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Baxter Raises Full-Year 2008 Outlook Following Strong Second-Quarter Financial Results
Date:7/17/2008

Company Posts Second Quarter EPS of $0.85 Per Diluted Share, An Increase of

31 Percent

DEERFIELD, Ill., July 17 /PRNewswire-FirstCall/ -- Baxter International Inc. (NYSE: BAX) today posted strong financial results for the second quarter of 2008 and raised its full-year financial outlook.

For the second quarter, Baxter reported net income of $544 million and earnings per diluted share of $0.85, which compared favorably to the company's earnings guidance of $0.81 to $0.83 per diluted share. Net income increased 26 percent compared to $431 million reported in the second quarter of 2007, and earnings per diluted share increased 31 percent from $0.65 per diluted share reported last year. 2007 results include an after-tax restructuring charge of $46 million or $0.07 per diluted share. On an adjusted basis, net income and earnings per diluted share increased 14 percent and 18 percent, respectively, compared to the prior year period.

The company's strong financial performance can be attributed to continued gross margin expansion as a result of enhanced business, product and geographic mix, favorable pricing across multiple businesses and manufacturing efficiencies.

"Our positive financial performance in the first half of 2008 continues to reflect the strength of our diversified business model, and positions us well in this uncertain global economy," said Robert L. Parkinson, Jr., chairman and chief executive officer.

Baxter's worldwide sales totaled $3.2 billion in the second quarter, an increase of 13 percent (or 5 percent excluding the impact of foreign exchange). Positive momentum continued in Baxter's BioScience business in the second quarter, with revenues totaling approximatel operations for a period. Management believes that

non-GAAP financial measures can facilitate a fuller analysis of the

company's results of operations, particularly in evaluating performance

period over period. Management uses these non-GAAP financial measures

internally in financial planning, to monitor business unit performance,

and in evaluating management performance. Refer to the company's filing

on Form 8-K of today's date for additional information.

BAXTER INTERNATIONAL INC.

Notes to Consolidated Statements of Income

Six Months Ended June 30, 2008 and 2007 Description of Adjustments and Reconciliation of GAAP to Non-GAAP Measures

(unaudited)

(in millions, except per share and percentage data)

2008 description of adjustment and reconciliation of GAAP to Non-GAAP

---------------------------------------------------------------------

The company's GAAP results for the six months ended June 30, 2008

included a first quarter charge related to COLLEAGUE infusion pumps,

which impacted the GAAP results as follows:

Income

Pre-tax Tax Net Diluted

Income Expense Income EPS

-----------------------------------

GAAP $1,206 $233 $973 $1.52

COLLEAGUE infusion pump charge (A) 53 8 45 0.07

-----------------------------------

Excluding specified item $1,259 $241 $1,018 $1.59

===================================

Effective tax rate 19.1%

(A) Included in the Cost of Goods Sold line in the accompanying

consolidated statement of income. Excluding this charge, adjusted

gross profit was $3,060 and the adjusted gross profit percentage

was 50.4%.

2007 description of adjustment and reconciliation of GAAP to Non-GAAP

---------------------------------------------------------------------

The company's GAAP results for the six months ended June 30, 2007

included a restructuring charge, primarily for costs and asset

impairments associated with the consolidation of certain commercial and

manufacturing operations outside of the United States, which impacted the

GAAP results as follows:

Income

Pre-tax Tax Net Diluted

Income Expense Income EPS

-----------------------------------

GAAP $1,037 $203 $834 $1.26

Restructuring charge 70 24 46 0.07

-----------------------------------

Excluding specified item $1,107 $227 $880 $1.33

===================================

Effective tax rate 20.5%

BAXTER INTERNATIONAL INC.

Condensed Consolidated Balance Sheets

(unaudited)

($ in millions)

June 30, 2008 December 31, 2007

-------------- ------------------

Assets

------

Cash and equivalents $2,147 $2,539

Receivables 2,217 2,026

Inventories 2,571 2,334

Other current assets 624 656

------------------------------------

Total current assets 7,559 7,555

------------------------------------

Property, plant and equipment, net 4,680 4,487

Other long-term assets 3,231 3,252

--------------------------------------------------------------------------

Total assets $15,470 $15,294

==========================================================================

Liabilities and Shareholders' Equity

------------------------------------

Short-term debt $62 $425

Other current liabilities 3,331 3,387

Long-term debt 3,172 2,664

Other long-term liabilities 1,686 1,902

Shareholders' equity 7,219 6,916

--------------------------------------------------------------------------

Total liabilities and

shareholders' equity $15,470 $15,294

==========================================================================

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 Six Months Ended

June 30, June 30,

------------------ ----------------

2008 2007 2008 2007

--------- ------- ------ -------

Net income $544 $431 $973 $834

Adjustments

Depreciation and amortization 160 147 316 287

Deferred income taxes 49 31 110 18

Stock compensation 35 36 73 63

Restructuring and infusion pump

charges - 70 53 70

Other 14 33 23 37

Changes in balance sheet items

Receivables (111) (56) (93) (154)

Inventories (50) (42) (155) (170)

Accounts payable and accrued

liabilities 87 67 (254) (91)

Restructuring payments (14) (3) (26) (6)

Other 6 17 62 58

-------------------------------------------------------------------------

Cash flows from operations $720 $731 $1,082 $946

=========================================================================

Changes in Net Debt

Increase (decrease) Three Months Ended Six Months Ended

June 30, June 30,

------------------ ----------------

2008 2007 2008 2007

--------- ------- ------ -------

Net debt, beginning of period $1,136 $336 $550 $316

Cash flows from operations (720) (731) (1,082) (946)

Capital expenditures 207 165 364 258

Dividends 137 109 275 489

Proceeds from sale of Transfusion

Therapies business - - - (421)

Proceeds from stock issued under

employee benefit plans (133) (227) (245) (428)

Purchases of treasury stock 388 544 933 814

Acquisitions of and investments in

businesses and technologies - 11 61 43

Payments relating to settlements of

cross-currency swaps 132 - 301 147

Other, including the effect of

exchange rate changes (60) 24 (70) (41)

-------------------------------------------------------------------------

Increase (decrease) in net debt (49) (105) 537 (85)

-------------------------------------------------------------------------

Net debt, June 30 $1,087 $231 $1,087 $231

=========================================================================

Key statistics, June 30:

Days sales outstanding 56.8 56.0 56.8 56.0

Inventory turns 2.3 2.6 2.3 2.6

Baxter International Inc.

Net Sales

Periods Ending June 30, 2008 and 2007

(unaudited)

($ in millions)

--------------------------------------------------------------------------

% Growth % Growth

@ @

Q2 Q2 Actual Constant

2008 2007 Rates Rates

--------------------------------------------------------------------------

--------------------------------------------------------------------------

BioScience (1)

United States $590 $532 11% 11%

International 795 658 21% 6%

Total $1,385 $1,190 16% 8%

--------------------------------------------------------------------------

--------------------------------------------------------------------------

Medication Delivery

United States $525 $535 (2%) (2%)

International 639 504 27% 13%

Total $1,164 $1,039 12% 5%

--------------------------------------------------------------------------

--------------------------------------------------------------------------

Renal

United States $97 $95 2% 2%

International 501 458 9% (2%)

Total $598 $553 8% (1%)

--------------------------------------------------------------------------

--------------------------------------------------------------------------

Baxter excluding Transfusion Therapies

United States $1,212 $1,162 4% 4%

International 1,935 1,620 19% 6%

Total $3,147 $2,782 13% 5%

--------------------------------------------------------------------------

--------------------------------------------------------------------------

Transfusion Therapies (1)

United States $29 $34 (15%) (15%)

International 13 13 0% (15%)

Total $42 $47 (11%) (15%)

--------------------------------------------------------------------------

--------------------------------------------------------------------------

Baxter International Inc.

United States $1,241 $1,196 4% 4%

International 1,948 1,633 19% 6%

Total $3,189 $2,829 13% 5%

==========================================================================

% Growth % Growth

@ @

YTD YTD Actual Constant

2008 2007 Rates Rates

--------------------------------------------------------------------------

--------------------------------------------------------------------------

BioScience (1)

United States $1,137 $1,016 12% 12%

International 1,458 1,246 17% 5%

Total $2,595 $2,262 15% 8%

--------------------------------------------------------------------------

--------------------------------------------------------------------------

Medication Delivery

United States $1,028 $1,050 (2%) (2%)

International 1,201 979 23% 10%

Total $2,229 $2,029 10% 4%

--------------------------------------------------------------------------

--------------------------------------------------------------------------

Renal

United States $195 $192 2% 2%

International 961 886 8% (2%)

Total $1,156 $1,078 7% (1%)

--------------------------------------------------------------------------

--------------------------------------------------------------------------

Baxter excluding Transfusion Therapies

United States $2,360 $2,258 5% 5%

International 3,620 3,111 16% 5%

Total $5,980 $5,369 11% 5%

--------------------------------------------------------------------------

--------------------------------------------------------------------------

Transfusion Therapies (1)

United States $60 $77 (22%) (22%)

International 26 58 (55%) (60%)

Total $86 $135 (36%) (39%)

--------------------------------------------------------------------------

--------------------------------------------------------------------------

Baxter International Inc.

United States $2,420 $2,335 4% 4%

International 3,646 3,169 15% 3%

Total $6,066 $5,504 10% 3%

==========================================================================

(1) The results of operations of the Transfusion Therapies (TT) business

were previously reported in the BioScience business. The TT business

was sold on February 28, 2007. The TT totals above include sales of

TT products through the date of divestiture, as well as revenues

associated with manufacturing, distribution and other services

provided by the company to the buyer of the TT business post-

divestiture.

Baxter International Inc.

Key Product Line Sales

Periods Ending June 30, 2008 and 2007

(unaudited)

($ in millions)

--------------------------------------------------------------------------

% Growth % Growth

@ @

Q2 Q2 Actual Constant

2008 2007 Rates Rates

--------------------------------------------------------------------------

--------------------------------------------------------------------------

BioScience

Recombinants $508 $431 18% 10%

Plasma Proteins 291 243 20% 12%

Antibody Therapy 315 238 32% 27%

Regenerative Medicine (1) 109 87 25% 17%

Other (2) 162 191 (15%) (27%)

--------------------------------------------------------------------------

Total BioScience (3) $1,385 $1,190 16% 8%

--------------------------------------------------------------------------

--------------------------------------------------------------------------

Medication Delivery

IV Therapies $408 $346 18% 8%

Global Injectables 393 381 3% (2%)

Infusion Systems 229 208 10% 5%

Anesthesia 122 96 27% 22%

Other 12 8 50% 38%

--------------------------------------------------------------------------

Total Medication Delivery $1,164 $1,039 12% 5%

--------------------------------------------------------------------------

--------------------------------------------------------------------------

Renal

PD Therapy $479 $443 8% (1%)

HD Therapy 119 110 8% (2%)

--------------------------------------------------------------------------

Total Renal $598 $553 8% (1%)

--------------------------------------------------------------------------

--------------------------------------------------------------------------

Baxter excluding Transfusion Therapies $3,147 $2,782 13% 5%

--------------------------------------------------------------------------

--------------------------------------------------------------------------

Transfusion Therapies (3) $42 $47 (11%) (15%)

--------------------------------------------------------------------------

--------------------------------------------------------------------------

TOTAL BAXTER $3,189 $2,829 13% 5%

==========================================================================

--------------------------------------------------------------------------

y $1.4 billion, an increase of 16 percent. Double-digit growth across the portfolio was the result of robust sales of plasma-based therapies, products used for the treatment of hemophilia and immune disorders, biosurgery products and strong demand for the company's encephalitis vaccine.

Medication Delivery sales grew 12 percent in the quarter to approximately $1.2 billion, driven by strong international sales of IV therapy products and injectable drugs, as well as anesthesia products globally. Renal sales increased 8 percent to approximately $600 million as a result of an increase in peritoneal dialysis patients in many markets around the world.

The company continues to advance its product pipeline across its business portfolio. Investments in research and development in the quarter totaled $222 million, reflecting an increase of 25 percent over the prior-year period.

Six-Month Results

For the first six months of 2008, Baxter's net income totaled $973 million and increased 17 percent, with earnings per diluted share increasing 21 percent to $1.52. On an adjusted basis, Baxter's net income of $1.0 billion increased 16 percent from $880 million last year. Adjusted earnings per diluted share for the six-month period of $1.59 increased 20 percent, from $1.33 per diluted share in the prior year period.

Baxter's worldwide sales grew 10 percent in the first half of the year to $6.1 billion, an increase from $5.5 billion last year. Excluding the impact of foreign exchange, sales growth for the first six months of the year was 3 percent. Sales within the United States totaled $2.4 billion, an increase of 4 percent over the same period last year, and international sales grew 15 percent (or 3 percent excluding the impact of foreign exchange) to $3.6 billion.

Third Quarter and Full-Year 2008 Outlook

As a result of the strong performance in the first half of the year, Baxter is raising its financial outlook for full-year 2008. The % Growth % Growth

@ @

YTD YTD Actual Constant

2008 2007 Rates Rates

--------------------------------------------------------------------------

--------------------------------------------------------------------------

BioScience

Recombinants $944 $819 15% 9%

Plasma Proteins 551 468 18% 11%

Antibody Therapy 601 460 31% 26%

Regenerative Medicine (1) 203 169 20% 14%

Other (2) 296 346 (14%) (25%)

--------------------------------------------------------------------------

Total BioScience (3) $2,595 $2,262 15% 8%

--------------------------------------------------------------------------

--------------------------------------------------------------------------

Medication Delivery

IV Therapies $779 $666 17% 8%

Global Injectables 761 742 3% (2%)

Infusion Systems 449 417 8% 3%

Anesthesia 221 185 19% 15%

Other 19 19 0% (5%)

--------------------------------------------------------------------------

Total Medication Delivery $2,229 $2,029 10% 4%

--------------------------------------------------------------------------

--------------------------------------------------------------------------

Renal

PD Therapy $924 $862 7% (1%)

HD Therapy 232 216 7% (2%)

--------------------------------------------------------------------------

Total Renal $1,156 $1,078 7% (1%)

--------------------------------------------------------------------------

--------------------------------------------------------------------------

Baxter excluding Transfusion Therapies $5,980 $5,369 11% 5%

--------------------------------------------------------------------------

--------------------------------------------------------------------------

Transfusion Therapies (3) $86 $135 (36%) (39%)

--------------------------------------------------------------------------

--------------------------------------------------------------------------

TOTAL BAXTER $6,066 $5,504 10% 3%

==========================================================================

(1) Previously referred to as BioSurgery.

(2) Principally includes vaccines, sales of plasma to third parties, and

recombinant FIX (BeneFIX). Sales of BeneFIX ceased as of June 30,

2007.

(3) The results of operations of the TT business were previously reported

in the BioScience business. The TT business was sold on February 28,

2007. The TT totals above include sales of TT products through the

date of divestiture, as well as revenues associated with

manufacturing, distribution and other services provided by the company

to the buyer of the TT business post-divestiture.

Baxter International Inc.

Key Product Line Sales by US and International

Three-Month Periods Ending June 30, 2008 and 2007

(unaudited)

($ in millions)

--------------------------------------------------------------------------

Q2 2008 Q2 2007

--------------------- ----------------------

Interna- Interna-

US tional Total US tional Total

--------------------------------------------------------------------------

BioScience

Recombinants $206 $302 $508 $198 $233 $431

Plasma Proteins 97 194 291 96 147 243

Antibody Therapy 220 95 315 176 62 238

Regenerative Medicine (1) 55 54 109 46 41 87

Other (2) 12 150 162 16 175 191

--------------------------------------------------------------------------

Total BioScience (3) $590 $795 $1,385 $532 $658 $1,190

--------------------------------------------------------------------------

--------------------------------------------------------------------------

Medication Delivery

IV Therapies $113 $295 $408 $107 $239 $346

Global Injectables 199 194 393 237 144 381

Infusion Systems 134 95 229 127 81 208

Anesthesia 76 46 122 62 34 96

Other 3 9 12 2 6 8

--------------------------------------------------------------------------

Total Medication Delivery $525 $639 $1,164 $535 $504 $1,039

--------------------------------------------------------------------------

--------------------------------------------------------------------------

Renal

PD Therapy $73 $406 $479 $68 $375 $443

HD Therapy 24 95 119 27 83 110

--------------------------------------------------------------------------

Total Renal $97 $501 $598 $95 $458 $553

--------------------------------------------------------------------------

--------------------------------------------------------------------------

Baxter excluding

Transfusion Therapies $1,212 $1,935 $3,147 $1,162 $1,620 $2,782

--------------------------------------------------------------------------

--------------------------------------------------------------------------

Transfusion Therapies (3) $29 $13 $42 $34 $13 $47

--------------------------------------------------------------------------

--------------------------------------------------------------------------

TOTAL BAXTER $1,241 $1,948 $3,189 $1,196 $1,633 $2,829

==========================================================================

% Growth @ Actual Rates

-----------------------------

Interna-

US tional Total

--------------------------------------------------------------------------

BioScience

Recombinants 4% 30% 18%

Plasma Proteins 1% 32% 20%

Antibody Therapy 25% 53% 32%

Regenerative Medicine (1) 20% 32% 25%

Other (2) (25%) (14%) (15%)

--------------------------------------------------------------------------

Total BioScience (3) 11% 21% 16%

--------------------------------------------------------------------------

--------------------------------------------------------------------------

Medication Delivery

IV Therapies 6% 23% 18%

Global Injectables (16%) 35% 3%

Infusion Systems 6% 17% 10%

Anesthesia 23% 35% 27%

Other 50% 50% 50%

--------------------------------------------------------------------------

Total Medication Delivery (2%) 27% 12%

--------------------------------------------------------------------------

--------------------------------------------------------------------------

Renal

PD Therapy 7% 8% 8%

HD Therapy (11%) 14% 8%

--------------------------------------------------------------------------

Total Renal 2% 9% 8%

--------------------------------------------------------------------------

--------------------------------------------------------------------------

Baxter excluding Transfusion Therapies 4% 19% 13%

--------------------------------------------------------------------------

--------------------------------------------------------------------------

Transfusion Therapies (3) (15%) 0% (11%)

--------------------------------------------------------------------------

--------------------------------------------------------------------------

TOTAL BAXTER 4% 19% 13%

==========================================================================

(1) Previously referred to as BioSurgery.

(2) Principally includes vaccines, sales of plasma to third parties,

and recombinant FIX (BeneFIX). Sales of BeneFIX ceased as of

June 30, 2007.

(3) The results of operations of the TT business were previously

reported in the BioScience business. The TT business was sold on

February 28, 2007. The TT totals above include sales of TT

products through the date of divestiture, as well as revenues

associated with manufacturing, distribution and other services

provided by the company to the buyer of the TT business post-

divestiture.

company expects sales growth for the year, excluding the impact of foreign exchange, of 5 to 6 percent, with earnings per diluted share of $3.28 to $3.32, before any special items. This compares to the company's previous earnings guidance of $3.18 to $3.24. In addition, the company expects cash flow from operations of at least $2.6 billion.

For the third quarter of 2008, Baxter expects sales growth of 6 to 8 percent, excluding the impact of foreign exchange, and earnings per diluted share, before any special items, of $0.81 to $0.83.

A webcast of Baxter's second 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 July 17, 2008. Please visit Baxter's website for more information regarding this and future investor events and webcasts, including investor presentations.

Baxter International Inc. develops, manufactures and markets products that save and sustain the lives of people with hemophilia, immune disorders, cancer, 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. 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; 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; reimbursement policies of government agencies and private payers; 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; 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 June 30, 2008 and 2007

(unaudited)

(in millions, except per share and percentage data)

Three Months Ended

June 30,

-------------------

2008 2007 Change

------ ------- --------

NET SALES $3,189 $2,829 13%

COST OF GOODS SOLD 1,562 1,437 9%

--------------------------------------------------------------------------

GROSS PROFIT 1,627 1,392 17%

--------------------------------------------------------------------------

% of Sales 51.0% 49.2% 1.8 pts

MARKETING AND ADMINISTRATIVE EXPENSES 703 621 13%

% of Sales 22.0% 22.0% 0 pts

RESEARCH AND DEVELOPMENT EXPENSES 222 177 25%

% of Sales 7.0% 6.3% 0.7 pts

RESTRUCTURING CHARGE - 70 (1) (100%)

NET INTEREST EXPENSE (INCOME) 25 (1) N/M

OTHER EXPENSE, NET 5 17 (71%)

--------------------------------------------------------------------------

PRE-TAX INCOME 672 508 32%

--------------------------------------------------------------------------

INCOME TAX EXPENSE 128 77 (2) 66%

--------------------------------------------------------------------------

% of Pre-Tax Income 19.0% 15.2% 3.8 pts

NET INCOME $544 $431 26%

==========================================================================

BASIC EPS $0.87 $0.66 32%

==========================================================================

DILUTED EPS $0.85 $0.65 31%

==========================================================================

WEIGHTED AVERAGE NUMBER OF COMMON

SHARES OUTSTANDING

Basic 626 650

Diluted 638 661

--------------------------------------------------------------------------

ADJUSTED PRE-TAX INCOME (excluding

specified item) $672 $578 (3) 16%

ADJUSTED NET INCOME (excluding

specified item) $544 $477 (3) 14%

ADJUSTED DILUTED EPS (excluding

specified item) $0.85 $0.72 (3) 18%

(1) A restructuring charge of $70 million ($46 million, or $0.07 per

share, on an after-tax basis) in 2007 was primarily for costs and

asset impairments associated with the consolidation of certain

commercial and manufacturing operations outside of the United States.

(2) Income tax expense in 2007 included a $15 million benefit related to

an audit settlement and the extension of tax incentives in

jurisdictions outside the United States. The effective income tax

rate in 2007 was also favorably impacted by the restructuring charge

described in Note 1 above.

(3) Refer to page 6 for a description of the adjustment and a

reconciliation to GAAP (generally accepted accounting principles)

measures.

Non-GAAP Financial Measures: The non-GAAP financial measures contained in

this press release (pre-tax income, net income and per-share earnings,

excluding certain items) adjust for factors that are unusual or

nonrecurring. Unusual or nonrecurring items can be highly variable,

difficult to predict, and of a size that may substantially impact the

company's reported operations for a period. Management believes that non-

GAAP financial measures can facilitate a fuller analysis of the company's

results of operations, particularly in evaluating performance period over

period. Management uses these non-GAAP financial measures internally in

financial planning, to monitor business unit performance, and in

evaluating management performance. Refer to the company's filing on Form

8-K of today's date for additional information.

BAXTER INTERNATIONAL INC.

Note to Consolidated Statement of Income

Three Months Ended June 30, 2007

Description of Adjustment and Reconciliation of GAAP to Non-GAAP Measures

(unaudited)

(in millions, except per share and percentage data)

The company's GAAP results for the three months ended June 30, 2007

included a restructuring charge, primarily for costs and asset impairments

associated with the consolidation of certain commercial and manufacturing

operations outside of the United States, which impacted the GAAP results

as follows:

Income

Pre-tax Tax Net Diluted

Income Expense Income EPS

-----------------------------------------

GAAP $508 $77 $431 $0.65

Restructuring charge 70 24 46 0.07

-----------------------------------------

Excluding specified item $578 $101 $477 $0.72

=========================================

Effective tax rate 17.5%

BAXTER INTERNATIONAL INC.

Consolidated Statements of Income

Six Months Ended June 30, 2008 and 2007

(unaudited)

(in millions, except per share and percentage data)

Six Months Ended

June 30,

---------------------

2008 2007 Change

-------- ------- -------

NET SALES $6,066 $5,504 10%

COST OF GOODS SOLD 3,059 (1) 2,846 7%

--------------------------------------------------------------------------

GROSS PROFIT 3,007 2,658 13%

--------------------------------------------------------------------------

% of Sales 49.6% 48.3% 1.3 pts

MARKETING AND ADMINISTRATIVE EXPENSES 1,343 1,204 12%

% of Sales 22.1% 21.9% 0.2 pts

RESEARCH AND DEVELOPMENT EXPENSES 412 336 23%

% of Sales 6.8% 6.1% 0.7 pts

RESTRUCTURING CHARGE - 70 (2) (100%)

NET INTEREST EXPENSE 42 4 N/M

OTHER EXPENSE, NET 4 7 (43%)

--------------------------------------------------------------------------

PRE-TAX INCOME 1,206 1,037 16%

--------------------------------------------------------------------------

INCOME TAX EXPENSE 233 203 15%

--------------------------------------------------------------------------

% of Pre-Tax Income 19.3% 19.6% (0.3 pts)

NET INCOME $973 $834 17%

==========================================================================

BASIC EPS $1.55 $1.28 21%

==========================================================================

DILUTED EPS $1.52 $1.26 21%

==========================================================================

WEIGHTED AVERAGE NUMBER OF COMMON

SHARES OUTSTANDING

Basic 629 650

Diluted 641 660

--------------------------------------------------------------------------

ADJUSTED PRE-TAX INCOME (excluding

specified items) $1,259 (3) $1,107 (3) 14%

ADJUSTED NET INCOME (excluding

specified items) $1,018 (3) $880 (3) 16%

ADJUSTED DILUTED EPS (excluding

specified items) $1.59 (3) $1.33 (3) 20%

(1) Cost of goods sold in the first quarter of 2008 included a charge of

$53 million ($45 million, or $0.07 per share, on an after-tax basis)

related to COLLEAGUE infusion pumps.

(2) A restructuring charge of $70 million ($46 million, or $0.07 per

share, on an after-tax basis) in 2007 was primarily for costs and

asset impairments associated with the consolidation of certain

commercial and manufacturing operations outside of the United States.

(3) Refer to page 8 for a description of the adjustments and a

reconciliation to GAAP measures.

Non-GAAP Financial Measures: The non-GAAP financial measures contained

in this press release (pre-tax income, net income and per-share earnings,

excluding certain items) adjust for factors that are unusual or

nonrecurring. Unusual or nonrecurring items can be highly variable,

difficult to predict, and of a size that may substantially impact the

company's reported
'/>"/>

SOURCE Baxter International Inc.
Copyright©2008 PR Newswire.
All rights reserved

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