Company Narrows Full-Year Earnings Guidance Range
DEERFIELD, Ill., April 20, 2006 – Baxter International Inc. (NYSE:BAX) today reported stronger than expected growth in earnings and organic sales for the first quarter.
First quarter net income of $282 million increased 26 percent compared to $224 million in the first quarter of 2005. Earnings per diluted share of $0.43 increased 19 percent over last year. Contributing to the growth in earnings were improved margins, lower interest expense and a lower tax rate. Excluding the impact of stock-option expense of $0.02 per diluted share under SFAS No. 123-R, earnings per diluted share totaled $0.45, which compares favorably with the guidance that Baxter previously provided for the quarter of $0.41 to $0.43 (which also excluded the impact of stock-option expense).
Baxter's sales totaled $2.4 billion in the first quarter, an increase of 4 percent on an organic basis, which excludes the impact of foreign exchange. Organic sales growth exceeded Baxter's guidance of 2 to 3 percent due to strong growth in the company's BioScience business. Including the negative impact of foreign exchange, reported sales grew 1 percent in the quarter. Sales within the United States totaled $1.1 billion, an increase of 1 percent over the same period last year, and sales outside of the United States also grew 1 percent (or 6 percent excluding the impact of foreign exchange) to $1.3 billion in the quarter. Strong sales in the company's BioScience business, which totaled $1.0 billion and grew 11 percent, offset the impact of foreign exchange and the impact of the COLLEAGUE® Infusion Pump hold, generic competition and the exit of lower-margin businesses.
“We are extremely pleased with our first quarter financial results,” said John J. Greisch, Baxter's chief financial officer. “Our strong financial performance reflects the value of our diversified portfolio and our ability to meet or exceed our commitments while improving the financial profile of the company.”
Baxter's cash flow also improved in the quarter. The company generated $305 million in cash flow from operations during the quarter compared to $272 million in the same period last year.
“We've made great progress over the last several quarters improving our financial position and operational execution, expanding our global market positions, and focusing our efforts on enhancing product innovation and R&D productivity,” said Robert L. Parkinson, Jr., chairman and chief executive officer. “Our strong first quarter financial performance allows us to accelerate R&D and strategic investments throughout the rest of the year that position the company to deliver value to our patients, customers and shareholders over the long term.”
Recent Highlights
Baxter recently announced several initiatives that leverage the company's unique technology platforms and further expand its global presence. These initiatives include:
- A $60 million investment to expand production capacity at its four manufacturing facilities in China to accommodate anticipated growth in demand for the company's intravenous solutions (IV) and peritoneal dialysis (PD) products.
- The launch of generic sevoflurane, a widely used inhalation anesthetic, in Japan, the United Kingdom and the United States.
- The launch in Europe of KIOVIG™ [Immune Globulin Intravenous (Human)], Baxter's ready-to-use liquid 10% Intravenous Immunoglobulin (IVIG), and the U.S. launch of FLEXBUMIN™, the first preparation of human albumin to be packaged in a flexible container.
- Initiation of the first human Phase II adult stem-cell therapy trial in the United States to investigate the efficacy, tolerability and safety of blood-derived, selected CD34+ stem cells to reduce symptoms and improve clinical outcomes in patients with chronic myocardial ischemia.
Second Quarter and Full-Year 2006 Outlook
Given the strong financial performance of the company in the first quarter, Baxter is narrowing its earnings guidance range for the full-year 2006. The company now expects to achieve organic sales growth of 4 to 5 percent, and earnings per diluted share of $2.10 to $2.16, before special items and excluding the impact of stock-option expense of $0.08 to $0.10 per diluted share. This compares favorably to the company's original guidance of $2.08 to $2.16, which also excluded special items and stock-option expense. Baxter continues to expect cash flow from operations for full-year 2006 to total approximately $1.9 billion, with free cash flow of approximately $1.4 billion (after approximately $550 million of anticipated capital expenditures).
For the second quarter of 2006, the company expects organic sales (excluding the impact of foreign exchange) to grow 2 to 3 percent, and earnings per diluted share of $0.54 to $0.56, before special items and excluding the impact of stock-option expense of approximately $0.03 per diluted share.
A webcast of Baxter's first 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 April 20, 2006. Please visit Baxter's website for more information regarding this and future events and webcasts, including investor presentations and the company's Annual Meeting for shareholders in Chicago on May 9.
Baxter International Inc., through its subsidiaries, assists healthcare professionals and their patients with the treatment of complex medical conditions, including hemophilia, immune disorders, cancer, infectious diseases, kidney disease, trauma and other conditions. The company applies its expertise in medical devices, pharmaceuticals and biotechnology to make a meaningful difference in patients' lives .
This release includes forward-looking statements concerning the company's financial results. 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: future actions of regulatory bodies and other governmental authorities, including the Food and Drug Administration and foreign counterparts that could delay, limit or suspend product development, manufacturing or sales or result in seizures, injunctions and monetary sanctions, including with respect to the COLLEAGUE Infusion Pump; product quality or patient safety concerns leading to product recalls, withdrawals, launch delays, litigation, or declining sales; product development risks; demand for and market acceptance risks for new and existing products, such as ADVATE, and other technologies; 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; inventory reductions or fluctuations in buying patterns by wholesalers or distributors; the availability of acceptable raw materials and component supply; global regulatory, trade and tax policies; the ability to enforce patents; patents of third parties preventing or restricting the company's manufacture, sale or use of affected products or technology; reimbursement policies of government agencies and private payers; timely realization of the anticipated benefits of the company's restructuring initiatives; foreign currency fluctuations; changes in credit agency ratings; and other risks identified in the company's most recent filing on Form 10-K and other SEC 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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