Company Affirms Fourth Quarter Earnings Guidance
DEERFIELD, Ill., October 21, 2004 – Baxter International Inc. (NYSE:BAX) today reported its results for the third quarter. Earnings per diluted share from continuing operations totaled $0.42 in the quarter, a decline of 9 percent from $0.46 per share reported last year, and in line with the company’s expectations.
Sales advanced 5 percent to $2.32 billion in the third quarter, with foreign exchange favorably impacting sales by 3 percentage points. Sales within the United States increased 3 percent to $1.10 billion. International sales totaled $1.22 billion, an increase of 6 percent, resulting entirely from favorable foreign exchange.
In the third quarter, BioScience sales increased 4 percent, to $849 million, Medication Delivery sales grew 4 percent to $986 million, and Renal sales grew 8 percent to $485 million.
The company’s restructuring initiatives continued to drive improvement in margins. Baxter’s gross margin of 41.5 percent and operating margin of 16.3 percent reflect continued sequential improvement throughout 2004.
“We are pleased with the meaningful progress we have made on multiple fronts,” said Robert L. Parkinson, Jr., chairman and chief executive officer. “In addition to achieving our key financial objectives, we exceeded expectations for Advate, achieved all of the milestones associated with the restructuring program, and made significant progress in building our senior leadership team with several important appointments.”
Year-to-Date Results
For the first nine months of 2004, Baxter’s sales grew 8 percent to $6.91 billion, up from $6.37 billion in the same period last year. Foreign exchange favorably impacted sales growth by 4 percentage points year-to-date. Sales within the United States totaled $3.22 billion, an increase of 6 percent over the same period last year. International sales increased 10 percent (including an 8 percentage point benefit from foreign exchange), totaling $3.69 billion.
Year-to-date, BioScience sales increased 9 percent to $2.55 billion, fueled by sales of ADVATE® Antihemophilic Factor (Recombinant), Plasma/Albumin Free Method (rAHF-PFM) for the treatment of hemophilia A, which totaled $85 million in the third quarter, and are expected to exceed $250 million for the full-year. ADVATE has been widely accepted by patients and clinicians since its approval in July 2003 in the U.S., and March 2004 in Europe. In the third quarter, Baxter also filed for European regulatory approval of the company’s next-generation immune globulin intravenous (IGIV) therapy for the treatment of primary immune deficiency disease, following the company’s second quarter regulatory submission in the U.S.
In its other business segments, year-to-date Medication Delivery sales increased approximately 7 percent to $2.92 billion, and Renal sales advanced 10 percent to $1.44 billion.
“We have a solid foundation in place, with market-leading products and strong business franchises. Our focus now is on improving the financial vitality of the company, providing greater flexibility over time to make strategic investments that further expand and diversify our business,” Parkinson added.
Baxter’s income from continuing operations totaled $277 million in the first nine months of the year. Excluding second-quarter special charges, the company reported year-to-date income from continuing operations of $691 million, a decrease of 6 percent over the same period last year. Year-to-date earnings per diluted share from continuing operations totaled $0.45, or $1.12 excluding the second-quarter charges.
Year-to-date, cash flow from continuing operations totaled $529 million, after funding $231 million for restructuring payments and pension contributions. Capital expenditures for the nine-month period declined by more than $200 million to $363 million in 2004, from $564 million in 2003.
“We are continuing to focus our efforts on aggressively managing cash flow, including a more disciplined approach toward capital spending, ” said John Greisch, chief financial officer. “I am pleased with the improvement in year-to-date cash flow, and am confident that further improvements in working capital management will yield consistent and sustainable cash flow in the future.”
2004 Outlook
Consistent with the company’s previous guidance, Baxter expects earnings per diluted share from continuing operations to be $0.54 to $0.58 for the fourth quarter, and $0.99 to $1.03 for the full-year, inclusive of special charges in the second quarter. Excluding the impact of second-quarter special charges, the company expects to achieve full-year earnings per diluted share from continuing operations of $1.66 to $1.70.
The company expects its reported sales for the fourth quarter to be flat versus the prior year, resulting in full-year sales growth between 5 to 6 percent, including foreign exchange benefit of 3 to 4 percentage points.
Baxter also expects to generate cash flow from continuing operations of approximately $1.4 billion for full-year 2004.
A webcast of Baxter's third 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 October 21, 2004.
Please visit Baxter’s website for a schedule of future investor events. The company’s fourth quarter cash flow and earnings conference call is scheduled for January 27, 2005.
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.
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 geographic and/or product mix on the company's sales; actions of regulatory bodies, including the FDA or foreign counterparts; product quality and/or patient safety concerns leading to product recalls, withdrawals, launch delays or declining sales; product development risks; demand for and market acceptance of new and existing products, such as ADVATE, and other technologies; 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; 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. This news release contains certain non-GAAP financial measures as defined by SEC rules. A reconciliation of these measures to the most directly comparable GAAP measure is included in the schedules entitled “Pro Forma Consolidated Statements of Income” and “GAAP to Pro Forma Reconciliation for Selected Income Statement Lines.”
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