DEERFIELD, Ill., April 20 /PRNewswire-FirstCall/ -- Baxter International Inc. 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(R) 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 (TM) [Immune Globulin Intravenous (Human)], Baxter’s ready-to-use liquid 10% Intravenous Immunoglobulin (IVIG), and the U.S. launch of FLEXBUMIN(TM), 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 http://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.
BAXTER INTERNATIONAL INC. Consolidated Statements of Income Three Months Ended March 31, 2006 and 2005 (unaudited) (in millions, except per share and percentage data) Three Months Ended March 31, --------------------- 2006 2005 Change -------- -------- ------- CONTINUING OPERATIONS: ---------------------- NET SALES $2,409 $2,383 1% GROSS PROFIT 1,052 969 9% % of Sales 43.7% 40.7% 3.0 pts MARKETING AND ADMINISTRATIVE EXPENSES 526 483 9% % of Sales 21.8% 20.3% 1.5 pts RESEARCH AND DEVELOPMENT EXPENSES 138 133 4% -------------------------------------------------------------------------- OPERATING INCOME 388 353 10% -------------------------------------------------------------------------- % of Sales 16.1% 14.8% 1.3 pts INTEREST, NET 18 31 (42%) OTHER EXPENSE, NET 16 24 (33%) -------------------------------------------------------------------------- INCOME BEFORE INCOME TAXES 354 298 19% INCOME TAX EXPENSE 72 74 (3%) -------------------------------------------------------------------------- INCOME FROM CONTINUING OPERATIONS $282 $224 26% -------------------------------------------------------------------------- BASIC EPS FROM CONTINUING OPERATIONS $0.44 $0.36 22% -------------------------------------------------------------------------- DILUTED EPS FROM CONTINUING OPERATIONS $0.43 $0.36 19% -------------------------------------------------------------------------- WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING Basic 641 619 Diluted 648 623 -------------------------------------------------------------------------- Note: Effective January 1, 2006, the company adopted SFAS No. 123-R using the modified prospective method. After-tax stock-option expense for the first quarter of 2006 was $10 million, or $0.02 per diluted share. In accordance with the modified prospective adoption method, the company did not adjust its historical consolidated financial statements to reflect the impact of stock-option expense. Based on the pro forma application of SFAS No. 123 for the calculation of stock-option expense prior to January 1, 2006 (as previously disclosed in the company’s consolidated financial statements), pro forma after-tax stock-option expense in the first quarter of 2005 was $12 million, or $0.02 per diluted share. BAXTER INTERNATIONAL INC. Condensed Consolidated Balance Sheets (unaudited) ($ in millions) March 31, December 31, 2006 2005 ASSETS -------- ----------- ------ Cash and equivalents $881 $841 Receivables 1,750 1,766 Inventories 2,006 1,925 Other current assets 594 584 --------------------------- Total current assets 5,231 5,116 --------------------------- Property, plant and equipment, net 4,122 4,144 Other long-term assets 3,427 3,467 ------------------------------------------------------------------------- Total assets $12,780 $12,727 ========================================================================= LIABILITIES AND SHAREHOLDERS’ EQUITY ------------------------------------ Short-term debt $129 $924 Other current liabilities 2,796 3,241 Long-term debt 2,276 2,414 Other long-term liabilities 1,832 1,849 Shareholders’ equity 5,747 4,299 -------------------------------------------------------------------------- Total liabilities and shareholders’ equity $12,780 $12,727 ========================================================================== BAXTER INTERNATIONAL INC. Cash Flows from Operations and Changes in Net Debt (unaudited) ($ in millions) Cash Flows from Operations (Brackets denote cash outflows) Three Months Ended March 31, ---------------------- 2006 2005 ---- ---- Net income $282 $226 Adjustments Depreciation and amortization 139 147 Deferred income taxes 2 23 Stock compensation 18 1 Other 18 17 Changes in balance sheet items Receivables 38 59 Inventories (63) 19 Accounts payable and accrued liabilities (105) (259) Restructuring payments (19) (43) Other (5) 82 ------------------------------------------------------------------------- Cash flows from operations $305 $272 ========================================================================= Changes in Net Debt Increase (decrease) Three Months Ended March 31, ------------------------ 2006 2005 ------ ------ Net debt, January 1 $2,497 $3,185 Cash flows from operations (305) (272) Capital expenditures 76 65 Dividends 363 359 Issuances of common stock (1,249) - Purchases of treasury stock 171 - Other, including the effect of exchange rate changes (29) 156 ------------------------------------------------------------------------ Increase (decrease) in net debt (973) 308 ------------------------------------------------------------------------ Net debt, March 31 $1,524 $3,493 ======================================================================== Key statistics, March 31: Days sales outstanding 54.8 59.2 Inventory turns 2.6 2.6 Net-debt-to-capital ratio (A) 21.0% 34.9% (A) The decrease in the debt-to-capital ratio from March 31, 2005 to March 31, 2006 primarily related to the settlement of the company’s equity units. In February 2006, the purchase contracts included in the company’s equity units matured, and the company issued approximately 35 million common shares in exchange for $1.25 billion. Management used a portion of the cash proceeds to pay down maturing debt. The net-debt-to-capital ratio at March 31, 2005 was calculated in accordance with the company’s primary credit agreements, which gave 70% equity credit to the company’s $1.25 billion equity units debt outstanding on that date (the majority of which was repurchased and retired in the fourth quarter of 2005). Refer to the company’s Form 10-K for the year ended December 31, 2005 for additional information regarding the equity units. Baxter International Inc. Net Sales from Continuing Operations Period Ending March 31, 2006 (unaudited) ------------------------------------------------------------------------- %Growth %Growth Q1 Q1 @ @ ($ in millions) 2006 2005 Actual Constant Rates Rates ------------------------------------------------------------------------- ------------------------------------------------------------------------- BioScience United States $474 $398 19% 19% International 526 504 4% 11% Total $1,000 $902 11% 15% ------------------------------------------------------------------------- Medication Delivery United States $491 $552 (11%) (11%) International 425 426 -% 4% Total $916 $978 (6%) (4%) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Renal United States $94 $94 -% -% International 399 409 (2%) 1% Total $493 $503 (2%) 1% ------------------------------------------------------------------------- ------------------------------------------------------------------------- Baxter International Inc. United States $1,059 $1,044 1% 1% International 1,350 1,339 1% 6% Total $2,409 $2,383 1% 4% ------------------------------------------------------------------------- Baxter International Inc. Key Product Line Sales Period Ending March 31, 2006 (unaudited) -------------------------------------------------------------------------- %Growth %Growth Q1 Q1 @ @ ($ in millions) 2006 2005 Actual Constant Rates Rates -------------------------------------------------------------------------- -------------------------------------------------------------------------- BioScience Recombinants $374 $344 9% 14% Plasma Proteins (1) 192 170 13% 15% Antibody Therapy 183 89 106% 110% BioSurgery (2) 69 66 5% 8% Transfusion Therapies 124 133 (7%) (4%) Other (3) 58 100 (42%) (39%) -------------------------------------------------------------------------- Total BioScience $1,000 $902 11% 15% -------------------------------------------------------------------------- -------------------------------------------------------------------------- Medication Delivery IV Therapies (4) $304 $296 3% 5% Drug Delivery 195 204 (4%) (3%) Infusion Systems 195 230 (15%) (14%) Anesthesia 212 231 (8%) (6%) Other (5) 10 17 (41%) (35%) -------------------------------------------------------------------------- Total Medication Delivery $916 $978 (6%) (4%) -------------------------------------------------------------------------- -------------------------------------------------------------------------- Renal PD Therapy $388 $377 3% 6% HD Therapy 105 126 (17%) (16%) -------------------------------------------------------------------------- Total Renal (6) $493 $503 (2%) 1% -------------------------------------------------------------------------- -------------------------------------------------------------------------- TOTAL BAXTER $2,409 $2,383 1% 4% ========================================================================== (1) Includes plasma-derived hemophilia (FVII, FVIII, FIX and FEIBA), albumin, and certain other plasma-based products. Sales of Tisseel, sales of plasma to third parties, and contract manufacturing revenues were previously reported in Plasma Proteins, and are now reported in other product lines, as detailed below.* (2) Includes sales of Tisseel and FloSeal/CoSeal, which were previously reported in Plasma Proteins and Other, respectively.* (3) Principally includes vaccines and sales of plasma to third parties. The sales of plasma to third parties were previously reported in Plasma Proteins. The prior year sales include contract manufacturing revenues.* (4) Principally includes intravenous solutions and nutritional products. (5) Principally includes other hospital-distributed products. (6) Sales of pharmaceutical and certain other products, which were previously reported in Other, are now reported in PD Therapy.* * Prior year sales data has been reclassified to reflect the above- mentioned changes. Baxter International Inc. Key Product Line Sales -- US/International Period Ending March 31, 2006 (unaudited) ------------------------------------------------------------------------- Q1 2006 Q1 2005 Interna- Interna- ($ in millions) US tional Total US tional Total ------------------------------------------------------------------------- BioScience Recombinants $161 $213 $374 $145 $199 $344 Plasma Proteins (1) 67 125 192 48 122 170 Antibody Therapy 139 44 183 48 41 89 BioSurgery (2) 39 30 69 35 31 66 Transfusion Therapies 56 68 124 65 68 133 Other (3) 12 46 58 57 43 100 ------------------------------------------------------------------------- Total BioScience $474 $526 $1,000 $398 $504 $902 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Medication Delivery IV Therapies (4) $104 $200 $304 $94 $202 $296 Drug Delivery 125 70 195 139 65 204 Infusion Systems 124 71 195 155 75 230 Anesthesia 133 79 212 158 73 231 Other (5) 5 5 10 6 11 17 ------------------------------------------------------------------------- Total Medication Delivery $491 $425 $916 $552 $426 $978 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Renal PD Therapy $66 $322 $388 $62 $315 $377 HD Therapy 28 77 105 32 94 126 ------------------------------------------------------------------------- Total Renal (6) $94 $399 $493 $94 $409 $503 ------------------------------------------------------------------------- ------------------------------------------------------------------------- TOTAL BAXTER $1,059 $1,350 $2,409 $1,044 $1,339 $2,383 ========================================================================= (1) Includes plasma-derived hemophilia (FVII, FVIII, FIX and FEIBA), albumin, and certain other plasma-based products. Sales of Tisseel, sales of plasma to third parties, and contract manufacturing revenues were previously reported in Plasma Proteins, and are now reported in other product lines, as detailed below.* (2) Includes sales of Tisseel and FloSeal/CoSeal, which were previously reported in Plasma Proteins and Other, respectively.* (3) Principally includes vaccines and sales of plasma to third parties. The sales of plasma to third parties were previously reported in Plasma Proteins. The prior year sales include contract manufacturing revenues.* (4) Principally includes intravenous solutions and nutritional products. (5) Principally includes other hospital-distributed products. (6) Sales of pharmaceutical and certain other products, which were previously reported in Other, are now reported in PD Therapy.* * Prior year sales data has been reclassified to reflect the above-mentioned changes. Baxter International Inc. Key Product Line Sales -- US/International Period Ending March 31, 2006 (unaudited) ------------------------------------------------------------------------- % Growth Interna- ($ in millions) US tional Total ------------------------------------------------------------------------ BioScience Recombinants 11% 7% 9% Plasma Proteins (1) 40% 2% 13% Antibody Therapy 190% 7% 106% BioSurgery (2) 11% (3%) 5% Transfusion Therapies (14%) -% (7%) Other (3) (79%) 7% (42%) ------------------------------------------------------------------------- Total BioScience 19% 4% 11% ------------------------------------------------------------------------- ------------------------------------------------------------------------- Medication Delivery IV Therapies (4) 11% (1%) 3% Drug Delivery (10%) 8% (4%) Infusion Systems (20%) (5%) (15%) Anesthesia (16%) 8% (8%) Other (5) (17%) (55%) (41%) ------------------------------------------------------------------------- Total Medication Delivery (11%) -% (6%) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Renal PD Therapy 6% 2% 3% HD Therapy (13%) (18%) (17%) ------------------------------------------------------------------------- Total Renal (6) -% (2%) (2%) ------------------------------------------------------------------------- ------------------------------------------------------------------------- TOTAL BAXTER 1% 1% 1% ========================================================================= (1) Includes plasma-derived hemophilia (FVII, FVIII, FIX and FEIBA), albumin, and certain other plasma-based products. Sales of Tisseel, sales of plasma to third parties, and contract manufacturing revenues were previously reported in Plasma Proteins, and are now reported in other product lines, as detailed below.* (2) Includes sales of Tisseel and FloSeal/CoSeal, which were previously reported in Plasma Proteins and Other, respectively.* (3) Principally includes vaccines and sales of plasma to third parties. The sales of plasma to third parties were previously reported in Plasma Proteins. The prior year sales include contract manufacturing revenues.* (4) Principally includes intravenous solutions and nutritional products. (5) Principally includes other hospital-distributed products. (6) Sales of pharmaceutical and certain other products, which were previously reported in Other, are now reported in PD Therapy.* * Prior year sales data has been reclassified to reflect the above-mentioned changes.
Baxter International Inc.
CONTACT: Media, Deborah Spak, +1-847-948-2349, or Tom Kline,+1-847-948-2251, or Investor, Mary Kay Ladone, +1-847-948-3371, or ClareSullivan, +1-847-948-3085, all of Baxter International
Web site: http://www.bax
