|
BAXTER'S
SALES GROW 11 PERCENT IN SECOND QUARTER
The Company Moves
Forward with Initiatives to Improve Profitability and Return on Assets
Baxter to Discontinue
Hemoglobin Therapeutic Development
DEERFIELD, Ill., July
17, 2003 -- Baxter International Inc. (NYSE: BAX) today reported its second
quarter results, with sales increasing 11 percent and income from continuing
operations declining primarily as a result of a previously announced restructuring
charge.
Sales in the second quarter totaled $2.16 billion, an increase of 11 percent.
Foreign exchange favorably impacted sales by 5 percent. Baxter's sales
within the United States increased 4 percent to $997 million, while sales
outside the United States grew 18 percent (including an 11 percent benefit
from foreign exchange) to $1.17 billion. In the second quarter, Medication
Delivery sales grew 17 percent to $938 million, Renal sales grew 11 percent
to $452 million, and BioScience sales grew 5 percent to $773 million.
Income from continuing operations totaled $49 million or $0.08 per diluted
share in the second quarter, including a special charge resulting from
the company's recently announced restructuring plans. The charge totals
$337 million, or $202 million after-tax (approximately two-thirds cash
and one-third non-cash), or $0.33 per share. This charge includes severance
costs for approximately 3,200 employees, representing about 6 percent
of Baxter's global workforce, and the write-down of certain facilities.
The second quarter results compare to income from continuing operations
of $204 million, or $0.33 per diluted share, in the same period last year,
including charges. Cash flows from continuing operations in the second
quarter were $228 million, an increase of $144 million from the same period
last year.
"While our financial results for the second quarter were in line
with our expectations, we are confident that our recently announced actions
will drive greater profitability, cash flows and shareholder returns over
the long term," said Harry M. Jansen Kraemer, Jr., chairman and chief
executive officer. "Specifically, we are simplifying our infrastructure
by consolidating functions and facilities, as well as continuing to prioritize
and focus our R&D investments."
Restructuring Update
Under Baxter's previously announced restructuring plans, approximately
40 percent of reductions in total company positions will be in the United
States, with the remaining 60 percent in the rest of the world. Across
functional areas, about half of the total workforce reductions are manufacturing-related,
with the remainder primarily general and administrative positions.
As part of its restructuring
initiatives, Baxter is consolidating and integrating certain global facilities,
including those in Frankfurt, Germany; Issoire, France; and Mirandola,
Italy. While Baxter expects to achieve significant efficiencies as a result
of these consolidations, there will be no impact on the company's ability
to provide current products to customers. Including the 27 facility closings
announced earlier this month, a total of 30 facilities will be shut down.
Research and Development Prioritization
In addition, Baxter continues to rigorously manage its research and development
(R&D) pipeline and R&D assets. Specifically, the company will
discontinue its Phase I recombinant hemoglobin protein program because
it did not meet the expected clinical results. Baxter is exploring a variety
of options for use of its state-of-the-art biotechnology facility in Boulder,
Colorado, where the hemoglobin program was based, including a potential
sale.
Another change resulting from the company's ongoing R&D prioritization
efforts is in the vaccines arena. Going forward, Baxter will focus its
vaccines business on development programs that utilize its proprietary
cell-culture technologies and platforms, including the influenza vaccine.
As a result of this decision, Baxter will be consolidating vaccines R&D
in California and Austria, and focusing its Maryland operations on manufacturing.
Financial Results Year-to-Date
Year-to-date, Baxter's sales have grown 9 percent to $4.16 billion, up
from the $3.8 billion reported last year. Excluding the impact of foreign
exchange, sales rose 4 percent. BioScience sales rose 2 percent to $1.5
billion, Medication Delivery sales advanced 17 percent to $1.79 billion
and Renal sales grew 6 percent to $859 million. Sales within the United
States totaled $2.0 billion in the first six months of this year, up 4
percent. Sales outside the United States increased 13 percent (including
a 10 percent benefit from foreign exchange), to $2.2 billion. Income from
continuing operations for the first six months of this year declined to
$266 million, or $0.44 per diluted share, including charges. This compares
with $457 million, or $0.73 per diluted share, including charges, reported
last year. Year-to-date, Baxter generated $205 million in cash flows from
continuing operations, which compares with an outflow of $11 million for
the same period last year.
2003 Outlook
For the third quarter, the company expects to achieve sales growth in
the range of 8 to 12 percent and earnings from continuing operations per
diluted share in the range of $0.45 to $0.50.
For the full-year 2003, the company expects to achieve sales growth in
the 8 to 10 percent range, earnings from continuing operations per diluted
share of $1.65 to $1.75 (including the current quarter $0.33 restructuring
charge) and cash flows from continuing operations of approximately $1.2
billion.
A webcast of Baxter's second quarter conference call for investors can
be accessed live from a link on Baxter's website at www.baxter.com
beginning at 7:30 a.m. CDT on July 17, 2003. Please visit Baxter's website
for additional information.
Baxter International Inc., through its subsidiaries, assists health-care
professionals and their patients with treatment of complex medical conditions,
including cancer, hemophilia, immune disorders, kidney disease and trauma.
The company applies its expertise in medical devices, pharmaceuticals
and biotechnology to make a meaningful difference in patients' lives.
Questions and Answers
What is the status of ADVATE? Have you received any questions from
the FDA or European Regulatory Agencies regarding your submission?
We have received and responded to questions from the regulatory agencies
and continue to expect ADVATE (Antihemophilic Factor (Recombinant), Plasma/Albumin-Free
Method) rAHF-PFM approval in the second half of 2003.
Does your Q3 guidance
include any impact from ADVATE?
We continue to expect ADVATE approval in the second half of this year
and have included some sales of ADVATE as one of the many variables for
our third quarter guidance. The wider range for the third quarter guidance
reflects this possibility.
What is the status
of Baxter's inventory of Recombinate with distributors? What's happening
with your levels of inventory?
Homecare distributor inventory levels of Baxter's Recombinate have fallen
to approximately 30-40 days on hand versus over 100 days at the end of
2002. Baxter's own level of Recombinate inventory continues to be approximately
30 days.
Does the charge
include a write-off of any inventory? What impact will it have on your
inventory levels going forward?
The charge does not include a write-off of any inventory. We expect the
plasma products inventory to decline annually beginning in 2004.
How much will Baxter
save as a result of the restructuring changes?
Now that the number of employees and facilities has been determined to
be higher, the company expects that these actions will generate incremental
annual savings of $0.15 to $0.20 per share when fully implemented, before
the impact of anticipated increases in pension and other employee benefit
costs in 2004 and beyond.
What are your plans
for exiting the equity forward agreements?
Given the timing of the restructuring announcement, we decided not to
exit the remaining 12 million equity forward agreements in Q2. However,
we do expect to be completely out of the equity forward agreements in
the third quarter. We do not expect this to have any impact on our EPS
estimates for 2003.
If the vaccines
business is doing well, why are you making changes?
Regardless of whether or not a business is doing well, we continually
seek opportunities to enhance their operations. Vaccines is an example
of a business we can streamline while it continues to do very well, with
sales expectations of approximately $200 million in 2003. We have decided
to focus on projects that leverage our proprietary technologies, including
the development of our Influenza vaccine. We will also continue with our
smallpox contracts and the partnership projects already in place. We are
canceling the early-stage conjugate meningitis combination vaccine (CYW)
and Group A step vaccine (GAS) projects, which were based on other technology
platforms.
What is happening
with the Alpha Therapeutic acquisition?
Since the announcement of our intent to acquire certain Alpha Therapeutic
assets, another company is acquiring the remainder of Alpha's assets.
These developments have increased the complexity and changed the timing
of closing. We now expect this transaction to close in the third quarter.
(Baxter, ADVATE and Recombinate are registered trademarks of Baxter International
Inc. and its affiliates.)
This news release
contains forward-looking statements that involve risks and uncertainties,
including the effect of economic conditions, actions of regulatory bodies,
product development risks, product demand and market acceptance, the impact
of competitive products and pricing, foreign currency exchange rates and
other risks detailed in the company's filings with the Securities and
Exchange Commission. These forward-looking statements are based on estimates
and assumptions made by management of the company and are believed to
be reasonable, though are inherently uncertain and difficult to predict.
Actual results or experience could differ materially from the forward-looking
statements.
Attachments
(Adobe Acrobat
PDF format)
FOR ADDITIONAL
INFORMATION:
 |
For Baxter
- Media Contacts:
- Deborah Spak, 847-948-2349
Cindy Resman, 847-948-28154
- Investor Contacts:
- Neville Jeharajah,
847-948-2875
Mary Kay Ladone, 847-948-3371
-
|
| |
|
Print this page
