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| Baxter International 1999 10-K Report (Partial 10-K shown; subscribers can see the entire 10-K report.) |
0000950131-00-001927.hdr.sgml : 20000324
ACCESSION NUMBER: 0000950131-00-001927
CONFORMED SUBMISSION TYPE: 10-K405
PUBLIC DOCUMENT COUNT: 10
CONFORMED PERIOD OF REPORT: 19991231
FILED AS OF DATE: 20000323
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: BAXTER INTERNATIONAL INC
CENTRAL INDEX KEY: 0000010456
STANDARD INDUSTRIAL CLASSIFICATION: SURGICAL & MEDICAL INSTRUMENTS & APPARATUS [3841]
IRS NUMBER: 360781620
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 10-K405
SEC ACT:
SEC FILE NUMBER: 001-04448
FILM NUMBER: 576068
BUSINESS ADDRESS:
STREET 1: ONE BAXTER PKWY
CITY: DEERFIELD
STATE: IL
ZIP: 60015
BUSINESS PHONE: 8479482000
MAIL ADDRESS:
STREET 1: ONE BAXTER PARKWAY
CITY: DEERFIELD
STATE: IL
ZIP: 60015
FORMER COMPANY:
FORMER CONFORMED NAME: BAXTER TRAVENOL LABORATORIES INC
DATE OF NAME CHANGE: 19880522
FORMER COMPANY:
FORMER CONFORMED NAME: BAXTER LABORATORIES INC
DATE OF NAME CHANGE: 19760608
10-K405
1
FORM 10-K
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 for the fiscal year ended December 31, 1999
OR
[_]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 for the transition period from __________ to __________
Commission file number 1-4448
- -------------------------------------------------------------------------------
Baxter International Inc.
- -------------------------------------------------------------------------------
(Exact Name of Registrant in its Charter)
Delaware 36-0781620
------------------------------------------- -------------------------
(State or Other Jurisdiction of Incorporation or (I.R.S. Employer
Organization) Identification No.)
One Baxter Parkway, Deerfield, Illinois 60015
------------------------------- -------------------------
(Address of Principal Executive Offices) (Zip Code)
847.948.2000
Registrant's telephone number, including area code ____________________________
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
--------------------
Common stock, $1 par value New York Stock Exchange,
Inc.
Preferred Stock Purchase Rights Chicago Stock Exchange,
(currently traded with common stock) Inc.
Pacific Exchange, Inc.
New York Stock Exchange,
Inc.
Chicago Stock Exchange,
Inc.
Pacific Exchange, Inc.
Securities registered pursuant to Section 12(g) of the Act: None
----------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
X
Yes No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of the voting common equity held by non-
affiliates of the registrant (based on the per share closing sale price of
$54.50 on February 29, 2000, and for the purpose of this computation only, the
assumption that all registrant's directors and executive officers are
affiliates) was approximately $15.6 billion. There is no non-voting common
equity held by non-affiliates of the registrant.
The number of shares of the registrant's common stock, $1 par value,
outstanding as of February 29, 2000, was 290,529,593.
Documents Incorporated By Reference
Those sections or portions of the registrant's annual report to stockholders
for fiscal year ended December 31, 1999 and of the registrant's proxy
statement for use in connection with its annual meeting of stockholders to be
held on May 2, 2000, described in the cross reference sheet and table of
contents attached hereto are incorporated by reference in this report.
- -------------------------------------------------------------------------------
CROSS REFERENCE SHEET
and
TABLE OF CONTENTS
Page Number or
(Reference) (1)
---------------
Item 1. Business
(a) General Development of Business................. 1(2)
(b) Financial Information about Segments............ 1(3)
(c) Narrative Description of Business............... 1(4)
(d) Financial Information about Foreign and Domestic
Operations and Export Sales..................... 7(5)
Item 2. Properties.......................................... 8
Item 3. Legal Proceedings................................... 8
Item 4. Submission of Matters to a Vote of Security Holders. 12
Market for the Registrant's Common Equity and
Item 5. Related Stockholder Matters......................... 13(6)
Item 6. Selected Financial Data............................. 13(7)
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations................. 13(8)
Quantitative and Qualitative Disclosures about
Item 7A. Market Risk......................................... 13(9)
Item 8. Financial Statements and Supplementary Data......... 13(10)
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure................. 13
Item 10. Directors and Executive Officers of the Registrant
(a) Identification of Directors..................... 14(11)
(b) Identification of Executive Officers............ 14
(c) Compliance with Section 16(a) of the Securities
Exchange Act of 1934............................ 15
Item 11. Executive Compensation.............................. 15(12)
Security Ownership of Certain Beneficial Owners and
Item 12. Management.......................................... 15(13)
Item 13. Certain Relationships and Related Transactions...... 15
Exhibits, Financial Statement Schedules and Reports
Item 14. on Form 8-K......................................... 16
(a) Financial Statements............................ 16
(b) Reports on Form 8-K............................. 16
(c) Exhibits........................................ 16
- -------
(1) Information incorporated by reference to Baxter's Annual Report to
Stockholders for the year ended December 31, 1999 ("Annual Report") and
Baxter's proxy statement for use in connection with its annual meeting of
stockholders to be held May 2, 2000 ("Proxy Statement").
(2) Annual Report, pages 37-39, section entitled "Notes to Consolidated
Financial Statements--Acquisitions and Divestitures."
(3) Annual Report, pages 48-49, section entitled "Notes to Consolidated
Financial Statements--Segment Information."
(4) Annual Report, pages 21-29, section entitled "Management's Discussion and
Analysis" and pages 48-49, section entitled "Notes to Consolidated
Financial Statements--Segment Information."
(5) Annual Report, pages 48-49, section entitled "Notes to Consolidated
Financial Statements--Segment Information."
(6) Annual Report, page 50, section entitled "Notes to Consolidated Financial
Statements--Quarterly Financial Results and Market for the Company's Stock
(Unaudited)."
(7) Annual Report, inside back cover, section entitled "Five-Year Summary of
Selected Financial Data."
(8) Annual Report, pages 21-29, section entitled "Management's Discussion and
Analysis."
(9) Annual Report, pages 28-29, section entitled "Financial Instrument Market
Risk."
(10) Annual Report, pages 30-50, sections entitled "Report of Independent
Accountants," "Consolidated Balance Sheets," "Consolidated Statements of
Income," "Consolidated Statements of Cash Flows," "Consolidated Statements
of Stockholders' Equity and Comprehensive Income" and "Notes to
Consolidated Financial Statements."
(11) Proxy Statement, pages 10-12, section entitled "Board of Directors--
Director Biographies."
(12) Proxy Statement, page 14, section entitled "Board of Directors--
Compensation of Directors" and pages 18-23, section entitled "Executive
Compensation."
(13) Proxy Statement, pages 24-25, section entitled "Ownership of Baxter
Stock."
- --------------------------------------------------------------------------------
Baxter International Inc., One Baxter Parkway, Deerfield, Illinois 60015
- --------------------------------------------------------------------------------
PART I
- --------------------------------------------------------------------------------
Item 1. Business.
(a) General Development of Business.
Baxter International Inc. was incorporated under Delaware law in 1931. As
used in this report, except as otherwise indicated in information incorporated
by reference, "Baxter International" means Baxter International Inc. and
"Baxter" or the "company" means Baxter International and its subsidiaries.
Baxter engages in the worldwide development, manufacture and distribution of
a diversified line of products, systems and services used primarily in the
health-care field. We manufacture products in 29 countries and sell them in
over 100 countries. Health care is concerned with the preservation of health
and with the diagnosis, cure, mitigation and treatment of disease and body
defects and deficiencies. Our products are used by hospitals, clinical and
medical research laboratories, blood and dialysis centers, rehabilitation
centers, nursing homes, doctors' offices and by patients, at home, under
physician supervision.
For information regarding significant acquisitions, investments in
affiliates and divestitures, see our Annual Report to Stockholders for the year
ended December 31, 1999 (Annual Report), pages 37-39, section entitled "Notes
to Consolidated Financial Statements--Acquisitions and Divestitures" which is
incorporated by reference. See also "Recent Acquisitions."
(b) Financial Information About Segments.
Incorporated by reference from the Annual Report, pages 48-49, section
entitled "Notes to Consolidated Financial Statements--Segment Information."
(c) Narrative Description of Business.
Recent Acquisitions
North American Vaccine, Inc.
In November 1999, Baxter announced an agreement to acquire North American
Vaccine, Inc., a developer, manufacturer and marketer of vaccines for adults
and children to prevent infectious diseases. The transaction has been
structured as a stock for stock transaction and is valued at approximately $390
million. The transaction is subject to a number of conditions, including
regulatory approval, and is expected to close during the first six months of
2000.
Althin Medical A.B.
In December 1999, Baxter announced an agreement to acquire Althin Medical
A.B. (Althin), a leading manufacturer of hemodialysis products based in Sweden.
The transaction, which closed in March 2000, was structured as a purchase of a
controlling interest in Althin followed by a public tender offer for all of
remaining shares. The cash and stock transaction was valued at approximately
$130 million.
Company Overview
Baxter operates as a global leader in critical therapies for life-
threatening conditions. We develop, manufacture and market products and
technologies related to the blood and circulatory system. Our continuing
operations are comprised of three segments: I.V. Systems/Medical Products,
which develops technologies and systems to improve intravenous medication
delivery and distributes medical products; Blood Therapies, which develops
biopharmaceutical and blood collection and separation products and
technologies; and Renal, which develops products and provides services to treat
end-stage kidney disease. Our three businesses enjoy leading positions in the
medical products and services fields. In July 1999, we announced that our board
of directors had approved a plan to spin-off Baxter's CardioVascular business
to our stockholders. As a result of the board's approval of the spin-off, the
CardioVascular business, which is substantially the same as the former
1
CardioVascular segment, is now being reported as a discontinued operation in
our financial statements. We expect the spin-off to occur on or about March
31, 2000. Unless otherwise indicated, each of the factors discussed in this
Part I do not materially differ in their impact across each of our three
segments.
Information about operating results is incorporated by reference from the
Annual Report, pages 21-29, section entitled "Management's Discussion and
Analysis" and pages 48-49, section entitled "Notes to Consolidated Financial
Statements--Segment Information."
I.V. Systems/Medical Products
Business Description. Baxter manufactures a range of products used to
deliver fluids and drugs to patients. These products provide fluid
replenishment, nutrition therapy, pain management, antibiotic therapy,
chemotherapy and other therapies. Baxter provides intravenous (IV) and
irrigating solutions in flexible, plastic and non-PVC containers; premixed
liquid and frozen drugs for IV delivery; IV access systems and tubing sets;
electronic IV infusion pumps; solutions, containers and automated compounding
systems for IV nutrition; IV anesthesia devices and inhalation agents; and
ambulatory infusion systems. Baxter also provides custom IV solution
compounding services in a number of markets around the world.
Global Strategy. In established markets, such as North America, Australia
and parts of Europe, Latin America and Asia, Baxter uses its recognized
leadership in IV therapy to introduce value-added products that increase
productivity and quality while reducing costs for hospitals and other health-
care providers. In new and developing markets, Baxter's strategy is to
establish a presence with selected products based on local market requirements
and then broaden its offering as the market develops and market acceptance of
Baxter's technologies grows. Although the company has a strong manufacturing
presence all over the world, it has continued to form joint ventures to market
or manufacture its IV products in developing regions of Asia, Latin America
and Eastern Europe. Because IV products are used in such a broad range of
medical therapies, Baxter expects much of its future growth in the IV
Systems/Medical Products group to come from the continuing economic expansion
of developing regions as health-care standards improve.
Product Development. Two years ago, Baxter introduced the Colleague(R)
single-channel volumetric infusion pump, and in 1999 launched a triple-channel
version, allowing clinicians to administer up to three IV solutions at a time
to a patient from a single pump. Also in 1999, Baxter launched a German-
language version of the Colleague, and in 2000, expects to introduce Colleague
in additional languages. In addition, last year Baxter launched a new
electronic ambulatory infusion pump for pain management and a new multi-
chamber bag for IV nutrition. In 2000, Baxter plans to release a new automated
compounding system for use by hospital pharmacies to custom-mix patient-
specific IV nutrition solutions. Baxter also continues to look at advancing
technologies in the "needleless" IV access area, and at expanding its line of
premixed drugs.
Acquisitions and Alliances. In 1999, Baxter reclaimed the distribution
rights for its inhalation agents in Canada and Western Europe from Pharmacia &
Upjohn, Inc. and also acquired its IV business in Germany. Baxter also began
distributing Gensia Sicor's generic propofol anesthetic. In early 2000, Baxter
acquired several outpatient infusion pumps and related medical systems from
Sabratek Corporation. Baxter also expects to continue to expand its alliances
with pharmaceutical companies to premix and package their drugs in Baxter IV
solution containers.
Blood Therapies
Business Description. Baxter produces therapeutic proteins from plasma and
through recombinant methods to treat hemophilia, immune deficiencies and other
blood-related disorders. These include coagulation factors, immune globulins,
albumin, wound-management products and vaccines. Baxter also manufactures
blood-collection containers and automated blood-cell separation and collection
systems. These products are used by hospitals, blood banks and plasma-
collection centers to collect and process blood components for therapeutic
use, or for processing into therapeutic products, such as albumin. Therapeutic
blood components are used to treat patients undergoing surgery, cancer therapy
and other critical therapies.
Global Strategy. The company has benefited from growth from its Recombinate
Antihemophilic Factor (recombinant), used to treat hemophilia A (the most
common form of hemophilia, characterized by lack of a clotting factor, Factor
VIII), as more production capacity has become available in Baxter's
recombinant facility in Thousand Oaks, California, in 2000. For Baxter's
blood-collection products, increased automation and the incorporation of
leukoreduction technologies (to eliminate unwanted white cells from collected
blood components) is expected to continue to drive growth. Technologies to
automate the collection of red cells and inactivate viral pathogens in
collected blood components may provide opportunities for longer term growth.
2
Product Development. In the first quarter of 1999, Baxter launched a
recombinant Factor IX product in Europe. Baxter also continues to pursue a
protein-free manufacturing process for recombinant blood-clotting factors.
Other products in development include a next-generation fibrin sealant and
vaccines for Lyme disease and influenza. In blood processing, Baxter and its
development partner, Cerus Corporation, are in clinical trials with pathogen-
inactivation technologies for platelets, plasma and red cells. Baxter also is
developing technology for the automated collection of red cells. In addition,
the company is developing a recombinant solution to replicate the function of
the hemoglobin molecule in carrying oxygen to vital organs in cases of severe
blood loss.
Acquisitions and Alliances. Baxter's 1997 acquisition of Immuno AG greatly
expanded the company's portfolio of plasma-derived therapeutic proteins. It
also added significant new wound-management products, like Tisseel(R) fibrin
sealant, and vaccines to Baxter's product offering, while strengthening
Baxter's market presence and research and development capabilities in Europe.
In November 1999, Baxter announced plans to acquire North American Vaccine,
Inc., which Baxter expects will further broaden its position in the vaccines
market.
Renal
Business Description. Baxter provides a range of renal dialysis products and
services to support people with kidney failure. The company is the world's
leading manufacturer of products for peritoneal dialysis (PD), a home dialysis
therapy. These products include PD solutions, container systems, and automated
machines that cleanse patients' blood overnight while they sleep. Baxter also
manufactures dialyzers and instrumentation for hemodialysis (HD). Baxter's
Renal Therapy Services (RTS) operates dialysis clinics in 12 countries outside
the United States, while Renal Management Strategies Inc. (RMS) partners with
U.S. nephrologists to provide a kidney-disease management program to health-
care payers.
Global Strategy. There are approximately one million known dialysis patients
in the world. Many more people with kidney disease currently go undiagnosed or
untreated, particularly in developing countries. Because PD can offer a lower-
cost alternative to HD, which requires an infrastructure of clinics, one of
Baxter's strategies is to increase the use of PD in developing countries where
people desperately need some form of dialysis treatment. Baxter also seeks to
expand PD in developed countries, where the lifestyle advantages offered by the
therapy make it an attractive alternative to in-center care for certain
patients. Baxter expects to continue to invest in both PD and HD and in its RTS
business in order to improve patient outcomes and provide a full spectrum of
quality, cost-effective dialysis products and services that best meet the needs
of patients, physicians and payers.
Product Development. In 1999, Baxter introduced a new generation of
HomeChoice(TM) technology: the HomeChoice(TM) PRO with PD Link. In addition to
providing overnight dialysis, the device improves patient monitoring by
allowing physicians to electronically access therapy data directly from the
machine. Baxter also continues to develop new PD solutions to manage specific
patient conditions. These include Nutrineal(R) solution, which provides extra
nutrition to patients, and Extraneal(R) solution, which draws excess fluid from
the bloodstream. For HD patients, Baxter has received approval from the U.S.
Food and Drug Administration for its new Meridian(R) hemodialysis instrument.
The company also is investing in xenotransplantation--animal-to-human
transplants. Baxter's Nextran unit is working to develop genetically modified
pig organs that someday could be transplanted safely into humans. This research
extends beyond kidneys to livers, hearts and other organs.
Acquisitions and Alliances. In late 1999, Baxter announced that it was
acquiring Althin Medical A.B., a Swedish manufacturer of hemodialysis
instruments and dialyzers. As described under "Joint Ventures" below, Baxter
entered into a joint venture with Gambro A.B. (Gambro) of Sweden to create
Tandem Healthcare LLC (Tandem). The company's RTS business continues to acquire
dialysis clinics in Asia, Europe and Latin America, where it operates the
clinics in partnership with local physicians. RTS entered the year 2000 with
more than 160 clinics in Argentina, Brazil, China, Colombia, France, Indonesia,
Korea, Malaysia, Singapore, Spain, Taiwan and the United Kingdom.
Discontinued Operation
In July 1999, our board of directors approved a plan to spin-off Baxter's
CardioVascular business to our stockholders. We expect that the CardioVascular
business will become an independent, publicly-traded company on or about March
31, 2000. The new company will be headquartered in Irvine, California, and will
be named Edwards Lifesciences Corporation.
3
Business Description. The CardioVascular business designs, develops,
manufactures and markets a comprehensive line of products and services to
treat late-stage cardiovascular disease. These include: cardiac surgery
products, encompassing heart valve therapy products, mechanical cardiac assist
systems, and cannulae and cardioplegia; critical care products, featuring
cardiac monitoring systems and disposables used to evaluate cardiac output and
measure blood pressure; vascular products, which includes products used in
peripheral vascular surgery, surgical accessories, implantable grafts, and
endovascular graft systems for treating aortic aneurysms; perfusion products
and services, comprised of oxygenators and related disposables used during
cardiopulmonary bypass, cardiopulmonary bypass hardware and perfusion
services; and left ventricular-assist devices.
United States Markets
The health-care marketplace continues to be highly competitive. There has
been consolidation in the company's customer base, and by its competitors,
which has resulted in pricing and market share pressures. These industry
trends are expected to continue. The company intends to continue to manage
these issues by developing new products and services, leveraging its cost
structure and making acquisitions.
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