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8-K - FORM 8-K - BAXTER INTERNATIONAL INCd474503d8k.htm

Exhibit 99.1

 

LOGO

FOR IMMEDIATE RELEASE

Media Contact:

Deborah Spak, (224) 948-2349

Investor Contacts:

Mary Kay Ladone, (224) 948-3371

Clare Trachtman, (224) 948-3085

BAXTER REPORTS RECORD SALES, EARNINGS AND CASH FLOW

FOR FULL-YEAR 2012

Increased Investments in R&D and Business Development

Set Strong Foundation for 2013 and Beyond

Baxter Provides Financial Outlook For 2013

DEERFIELD, Ill., January 24, 2013 — Baxter International Inc. (NYSE:BAX) today announced financial results for the fourth quarter of 2012, and provided its financial outlook for the first quarter and full-year 2013.

Baxter reported net income in the fourth quarter of $494 million, which compares to $463 million reported in the prior-year period. Earnings per diluted share of $0.89 compares to $0.82 per diluted share reported in the fourth quarter of 2011, reflecting an increase of 9 percent. The fourth quarter 2012 results included special after-tax items of $206 million (or $0.37 per diluted share) primarily related to costs associated with settlement of certain U.S. pension obligations and business optimization initiatives. After-tax special items in the fourth quarter of 2011 totaled approximately $200 million (or $0.35 per diluted share).

On an adjusted basis, excluding special items in both periods, Baxter’s net income of $700 million increased 6 percent in the fourth quarter from $662 million in the prior-year period. Adjusted earnings per diluted share of $1.26 advanced

 

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BAXTER REPORTS 4th QUARTER FINANCIAL RESULTS — Page  2

 

8 percent from $1.17 per diluted share reported in the fourth quarter of 2011. These results were in line with the company’s previously issued earnings guidance of $1.24 to $1.27 per diluted share.

Worldwide revenues grew 4 percent in the fourth quarter to $3.8 billion compared to $3.6 billion in the fourth quarter of 2011. Excluding the impact of foreign currency, sales increased 5 percent. Sales within the United States of $1.6 billion advanced 7 percent, and international sales increased 2 percent to $2.2 billion (or 4 percent excluding the impact of foreign currency).

BioScience revenues totaled $1.7 billion and rose 7 percent (or 9 percent excluding the impact of foreign currency) from the same period last year. Driving this performance was robust growth in demand, particularly in the United States, for ADVATE [Antihemophilic Factor (Recombinant), Plasma/Albumin-Free Method], and GAMMAGARD LIQUID [Immune Globulin Intravenous (Human)], as well as other plasma-based therapeutics including FEIBA, an inhibitor bypass therapy, and albumin. In addition, the company benefited from milestone payments related to the company’s ongoing collaborations with governments on the development of influenza vaccines, and the acquisition of Synovis Life Technologies.

Medical Products sales totaled $2.1 billion and increased 2 percent over the prior-year period (or 3 percent excluding the impact of foreign currency), driven primarily by gains in peritoneal dialysis patients in the U.S., as well as growth in intravenous therapies (including the company’s parenteral nutrition products), certain injectable drugs including oncolytics and critical care products, and a benefit from the company’s acquisition of Baxa Corporation.

 

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BAXTER REPORTS 4th QUARTER FINANCIAL RESULTS — Page  3

 

Full-Year 2012 Results

For the full year 2012, Baxter reported net income of $2.3 billion or $4.18 per diluted share, compared to net income of $2.2 billion or $3.88 per diluted share in 2011. On an adjusted basis, excluding special items in both years, Baxter’s net income was $2.5 billion in 2012, which represents an increase of 2 percent over the prior year, and earnings per diluted share of $4.53 rose 5 percent from earnings per diluted share of $4.31 reported in 2011.

Baxter’s worldwide sales totaled $14.2 billion for full-year 2012 and increased 2 percent versus the prior-year period (or 5 percent excluding the impact of foreign currency). Sales within the United States of $6.1 billion advanced 6 percent in 2012, and international sales declined 1 percent to $8.1 billion (but increased 4 percent excluding the impact of foreign currency). BioScience sales improved 3 percent (or 6 percent excluding the impact of foreign currency) to $6.2 billion, while Medical Products sales increased 1 percent to $8.0 billion (or 4 percent excluding the impact of foreign currency).

Baxter generated strong cash flows from operations in 2012 and returned significant value to shareholders in the form of dividends and share repurchases. Cash flows from operations rose 10 percent and totaled more than $3.1 billion in 2012, a record level. Baxter returned approximately $2.3 billion to shareholders during the year, through dividends totaling $800 million and share repurchases of approximately $1.5 billion (or approximately 25 million shares).

At the same time, Baxter increased its investments in research and development to $1.2 billion, reflecting an increase of 22 percent, as the company advanced a number of clinical programs in its pipeline, expanded its portfolio with

 

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BAXTER REPORTS 4th QUARTER FINANCIAL RESULTS — Page  4

 

several product launches and line extensions, and initiated several new programs and collaborations. In addition, Baxter announced investments to enhance future plasma production capacity with a new state-of-the-art manufacturing facility in Georgia and a collaboration with Stichting Sanquin Bloedvoorziening (Sanquin Blood Supply Foundation) in the Netherlands to support growth of its plasma-based treatments. The company also entered into a number of partnerships, such as a novel public-private partnership in Brazil to expand patient access to vital hemophilia therapies, and executed several business development initiatives to enhance future growth, including the proposed acquisition of Gambro AB, a global medical technology company focused on developing, manufacturing and supplying dialysis products and therapies for patients with acute or chronic kidney disease.

“The progress we have made during 2012, together with our solid financial performance, sets a very strong foundation for 2013 and beyond. We remain very confident in the long-term growth prospects for our company,” said Robert L. Parkinson, Jr., chairman and chief executive officer. “Baxter’s core portfolio continues to benefit from our focus on life-saving therapies, and the increased level of R&D investment has transformed our new product pipeline into a robust portfolio of products and therapies directed at improving the quality of care while addressing key, high-potential areas of unmet medical need. We’ve also entered into a number of partnerships and executed business development initiatives that align with our core strengths, position Baxter for future success, and enhance shareholder value.”

 

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BAXTER REPORTS 4th QUARTER FINANCIAL RESULTS — Page  5

 

Recent achievements reflecting these priorities include the following:

 

   

Announcement of pivotal Phase III study results evaluating the efficacy and safety of routine prophylaxis compared to on-demand treatment of FEIBA NF [Anti-Inhibitor Coagulant Complex], Nanofiltered and Vapor Heated, in patients with hemophilia A or B that develop inhibitors. Top-line results from the study showed a reduced median annual bleed rate from 28.7 during FEIBA NF on-demand treatment to 7.9 during FEIBA NF prophylactic treatment (a 72.5 percent reduction). The Phase III study will form the basis of a biologics license application to be filed with the U.S. Food and Drug Administration (FDA) in the first quarter of 2013.

 

   

Submission of an Investigational New Drug application for hemophilia A treatment BAX 855 with the FDA, following positive results from a Phase I trial. BAX 855 is a full-length longer-acting recombinant factor VIII (rFVIII) that was developed to increase the half-life of ADVATE [Antihemophilic Factor (Recombinant) Plasma/Albumin-Free Method] — the most widely chosen rFVIII in the world. Baxter expects to start enrollment of adult patients in its Phase II/III study in the first quarter of 2013.

 

   

Execution of an exclusive 20-year partnership with Hemobrás (Empresa Brasileira de Hemoderivados e Biotechnologia) to provide hemophilia patients in Brazil greater access to recombinant factor VIII (rFVIII) therapy for the treatment of hemophilia A. Hemophilia A is a genetic condition in which the body does not produce enough clotting protein factor VIII. It is estimated that more than 10,000 people in Brazil are living with hemophilia A, and today the vast majority are treated with plasma-derived FVIII therapy. Through this innovative partnership, Baxter will be the exclusive provider of Brazil’s recombinant FVIII treatment over the next 10 years while the companies work together on a technology transfer to support development of local manufacturing capacity by Hemobrás.

 

   

Completion of the first U.S. study of the company’s home hemodialysis system and initiation of a nocturnal in-center trial in Canada. Data from both trials will support the company’s submission for CE Mark in Europe in 2013.

 

   

Conclusion of Baxter’s first Phase III trial evaluating IG therapy in mild to moderate Alzheimer’s disease patients. Initial data from the trial are expected to be released in the second quarter of 2013, and the company continues enrollment in a second, confirmatory Phase III trial.

 

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BAXTER REPORTS 4th QUARTER FINANCIAL RESULTS — Page  6

 

Outlook for First Quarter, Full-Year 2013

Baxter also announced today its outlook for the first quarter and full-year 2013. The company’s full-year guidance includes the impact of the Gambro AB acquisition, which is projected to close at the end of the second quarter and dilute full-year 2013 earnings by $0.10 to $0.15 per diluted share. Including Gambro, Baxter’s guidance reflects sales growth for the full-year 2013 of approximately 10 percent, before the impact of foreign exchange. Also, for the full year, Baxter expects earnings of $4.60 to $4.70 per diluted share, before any special items, and cash flows from operations of approximately $3.3 billion.

For the first quarter of 2013, the company expects sales growth of approximately 2 to 3 percent, excluding the impact of foreign currency. Baxter expects earnings of $1.03 to $1.05 per diluted share in the first quarter, before any special items.

A webcast of Baxter’s fourth 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. CST on January 24, 2013. Please visit www.baxter.com 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.

 

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BAXTER REPORTS 4th QUARTER FINANCIAL RESULTS — Page  7

 

This release includes forward-looking statements concerning the company’s financial results, business development activities, R&D pipeline and outlook for 2013. 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 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; the ability of the company to obtain required regulatory approvals, satisfy closing conditions and close the Gambro AB transaction in a timely manner; future actions of governmental authorities and other third parties as U.S. healthcare reform legislation and other austerity measures are implemented globally; additional legislation, regulation and other governmental pressures, which may affect pricing, taxation, reimbursement and rebate policies of government agencies and private payers or other elements of the company’s business; product development risks, including satisfactory clinical performance; the company’s ability to realize the anticipated benefits from its business development and R&D activities; 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; the impact of global economic conditions on Baxter and its customers, including foreign governments in certain countries in which the company operates; 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 December 31, 2012 and 2011

(unaudited)

(in millions, except per share and percentage data)

 

                                                        
    Three Months Ended
December 31,
       
    2012     2011     Change  

NET SALES

    $   3,753        $     3,594        4%   

COST OF SALES

    1,848        1,829        1%   
     

 

 

GROSS MARGIN

    1,905        1,765        8%   

 

 

% of Net Sales

    50.8%        49.1%        1.7 pts   

MARKETING AND ADMINISTRATIVE EXPENSES

    1,040        886        17%   

% of Net Sales

    27.7%        24.7%        3.0 pts   

RESEARCH AND DEVELOPMENT EXPENSES

    291        254        15%   

% of Net Sales

    7.8%        7.1%        0.7 pts   

NET INTEREST EXPENSE

    22        15        47%   

OTHER (INCOME) EXPENSE, NET

    (22 ) A      71  A      N/M   
     

 

 

PRE-TAX INCOME

    574        539        6%   

 

 

INCOME TAX EXPENSE

    80        76        5%   

 

 

% of Pre-Tax Income

    13.9%        14.1%        (0.2 pts

NET INCOME

    $      494        $       463        7%   

 

 

BASIC EPS

    $     0.90        $      0.82        10%   

 

 

DILUTED EPS

    $     0.89        $      0.82        9%   

 

 

WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING

     

Basic

    548        562     

Diluted

    555        566     

 

 

ADJUSTED PRE-TAX INCOME (excluding special items)

    $       894  B      $       834  B      7%   

ADJUSTED NET INCOME (excluding special items)

    $       700  B      $       662  B      6%   

ADJUSTED DILUTED EPS (excluding special items)

    $      1.26  B      $      1.17  B      8%   

 

A 

Other (income) expense, net includes the net results attributable to noncontrolling interests, which had been reported separately in the prior year. The prior period consolidated statement of income presented above, the reconciliation of GAAP (generally accepted accounting principles) to non-GAAP measures presented on page 9, and the cash flows from operations schedule presented on page 12 have been conformed to the current period presentation.

 

B 

Refer to page 9 for a description of the adjustments and a reconciliation to GAAP measures.


BAXTER — PAGE  9

 

BAXTER INTERNATIONAL INC.

Note to Consolidated Statements of Income

Three Months Ended December 31, 2012 and 2011

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 December 31, 2012 and 2011 included special items which impacted the GAAP measures as follows:

 

                                                        
    Three Months  Ended
December 31,
       
    2012        2011        Change   

Gross Margin

    $   1,905        $    1,765        8%   

Business optimization items 1

    62        95     
 

 

 

 

Adjusted Gross Margin

    $   1,967        $    1,860        6%   
 

 

 

 

% of Net Sales

    52.4%        51.8%        0.6 pts   

Marketing and Administrative Expenses

    $   1,040        $       886        17%   

Business optimization items 1

    (60     (97  

Pension settlement items 2

    (170         

Asset impairment and other items 3

           (41  
 

 

 

 

Adjusted Marketing and Administrative Expenses

    $      810        $       748        8%   
 

 

 

 

% of Net Sales

    21.6%        20.8%        0.8 pts   

Research and Development Expenses

    $      291        $       254        15%   

Business optimization items 1

    (28         
 

 

 

 

Adjusted Research and Development Expenses

    $      263        $       254        4%   
 

 

 

 

% of Net Sales

    7.0%        7.1%        (0.1 pts

Other (Income) Expense, Net

    $       (22     $         71        N/M   

Asset impairment and other items 3

           (62  
 

 

 

 

Adjusted Other (Income) Expense, Net

    $       (22     $           9        N/M   
 

 

 

 

Pre-Tax Income

    $      574        $       539        6%   

Impact of special items

    320        295     
 

 

 

 

Adjusted Pre-Tax Income

    $      894        $       834        7%   
 

 

 

 

Income Tax Expense

    $        80        $         76        5%   

Impact of special items

    114        96     
 

 

 

 

Adjusted Income Tax Expense

    $      194        $       172        13%   
 

 

 

 

% of Adjusted Pre-Tax Income

    21.7%        20.6%        1.1 pts   

Net Income

    $      494        $       463        7%   

Impact of special items

    206        199     
 

 

 

 

Adjusted Net Income

    $      700        $       662        6%   
 

 

 

 

Diluted EPS

    $     0.89        $      0.82        9%   

Impact of special items

    0.37        0.35     
 

 

 

 

Adjusted Diluted EPS

    $     1.26        $      1.17        8%   
 

 

 

 

WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING

     

Diluted

    555        566     

 

 

 

1 

The company undertook business optimization initiatives resulting in charges totaling $150 million ($101 million, or $0.18 per diluted share, on an after-tax basis) and $192 million ($128 million, or $0.22 per diluted share, on an after-tax basis) in 2012 and 2011, respectively.

 

2 

Marketing and administrative expenses in 2012 included a charge totaling $170 million ($105 million, or $0.19 per diluted share, on an after-tax basis) primarily related to the settlement of certain pension obligations in the United States.

 

3 

Marketing and administrative expenses and other (income) expense, net in 2011 included charges totaling $103 million ($71 million, or $0.13 per diluted share, on an after-tax basis) primarily related to a contribution to the Baxter International Foundation and the write-down of Greek government bonds.

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


BAXTER — PAGE  10

 

BAXTER INTERNATIONAL INC.

Consolidated Statements of Income

Twelve Months Ended December 31, 2012 and 2011

(unaudited)

(in millions, except per share and percentage data)

 

                                                        
    Twelve Months Ended
December 31,
       
    2012     2011     Change  

NET SALES

    $14,190        $ 13,893        2%   

COST OF SALES

    6,889        6,847        1%   
     

 

 

GROSS MARGIN

    7,301        7,046        4%   

 

 

% of Net Sales

    51.5%        50.7%        0.8 pts   

MARKETING AND ADMINISTRATIVE EXPENSES

    3,324        3,154        5%   

% of Net Sales

    23.4%        22.7%        0.7 pts   

RESEARCH AND DEVELOPMENT EXPENSES

    1,156        946        22%   

% of Net Sales

    8.1%        6.8%        1.3 pts   

NET INTEREST EXPENSE

    87        54        61%   

OTHER (INCOME) EXPENSE, NET

    (155 ) A      115  A      N/M   
     

 

 

PRE-TAX INCOME

    2,889        2,777        4%   

 

 

INCOME TAX EXPENSE

    563        553        2%   

 

 

% of Pre-Tax Income

    19.5%        19.9%        (0.4 pts

NET INCOME

    $  2,326        $   2,224        5%   

 

 

BASIC EPS

    $    4.22        $     3.91        8%   

 

 

DILUTED EPS

    $    4.18        $     3.88        8%   

 

 

WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING

     

Basic

    551        569     

Diluted

    556        573     

 

 

ADJUSTED PRE-TAX INCOME (excluding special items)

    $  3,223  B      $    3,151  B      2%   

ADJUSTED NET INCOME (excluding special items)

    $  2,516  B      $    2,471  B      2%   

ADJUSTED DILUTED EPS (excluding special items)

    $     4.53  B      $      4.31  B      5%   

 

A 

Other (income) expense, net includes the net results attributable to noncontrolling interests, which had been reported separately in the prior year. The prior period consolidated statement of income presented above, the reconciliation of GAAP to non-GAAP measures presented on page 11, and the cash flows from operations schedule presented on page 12 have been conformed to the current period presentation.

 

B 

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


BAXTER — PAGE  11

 

BAXTER INTERNATIONAL INC.

Note to Consolidated Statements of Income

Twelve Months Ended December 31, 2012 and 2011

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 twelve months ended December 31, 2012 and 2011 included special items which impacted the GAAP measures as follows:

 

                                                        
    Twelve Months Ended
December 31,
       
    2012        2011        Change   

Gross Margin

    $   7,301        $   7,046        4%   

Business optimization items 1

    62        95     

Reserve adjustments 2

    (23         

Business development items 3

    6            
 

 

 

 

Adjusted Gross Margin

    $   7,346        $   7,141        3%   
 

 

 

 

% of Net Sales

    51.8%        51.4%        0.4 pts   

Marketing and Administrative Expenses

    $   3,324        $   3,154        5%   

Business optimization items 1

    (60     (97  

Business development items 3

    (9         

Pension settlement items 4

    (170         

AWP litigation and historical rebate and discount items 5

           (79  

Asset impairment and other items 6

           (41  
 

 

 

 

Adjusted Marketing and Administrative Expenses

    $   3,085        $   2,937        5%   
 

 

 

 

% of Net Sales

    21.7%        21.1%        0.6 pts   

Research and Development Expenses

    $   1,156        $      946        22%   

Business optimization items 1

    (28         

Business development items 3

    (113         
 

 

 

 

Adjusted Research and Development Expenses

    $   1,015        $      946        7%   
 

 

 

 

% of Net Sales

    7.2%        6.8%        0.4 pts   

Other (Income) Expense, Net

    $     (155     $      115        N/M   

Reserve adjustments 2

    91            

Asset impairment and other items 6

           (62  
 

 

 

 

Adjusted Other (Income) Expense, Net

    $       (64     $        53        N/M   
 

 

 

 

Pre-Tax Income

    $   2,889        $   2,777        4%   

Impact of special items

    334        374     
 

 

 

 

Adjusted Pre-Tax Income

    $   3,223        $   3,151        2%   
 

 

 

 

Income Tax Expense

    $      563        $      553        2%   

Impact of special items

    144        127     
 

 

 

 

Adjusted Income Tax Expense

    $      707        $      680        4%   
 

 

 

 

% of Adjusted Pre-Tax Income

    21.9%        21.6%        0.3 pts   

Net Income

    $   2,326        $   2,224        5%   

Impact of special items

    190        247     
 

 

 

 

Adjusted Net Income

    $   2,516        $   2,471        2%   
 

 

 

 

Diluted EPS

    $     4.18        $     3.88        8%   

Impact of special items

    0.35        0.43     
 

 

 

 

Adjusted Diluted EPS

    $     4.53        $     4.31        5%   
 

 

 

 

WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING

     

Diluted

    556        573     

 

 

 

1 

The company undertook business optimization initiatives resulting in charges totaling $150 million ($101 million, or $0.18 per diluted share, on an after-tax basis) and $192 million ($128 million, or $0.22 per diluted share, on an after-tax basis) in 2012 and 2011, respectively.

 

2 

Cost of sales included a net benefit of $23 million ($27 million, or $0.05 per diluted share, on an after-tax basis) primarily related to an adjustment to the COLLEAGUE infusion pump reserves when the company substantially completed its recall activities in the United States in 2012. Other (income) expense, net in 2012 included a benefit of $91 million, or $0.16 per diluted share, consisting of gains of $53 million and $38 million for the reduction of certain contingent payment liabilities related to the prior acquisitions of Prism Pharmaceuticals, Inc. (Prism) and ApaTech Limited, respectively, for which there was no tax expense recognized.

 

3 

The company incurred business development charges in 2012 totaling $128 million ($102 million, or $0.19 per diluted share, on an after-tax basis) which principally related to R&D charges of $33 million associated with the company’s global collaboration with Momenta Pharmaceuticals, Inc. (Momenta), $30 million associated with the company’s global collaboration with Chatham Therapeutics, LLC (Chatham), and $50 million associated with the company’s licensing agreement with Onconova Therapeutics, Inc. (Onconova).

 

4 

Marketing and administrative expenses in 2012 included a charge totaling $170 million ($105 million, or $0.19 per diluted share, on an after-tax basis) primarily related to the settlement of certain pension obligations in the United States.

 

5 

Marketing and administrative expenses in 2011 included a charge totaling $79 million ($48 million, or $0.09 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.

 

6 

Marketing and administrative expenses and other (income) expense, net in 2011 included charges totaling $103 million ($71 million, or $0.12 per diluted share, on an after-tax basis) primarily related to a contribution to the Baxter International Foundation and the write-down of Greek government bonds.

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


BAXTER — PAGE  12

 

BAXTER INTERNATIONAL INC.

Cash Flows from Operations and Changes in Net Debt

(unaudited)

($ in millions)

 

                                                                           

 Cash Flows from Operations

  

   (Brackets denote cash outflows)   Three Months Ended
December 31,
    Twelve Months Ended
December 31,
 
    2012     2011     2012     2011  

   Net income

    $ 494        $ 463        $ 2,326        $ 2,224   

   Adjustments

       

   Depreciation and amortization

    178        167        712        670   

   Deferred income taxes

    (214 )      (46     (17 )      172   

   Stock compensation

    33        25        130        119   

   Realized excess tax benefits from stock issued under employee benefit plans

    (10     (4     (24     (21

   Business optimization items

    150        192        150        192   

   Asset impairment and other items

           103               182   

   Other

    5        17        (42 )      64   

   Changes in balance sheet items

       

   Accounts and other current receivables, net

    (113     (127     (41     (229

   Inventories

    7        (43     (129     (315

   Accounts payable and accrued liabilities

    300        188        18        98   

   Infusion pump and business optimization payments

    (57     (89     (283     (347

   Other

    172  A      46        306  A      8  A 

 

 

   Cash flows from operations

    $ 945        $ 892        $ 3,106        $ 2,817   

 

 
       

 Changes in Net Debt

  

   Increase (decrease)   Three Months Ended
December 31,
    Twelve Months Ended
December 31,
 
    2012     2011     2012     2011  

   Net debt, beginning of period

    $ 2,756        $ 2,204        $ 2,290        $ 1,702   

   Cash flows from operations

    (945     (892     (3,106     (2,817

   Capital expenditures

    399        317        1,161        960   

   Dividends

    246        175        804        709   

   Proceeds from stock issued under employee benefit plans

    (195     (39     (488     (427

   Purchases of treasury stock

    415        170        1,480        1,583   

   Acquisitions and investments

    20        361  B      605  B      590  B 

   Divestiture and other investing activities

    (21 )      (17 )      (107 )      (123

   Other, including the effect of exchange rate changes

    (15 )      11        21        113   

 (Decrease) increase in net debt

    (96     86        370        588   

   Net debt, December 31

    $ 2,660        $ 2,290        $ 2,660        $ 2,290   

 

 
       

 Key statistics, December 31:

                               

 Days sales outstanding

    53.3        53.5        53.3        53.5   

 Inventory turns

    2.5        2.7        2.5        2.7   

 

A 

Other changes in balance sheet items included the pension settlement charge of $170 million primarily related to the settlement of certain pension obligations in the United States in 2012 and the discretionary contribution of $150 million to the company’s pension plan in the United States in 2011.

 

B 

Acquisitions and investments in 2012 and 2011 included $100 million for the third quarter 2012 investment in Onconova preferred stock and execution of a licensing agreement, $90 million for the second quarter 2012 exercise of the company’s option to acquire the remaining equity interest in Sigma International General Medical Apparatus, LLC, $30 million related to the second quarter 2012 collaboration with Chatham, $304 million for the first quarter 2012 acquisition of Synovis Life Technologies, Inc., $33 million for the first quarter 2012 payment to execute the Momenta collaboration, $360 million for the fourth quarter 2011 acquisition of Baxa Corporation, and $170 million for the second quarter 2011 acquisition of Prism.


BAXTER — PAGE  13

 

BAXTER INTERNATIONAL INC.

Net Sales

Periods Ending December 31, 2012 and 2011

(unaudited)

($ in millions)

 

                                                                                                                                                       
     Q4
2012
     Q4
2011
     % Growth @
Actual Rates
     % Growth @
Constant Rates
     YTD
2012
     YTD
2011
     % Growth @
Actual Rates
    % Growth @
Constant Rates
 

    

                                                                     

BioScience

                       

United States

    $   825         $   735         12%         12%         $  3,087         $  2,805         10%        10%   

International

    862         840         3%         6%         3,150         3,248         (3%     2%   

Total BioScience

    $1,687         $1,575         7%         9%         $  6,237         $  6,053         3%        6%   

    

                                                                     

Medical Products

                       

United States 1

    $   747         $   731         2%         2%         $  2,969         $  2,904         2%        2%   

International 1

    1,319         1,288         2%         3%         4,984         4,936         1%        4%   

Total Medical Products 1

    $2,066         $2,019         2%         3%         $  7,953         $  7,840         1%        4%   

    

                                                                     

Baxter International Inc.    

                       

United States

    $1,572         $1,466         7%         7%         $  6,056         $  5,709         6%        6%   

International

    2,181         2,128         2%         4%         8,134         8,184         (1%     4%   

Total Baxter

    $3,753         $3,594         4%         5%         $14,190         $13,893         2%        5%   
                                                                       

 

1 

Includes 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, which had previously been reported separately. The prior periods have been recast to conform to the current period presentation.


BAXTER — PAGE  14

 

BAXTER INTERNATIONAL INC.

Key Product Line Sales

Periods Ending December 31, 2012 and 2011

(unaudited)

($ in millions)

 

                                                                                                                                                       
     Q4
2012
     Q4
2011
     % Growth @
Actual Rates
    % Growth @
Constant Rates
    YTD
2012
     YTD
2011
     % Growth @
Actual Rates
    % Growth @
Constant Rates
 

    

                                                                   

BioScience

                     

Recombinants

    $   581         $   578         1%        3%        $  2,234         $  2,212         1%        4%   

Antibody Therapy

    425         406         5%        5%        1,593         1,541         3%        5%   

Plasma Proteins

    447         397         13%        13%        1,464         1,440         2%        4%   

Regenerative Medicine

    180         150         20%        21%        673         580         16%        19%   

Other 1

    54         44         23%        30%        273         280         (3%     5%   

Total BioScience

    $1,687         $1,575         7%        9%        $  6,237         $  6,053         3%        6%   

    

                                                                   

Medical Products

                     

Renal

    $   675         $   664         2%        2%        $  2,527         $  2,530         0%        2%   

Global Injectables

    522         487         7%        8%        2,075         2,004         4%        5%   

IV Therapies

    500         469         7%        8%        1,930         1,802         7%        10%   

Infusion Systems

    210         235         (11%     (11%     813         901         (10%     (9%

Anesthesia

    140         147         (5%     (5%     545         537         1%        3%   

Other 2

    19         17         12%        0%        63         66         (5%     (9%

Total Medical Products 2    

    $2,066         $2,019         2%        3%        $  7,953         $  7,840         1%        4%   

    

                                                                   

Total Baxter

    $3,753         $3,594         4%        5%        $14,190         $13,893         2%        5%   
                                                                     

 

1 

Principally includes vaccines and sales of plasma to third parties.

 

2 

Includes revenues associated with manufacturing, distribution and other services provided by the company to the buyer of the TT business after the February 2007 divestiture, which had previously been reported separately. The prior periods have been recast to conform to the current period presentation.


BAXTER — PAGE  15

 

BAXTER INTERNATIONAL INC.

Key Product Line Sales by U.S. and International

Three-Month Periods Ending December 31, 2012 and 2011

(unaudited)

($ in millions)

 

                                                                                                                                                                          
     Q4 2012      Q4 2011      % Growth  
     U.S.      International      Total      U.S.      International      Total      U.S.     International     Total  

    

                                                                             

BioScience

                         

Recombinants

    $   268         $   313         $   581         $   246         $   332         $   578         9%        (6%     1%   

Antibody Therapy

    317         108         425         290         116         406         9%        (7%     5%   

Plasma Proteins

    121         326         447         106         291         397         14%        12%        13%   

Regenerative Medicine

    102         78         180         81         69         150         26%        13%        20%   

Other 1

    17         37         54         12         32         44         42%        16%        23%   

Total BioScience

    $   825         $   862         $1,687         $   735         $   840         $1,575         12%        3%        7%   

    

                                                                             

Medical Products

                         

Renal

    $   109         $   566         $   675         $     96         $   568         $   664         14%        0%        2%   

Global Injectables

    252         270         522         232         255         487         9%        6%        7%   

IV Therapies

    182         318         500         166         303         469         10%        5%        7%   

Infusion Systems

    114         96         210         137         98         235         (17%     (2%     (11%

Anesthesia

    78         62         140         92         55         147         (15%     13%        (5%

Other 2

    12         7         19         8         9         17         50%        (22%     12%   

Total Medical Products 2    

    $   747         $1,319         $2,066         $   731         $1,288         $2,019         2%        2%        2%   

    

                                                                             

Total Baxter

    $1,572         $2,181         $3,753         $1,466         $2,128         $3,594         7%        2%        4%   
                                                                               

 

1 

Principally includes vaccines and sales of plasma to third parties.

 

2 

Includes revenues associated with manufacturing, distribution and other services provided by the company to the buyer of the TT business after the February 2007 divestiture, which had previously been reported separately. The prior period has been recast to conform to the current period presentation.