(Source: Business Wire)
Baxter International Inc. (NYSE:BAX) today reported solid financial
results for the third quarter of 2009, and provided its fourth quarter
and updated full-year 2009 financial outlook.
Net income grew 12 percent to $530 million from $472 million reported in
the third quarter of 2008. Earnings per diluted share of $0.87 advanced
18 percent from $0.74 per diluted share reported in the prior-year
period. The third quarter results include after-tax special charges
totaling $69 million (or $0.11 per diluted share) primarily for fixed
asset write-offs related to the discontinuation of the company's SOLOMIX
drug delivery system in development, and planned retirement costs
associated with the SYNDEO PCA Syringe Pump. The company recorded
after-tax special charges in the third quarter of 2008 totaling $91
million (or $0.14 per diluted share).
On an adjusted basis, excluding special charges in both years, Baxter's
net income of $599 million increased 6 percent in the third quarter from
$563 million reported in the third quarter last year. Adjusted earnings
per diluted share of $0.98 increased 11 percent from $0.88 per diluted
share reported in the prior-year period, and compares favorably with the
guidance the company previously provided of $0.95 to $0.97 per diluted
share. This financial performance was the result of continued margin
expansion, expense leverage and benefits derived from the company's
ongoing share repurchase program.
Baxter's global sales of $3.1 billion were flat compared to the third
quarter last year. Excluding the impact of foreign currency, Baxter's
worldwide sales increased 6 percent. Sales within the United States
increased 5 percent to $1.3 billion in the third quarter, while
international sales declined 4 percent to $1.8 billion. Excluding the
impact of foreign currency, Baxter's international sales grew 7 percent.
Medication Delivery sales of $1.2 billion increased 1 percent (and
excluding foreign currency increased 7 percent). Renal sales of $576
million declined 3 percent (and excluding foreign currency increased 4
percent). Contributing to these results was growth across multiple
product categories, including products used in peritoneal dialysis (PD)
treatment, intravenous therapies, injectable drugs and anesthesia
products.
BioScience revenues totaled $1.4 billion in the third quarter, which
represents a 2 percent increase over the prior-year period. Excluding
foreign currency, BioScience sales advanced 8 percent, reflecting gains
across several core franchises. Key drivers of sales performance include
continued growth of recombinant therapies, including ADVATE
[Antihemophilic Factor (Recombinant), Plasma/Albumin-Free Method] for
the treatment of hemophilia, antibody therapies and several specialty
plasma therapeutics, as well as biosurgery products.
"We continue to leverage the benefits derived from our diversified
healthcare model to achieve solid financial performance, despite a
challenging global macro-economic environment," said Robert L.
Parkinson, Jr., chairman and chief executive officer. "Given our strong
financial position, geographic presence, and the medically-necessary
nature of Baxter's products, Baxter is well-positioned to capitalize on
opportunities across a broad array of therapeutic areas."
Nine-Month Results
For the first nine months of 2009, Baxter's net income totaled $1.6
billion, an increase of 13 percent. Earnings per diluted share of $2.66
advanced 18 percent over $2.26 per diluted share reported in the
prior-year period. On an adjusted basis, excluding special items from
both years, Baxter's net income of $1.7 billion increased 8 percent over
$1.6 billion reported for the same period last year. Adjusted earnings
per diluted share for the nine-month period increased 12 percent to
$2.77 per diluted share, from $2.47 per diluted share reported in 2008.
Baxter's global sales in the first nine months of the year totaled $9.1
billion, and declined 1 percent from $9.2 billion reported in the
prior-year period. Excluding the impact of foreign currency, sales
growth for the first nine months of 2009 was 7 percent. Sales within the
United States totaled $3.9 billion, an increase of 6 percent over the
same period last year, while international sales declined 6 percent to
$5.2 billion. Excluding the impact of foreign currency, Baxter's
international sales grew 8 percent.
Recent Highlights
Baxter has achieved a number of scientific and commercial milestones
over the last several months, including:
The commercial launch of HYLENEX recombinant (hyaluronidase human
injection) in the United States for use in pediatric rehydration.
HYLENEX, an enzyme, allows fluids to be administered under the skin
(subcutaneously) rather than through a vein. This allows for rapid
treatment initiation and delivery of intravenous (IV)-like fluid
rates, which can help lead to successful rehydration of children in a
less invasive manner.
Marketing authorization from the European Commission for CELVAPAN H1N1
pandemic vaccine using Baxter's Vero cell technology. CELVAPAN H1N1 is
the first cell culture-based and non-adjuvanted pandemic influenza
vaccine to receive marketing authorization in the European Union.
Completion of the seasonal influenza Phase III confirmatory study in
healthy adults in the United States. The company expects final study
results to be available by the end of this year, to support filing for
regulatory approval in the United States in the first half of 2010.
Initiation of a Phase III study evaluating the use of ARTISS [Fibrin
Sealant (Human)] in facial surgery in the United States. Currently,
ARTISS is the first and only slow-setting fibrin sealant indicated for
use in adhering skin grafts in adult and pediatric burn patients.
ARTISS was developed using Baxter's proven fibrin sealant technology
platform and is the newest agent in the company's expanding biosurgery
portfolio.
Filing an Investigational Device Exemption (IDE) with the U.S. Food
and Drug Administration (FDA) to begin a clinical study to collect
safety and effectiveness data required for a 510(k) application for a
new home hemodialysis system.
Completion of the acquisition of certain assets related to Edwards
Lifesciences Corporation's hemofiltration product line, also known as
Continuous Renal Replacement Therapy (CRRT). CRRT provides a method of
continuous yet adjustable fluid removal that can gradually remove
excess fluid and waste products that build up with the acute
impairment of kidney function, and is usually administered in an
intensive care setting in the hospital.
Fourth Quarter and Full-Year 2009 Outlook
Baxter also announced today its guidance for fourth quarter 2009 and
updated its guidance for the full year.
For the fourth quarter of 2009, Baxter expects sales growth, excluding
the impact of foreign currency, of 6 to 8 percent. Based on the
company's outlook for foreign exchange rates, the company expects
reported sales including the impact of foreign currency to increase 8 to
10 percent over the prior-year period. Baxter also expects to achieve
earnings per diluted share of $1.02 to $1.04, before any special items,
in the fourth quarter.
For the full year, Baxter expects sales growth, excluding the impact of
foreign currency, to increase 7 to 8 percent. Based on the company's
outlook for foreign exchange rates, Baxter expects reported sales growth
to increase approximately 0 to 1 percent. In addition, the company
expects earnings per diluted share of $3.79 to $3.81, before any special
items, and continues to expect cash flow from operations to total more
than $2.6 billion.
A webcast of Baxter's third 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 October 15, 2009. Please visit Baxter's
website 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.
This release includes forward-looking statements concerning the
company's financial results and outlook for 2009. 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, including the FDA and foreign counterparts,
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; additional legislation or regulation
which may affect pricing, reimbursement and rebate policies of
government agencies and private payers or other elements of the
company's business; production yields, regulatory clearances and
customers' final purchase commitments with respect to the company's
pandemic vaccine; product development risks; 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; 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;
any impact of the commercial and credit environment on Baxter and its
customers; 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.
BAXTER INTERNATIONAL INC.
Consolidated Statements of Income
Three Months Ended September 30, 2009 and 2008
(unaudited)
(in millions, except per share and percentage data)
Three Months Ended
September 30,
2009 2008 Change
NET SALES $3,145 $3,151 0%
COST OF SALES 1,513 A 1,630 A (7%)
GROSS MARGIN 1,632 1,521 7%
% of Net Sales 51.9% 48.3% 3.6 pts
MARKETING AND ADMINISTRATIVE EXPENSES 672 681 (1%)
% of Net Sales 21.4% 21.6% (0.2 pts)
RESEARCH AND DEVELOPMENT EXPENSES 228 230 B (1%)
% of Net Sales 7.2% 7.3% (0.1 pt)
NET INTEREST EXPENSE 23 20 15%
OTHER EXPENSE, NET 51 C 28 C 82%
PRE-TAX INCOME 658 562 17%
INCOME TAX EXPENSE 126 86 D 47%
% of Pre-Tax Income 19.1% 15.3% 3.8 pts
NET INCOME 532 476 12%
LESS: NONCONTROLLING INTERESTS 2 4 (50%)
NET INCOME ATTRIBUTABLE TO BAXTER $530 $472 12%
BASIC EPS $0.88 $0.76 16%
DILUTED EPS $0.87 $0.74 18%
WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
Basic 605 625
Diluted 612 638
ADJUSTED PRE-TAX INCOME (excluding specified items) $739 E $677 E 9%
ADJUSTED NET INCOME ATTRIBUTABLE TO BAXTER (excluding specified items) $599 E $563 E 6%
ADJUSTED DILUTED EPS (excluding specified items) $0.98 E $0.88 E 11%
A Cost of sales in 2009 included a charge of $27 million ($22 million on an after-tax basis, or $0.03 per diluted share) primarily related to planned retirement costs associated with the SYNDEO PCA Syringe Pump. Cost of sales in 2008 included a charge of $72 million ($65 million on an after-tax basis, or $0.10 per diluted share) related to COLLEAGUE infusion pumps.
B Research and development (R&D) expenses in 2008 included an in-process R&D (IPR&D) charge of $12 million ($7 million on an after-tax basis, or $0.01 per diluted share) related to the company's in-licensing agreement with Innocoll Pharmaceuticals Ltd. (Innocoll).
C Other expense, net in 2009 included an impairment charge of $54 million ($47 million on an after-tax basis, or $0.08 per diluted share) associated with the discontinuation of the company's SOLOMIX drug delivery system in development. Other expense, net in 2008 included an impairment charge of $31 million ($19 million on an after-tax basis, or $0.03 per diluted share) associated with the discontinuation of the CLEARSHOT pre-filled syringe program.
D Income tax expense in 2008 included a net benefit of $15 million, or $0.02 per diluted share, related primarily to the reversal of a valuation allowance, partially offset by tax expense associated with foreign earnings that the company planned to repatriate to the United States.
E Refer to page 9 for a description of the adjustments and a reconciliation of GAAP (generally accepted accounting principles) measures.
Note: The consolidated statements of income reflect the January 1, 2009 adoption of a new accounting standard that requires a company to present a consolidated net income measure that includes the amount attributable to noncontrolling interests (historically referred to as minority interests) for all periods presented. Prior to January 1, 2009, the noncontrolling interests' share of net income was included in other expense, net.
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BAXTER INTERNATIONAL INC.
Notes to Consolidated Statements of Income
Three Months Ended September 30, 2009 and 2008
Description of Adjustments and Reconciliation of GAAP to Non-GAAP Measures
(unaudited)
(in millions, except per share and percentage data)
2009 description of adjustments and reconciliation of GAAP to Non-GAAP
The company's GAAP results for the three months ended September 30, 2009 included an impairment charge associated with the discontinuation of the company's SOLOMIX drug delivery system in development and a charge primarily related to planned retirement costs associated with the SYNDEO PCA Syringe Pump, which impacted the GAAP results as follows:
Income Net Income
Pre-tax Tax Attributable Diluted
Income Expense to Baxter EPS
GAAP $658 $126 $530 $0.87
Impairment charge 54 7 47 0.08
Infusion pump charge 1 27 5 22 0.03
Excluding specified items $739 $138 $599 $0.98
Effective tax rate 18.7%
1 Included in the cost of sales line within the accompanying consolidated statements of income. Excluding this item, adjusted gross margin was $1.66 billion and the adjusted gross margin percentage was 52.8%.
2008 description of adjustments and reconciliation of GAAP to Non-GAAP
The company's GAAP results for the three months ended September 30, 2008 included a charge related to COLLEAGUE infusion pumps, an impairment charge associated with the discontinuation of the CLEARSHOT pre-filled syringe program, and an IPR&D charge related to the company's in-licensing agreement with Innocoll, which impacted the GAAP results as follows:
Income Net Income
Pre-tax Tax Attributable Diluted
Income Expense to Baxter EPS
GAAP $562 $86 $472 $0.74
Infusion pump charge 1 72 7 65 0.10
Impairment charge 31 12 19 0.03
IPR&D charge 2 12 5 7 0.01
Excluding specified items $677 $110 $563 $0.88
Effective tax rate 16.2%
1 Included in the cost of sales line within the accompanying consolidated statements of income. Excluding this item, adjusted gross margin was $1.59 billion and the adjusted gross margin percentage was 50.6%.
2 Included in the R&D expenses line within the accompanying consolidated statements of income. Excluding this item, adjusted R&D expenses were $218 million, or 6.9% of net sales.
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.
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BAXTER INTERNATIONAL INC.
Consolidated Statements of Income
Nine Months Ended September 30, 2009 and 2008
(unaudited)
(in millions, except per share and percentage data)
Nine Months Ended
September 30,
2009 2008 Change
NET SALES $9,092 $9,217 (1%)
COST OF SALES 4,334 A 4,689 A (8%) A service of YellowBrix, Inc.
