, eight of which are purported
class actions, seeking damages, injunctive relief and medical monitoring for
claimants alleged to have contracted autism or other attention deficit
disorders as a result of exposure to vaccines for childhood diseases containing
Thimerosal. In the fourth quarter of 2002, the U.S.D.C. for the Southern
District of Mississippi dismissed with prejudice three suits and the U.S.D.C.
for the Southern District of New York dismissed with prejudice one suit brought
against Baxter and others based on the application of the National Vaccine
Injury Compensation Act. Additional Thimerosal cases may be filed in the future
against Baxter and other companies that marketed Thimerosal-containing products.
As of September 30, 1996, the date of the spin-off of Allegiance Corporation
(Allegiance) from Baxter, 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 most of this litigation but 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, 2002, the company was named as a defendant in
338 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 a number of 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 all but eight of these sites. The estimated exposure for
Baxter's eight sites is approximately $2.3 million, which has been accrued (and
not discounted) in the company's financial statements.
13
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.
14
- --------------------------------------------------------------------------------
PART II
- --------------------------------------------------------------------------------
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters.
Incorporated by reference from the Annual Report, page 73, 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, page 76, 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 25-41, section
entitled "Management's Discussion and Analysis."
- --------------------------------------------------------------------------------
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Incorporated by reference from the Annual Report, pages 39-40, section
entitled "Financial Instrument Market Risk."
- --------------------------------------------------------------------------------
Item 8. Financial Statements and Supplementary Data.
Incorporated by reference from the Annual Report, pages 43-73, 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.
15
- --------------------------------------------------------------------------------
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 6, 2003
(Proxy Statement), page 4, section entitled "Election of Directors--Proposal 1
on the Proxy Card," and pages 12-14, section entitled "Board of
Directors--Director Biographies."
(b) Identification of Executive Officers
Following are the names and ages, as of March 12, 2003, of the executive
officers of Baxter International, and one or both of its two principal
operating 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 48, 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 Science Applications International Corporation.
Brian P. Anderson, age 52, is senior vice president and chief financial
officer of Baxter International, having served in those capacities since
February 1998. Mr. Anderson is responsible for tax, treasury, finance, supply
chain, information technology, and purchasing and supplier management.
J. Robert Hurley, age 53, is a corporate vice president, integration and
alliance management, of Baxter International. Prior to that from 1993 to 2000,
he was a corporate vice president of Baxter World Trade Corporation and
president--Japan.
Neville J. Jeharajah, age 50, is a corporate vice president, investor
relations and financial planning, of Baxter International, having served in
that capacity since February 2001. Prior to that since 1982, Mr. Jeharajah held
various finance positions with the company, the most recent of which was vice
president, investor relations and financial planning.
Karen J. May, age 44, is a corporate vice president, human resources, of
Baxter International, having served in that capacity since February 2001. Prior
to her current appointment she was vice president, human resources from 2000
until 2001, vice president, global planning and staffing from 1998 to 2000, and
vice president, international finance from 1997 to 1998.
Steven J. Meyer, age 46, is treasurer of Baxter International, having served
in that capacity since February 1997.
16
John C. Moon, age 44, is corporate vice president and chief information
officer of Baxter International, having served as a corporate vice president
since November 2002 and chief information officer since May 2000. Prior to that
he served as vice president, information technology of Baxter's Renal business
from September 1996 to May 2000.
John L. Quick, age 58, is a corporate vice president, quality/regulatory, of
Baxter International, having served in that capacity since 1996.
Jan Stern Reed, age 43, is corporate secretary and associate general counsel
of Baxter International, having served in those capacities since February 1998.
Norbert G. Riedel, age 45, is a corporate vice president and chief
scientific officer of Baxter International, having served in those capacities
since May 2001. From 1998 to 2001 he served as president of the recombinant
business unit of the BioScience division of Baxter Healthcare Corporation.
Prior to joining Baxter in 1998 he was head of worldwide biotechnology and
worldwide core research functions at Hoechst Marion Roussel.
Thomas J. Sabatino, Jr., age 44, is a senior vice president and general
counsel of Baxter International, having served as a senior vice president since
May 2001 and as general counsel since December 1997. Mr. Sabatino is
responsible for law, government affairs, business practices, environmental
health and safety, business development and technology outlicensing. He was a
corporate vice president from December 1997 to May 2001.
Michael J. Tucker, age 50, is a senior vice president of Baxter
International, having served in that capacity since since September 1995. Mr.
Tucker is responsible for human resources, communications, Europe operations,
corporate strategy, and integration and alliance management.
(2) Baxter Healthcare Corporation and Baxter World Trade Corporation Executive
Officers
Eric A. Beard, age 51, 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, Mr. Beard was president
of a division of a subsidiary of Baxter World Trade Corporation.
Carlos del Salto, age 60, is a senior vice president of Baxter World Trade
Corporation and president--Intercontinental/Asia, having served in that
capacity since 1996.
David F. Drohan, age 64, is a senior vice president of Baxter Healthcare
Corporation and president--Medication Delivery, having served as a senior vice
president since May 2001 and as president-Medication Delivery since 1996. He
was a corporate vice president from 1996 to May 2001.
James M. Gatling, age 53, is a corporate vice president, global
manufacturing operations, of Baxter Healthcare Corporation, having served in
that capacity since December 1996.
Thomas H. Glanzmann, age 44, is a senior vice president of Baxter World
Trade Corporation and Baxter Healthcare Corporation, and president--BioScience.
He has served as a senior vice president since May 2001 and was a corporate
vice president from October 1998 to May 2001. Prior to that, Mr. Glanzmann was
president of a division of a subsidiary of Baxter World Trade Corporation.
Alan L. Heller, age 49, is a senior vice president of Baxter Healthcare
Corporation and Baxter World Trade Corporation, and president--Renal, having
served as a senior vice president since May 2001 and as president--
Renal since he joined the Company in October 2000. He was a group vice
president from October 2000 to May 2001. Prior to that, Mr. Heller was
co-president and chief operating officer of G.D. Searle & Co.
David C. McKee, age 56, is a corporate vice president and deputy general
counsel of Baxter Healthcare Corporation and Baxter World Trade Corporation,
having served as corporate vice president since 1997 and
17
1996, respectively, and as deputy general counsel of both entities since 1996.
Mr. McKee has held various positions with Baxter International, including
corporate vice president from 1997 to 1999 and deputy general counsel from 1996
to 1999.
Gregory P. Young, age 49, is a corporate vice president of Baxter Healthcare
Corporation and president of the Transfusion Therapies division. He has served
as a corporate vice president since February 2001 and as president of the
Transfusion Therapies 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 35, section
entitled "Section 16(a) Beneficial Ownership Reporting Compliance."
- --------------------------------------------------------------------------------
Item 11. Executive Compensation.
Incorporated by reference from the Proxy Statement, page 21, section
entitled "Board of Directors-Compensation of Directors" and pages 27-32,
section entitled "Executive Compensation."
- --------------------------------------------------------------------------------
Item 12. Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters.
Incorporated by reference from the Proxy Statement, pages 33-34, section
entitled "Ownership of Baxter Stock" and pages 36-39, section entitled "Equity
Compensation Plan Information."
- --------------------------------------------------------------------------------
Item 13. Certain Relationships and Related Transactions.
None.
18
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PART IV
- --------------------------------------------------------------------------------
Item 14. Controls and Procedures.
Within 90 days of the filing date of this report, the company carried out an
evaluation, under the supervision and with the participation of the company's
Disclosure Committee and the company's management, including the Chief
Executive Officer and Chief Financial Officer, of the effectiveness of the
company's disclosure controls and procedures (as such term is defined in Rules
13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934, as amended
(the "Exchange Act")). The company's disclosure controls and procedures are
designed to ensure that information required to be disclosed by the company in
the reports it files or submits under the Exchange Act is recorded, processed,
summarized and reported on a timely basis. Based on that evaluation, the Chief
Executive Officer and Chief Financial Officer concluded that the company's
disclosure controls and procedures are effective in alerting them in a timely
fashion to material information relating to Baxter required to be included in
the reports that the company files under the Exchange Act. There have been no
significant changes in Baxter's internal controls or in other factors that
could significantly affect internal controls subsequent to the date of their
evaluation.
Item 15. 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 44
Consolidated Statements of Income Annual Report, page 45
Consolidated Statements of Cash Flows Annual Report, page 46
Consolidated Statements of Stockholders' Equity and
Comprehensive Income Annual Report, page 47
Notes to Consolidated Financial Statements Annual Report, pages 48-73
Report of Independent Accountants Annual Report, page 43
Schedules Required By Article 12 of Regulation S-X
Report of Independent Accountants on Financial Statement
Schedule page 20
Schedule II--Valuation and Qualifying Accounts page 21
All other schedules have been omitted because they are not applicable or not
required.
(b) Reports on Form 8-K
On December 4, 2002, Baxter International filed a current report on Form
8-K under Item 5, "Other Events," which reported that Baxter International
issued a press release announcing its intent to divest the majority of the
services component of its Renal business and focus primarily on the products
used in the treatment of kidney disease.
(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.
19
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 14, 2003 appearing in the 2002 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 15(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 14, 2003
20
- --------------------------------------------------------------------------------
SCHEDULE II
- --------------------------------------------------------------------------------
Valuation and Qualifying Accounts
(in million of dollars)
- --------------------------------------------------------------------------------
Additions
----------
Charged/
Balance at Charged to (credited) Balance
beginning of costs and to other Deductions at end of
period expenses accounts/(a)/ from reserves period
- --------------------------------------------------------------------------------------------------------
Year ended December 31, 2002:
Allowance for doubtful accounts 57 14 (2) (7) 62
Inventory reserves 125 177 7 (191) 118
Litigation reserves 287 58 8 (121) 232
Deferred tax asset valuation allowance 58 9 -- -- 67
- --------------------------------------------------------------------------------------------------------
Year ended December 31, 2001:
Allowance for doubtful accounts 43 17 -- (3) 57
Inventory reserves 110 116 (7) (94) 125
Litigation reserves /(b)/ 361 49 3 (126) 287
Deferred tax asset valuation allowance 50 17 -- (9) 58
- --------------------------------------------------------------------------------------------------------
Year ended December 31, 2000:
Allowance for doubtful accounts 34 10 3 (4) 43
Inventory reserves 78 73 4 (45) 110
Litigation reserves /(b)/ 458 42 -- (139) 361
Deferred tax asset valuation allowance 43 12 -- (5) 50
- --------------------------------------------------------------------------------------------------------
(a) Valuation accounts of acquired or divested companies and foreign currency
translation adjustments. Reserves are deducted from assets to which they
apply.
(b) Litigation reserve amounts have been changed to conform to the current year
presentation.
21
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.
By: /s/ HARRY M. JANSEN KRAEMER,
JR.
-----------------------------
Harry M. Jansen Kraemer, Jr.
Chairman and Chief Executive
Officer
DATE: March 12, 2003
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.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on March 12, 2003.
Signature Title
--------- -----
/s/ HARRY M. JANSEN 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
Brian P. Anderson and 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
22
Signature Title
--------- -----
/s/ GAIL D. FOSLER Director
- ------------------------------------
Gail D. Fosler
/s/ JAMES R. GAVIN III, M.D., PH.D. Director
- ------------------------------------
James R. Gavin III, M.D., Ph.D.
/s/ JOSEPH B. MARTIN, M.D., PH.D. Director
- ------------------------------------
Joseph B. Martin, M.D., Ph.D.
/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
23
CERTIFICATIONS
CERTIFICATION OF CHIEF EXECUTIVE OFFICER ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Harry M. Jansen Kraemer, Jr., certify that:
1. I have reviewed this annual report on Form 10-K of Baxter International
Inc.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this annual report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report
is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date
of this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officer and I have indicated in this
annual report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
By: /s/ HARRY M. JANSEN KRAEMER, JR.
-----------------------------------
Harry M. Kraemer, Jr.
Chairman of the Board and Chief
Executive Officer
Date: March 12, 2003
24
CERTIFICATION OF CHIEF FINANCIAL OFFICER ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Brian P. Anderson, certify that:
1. I have reviewed this annual report on Form 10-K of Baxter International
Inc.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this annual report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report
is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date
of this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officer and I have indicated in this
annual report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
By: /S/ BRIAN P. ANDERSON
-----------------------------
Brian P. Anderson
Senior Vice President and
Chief Financial Officer
(Chief Accounting Officer)
Date: March 12, 2003
25
EXHIBITS FILED WITH SECURITIES AND EXCHANGE COMMISSION
Number and Description of Exhibit
---------------------------------
3. Certificate of Incorporation and Bylaws
3.1* Restated Certificate of Incorporation, as amended, including Certificate of Designation of
Series B Junior Participating Preferred Stock and Certificate of Elimination of Series A Junior
Participating Preferred Stock, filed as exhibit 3.1 to the company's quarterly report on
Form 10-Q for the quarter ended June 30, 2002.
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 25, 2003.
4. Instruments defining the rights of security holders, including 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 (the "1987 Form 10-K").
4.5* Specimen 91/2% Note, filed as exhibit 4.3(a) to the company's current report on Form 8-K dated
June 23, 1988.
4.6* Specimen 91/4% Note, filed as exhibit 4.3(a) to the company's current report on Form 8-K dated
September 13, 1989.
4.7* Specimen 91/4% Note, filed as exhibit 4.3(a) to the company's current report on Form 8-K dated
December 7, 1989.
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 2 to the
Company's registration statement on Form S-4 (No. 333-47927).
26
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.
4.12* Indenture dated as of May 21, 2001 by and among the company and Bank One Trust Company,
N.A. as trustee, filed as exhibit 4.6 to the company's registration statement on Form S-3
(No. 333-67772).
4.13* Form of Debenture, filed as exhibit 4.7 to the company's registration statement on Form S-3
(No. 333-67772).
4.14* Registration Rights Agreement dated May 16, 2001 by and among the company and the initial
purchasers of the Debentures, filed as exhibit 4.8 to the company's registration statement on
Form S-3 (No. 333-67772).
4.15* Purchase Contract Agreement, dated as of December 17, 2002, between the company and Bank
One Trust Company, N.A., as Purchase Contract Agent, filed as exhibit 4.2 to Amendment
No. 1 to the Form 8-A dated December 23, 2002 ("December 2002 Form 8-A").
4.16* Pledge Agreement, dated as of December 17, 2002, among the company, Bank One Trust
Company, N.A., as Collateral Agent, Custodial Agent and Securities Intermediary and Bank
One Trust Company, N.A., as Purchase Contract Agent, filed as exhibit 4.3 to December 2002
Form 8-A.
4.17* Remarketing Agreement, dated as of December 17, 2002, among the company, Bank One Trust
Company, N.A., as Purchase Contract Agent, and the Remarketing Agent named therein, filed
as exhibit 4.4 to December 2002 Form 8-A.
4.18* Indenture, dated as of April 26, 2002 between the company and Bank One Trust Company,
N.A., as Trustee, filed as exhibit 4.5 to December 2002 Form 8-A.
4.19* Supplemental Indenture No. 1, dated as of December 17, 2002, between the company and Bank
One Trust Company, N.A., as Trustee, filed as exhibit 4.6 to December 2002 Form 8-A.
4.20* Form of Corporate Unit (included in exhibit 4.15).
4.21* Form of Senior Note due 2008 (included in exhibit 4.19).
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.
C 10.2* Baxter International Inc. International Retirement Plan, filed as exhibit 10.2 to the company's
annual report on Form 10-K for the year ended December 31, 2001 (the "2001 Form 10-K").
C 10.3* Baxter International Inc. and Subsidiaries Supplemental Pension Plan, as amended and restated
effective January 1, 2002, filed as exhibit 10.3 to the company's quarterly report on Form 10-Q
for the quarter ended March 31, 2002 (the "March 2002 Form 10-Q").
C 10.4 2001 Global Stock Option Plan
C 10.5* Baxter International Inc. Stock Option Plan adopted February 21, 2000, filed as exhibit 10.2 to
the company's registration statement on Form S-8 (No. 333-48906).
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.
C 10.7* Amendment to 1987 Incentive Compensation Program, filed as exhibit 19.1 to September 1989
Form 10-Q.
27
Number and Description of Exhibit
---------------------------------
C 10.8* Non-Employee Director Stock Option Plan for Annual Grant, as amended and restated effective
February 25, 2002, filed as exhibit 10.8 to the 2001 Form 10-K.
C.. 10.9* Baxter International Inc. and Subsidiaries Deferred Compensation Plan, as amended and
restated effective January 1, 2002, filed as exhibit 10.9 to the March 2002 Form 10-Q.
C.. 10.10* First Amendment to the Baxter International Inc. and Subsidiaries Deferred Compensation Plan,
filed as exhibit 10.10 to the September 2002 Form 10-Q.
C.. 10.11* Stock Option Plan adopted March 14, 1997, filed as exhibit 4.8 to the company's registration
statement on Form S-8 (No. 333-71533).
C.. 10.12* Corporate Aviation Policy, filed as exhibit 10.33 to the company's annual report on Form 10-K
for the year ended December 31, 1992.
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.
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.
C.. 10.15* Officer Incentive Compensation Plan, filed as exhibit 10.15 to the 2001 Form 10-K.
C.. 10.16* Baxter International Inc. Restricted Stock Plan for Non-Employee Directors, as amended and
restated effective May 1, 2001, filed as exhibit 10.16 to the quarterly report on Form 10-Q for
the quarter ended March 31, 2001.
C.. 10.17* 1995 Stock Option Grant Terms and Conditions, filed as exhibit 10.34 to the company's annual
report on Form 10-K for the year ended December 31, 1995.
C.. 10.18* Stock Option Plan adopted February 17, 1997, filed as Exhibit 4.2 to the company's registration
statement on Form S-8 (No. 333-71533).
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
company's annual report on Form 10-K for the year ended December 31, 1997 (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.
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.
C.. 10.27* 2001 Incentive Compensation Program and Amendment No. 1 thereto, filed as exhibit 10.27 to
the 2001 Form 10-K.
28
Number and Description of Exhibit
---------------------------------
C 10.28* Stock Option Plan adopted February 17, 1998, filed as exhibit 4.5 to the company's
registration statement on Form S-8 (No. 333-71533).
C 10.29* Special Stock Option Plan adopted February 17, 1998, filed as exhibit 4.6 to the company's
registration statement on Form S-8 (No. 333-71533).
C 10.30* 2003 Incentive Compensation Program, filed as Exhibit A to the company's proxy statement
for use in connection with its May 6, 2003 annual meeting of stockholders
12. Computation of Ratio of Earnings to Fixed Charges.
13. Selections from the 2002 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 in signature page)
99.1 Certification of Chief Executive Officer Pursuant to 18 U.S.C. 1350.
99.2 Certification of Chief Financial Officer Pursuant to 18 U.S.C. 1350.
- --------
* Incorporated herein by reference.
C Exhibit contemplated by Item 14(a)(3) of Form 10-K.
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 24 cents per page from the Public
Reference Room of the Securities and Exchange Commission, Washington, D.C.,
20549.
29