Corporate News
		Baxter International Inc. One Baxter Parkway Deerfield, IL 60015

FOR IMMEDIATE RELEASE

Media Contact:

Deborah Spak, (847) 948-2349

Investor Contacts:

Mary Kay Ladone, (847) 948-3371

Clare Trachtman, (847) 948-3085

BAXTER REPORTS STRONG THIRD QUARTER FINANCIAL RESULTS

AND CONFIRMS FULL-YEAR GUIDANCE

Baxter Reinforces Commitment to Innovation with Increased Investment in

Research and Development and Advancements in New Product Pipeline

DEERFIELD, Ill., October 20, 2011 — Baxter International Inc. (NYSE:BAX) today reported third quarter net income of $576 million, an increase of 10 percent from $525 million reported in the third quarter of 2010. Earnings per diluted share of $1.01 advanced 13 percent from $0.89 per diluted share reported in the prior-year period. Baxter’s third quarter financial results included an after-tax special charge of $48 million (or $0.08 per diluted share) for the resolution of long-standing litigation pertaining to average wholesale prices (AWP) and certain historical rebate and discount adjustments. Baxter’s third quarter 2010 financial results included an after-tax special item of $70 million (or $0.12 per diluted share) related to the impairment of assets associated with the divestiture of the U.S. multi-source generic injectables business.

On an adjusted basis, excluding special items from both periods, Baxter’s third quarter net income of $624 million rose 5 percent from $595 million reported in 2010. Adjusted earnings per diluted share of $1.09 increased 8 percent from

 

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BAXTER REPORTS 3rd QUARTER FINANCIAL RESULTS — Page 2

 

$1.01 per diluted share reported last year and were in-line with the guidance the company previously provided of $1.07 to $1.09 per diluted share.

Worldwide sales totaled $3.48 billion compared to sales of $3.22 billion in the third quarter of 2010, representing an increase of 8 percent (or 3 percent excluding the impact of foreign currency). Adjusting for the divestiture of the U.S. multi-source generic injectables business which was completed in the second quarter 2011, worldwide revenues advanced 10 percent (or 4 percent excluding the impact of foreign currency). Sales within the United States of $1.40 billion grew 1 percent (or 5 percent adjusting for the divestiture). International sales of $2.08 billion advanced 13 percent (or 4 percent excluding the impact of foreign currency), driven by solid performance across the portfolio, particularly in emerging markets.

BioScience revenues totaled $1.52 billion and rose 9 percent (or 4 percent excluding the impact of foreign currency), reflecting robust demand for GAMMAGARD LIQUID [Immune Globulin Intravenous (Human)] (marketed as KIOVIG outside of the United States), certain plasma-based therapeutics, and vaccines. Medical Products sales of $1.95 billion increased 7 percent (or 1 percent excluding the impact of foreign currency). Adjusting for the divestiture, Medical Products sales increased 10 percent (or 4 percent excluding the impact of foreign currency), reflecting strong growth of intravenous therapies and injectable drugs, as well as peritoneal dialysis therapy and anesthesia products in international markets.

 

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BAXTER REPORTS 3rd QUARTER FINANCIAL RESULTS — Page 3

 

Nine-Month Results

For the first nine months of 2011, Baxter reported net income of $1.76 billion or $3.06 per diluted share, compared to net income of $997 million or $1.67 per diluted share in the same period last year. On an adjusted basis, excluding special items, Baxter’s net income for the nine-month period of $1.81 billion increased 5 percent from the $1.72 billion reported in the prior-year period, and earnings of $3.14 per diluted share increased 9 percent from $2.87 per diluted share reported in the same period last year.

Baxter’s worldwide revenues totaled $10.30 billion and increased 10 percent (or 7 percent excluding the impact of foreign currency) compared to sales of $9.35 billion in the same period of 2010. Excluding the prior-year COLLEAGUE revenue adjustment and the divestiture of the U.S. multi-source generic injectables business, Baxter’s worldwide sales increased 9 percent over the prior-year period (or 5 percent excluding the impact of foreign currency).

Through the first nine months of the year, Baxter generated strong cash flows from operations of $1.93 billion and has returned significant value to shareholders in the form of dividends and share repurchases. Through the third quarter 2011, Baxter has returned $1.95 billion to shareholders through dividends totaling $534 million and share repurchases of approximately $1.41 billion (or 26 million shares), a 9 percent increase versus the prior-year period.

“The evolving global macro-environment will exert ongoing pressures on our business, creating challenges that we will manage through disciplined execution of our strategies,” said Robert L. Parkinson, Jr., chairman and chief executive officer. “We continue to benefit from the diversified and medically-

 

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BAXTER REPORTS 3rd QUARTER FINANCIAL RESULTS — Page  4

 

necessary nature of our portfolio, broad geographic reach and strong financial position, and remain committed to innovation through clinical differentiation, enhanced operational and cost effectiveness, improved earnings growth, and delivering sustained value for our shareholders.”

Recent Highlights

Baxter continued its commitment to innovation with further investments in research and development and advancements in the new product pipeline, augmented by business development initiatives. The company’s research and development expenditures accelerated 15 percent in the third quarter reflecting progress of investigational therapies in late-stage clinical development and success in obtaining approvals and launching innovative products to the global marketplace. Recent achievements include the following:

 

•

U.S. Food and Drug Administration (FDA) approval and launch of GAMMAGARD LIQUID 10% [Immune Globulin Infusion (Human)] for subcutaneous administration in patients with primary immunodeficiency (PI). This approval allows patients to self-administer their therapy at home on a weekly basis and offers patients an option to administer GAMMAGARD LIQUID therapy either intravenously or subcutaneously, depending on their individual needs. The subcutaneous clinical trial in PI patients demonstrated efficacy with limited adverse reactions (mostly local site reactions, which occurred in only 2.7% of infusions).

 

•

Submissions to the United States and European regulatory bodies seeking approval for HyQ, Baxter’s investigational immunoglobulin (IG) therapy administered subcutaneously and facilitated by recombinant human hyaluronidase for patients with PI. The filings were supported by the completion of the phase III clinical study which met both primary and secondary endpoints. Final data will be presented at the 2011 Annual Meeting of the American College of Allergy, Asthma and Immunology in Boston, MA in November.

 

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BAXTER REPORTS 3rd QUARTER FINANCIAL RESULTS — Page  5

 

•

FDA approval of an expanded indication for ARTISS [Fibrin Sealant (Human)] to include adhering tissue flaps during facial rhytidectomy (face-lift) surgery. ARTISS is the only premixed, ready-to-use fibrin sealant specifically indicated for tissue adherence in both facial rhytidectomy and burn surgeries. It was first approved by the FDA in 2008 to adhere autologous skin grafts to surgically prepared wound beds resulting from burns in adult and pediatric populations one year of age or older.

 

•

Initiation of a global Phase III clinical trial to evaluate the safety and effectiveness of BAX 111, Baxter’s investigational recombinant von Willebrand factor (rVWF), for the treatment and prevention of bleeding episodes in patients with von Willebrand disease. This condition is the most common type of inherited bleeding disorder, affecting both men and women, the vast majority of whom are undiagnosed and not treated due to mild symptoms. BAX 111 is the first and only recombinant von Willebrand product in clinical development.

 

•

Clearance under the Hart-Scott-Rodino Antitrust Improvements Act for Baxter’s previously announced $380 million acquisition of Baxa Corporation. Baxter expects to close the acquisition before the end of 2011. Annual sales for Baxa were approximately $150 million in 2010, and Baxter expects the future top-line growth of this business to be accretive to the company’s future sales growth. Nutrition is recognized as an important element of patients’ therapy, and both Baxter and Baxa have sought to advance the delivery of IV nutrition with innovative technologies. The addition of Baxa’s product lines will complement Baxter’s portfolio of nutrition products and drug delivery systems and support patient safety.

Outlook for Fourth Quarter and Full-Year 2011

Baxter also confirmed previously-issued guidance and expects earnings, before special items, of $4.29 to $4.32 per diluted share for full-year 2011. Baxter continues to expect sales growth of 3 to 4 percent excluding the impact of foreign currency and the COLLEAGUE revenue adjustment in 2010 (or 5 to 6 percent including the impact of foreign currency). In addition, the company expects to generate cash flows from operations of approximately $2.8 billion.

For the fourth quarter of 2011, the company expects earnings per diluted share of $1.15 to $1.18, before any special items, and sales growth of 2 to 3 percent excluding the impact of foreign currency (or 1 to 2 percent including the impact of foreign currency).

 

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BAXTER REPORTS 3rd QUARTER FINANCIAL RESULTS — Page  6

 

A webcast of Baxter’s third quarter conference call for investors can be accessed live from a link on the company’s website at www.baxter.com beginning at 7:30 a.m. CDT on October 20, 2011. Please visit Baxter’s website for more information regarding this and future investor events and webcasts.

Baxter International Inc., through its subsidiaries, develops, manufactures and markets products that save and sustain the lives of people with hemophilia, immune disorders, infectious diseases, kidney disease, trauma, and other chronic and acute medical conditions. As a global, diversified healthcare company, Baxter applies a unique combination of expertise in medical devices, pharmaceuticals and biotechnology to create products that advance patient care worldwide.

This release includes forward-looking statements concerning the company’s financial results, outlook for 2011 and R&D pipeline. The statements are based on assumptions about many important factors, including the following, which could cause actual results to differ materially from those in the forward-looking statements: demand for and market acceptance risks for new and existing products, such as ADVATE, and other technologies; future actions of regulatory bodies and other governmental authorities, including with respect to the company’s implementation of the COLLEAGUE recall, that could delay, limit or suspend product development, manufacturing or sales or result in sanctions; product quality or patient safety concerns leading to product recalls, withdrawals, launch delays, litigation, or declining sales; Sigma’s ability to build production capacity to meet customer demand; future actions of governmental authorities and other third parties as U.S. healthcare reform legislation and other austerity measures are implemented; additional legislation, regulation and other governmental pressures, which may affect pricing, reimbursement and rebate policies of government agencies and private payers or other elements of the company’s business; product development risks; inventory reductions or fluctuations in buying patterns by wholesalers or distributors; the impact of geographic and product mix on the company’s sales; the impact of competitive products and pricing, including generic competition, drug reimportation and disruptive technologies; the availability of acceptable raw materials and component supply; fluctuations in supply and demand and the pricing of plasma-based therapies; the ability to enforce company patents; patents of third parties preventing or restricting the company’s manufacture, sale or use of affected products or technology; any impact of the current economic conditions on Baxter

 

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BAXTER REPORTS 3rd QUARTER FINANCIAL RESULTS — Page  7

 

and its customers; foreign currency fluctuations and other risks identified in the company’s most recent filing on Form 10-K and other Securities and Exchange Commission filings, all of which are available on the company’s website. The company does not undertake to update its forward-looking statements. Financial schedules are attached to this release and available on the company’s website.

# # #

 

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BAXTER — PAGE 8

 

BAXTER INTERNATIONAL INC.

Consolidated Statements of Income

Three Months Ended September 30, 2011 and 2010

(unaudited)

(in millions, except per share and percentage data)

 

			Excluding				Excluding				Excluding
		Three Months Ended September 30,
		2011				2010				Change
NET SALES			$   3,479				$  3,224				8%
COST OF SALES			1,708				1,565				9%
GROSS MARGIN			1,771				1,659				7%
% of Net Sales			50.9%				51.5%				(0.6 pts	)
MARKETING AND ADMINISTRATIVE EXPENSES			787	A			670				17%
% of Net Sales			22.6%				20.8%				1.8 pts
RESEARCH AND DEVELOPMENT EXPENSES			239				207				15%
% of Net Sales			6.9%				6.4%				0.5 pts
NET INTEREST EXPENSE			14				24				(42%	)
OTHER EXPENSE, NET			4				117	B			(97%	)
PRE-TAX INCOME			727				641				13%
INCOME TAX EXPENSE			149				117				27%
% of Pre-Tax Income			20.5%				18.3%				2.2 pts
NET INCOME			578				524				10%
LESS: NONCONTROLLING INTERESTS			2				(1	)			N/M
NET INCOME ATTRIBUTABLE TO BAXTER			$      576				$     525				10%
BASIC EPS			$     1.02				$    0.90				13%
DILUTED EPS			$     1.01				$    0.89				13%
WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
Basic			566				584
Diluted			571				587
ADJUSTED PRE-TAX INCOME (excluding specified items)			$     806	C			$     753	C			7%
ADJUSTED NET INCOME ATTRIBUTABLE TO BAXTER (excluding specified items)			$     624	C			$     595	C			5%
ADJUSTED DILUTED EPS (excluding specified items)			$     1.09	C			$     1.01	C			8%

 

A	Marketing and administrative expenses in 2011 included a charge totaling $79 million ($48 million, or $0.08 per diluted share, on an after-tax basis) related to the resolution of litigation pertaining to average wholesale prices (AWP) and certain historical rebate and discount adjustments.

 

B	Other expense, net in 2010 included an impairment charge of $112 million ($70 million, or $0.12 per diluted share, on an after-tax basis) principally to write down assets associated with the company’s divestiture of its U.S. generic injectables business.

 

C	Refer to page 9 for a description of the adjustments and a reconciliation to generally accepted accounting principles (GAAP) measures.

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BAXTER — PAGE 9

 

BAXTER INTERNATIONAL INC.

Note to Consolidated Statements of Income

Three Months Ended September 30, 2011 and 2010

Description of Adjustments and Reconciliation of GAAP to Non-GAAP Measures

(unaudited)

(in millions, except per share and percentage data)

The company’s GAAP results for the three months ended September 30, 2011 and 2010 included specified items which impacted the GAAP results as follows:

 

			Excluding				Excluding				Excluding				Excluding				Excluding				Excluding				Excluding
		Three Months Ended September 30,
		2011												2010
			GAAP				Specified items	1			Excluding specified items				GAAP				Specified item	2			Excluding specified item				Change	3
NET SALES			$   3,479				$  —				$   3,479				$   3,224				$  —				$   3,224				8%
COST OF SALES			1,708				—				1,708				1,565				—				1,565				9%
GROSS MARGIN			1,771				—				1,771				1,659				—				1,659				7%
% of Net Sales			50.9%								50.9%				51.5%								51.5%				(0.6 pts	)
MARKETING AND ADMINISTRATIVE EXPENSES			787				(79	)			708				670				—				670				6%
% of Net Sales			22.6%								20.4%				20.8%								20.8%				(0.4 pts	)
RESEARCH AND DEVELOPMENT EXPENSES			239				—				239				207				—				207				15%
% of Net Sales			6.9%								6.9%				6.4%								6.4%				0.5 pts
NET INTEREST EXPENSE			14				—				14				24				—				24				(42%	)
OTHER EXPENSE, NET			4				—				4				117				(112	)			5				(20%	)
PRE-TAX INCOME			727				79				806				641				112				753				7%
INCOME TAX EXPENSE			149				31				180				117				42				159				13%
% of Pre-Tax Income			20.5%								22.3%				18.3%								21.1%				1.2 pts
NET INCOME			578				48				626				524				70				594				5%
LESS: NONCONTROLLING INTERESTS			2				—				2				(1	)			—				(1	)			N/M
NET INCOME ATTRIBUTABLE TO BAXTER			$      576				$    48				$      624				$      525				$    70				$      595				5%
BASIC EPS			$     1.02				$ 0.08				$     1.10				$     0.90				$ 0.12				$     1.02				8%
DILUTED EPS			$     1.01				$ 0.08				$     1.09				$     0.89				$ 0.12				$     1.01				8%
WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
Basic			566								566				584								584
Diluted			571								571				587								587

 

1	Marketing and administrative expenses in 2011 included a charge totaling $79 million ($48 million, or $0.08 per diluted share, on an after-tax basis) related to the resolution of litigation pertaining to AWP and certain historical rebate and discount adjustments.

 

2	Other expense, net in 2010 included an impairment charge of $112 million ($70 million, or $0.12 per diluted share, on an after-tax basis) principally to write down assets associated with the company’s divestiture of its U.S. generic injectables business.

 

3	Represents the percentage change between the 2011 and 2010 results, both excluding specified items.

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

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BAXTER — PAGE 10

 

BAXTER INTERNATIONAL INC.

Consolidated Statements of Income

Nine Months Ended September 30, 2011 and 2010

(unaudited)

(in millions, except per share and percentage data)

 

			Excluding				Excluding				Excluding
		Nine Months Ended September 30,
		2011				2010				Change
NET SALES			$  10,299				$   9,345	A			10%
COST OF SALES			5,018				5,005	A			0%
GROSS MARGIN			5,281				4,340				22%
% of Net Sales			51.3%				46.4%				4.9 pts
MARKETING AND ADMINISTRATIVE EXPENSES			2,268	B			2,074	B			9%
% of Net Sales			22.0%				22.2%				(0.2 pts	)
RESEARCH AND DEVELOPMENT EXPENSES			692				653				6%
% of Net Sales			6.7%				7.0%				(0.3 pts	)
NET INTEREST EXPENSE			39				68				(43%	)
OTHER EXPENSE, NET			21				122	C			(83%	)
PRE-TAX INCOME			2,261				1,423				59%
INCOME TAX EXPENSE			477				422	D			13%
% of Pre-Tax Income			21.1%				29.7%				(8.6 pts	)
NET INCOME			1,784				1,001				78%
LESS: NONCONTROLLING INTERESTS			23				4				N/M
NET INCOME ATTRIBUTABLE TO BAXTER			$    1,761				$       997				77%
BASIC EPS			$      3.08				$      1.68				83%
DILUTED EPS			$      3.06				$      1.67				83%
WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
Basic			571				593
Diluted			575				597
ADJUSTED PRE-TAX INCOME (excluding specified items)			$    2,340	E			$     2,151	E			9%
ADJUSTED NET INCOME ATTRIBUTABLE TO BAXTER (excluding specified items)			$    1,809	E			$     1,716	E			5%
ADJUSTED DILUTED EPS (excluding specified items)			$      3.14	E			$       2.87	E			9%

 

A

Net sales and cost of sales in the first quarter of 2010 included a charge totaling $588 million, or $0.98 per diluted share, which related to the recall of COLLEAGUE infusion pumps from the U.S. market and other actions the company is undertaking outside of the United States, for which there was no net tax benefit recognized.

 

B

Marketing and administrative expenses in the third quarter of 2011 included a charge totaling $79 million ($48 million, or $0.08 per diluted share, on an after-tax basis) related to the resolution of litigation pertaining to AWP and certain historical rebate and discount adjustments. Marketing and administrative expenses in the second quarter of 2010 included a charge of $28 million ($22 million, or $0.03 per diluted share, on an after-tax basis) to write down accounts receivable in Greece, principally as a result of the anticipated settlement of certain accounts receivable with the Greek government.

 

C	Other expense, net in the third quarter of 2010 included an impairment charge of $112 million ($70 million, or $0.12 per diluted share, on an after-tax basis) principally to write down assets associated with the company’s divestiture of its U.S. generic injectables business.

 

D	Income tax expense in the first quarter of 2010 included a charge of $39 million, or $0.07 per diluted share, to write off a deferred tax asset as a result of a change in the tax treatment of reimbursements under the Medicare Part D retiree prescription drug subsidy program.

 

E	Refer to page 11 for a description of the adjustments and a reconciliation to GAAP measures.

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BAXTER — PAGE 11

 

BAXTER INTERNATIONAL INC.

Note to Consolidated Statements of Income

Nine Months Ended September 30, 2011 and 2010

Description of Adjustments and Reconciliation of GAAP to Non-GAAP Measures

(unaudited)

(in millions, except per share and percentage data)

The company’s GAAP results for the nine months ended September 30, 2011 and 2010 included specified items which impacted the GAAP results as follows:

 

			Excluding				Excluding				Excluding				Excluding				Excluding				Excluding				Excluding
		Nine Months Ended September 30,
		2011												2010
			GAAP				Specified items	1			Excluding specified items				GAAP				Specified items	2			Excluding specified items				Change 3
NET SALES			$  10,299				$  —				$  10,299				$   9,345				$   213				$   9,558				8%
COST OF SALES			5,018				—				5,018				5,005				(375	)			4,630				8%
GROSS MARGIN			5,281				—				5,281				4,340				588				4,928				7%
% of Net Sales			51.3%								51.3%				46.4%								51.6%				(0.3 pts	)
MARKETING AND ADMINISTRATIVE EXPENSES			2,268				(79	)			2,189				2,074				(28	)			2,046				7%
% of Net Sales			22.0%								21.3%				22.2%								21.4%				(0.1 pt	)
RESEARCH AND DEVELOPMENT EXPENSES			692				—				692				653				—				653				6%
% of Net Sales			6.7%								6.7%				7.0%								6.8%				(0.1 pt	)
NET INTEREST EXPENSE			39				—				39				68				—				68				(43%	)
OTHER EXPENSE, NET			21				—				21				122				(112	)			10				110%
PRE-TAX INCOME			2,261				79				2,340				1,423				728				2,151				9%
INCOME TAX EXPENSE			477				31				508				422				9				431				18%
% of Pre-Tax Income			21.1%								21.7%				29.7%								20.0%				1.7 pts
NET INCOME			1,784				48				1,832				1,001				719				1,720				7%
LESS: NONCONTROLLING INTERESTS			23				—				23				4				—				4				N/M
NET INCOME ATTRIBUTABLE TO BAXTER			$    1,761				$    48				$    1,809				$      997				$   719				$   1,716				5%
BASIC EPS			$      3.08				$ 0.09				$      3.17				$     1.68				$  1.22				$     2.90				9%
DILUTED EPS			$      3.06				$ 0.08				$      3.14				$     1.67				$  1.20				$     2.87				9%
WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
Basic			571								571				593								593
Diluted			575								575				597								597

 

1	Marketing and administrative expenses in the third quarter of 2011 included a charge totaling $79 million ($48 million, or $0.08 per diluted share, on an after-tax basis) related to the resolution of litigation pertaining to AWP and certain historical rebate and discount adjustments.

 

2

Net sales and cost of sales in the first quarter of 2010 included a charge totaling $588 million, or $0.98 per diluted share, which related to the recall of COLLEAGUE infusion pumps from the U.S. market and other actions the company is undertaking outside of the United States, for which there was no net tax benefit recognized. Marketing and administrative expenses in the second quarter of 2010 included a charge of $28 million ($22 million, or $0.03 per diluted share, on an after-tax basis) to write down accounts receivable in Greece, principally as a result of the anticipated settlement of certain accounts receivable with the Greek government. Other expense, net in the third quarter of 2010 included an impairment charge of $112 million ($70 million, or $0.12 per diluted share, on an after-tax basis) principally to write down assets associated with the company’s divestiture of its U.S. generic injectables business. Income tax expense in the first quarter of 2010 included a charge of $39 million, or $0.07 per diluted share, to write off a deferred tax asset as a result of a change in the tax treatment of reimbursements under the Medicare Part D retiree prescription drug subsidy program.

 

3	Represents the percentage change between the 2011 and 2010 results, both excluding specified items.

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

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BAXTER — PAGE 12

 

BAXTER INTERNATIONAL INC.

Cash Flows from Operations and Changes in Net Debt

(unaudited)

($ in millions)

 

			September30,2011				September30,2011				September30,2011				September30,2011
Cash Flows from Operations
(Brackets denote cash outflows)
		Three Months  Ended September 30,								Nine Months  Ended September 30,
		2011				2010				2011				2010
Net income			$   578				$     524				$ 1,784				$ 1,001
Adjustments
Depreciation and amortization			176				171				503				506
Deferred income taxes			58				49				218				169	A
Stock compensation			33				29				94				92
Realized excess tax benefits from stock issued under employee benefit plans			(4	)			(1	)			(17	)			(35	)
COLLEAGUE infusion pump charge			—				—				—				588
Impairment charge			—				112				—				112
Other			85				23				103				56
Changes in balance sheet items
Accounts and other current receivables			55				11				(102	)			(27	)
Inventories			(58	)			25				(272	)			(94	)
Accounts payable and accrued liabilities			34				114				(90	)			(38	)
Infusion pump and business optimization payments			(111	)			(21	)			(258	)			(62	)
Other			76				(30	)			(38	) B			(200	) B
Cash flows from operations			$   922				$  1,006				$ 1,925				$ 2,068
Changes in Net Debt
Increase (decrease)
		Three Months  Ended September 30,								Nine Months  Ended September 30,
		2011				2010				2011				2010
Net debt, beginning of period			$  2,382				$  2,514				$  1,702				$  1,365
Cash flows from operations			(922	)			(1,006	)			(1,925	)			(2,068	)
Capital expenditures			235				232				643				699
Dividends			176				171				534				519
Proceeds from stock issued under employee benefit plans			(97	)			(33	)			(388	)			(234	)
Purchases of treasury stock			298				161				1,413				1,273
Acquisitions and investments			27				20				229	C			274	C
Divestiture and other			—				—				(106	)			—
Other, including the effect of exchange rate changes			105				36				102				267
(Decrease) increase in net debt			(178	)			(419	)			502				730
Net debt, September 30			$  2,204				$  2,095				$  2,204				$  2,095
Key statistics, September 30:
Days sales outstanding			54.5				56.2				54.5				56.2
Inventory turns			2.5				2.4				2.5				2.4
Selected balance sheet information:										September 30, 2011				December 31, 2010
Cash and equivalents											$2,338				$2,685
Accounts and other current receivables											$2,347				$2,265
Inventories											$2,621				$2,371
Accounts payable and accrued liabilities											$4,070				$4,017

 

A	Deferred income taxes in the first quarter of 2010 included a charge of $39 million to write off a deferred tax asset as a result of a change in the tax treatment of reimbursements under the Medicare Part D retiree prescription drug subsidy program.

 

B	Other cash flows from operations included planned contributions to the company’s pension plan in the United States of $150 million and $300 million in the first quarters of 2011 and 2010, respectively.

 

C

Acquisitions and investments in 2011 and 2010 principally related to the second quarter 2011 acquisition of Prism Pharmaceuticals, Inc., a specialty pharmaceutical company based in the United States, and the first quarter 2010 acquisition of ApaTech Limited, an orthobiologic products company based in the United Kingdom.

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BAXTER — PAGE 13

 

BAXTER INTERNATIONAL INC.

Net Sales

Periods Ending September 30, 2011 and 2010

(unaudited)

($ in millions)

 

			ConstantRates				ConstantRates				ConstantRates				ConstantRates				ConstantRates				ConstantRates				ConstantRates				ConstantRates
		Q3 2011				Q3 2010				% Growth @ Actual Rates				% Growth @     Constant Rates				YTD 2011				YTD 2010				% Growth @ Actual Rates				% Growth @ Constant Rates
BioScience
United States			$    699				$    666				5%				5%				$   2,070				$ 1,912				8%				8%
International			818				721				13%				4%				2,408				2,195				10%				4%
Total BioScience			$1,517				$1,387				9%				4%				$  4,478				$4,107				9%				6%
Medical Products 1
United States 2,3			$    692				$    713				(3%)				(3%)				$   2,144				$ 2,097				2%				2%
International			1,258				1,111				13%				4%				3,647				3,317				10%				4%
Total Medical Products - Adjusted 2,3			$1,950				$1,824				7%				1%				$  5,791				$5,414				7%				3%
COLLEAGUE infusion pump charge 2																							(213	)
Total Medical Products - GAAP 2,3			$1,950				$1,824				7%				1%				$  5,791				$5,201				11%				7%
Transfusion Therapies 4
United States			$      12				$      10				20%				20%				$        29				$      28				4%				4%
International			—				3				N/M				N/M				1				9				(89%)				(89%)
Total Transfusion Therapies			$     12				$     13				(8%)				(8%)				$       30				$    37				(19%)				(19%)
Baxter International Inc.
United States 2,3			$ 1,403				$ 1,389				1%				1%				$   4,243				$ 4,037				5%				5%
International			2,076				1,835				13%				4%				6,056				5,521				10%				4%
Total Baxter - Adjusted 2,3			$3,479				$3,224				8%				3%				$10,299				$9,558				8%				4%
COLLEAGUE infusion pump charge 2																							(213	)
Total Baxter - GAAP 2,3			$3,479				$3,224				8%				3%				$10,299				$9,345				10%				7%
1         Medical Products represents the combination of the company’s former Medication Delivery and Renal businesses into a single global business unit. Effective January 1, 2011, the company changed its segment presentation to reflect this new structure, and recast all prior periods presented to conform to the new presentation.   2         GAAP net sales in the first quarter of 2010 included a charge of $213 million related to the recall of COLLEAGUE infusion pumps. Refer to page 17 for a reconciliation to GAAP measures.   3         Included net sales related to the U.S. generic injectables business through the May 2011 divestiture date. The impact on adjusted net sales for total Medical Products and total Baxter was as follows ($ in millions):
		Q3 2011				Q3 2010				% Growth @ Actual Rates				% Growth @     Constant Rates				YTD 2011				YTD 2010				% Growth @ Actual Rates				% Growth @ Constant Rates
Total Medical Products - Adjusted 2			$1,950				$1,824				7%				1%				$  5,791				$5,414				7%				3%
U.S. generic injectables business							(57	)											(58	)			(143	)
Total Medical Products - Adjusted (Excluding U.S. Generic Injectables)			$1,950				$1,767				10%				4%				$  5,733				$5,271				9%				5%
Total Baxter - Adjusted 2			$3,479				$3,224				8%				3%				$10,299				$9,558				8%				4%
U.S. generic injectables business							(57	)											(58	)			(143	)
Total Baxter - Adjusted (Excluding U.S. Generic Injectables)			$3,479				$3,167				10%				4%				$10,241				$9,415				9%				5%
4         Represents revenues associated with manufacturing, distribution and other services provided by the company to the buyer of the Transfusion Therapies (TT) business after the February 2007 divestiture.

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BAXTER — PAGE 14

 

BAXTER INTERNATIONAL INC.

GAAP Key Product Line Sales

Periods Ending September 30, 2011 and 2010

(unaudited)

($ in millions)

 

			Constant Rates				Constant Rates				Constant Rates				Constant Rates				Constant Rates				Constant Rates				Constant Rates				Constant Rates
		GAAP Q3 2011				GAAP Q3 2010				% Growth @ Actual Rates				% Growth @     Constant Rates				GAAP YTD 2011				GAAP YTD 2010				% Growth @ Actual Rates				% Growth @ Constant Rates
BioScience
Recombinants			$   552				$   526				5%				(1%)				$  1,634				$1,561				5%				1%
Plasma Proteins			372				346				8%				4%				1,043				952				10%				7%
Antibody Therapy			380				336				13%				11%				1,135				968				17%				17%
Regenerative Medicine			143				130				10%				5%				430				382				13%				10%
Other 1			70				49				43%				15%				236				244				(3%	)			(12%	)
Total BioScience			$1,517				$1,387				9%				4%				$  4,478				$4,107				9%				6%
Medical Products 2
Renal			$   646				$   594				9%				2%				$  1,866				$1,763				6%				1%
Global Injectables			494				469				5%				0%				1,517				1,392				9%				6%
IV Therapies			453				417				9%				3%				1,333				1,226				9%				5%
Infusion Systems 3			222				213				4%				1%				666				425				57%				53%
Anesthesia			129				127				2%				(2%)				390				384				2%				(1%	)
Other			6				4				40%				(4%)				19				11				73%				13%
Total Medical Products 3			$1,950				$1,824				7%				1%				$  5,791				$5,201				11%				7%
Transfusion Therapies 4			$     12				$     13				(8%	)			(8%)				$       30				$     37				(19%	)			(19%	)
Total Baxter 3			$3,479				$3,224				8%				3%				$10,299				$9,345				10%				7%

 

1	Principally includes vaccines and sales of plasma to third parties.

 

2

Medical Products represents the combination of the company’s former Medication Delivery and Renal businesses into a single global business unit. Effective January 1, 2011, the company changed its segment presentation to reflect this new structure, and recast all prior periods presented to conform to the new presentation.

 

3	GAAP net sales in the first quarter of 2010 included a charge of $213 million related to the recall of COLLEAGUE infusion pumps. Refer to page 17 for a reconciliation to GAAP measures.

 

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

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BAXTER — PAGE 15

 

BAXTER INTERNATIONAL INC.

Adjusted Key Product Line Sales

Periods Ending September 30, 2011 and 2010

(unaudited)

($ in millions)

 

			ConstantRates				ConstantRates				ConstantRates				ConstantRates				ConstantRates				ConstantRates				ConstantRates				ConstantRates
			GAAP Q3  2011	1			GAAP Q3 2010	1			% Growth @ Actual Rates				% Growth @     Constant Rates				GAAP YTD 2011	1			Adjusted YTD 2010				% Growth @ Actual Rates				% Growth @ Constant Rates
BioScience
Recombinants			$   552				$   526				5%				(1%)				$  1,634				$1,561				5%				1%
Plasma Proteins			372				346				8%				4%				1,043				952				10%				7%
Antibody Therapy			380				336				13%				11%				1,135				968				17%				17%
Regenerative Medicine			143				130				10%				5%				430				382				13%				10%
Other 2			70				49				43%				15%				236				244				(3%	)			(12%	)
Total BioScience			$1,517				$1,387				9%				4%				$  4,478				$4,107				9%				6%
Medical Products 3
Renal			$   646				$   594				9%				2%				$  1,866				$1,763				6%				1%
Global Injectables			494				469				5%				0%				1,517				1,392				9%				6%
IV Therapies			453				417				9%				3%				1,333				1,226				9%				5%
Infusion Systems - Adjusted 4			222				213				4%				1%				666				638				4%				2%
Anesthesia			129				127				2%				(2%)				390				384				2%				(1%	)
Other			6				4				40%				(4%)				19				11				73%				13%
Total Medical Products - Adjusted 4			$1,950				$1,824				7%				1%				$  5,791				$5,414				7%				3%
Transfusion Therapies 5			$     12				$     13				(8%	)			(8%)				$       30				$     37				(19%	)			(19%	)
Total Baxter - Adjusted 4			$3,479				$3,224				8%				3%				$10,299				$9,558				8%				4%

 

1	There were no adjustments included in the 2011 GAAP results or the Q3 2010 GAAP results.

 

2	Principally includes vaccines and sales of plasma to third parties.

 

3

Medical Products represents the combination of the company’s former Medication Delivery and Renal businesses into a single global business unit. Effective January 1, 2011, the company changed its segment presentation to reflect this new structure, and recast all prior periods presented to conform to the new presentation.

 

4	Adjusted net sales in the first quarter of 2010 excluded a charge of $213 million related to the recall of COLLEAGUE infusion pumps. Refer to page 17 for a reconciliation to GAAP measures.

 

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

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BAXTER — PAGE 16

 

BAXTER INTERNATIONAL INC.

Key Product Line Sales by U.S. and International

Three-Month Periods Ending September 30, 2011 and 2010

(unaudited)

($ in millions)

 

			$1,403				$1,403				$1,403				$1,403				$1,403				$1,403				$1,403				$1,403				$1,403
		Q3 2011												Q3 2010												% Growth
			U.S.				International				Total				U.S.				International				Total				U.S.				International				Total
BioScience
Recombinants			$   246				$   306				$   552				$   237				$   289				$   526				4%				6%				5%
Plasma Proteins			104				268				372				113				233				346				(8%	)			15%				8%
Antibody Therapy			267				113				380				230				106				336				16%				7%				13%
Regenerative Medicine			78				65				143				79				51				130				(1%	)			27%				10%
Other 1			4				66				70				7				42				49				(43%	)			57%				43%
Total BioScience			$   699				$   818				$1,517				$   666				$   721				$1,387				5%				13%				9%
Medical Products 2
Renal			$     96				$   550				$   646				$     99				$   495				$   594				(3%	)			11%				9%
Global Injectables 3			237				257				494				257				212				469				(8%	)			21%				5%
IV Therapies			148				305				453				144				273				417				3%				12%				9%
Infusion Systems			133				89				222				127				86				213				5%				3%				4%
Anesthesia			77				52				129				84				43				127				(8%	)			21%				2%
Other			1				5				6				2				2				4				(57%	)			150%				40%
Total Medical Products 3			$   692				$1,258				$1,950				$   713				$1,111				$1,824				(3%	)			13%				7%
Transfusion Therapies 4			$     12				$   —				$     12				$     10				$       3				$     13				20%				N/M				(8%	)
Total Baxter 3			$1,403				$2,076				$3,479				$1,389				$1,835				$3,224				1%				13%				8%
1         Principally includes vaccines and sales of plasma to third parties.   2          Medical Products represents the combination of the company’s former Medication Delivery and Renal businesses into a single global business unit. Effective January 1, 2011, the company changed its segment presentation to reflect this new structure, and recast all prior periods presented to conform to the new presentation.   3          Included net sales related to the U.S. generic injectables business through the May 2011 divestiture date. The impact on GAAP net sales for total Medical Products and total Baxter was as follows ($ in millions):
		Q3 2011												Q3 2010												% Growth
			U.S.				International				Total				U.S.				International				Total				U.S.				International				Total
Total Medical Products			$   692				$1,258				$1,950				$  713				$1,111				$1,824				(3%	)			13%				7%
U.S. generic injectables business															(57	)							(57	)
Total Medical Products (Excluding U.S. Generic Injectables)			$   692				$1,258				$1,950				$  656				$1,111				$1,767				6%				13%				10%
Total Baxter			$1,403				$2,076				$3,479				$1,389				$1,835				$3,224				1%				13%				8%
U.S. generic injectables business															(57	)							(57	)
Total Baxter (Excluding U.S. Generic Injectables)			$1,403				$2,076				$3,479				$1,332				$1,835				$3,167				5%				13%				10%
4         Represents revenues associated with manufacturing, distribution and other services provided by the company to the buyer of the TT business after the February 2007 divestiture.

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BAXTER — PAGE 17

 

BAXTER INTERNATIONAL INC.

Reconciliation of GAAP to Non-GAAP Net Sales Measures

Periods Ending September 30, 2011 and 2010

(unaudited)

($ in millions)

The company’s GAAP net sales results for the nine months ended September 30, 2010 included a $213 million charge related to the recall of COLLEAGUE infusion pumps, which impacted GAAP net sales as follows:

 

			000000				000000				000000				000000				000000				000000				000000				000000				000000				000000				000000				000000
		2011 YTD												2010 YTD												% Growth @ Actual Rates												% Growth @ Constant Rates
			U.S.				International				Total				U.S.				International				Total				U.S.				International				Total				U.S.				International				Total
Infusion Systems - GAAP											$     666												$   425												57%												53%
COLLEAGUE infusion pump charge																							213
Infusion Systems - Adjusted											$     666												$   638												4%												2%
Total Medical Products - GAAP			$2,144				$3,647				$  5,791				$1,884				$3,317				$5,201				14%				10%				11%				14%				4%				7%
COLLEAGUE infusion pump charge															213								213
Total Medical Products - Adjusted			$2,144				$3,647				$  5,791				$2,097				$3,317				$5,414				2%				10%				7%				2%				4%				3%
Total Baxter - GAAP			$4,243				$6,056				$10,299				$3,824				$5,521				$9,345				11%				10%				10%				11%				4%				7%
COLLEAGUE infusion pump charge															213								213
Total Baxter - Adjusted			$4,243				$6,056				$10,299				$4,037				$5,521				$9,558				5%				10%				8%				5%				4%				4%

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