Additional Restructuring Measures to Improve Profitability Will Begin in Second Quarter
DEERFIELD, Ill., April 22, 2004 – Baxter International Inc. (NYSE:BAX) today reported its financial results for the first quarter, with sales increasing 11 percent and earnings per diluted share from continuing operations totaling $0.31, compared to the company’s guidance of $0.28 to $0.31 per diluted share.
Baxter’s sales totaled $2.21 billion in the first quarter, with foreign exchange favorably impacting sales by 7 percentage points. Sales within the United States grew 7 percent to $1.02 billion, while sales outside the United States grew 14 percent (including a 12 percentage point benefit from foreign exchange) to $1.19 billion. Sales from Baxter’s BioScience business increased 9 percent to $810 million, while the company’s Medication Delivery business grew 9 percent in the first quarter to $929 million, and Renal sales grew 16 percent to $470 million.
Income from continuing operations totaled $189 million, or $0.31 per diluted share, down from the $217 million, or $0.36 per diluted share, reported last year.
“While organic sales growth was in line with our expectations, we need to take further actions to realign our cost structure to drive greater profitability,” said Brian P. Anderson, senior vice president and chief financial officer. “Therefore, we will implement a number of additional initiatives to better leverage our resources, with a focus on standardizing and consolidating work processes and reducing capacity in our plasma business, in order to drive sustainable improvements in our financial performance.”
As announced in January 2004, Baxter plans to begin implementing additional actions to reduce costs. These actions will include the elimination of approximately 3,500 to 4,000 additional positions, or approximately 7 to 8 percent of Baxter’s current global workforce. About half of the positions to be eliminated are located in the United States, and half located outside the United States, with nearly three-quarters of the savings within general and administrative expenses. While the market for plasma-derived products has stabilized, the company intends to further enhance profitability and cash flow by adjusting its plasma production. Accordingly, Baxter plans to reduce plasma production by 400,000 liters, or 13 percent, annually and close additional plasma collection centers.
The company anticipates that it will record an after-tax charge in the second quarter of 2004 of approximately $350 to $400 million, or $0.55 to $0.65 per diluted share, principally for severance and costs associated with the closing of facilities. Baxter expects that these additional initiatives will yield savings of $0.05 per diluted share in the second half of 2004, $0.20 to $0.25 per diluted share in 2005, and $0.30 to $0.35 per diluted share when fully implemented in 2006.
Looking forward to the second quarter, the company expects its sales growth to be between 4 to 6 percent, excluding the impact of foreign exchange, and earnings per diluted share from continuing operations to be $0.37 to $0.41 excluding the impact of the 2004 restructuring charges and benefits. For full-year 2004, Baxter expects sales growth to be between 3 to 5 percent, excluding the impact of foreign exchange. Baxter also expects to achieve earnings per diluted share from continuing operations of $1.75 to $1.85, excluding the impact of the 2004 restructuring charges and benefits, and to generate cash flow from continuing operations of approximately $1.5 billion.
Related Questions and Answers
What is the status of the Advate launch? What were Advate sales in the first quarter?
Baxter received clearance from regulatory authorities in Europe in March, and has launched Advate in Germany, the Netherlands and United Kingdom. Advate contributed $27 million in sales to the total of $292 million in recombinant sales in the first quarter, helping grow that product line by 19 percent. With the European launch now well underway, Baxter expects Advate sales in the second quarter to be significantly higher. The company anticipates that full-year sales of Advate will total $200 to $300 million, and expects to take further actions to accelerate conversion to the product.
What is the status of Baxter’s 2003 restructuring initiative?
In July 2003, Baxter announced a number of initiatives aimed at generating approximately $0.15 to $0.20 per diluted share in annual savings. These initiatives involved the closing and/or consolidation of a number of facilities worldwide, elimination of approximately 3,000 positions worldwide, and changes in its plasma operations that reduced plasma production by 600,000 liters and closed 26 plasma collection centers across the United States. The company is on track in implementing these initiatives, and has eliminated approximately 85 percent of the positions and generated savings of $0.04 per diluted share in the first quarter 2004.
How much of the anticipated second quarter 2004 restructuring charge will be cash versus non-cash?
Baxter expects that approximately two-thirds of the charge will be cash (primarily for severance payments) and one-third of the charge will be non-cash (for write-offs of fixed assets).
A webcast of Baxter´s first 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 April 22, 2004. Baxter’s Annual Meeting of Stockholders is scheduled for May 4, 2004 at 10:30 a.m. CDT, and will be webcast live. Please visit Baxter´s website, www.baxter.com, for additional information.
Baxter International Inc., through its subsidiaries, assists health-care professionals and their patients with the 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.
(Advate and Baxter are registered trademarks of Baxter International Inc. and its affiliates.)
This news release contains forward-looking statements that involve risks and uncertainties, including the company´s ability to realize in a timely fashion the anticipated benefits of restructuring initiatives, the effect of economic conditions, the impact of the geographic mix of the company´s sales, 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. The company does not undertake any obligation to update any forward-looking statements as a result of new information, future events, changed assumptions or otherwise; and all forward-looking statements speak only as of the time when made. Actual results or experience could differ materially from the forward-looking statements.
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