<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
------- SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1994
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 as specified in its charter)
DELAWARE 36-0781620
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
ONE BAXTER PARKWAY, DEERFIELD, ILLINOIS 60015-4633
- - --------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(708) 948-2000
-------------------------------
(Registrant's telephone number,
including area code)
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.
Yes X No
----- -----
The number of shares of the registrant's Common Stock, $1 par value, outstanding
as of April 30, 1994 the latest practicable date, was 277,148,631 shares.
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Baxter International Inc. and Subsidiaries
Condensed Consolidated Statements of Income (Unaudited)
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------
(In millions, except per share data) Three Months Ended
March 31,
1994 1993
<S> <C> <C>
Operations
Net Sales $2,193 $2,041
Costs and expenses
Cost of goods sold 1,433 1,293
Marketing and administrative expenses 440 435
Research and development expenses 76 78
Settlement of patent litigation 0 105
Interest expense 56 52
Interest income (9) (6)
Goodwill amortization 17 17
Other 6 12
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Total costs and expenses 2,019 1,986
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Income before income taxes and cumulative
effect of accounting changes 174 55
Income tax expense (benefit) 43 (2)
- - -------------------------------------------------------------------------------
Income before cumulative effect of accounting
changes 131 57
Cumulative effect of changes in accounting principles,
net of income taxes 0 70
- - -------------------------------------------------------------------------------
Net income $131 $127
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
Earnings per common share
Operations $0.47 $0.20
Cumulative effect of changes in accounting
principles 0.00 0.25
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Net income $0.47 $0.45
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Average number of common shares outstanding 277 278
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</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
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Baxter International Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------------
(In millions, except shares) March 31, December 31,
1994 1993
(Unaudited)
<S> <C> <C>
Current assets Cash and equivalents $ 472 $ 479
Accounts receivable 1,543 1,594
Notes and other current
receivables 108 82
Inventories 1,800 1,772
Short-term deferred income taxes 335 341
Prepaid expenses 161 154
-----------------------------------------------------------------
Total current assets 4,419 4,422
- - -------------------------------------------------------------------------------------
Property, At cost 4,534 4,491
plant and Accumulated depreciation
equipment and amortization (1,901) (1,836)
-----------------------------------------------------------------
Net property, plant and equipment 2,633 2,655
- - -------------------------------------------------------------------------------------
Other assets Goodwill and other intangibles 2,479 2,490
Non-current receivables 191 180
Insurance receivables 509 509
Investments in affiliates 158 180
Other 114 109
-----------------------------------------------------------------
Total other assets 3,451 3,468
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Total assets $10,503 $10,545
- - -------------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------------
Current
liabilities Short-term debt $ 913 $ 822
Accounts payable and other
current liabilities 1,994 2,111
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Total current liabilities 2,907 2,933
- - -------------------------------------------------------------------------------------
Long-term debt and lease obligations 2,704 2,800
- - -------------------------------------------------------------------------------------
Long-term deferred income taxes 209 201
- - -------------------------------------------------------------------------------------
Long-term litigation liabilities 674 674
- - -------------------------------------------------------------------------------------
Other non-current liabilities 747 752
- - -------------------------------------------------------------------------------------
Stockholders' Common stock, $1 par value,
equity authorized 350,000,000 shares,
issued 287,701,247 shares in
1994 and 1993 288 288
Additional contributed capital 1,878 1,883
Retained earnings 1,513 1,452
Common stock in treasury, at cost,
10,724,042 shares in 1994 and
11,187,278 shares in 1993 (332) (350)
Foreign currency adjustment (85) (88)
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Total stockholders' equity 3,262 3,185
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Total liabilities and stockholders' equity $10,503 $10,545
- - -------------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
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Baxter International Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------------
Three months ended March 31, (in millions) 1994 1993
(Brackets denote cash outflows)
<S> <C> <C>
Cash flow provided Income from operations $131 $ 57
by operations Adjustments
Depreciation and amortization 125 117
Deferred income taxes 14 (14)
Asset dispositions, net (pre-tax) (13) (3)
Provision for litigation 0 105
Other 3 6
Changes in balance sheet items
Accounts receivable 25 63
Inventories (25) (97)
Accounts payable and other
accrued liabilities (100) (47)
Restructuring program payments (24) (7)
Other (9) (15)
---------------------------------------------------------------
Cash flow provided by operations 127 165
-----------------------------------------------------------------
Investment Capital expenditures (1) (86) (93)
transactions Acquisitions (net of cash received)
and investments in affiliates (23) (35)
Proceeds from asset dispositions 39 0
-----------------------------------------------------------------
Investment transactions, net (70) (128)
- - -------------------------------------------------------------------------------------
Financing Issuances of debt and lease
transactions obligations 402 446
Redemption of debt and lease
obligations (506) (246)
Increase in debt with maturities
of three months or less, net 96 194
Common stock dividends (69) (69)
Stock issued under employee
benefit plans 13 13
Purchase of treasury stock 0 (78)
-----------------------------------------------------------------
Financing transactions, net (64) 260
- - -------------------------------------------------------------------------------------
Effect of foreign exchange rate changes on cash
and equivalents 0 (5)
- - -------------------------------------------------------------------------------------
Increase (decrease) in cash and equivalents (7) 292
Cash and equivalents at beginning of period 479 32
- - -------------------------------------------------------------------------------------
Cash and equivalents at end of period $472 $324
- - -------------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------------
<FN>
(1) Includes additions to the pool of equipment leased or rented to customers.
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
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Baxter International Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
FINANCIAL INFORMATION
The unaudited interim condensed consolidated financial statements of Baxter
International Inc. and its subsidiaries ("the Company" or "Baxter") have been
prepared pursuant to the rules and regulations of the Securities and Exchange
Commission. Accordingly, certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. These interim consolidated
financial statements should be read in conjunction with the condensed
consolidated financial statements and notes included in the Company's 1993
Annual Report to Stockholders.
In the opinion of management, the interim condensed consolidated financial
statements reflect all adjustments necessary for a fair presentation of the
interim periods. The results of operations for the interim period are not
necessarily indicative of the results of operations to be expected for the full
year.
INVENTORIES
Inventories consisted of the following (in millions):
<TABLE>
<CAPTION>
March 31, December 31,
1994 1993
(Unaudited)
<S> <C> <C>
Raw materials $ 242 $ 238
Work in process 230 221
Finished products 1,328 1,313
----- -----
Total inventories $1,800 $1,772
----- -----
----- -----
</TABLE>
LEGAL PROCEEDINGS
Please refer to "Part II - Item 1. Legal Proceedings" which begins on page 13 of
this document for the status of cases and claims from individuals seeking
damages for injuries allegedly caused by silicone gel-filled mammary prostheses
manufactured by a division of American Hospital Supply Corporation. That section
also discusses the status of lawsuits and claims involving individuals suffering
with hemophilia, seeking damages for injuries allegedly caused by
anti-hemophilic factor VIII and IX concentrates derived from human blood plasma
processed and sold by the Company and other commercial producers.
JOINT VENTURES
In April 1994, Baxter entered an agreement to sell its interest in IBAX, a joint
venture with International Business Machines which provides computer software
and services to hospitals and other health-care providers. This agreement is
consistent with the Company's program to exit selected non-strategic businesses.
<PAGE>
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Item. 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
The Company's 1993 Annual Report to Stockholders ("ARS") contains management's
discussion and analysis of financial condition and results of operations at and
for the year ended December 31, 1993. In the ARS, management outlined its key
financial objectives in 1994 which are summarized as follows:
* Improve operational cash flows (defined later in this report) from $275
million in 1993 to $450 million thereby allowing the Company to remain
debt-neutral in 1994, after payment of dividends and all financing costs;
* Grow sales and net earnings in the high single digit percentage range;
* Hold operating expenses flat for 1994 and 1995 and position Baxter to further
reduce its expense ratio in the years beyond 1995;
* Reduce the Company's net debt to net capital ratio from approximately 50% at
the end of 1993 to the mid 40's by the end of 1994, before considering the
use of any proceeds from the divestiture of the Diagnostics manufacturing
businesses; and
* Complete the divestiture of Baxter's Diagnostics manufacturing businesses.
The following discussion and analysis describes management's progress toward the
above objectives and material changes in the Company's financial condition since
December 31, 1993. Trends of a material nature are discussed to the extent known
and considered relevant. The analysis of results compares the three months ended
March 31, 1994 with the corresponding period of 1993.
RESULTS OF OPERATIONS
First quarter net sales increased 7% to $2.2 billion. The following table shows
net sales for each industry segment (unaudited):
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------
Percent
Three months ended March 31, (in millions) 1994 1993 Increase
<S> <C> <C> <C>
Medical specialties $ 793 $ 742 7%
Medical/laboratory products and distribution 1,400 1,299 8
- - -------------------------------------------------------------------------------
Total net sales $2,193 $2,041 7%
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
</TABLE>
Domestic sales for the first quarter of 1994 were approximately $1.6 billion, an
increase of 8% over the comparable period in 1993. Sales from international
markets in the first quarter were $574 million, representing a 6% increase over
1993. International sales growth in local currency was approximately 10% in the
first quarter of 1994. Sales growth in both segments was generally attributable
to normal market growth and increased market penetration in selected areas. The
medical specialties segment also was adversely impacted by weaker foreign
currency exchange rates.
The gross profit margin was 34.7% for the three months ended March 31, 1994,
versus 36.6% for the similar period of 1993. This decline reflects pricing
pressures on certain product lines, a
<PAGE>
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heavier mix of lower-margin distributed products, and the voluntary market
withdrawal of Gammagard, an immune globulin intravenous product. Gammagard-R-
IGIV, an immune globulin intravenous product. In the second quarter of 1994,
a new product, Gammagard-R- S/D was licensed for sale in the United States and
Germany. This product was previously approved for sale in Sweden, Finland and
Iceland. This product is the second generation of Gammagard-R- IGIV.
Gammagard-R- S/D is treated with a solvent and two detergents known to
inactivate viruses such as hepatitis B, hepatitis C and HIV.
Marketing and administrative expenses were 20.1% as a percent of sales for the
quarter ended March 31, 1994, versus 21.3% for the same period in 1993. This
decrease reflects improved expense leveraging as a result of initiatives taken
in connection with the 1993 downsizing and restructuring programs. As mentioned
above, the company expects to hold marketing and administrative expenses flat
for the next two years and to further reduce the expense ratio over the next
five years.
The following table shows research and development expenses for each industry
segment (unaudited):
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------
Three months ended March 31, (in millions) Percent
Increase
1994 1993 (Decrease)
<S> <C> <C> <C>
Medical specialties $56 $51 10%
Medical/laboratory products and distribution 20 27 (26%)
- - -------------------------------------------------------------------------------
Total research and development expenses 76 78 (3%)
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
</TABLE>
Total company research and development expenses decreased 3% to $76 million for
the three months ended March 31, 1994, as compared to the similar period of
1993, as a result of the Company's strategic review of research and development
initiatives. Research and development expenses have increased in the medical
specialties segment as the company continues to increase its investment in
high-growth, strategic initiatives such as kidney transplants, Novacor and
Blood Substitutes.
The operating results for the first quarter of 1993 included the effect of a
worldwide settlement of patent litigation with Scripps Research Institute and
Rhone-Poulenc Rorer, Inc. ("Rorer"), which required Baxter to pay $105 million
to Rorer, and reduced earnings per share by $.23.
Interest expense increased $4 million to $56 million for the three months ended
March 31, 1994, as compared to the same period ended March 31, 1993, primarily
as a result of higher average debt levels partially offset by lower interest
rates. Compared to the fourth quarter of 1993, interest expense decreased $3
million for the first quarter of 1994 as a result of lower interest rates
primarily achieved through interest rate swaps.
Other non-operating income for the three months ended March 31, 1994, includes
approximately $13 million (as compared to $3 million in the same period of
1993), in net gains associated with the disposal or discontinuance of minor,
non-strategic business and investments.
Income before income taxes was $174 million for the three months ended March 31,
1994 versus $55 million for the comparable period of 1993. The following table
shows income before income taxes for each industry segment (unaudited):
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------
Three months ended March 31, (in millions) 1994 1993
<S> <C> <C>
Medical specialties $131 $42
Medical/laboratory products and distribution 114 93
General corporate and other (24) (34)
Interest - net (47) (46)
- - -------------------------------------------------------------------------------
Total $174 $55
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
</TABLE>
<PAGE>
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The increase in pre-tax income in the medical specialties segment for the three
month period is primarily due to the reduction in the 1993 operating results for
this segment as a result of the $105 million settlement of the patent litigation
described above. The medical specialties segment was adversely impacted in 1994
by weaker foreign currency exchange rates and by the effect of the voluntary
market withdrawal of Gammagard, discussed earlier. The medical/laboratory
products and distribution segment's income before income taxes increased 22.6%
for the first quarter as compared to the same period in 1993 as a result of
higher sales volume and the benefits of cost containment measures implemented
throughout 1993 and the first quarter of 1994. The net decrease in costs in
general corporate and other for the three month period primarily reflects the
effect of net gains associated with the disposal or discontinuance of minor,
non-strategic business investments.
The effective tax rate for the first quarter was 24.7% versus 25.0% for the
similar period in 1993 (excluding the tax effects from the patent litigation
settlement described above). The decrease is primarily due to a larger
proportion of earnings generated in partially exempt tax jurisdictions.
Income before cumulative effect of accounting changes was $131 million for the
first quarter of 1994 versus $57 million in the comparable period of 1993.
Earnings per common share from operations increased from 20 cents to 47 cents.
As described above, the settlement of patent litigation reduced earnings per
share in 1993 by 23 cents. Earnings per share, excluding the settlement of
patent litigation in 1993, increased 9% from the prior year. This increase in
1994 reflects general growth in the Company's operations and improved expense
control.
The 1993 benefit for the cumulative effect of adopting FASB Statement No. 109,
"Accounting for Income Taxes" was $81 million, or 29 cents per common share. The
1993 charge for the cumulative effect of adopting FASB Statement No.112,
"Accounting for Postemployment Benefits" was $11 million (net of $7 million in
income tax benefits) or 4 cents per common share.
LIQUIDITY AND CAPITAL RESOURCES
Management assesses the Company's liquidity in terms of its overall ability to
mobilize cash to support ongoing business levels and to fund its growth.
Cash flow provided by continuing operations (which includes working capital
components) decreased to $127 million from a level of $165 million for the three
months ended March 31, 1994. This decrease primarily reflects net cash outflows
for working capital components. At $24 million for the first quarter of 1994,
the restructuring program payments are in line with the Company's plan.
Management believes that this level of cash flow is sufficient to support normal
ongoing business requirements.
As a result of the Company's increased emphasis on cash flow, management
introduced a new internal performance measure called "operational cash flow"
which evaluates each operating business on all aspects of cash flow under their
direct control. Management's objective in 1994 is to generate operational cash
flow of at least $450 million (after the payment of restructuring costs planned
in 1994) compared to $275 million in operational cash flow in 1993. In addition,
the incentive compensation programs for the Company's senior management in each
business have been modified to include significant emphasis on the attainment of
both operational cash flow as well as earnings objectives.
<PAGE>
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The following table reconciles cash flow provided by continuing operations, as
determined by generally accepted accounting principles, to the Company's
internal measure of operational cash flow (unaudited):
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------------------
(in millions) (Brackets denote cash outflows) Three Months Ended
March 31,
1994 1993
<S> <C> <C>
Cash flow provided by operations per the Company's
condensed consolidated statements of cash flows $127 $165
Capital expenditures (86) (93)
Net interest after tax 28 27
Other adjustments 5 1
- - --------------------------------------------------------------------------------------------
Total operational cash flow $74 $100
- - --------------------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------------------
</TABLE>
Operational cash flow of $74 million for the first quarter of 1994 is consistent
with the Company's internal projections.
Investment transactions for the three months ended March 31, 1994 totaled $70
million (compared to the $128 million expended in the similar period of 1993),
and included $86 million in capital expenditures and additions to the pool of
equipment leased or rented to customers, $23 million for the acquisition of
minor businesses and investment positions for the purpose of acquiring
technologies, broadening product lines or expanding market coverage and $39
million in proceeds from the disposal or discontinuance of minor, non- strategic
business units and investments.
The following table shows capital expenditures for each industry segment
(unaudited):
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------
Three months ended March 31, (in millions) 1994 1993 Percent
Increase
(Decrease)
<S> <C> <C> <C>
Medical specialties $46 $39 18%
Medical/laboratory products and distribution 36 49 (27)
General corporate 4 5 (20)
- - --------------------------------------------------------------------------------
Total $86 $93 (8%)
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
</TABLE>
Capital expenditures in the medical specialties segment represented 53% and 42%
of total company capital expenditures during the periods ended March 31, 1994
and 1993, respectively. In comparison, capital expenditures in the
medical/laboratory products and distribution segment represented 42% and 53% of
total Company capital expenditures during the periods ended March 31, 1994 and
1993, respectively. This shift is consistent with the company's strategy to
increase its investment in its higher growth medical specialties businesses. The
Company has made significant investments in recent years in its U.S.
Distribution and manufacturing infrastructure. As a consequence, the level of
capital expenditures in the medical/laboratory products and distribution segment
will decline as compared to 1993 levels. Incremental capital investments are
being made in the medical specialties segment for the expansion of manufacturing
capacity for renal and blood collection products.
The Company's current assets exceeded current liabilities by $1.5 billion at
March 31, 1994 and December 31, 1993. Current assets included receivables of
$1.5 billion and inventories of $1.8 billion. These sources of liquidity are
convertible into cash over a relatively short period of time and thus, will help
the Company satisfy normal operating cash requirements.
<PAGE>
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Short-term debt increased from $822 million to $913 million and long-term debt
decreased from $2,800 million to $2,704 million at March 31, 1994. Net debt
(after consideration of cash equivalents) remained essentially flat since the
start of this year, thus, the common stock dividends of $69 million were paid
without the need for additional borrowings. At March 31, 1994, the Company's net
debt to net capital ratio was 49.1% versus 49.7% at year-end 1993. The Company
intends to utilize the net proceeds from the planned divestiture of the
diagnostics-products manufacturing and other non-strategic businesses to reduce
net debt, and thus, anticipates that its net debt to net capital ratio will
decline during the balance of 1994, with the goal of reaching the 40% range in
the years ahead.
The Company intends to fund its short-term and long-term obligations as they
mature by issuing additional debt or through cash flow from operations.
Refer to "Part II - Item 1. Legal Proceedings" which begins on page 13 of this
document for the status of cases and claims from individuals seeking damages for
injuries allegedly caused by silicone gel-filled mammary prostheses manufactured
by a division of American Hospital Supply Corporation. That section also
discusses the status of lawsuits and claims involving individuals suffering with
hemophilia, seeking damages for injuries allegedly caused by anti-hemophilic
factor VIII and IX concentrates derived from human blood plasma processed and
sold by the Company and other commercial producers.
Upon resolution of any of the above-mentioned uncertainties, or if the Company
should, along with the other defendants, enter into a comprehensive settlement
of the related purported class actions, the Company may incur charges in excess
of presently established reserves. While such future charges could have a
material adverse impact on the Company's net income in the period in which it is
recorded, management believes that any outcome of these actions will not have a
material adverse effect on the Company's consolidated financial position.
The Company believes it has lines of credit adequate to support ongoing business
operations and has sufficient financial flexibility to attract long-term capital
on satisfactory terms to support its obligations and growth objectives.
<PAGE>
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REVIEW BY INDEPENDENT PUBLIC ACCOUNTANTS
A review of the interim consolidated financial information included in this
Quarterly Report on Form 10-Q for the three months ended March 31, 1994 has been
performed by Price Waterhouse, the Company's independent public accountants.
Their report on the interim consolidated financial information follows. There
have been no adjustments or disclosures proposed by Price Waterhouse which have
not been reflected in the interim consolidated financial information. Their
report is not considered a report within the meaning of Sections 7 and 11 of the
Securities Act of 1933 and therefore, the independent accountants' liability
under Section 11 does not extend to it.
<PAGE>
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REPORT OF INDEPENDENT ACCOUNTANTS
May 12, 1994
Board of Directors and Stockholders
Baxter International Inc.
We have reviewed the accompanying condensed consolidated balance sheet and the
related condensed consolidated statements of income and condensed consolidated
statements of cash flows of Baxter International Inc. and its subsidiaries as
of March 31, 1994 and for the three-month periods ended March 31, 1994 and 1993.
This interim financial information is the responsibility of the company's
management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying interim financial information for it to be in
conformity with generally accepted accounting principles.
We previously audited, in accordance with generally accepted auditing standards,
the consolidated balance sheet as of December 31, 1993, and the related
consolidated statements of income, cash flows and stockholders' equity for the
year then ended (not presented herein), and in our report dated February 10,
1994 we expressed an unqualified opinion on those consolidated financial
statements. In our opinion, the information set forth in the accompanying
condensed consolidated balance sheet as of December 31, 1993, is fairly stated
in all material respects in relation to the consolidated balance sheet from
which it has been derived.
Price Waterhouse
<PAGE>
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PART II. OTHER INFORMATION
Baxter International Inc. and Subsidiaries
Item 1. Legal Proceedings
As of March 31, 1994, the Company was a defendant, together with other
defendants, in 4,517 lawsuits and had 1,689 pending claims from individuals, all
of which seek damages for injuries allegedly caused by silicone mammary
prostheses ("mammary implants") manufactured by the American Heyer-Schulte
division of American Hospital Supply Corporation ("American"). The Company's
responsibility for mammary implants results from the American Heyer-Schulte
division of American which manufactured these products from 1974 until 1984, at
which time the products and related assets were sold to Mentor Corporation.
American retained the product liability responsibility for products sold before
the divestiture, and that responsibility was assumed by a subsidiary of the
Company as part of its 1985 acquisition of American. The Company has never
manufactured this product nor does it have any of the product in its inventory.
The typical case or claim alleges that the individual's mammary implants caused
one or more of a wide range of ailments, including non-specific autoimmune
disease, scleroderma, lupus, rheumatoid arthritis, fibromyalgia, mixed
connective tissue disease, Sjogren's Syndrome, dermatomyositis, polymyositis,
and chronic fatigue. The comparable number of cases and claims was 137 as of
December 31, 1991, 1,612 as of December 31, 1992 and 4,870 as of December 31,
1993. In 1991, 76 cases and claims were disposed of; in 1992, 309 cases and
claims were disposed of; in 1993, 634 cases and claims were disposed of; and in
the first quarter of 1994, 98 cases and claims were disposed of.
In addition to the individual suits against the Company, a class action on
behalf of all women with mammary implants filed against all manufacturers of
such implants has been conditionally certified and is pending in the United
States District Court for the Northern District of Alabama (DANTE, ET AL., V.
DOW CORNING, ET AL., U.S.D.C., N. Dist., Ala., 92-2589; part of IN RE: SILICONE
GEL BREAST IMPLANT PRODUCT LIABILITY LITIGATION, U.S.D.C., N. Dist. Ala., MDL
926, (U.S.D.C., N. Dist. Ala., CV 92-P-10000-S)). Another class action has been
certified and is pending in state court in Louisiana (SPITZFADDEN, ET AL., V.
DOW CORNING CORP., ET AL., Dist. Ct., Parish of Orleans, 92-2589). Baxter also
has been named in three purported additional class actions, none of which is
currently certified. (BARCELLONA, ET AL., V. DOW CORNING, ET AL., U.S.D.C.,
Mich., 9300 72045 DT and MOSS, ET AL., V. DOW CORNING, ET AL., U.S.D.C., Minn.,
92-P-10560-S, both of which have been transferred to and are part of IN RE:
SILICONE GEL BREAST IMPLANT PRODUCT LIABILITY LITIGATION, U.S.D.C., N. Dist.
Ala., MDL- 926 for discovery purposes, and DOE, ET AL., V. INAMED CORPORATION,
ET AL., Circuit Ct., Dade County, Fla, 92-07034.) A suit seeking class
certification on behalf of all residents of the Province of Ontario, Canada, who
received Heyer-Schulte implants has also been filed (BURKE, V. AMERICAN
HEYER-SCHULTE, ET al., Ontario Prov. Court, Gen. Div., 15981/93.)
Additionally, the Company has been served with a purported class action brought
on behalf of children allegedly exposed to silicone in utero and through breast
milk. (FEUER, ET AL., V. MCGHAN, ET AL., U.S.D.C., E. Dist. N.Y., 93-0146.) The
suit names all mammary implant manufacturers as defendants and seeks to
establish a medical monitoring fund.
These implant cases and claims generally raise difficult and complex factual and
legal issues and are subject to many uncertainties and complexities, including,
but not limited to, the facts and circumstances of each particular case or
claim, the jurisdiction in which each suit is brought, and differences in
applicable law. Many of the cases and claims are at very
<PAGE>
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preliminary stages, and the Company has not been able to obtain information
sufficient to evaluate each case and claim.
There also are issues concerning which of the Company's insurers is responsible
for covering each matter and the extent of the Company's claims for contribution
against third parties. The Company believes that a substantial portion of the
liability and defense costs related to mammary implant cases and claims will be
covered by insurance, subject to self- insurance retentions, exclusions,
conditions, coverage gaps, policy limits and insurer solvency. Most of the
Company's insurers have reserved (i.e., neither admitted nor denied), and may
attempt to reserve in the future, the right to deny coverage, in whole or in
part, due to differing theories regarding, among other things, the applicability
of coverage and when coverage may attach. The Company has been, and will
continue to be, engaged in active negotiations with its insurers concerning
coverages and the settlement described below. Also, some of the mammary implant
cases pending against the Company seek punitive damages and compensatory damages
arising out of alleged intentional torts. Depending on policy language,
applicable law and agreements with insurers, the damages awarded pursuant to
such claims may or may not be covered, in whole or in part, by insurance. On
February 7, 1994, the Company filed suit against all of the insurance companies
which issued product liability policies to American, American Heyer-Schulte and
Baxter for a declaratory judgment that: the policies cover each year of injury
or claim, the Company may choose among multiple coverages; coverage begins with
the date of implant; and legal fees and punitive damages are covered.
Subsequently, certain of the Company's product liability insurance carriers
filed suit against the Company and all of its other carriers for a declaratory
judgment to define various terms in the Company's insurance policies, the extent
of the Company's coverage, the date of the occurrences giving rise to coverage,
and the relative liabilities of the various insurance carriers involved.
Representatives of the plaintiffs and defendants in these cases have negotiated
a global settlement of the issues under the jurisdiction of the Court in the
DANTE V. DOW CORNING, ET AL. case. The monetary provisions of the settlement
proposal providing compensation for all present and future plaintiffs and
claimants based on a series of specific funds and scheduled medical conditions
have been agreed upon by most of the significant defendants and representatives
of the plaintiffs. Under the proposal, the total of all of the specific funds,
which would be paid-in and made available over approximately thirty years
following final approval of the settlement by the Courts, is capped at $4.75
billion. The settling defendants have agreed to fund $4.255 billion of this
amount. The Company's share of this settlement has been established by the
settlement negotiations at $556 million. This settlement is subject to a series
of court proceedings, including a court review of its fairness, and the
opportunity for individual plaintiffs and claimants to elect to remove
themselves from the settlement ("opt-out"). At present, the Company is not able
to estimate the nature and extent of its potential future liability with respect
to opt-outs.
In the fourth quarter of 1993, the Company accrued $556 million for its
estimated liability resulting from a potential global settlement of the mammary
implant class action and recorded a receivable for estimated insurance recovery
of $426 million, resulting in a net charge of $130 million. The reserves for the
settlement do not include any provisions for opt-outs and are in addition to the
general reserves for the mammary implant cases discussed below.
In connection with its acquisition of American, the Company had established
reserves at the time of the merger for product liability, including mammary
implant cases and claims. At March 31, 1994, the reserve allocated to mammary
implant cases and claims was approximately $34 million. Based on current
information, management believes that this
<PAGE>
-15-
reserve represents the Company's minimum net exposure in connection with future
mammary implant cases and claims beyond the effect of the global settlement
described above.
Upon resolution of any of the uncertainties concerning these cases, the Company
may ultimately incur charges in excess of presently established reserves. While
such a future charge could have a material adverse impact on the Company's net
income in the period in which it is recorded, management believes that any
outcome of this litigation will not have a material adverse effect on the
Company's consolidated financial position.
As of March, 31, 1994, the Company was a defendant, together with other
defendants, in 148 lawsuits, and has one pending claim, in the United States and
Canada involving individuals who have hemophilia, or their representatives.
Those cases and claim seek damages for injuries allegedly caused by
anti-hemophilic factor concentrates VIII and IX derived from human blood plasma
processed and sold by the Company. Furthermore, 58 lawsuits seeking damages
based on similar allegations are pending in Ireland, Japan and Germany.
The typical case or claim alleges that the individual with hemophilia was
infected with HIV by infusing Factor VIII or Factor IX concentrates ("Factor
Concentrates") containing HIV. The total number of cases and claims asserted
against the Company as of December 31, 1991, was 16, as of December 31, 1992,
was 52, and as of December 31, 1993, was 178. In 1991, 11 cases and claims were
disposed of; in 1992, 9 cases and claims were disposed of; in 1993, 11 cases and
claims were disposed of; and in the first quarter of 1994, 14 cases and claims
were disposed of.
In addition to the individual suits against the Company, a purported class
action was filed on September 30, 1993, on behalf of all U.S. residents with
hemophilia (and their families) who were treated with Factor Concentrates and
who allegedly are infected with HIV as a result of the use of such Factor
Concentrates. This lawsuit was filed in the United States District Court for the
Northern District of Illinois (WADLEIGH, ET AL., V. RHONE-POULENC RORER, ET AL.,
U.S.D.C., N. Dist., Ill. 93C 5969). A state-wide class action also has been
filed on behalf of all New Jersey residents with hemophilia and HIV. (D.K., ET
AL., V. ARMOUR PHARMACEUTICAL COMPANY, ET AL., Sup. Ct., Middlesex County, N.J.,
L8134-93.) Neither class action has yet been certified.
Many of the cases and claims are at very preliminary stages, and the Company has
not been able to obtain information sufficient to evaluate each case and claim.
In most states, the Company's potential liability is limited by laws which
provide that the sale of blood or blood derivatives, including Factor
Concentrates, is not the sale of a "good," and thus is not covered by the
doctrine of strict liability. As a result, each claimant will have to prove that
his or her injuries were caused by the Company's negligence. The WADLEIGH case
alleges that the Company was negligent in failing: to use available purification
technology; to promote research and development for product safety; to withdraw
Factor Concentrates once it knew or should have known of viral contamination of
such concentrates; to screen plasma donors properly; to recall contaminated
Factor Concentrates; and to warn of risks known at the time the product was
used. The Company denies these allegations and will file a challenge to the
class proceedings later in 1994. The Company is not able to estimate the nature
and extent of its potential or ultimate future liability with respect to these
cases and claims, but as a result of settlement discussions and opinions of
litigation counsel, has established the reserve described below.
<PAGE>
-16-
The Company believes that a substantial portion of the liability and defense
costs related to anti-hemophilic factor concentrates cases and claims will be
covered by insurance, subject to self-insurance retentions, exclusions,
conditions, coverage gaps, policy limits and insurer solvency. Most of the
Company's insurers have reserved (i.e., neither admitted nor denied), and may
attempt to reserve in the future, the right to deny coverage, in whole or in
part, due to differing theories regarding, among other things, the applicability
of coverage and when coverage may attach. Zurich Insurance Co., one of the
Company's comprehensive general liability insurance carriers, on February 1,
1994, filed a suit against the Company seeking a declaratory judgment that the
policies it had issued do not cover the losses that the Company has notified it
of for a number of reasons, including that Factor Concentrates are products, not
services, and are, therefore, excluded from the policy coverage, and that the
Company has failed to comply with various obligations of tender, notice, and the
like under the policies. On February 8, 1994, the Company filed suit against all
of the insurance companies which issued comprehensive general liability and
product liability policies to the Company for a declaratory judgment that the
policies for all of the excess carriers covered both products and services. In
that suit, the Company also sued Zurich for failure to defend it and Zurich and
Columbia Casualty Company for failure to indemnify it.
The Company has notified its insurers concerning coverages and the status of the
cases. Also, some of the anti-hemophilic factor concentrates cases pending
against the Company seek punitive damages and compensatory damages arising out
of alleged intentional torts. Depending on policy language, applicable law and
agreements with insurers, the damages awarded pursuant to such claims may or may
not be covered, in whole or in part, by insurance. Accordingly, the Company is
not currently in a position to estimate the amount of its potential future
recoveries from its insurers, but has estimated its recovery with respect to the
reserves it has established.
The Company is vigorously defending each of the cases and claims against it. At
the same time, the Company will continue to seek ways to resolve pending and
threatened litigation concerning these issues through a negotiated resolution.
In Canada, the provincial governments created a settlement fund to which all of
the fractionators, including the Company, have contributed. The Company's
contribution to the fund was approximately $3 million. Those Canadian claimants
who avail themselves of this fund must sign releases in favor of the Company
against further litigation. The period in which to file a claim against the fund
expired on March 15, 1994.
In the fourth quarter of 1993, the Company accrued $131 million for its
estimated worldwide liability for litigation and settlement expenses involving
anti-hemophilic Factor Concentrate cases, and recorded a receivable for
insurance coverage of $83 million, resulting in a net charge of $48 million. The
expense of the Canadian settlement is covered by this reserve.
Upon resolution of any of the uncertainties concerning these cases, or if the
Company, along with the other defendants, enters into a comprehensive settlement
of the class actions described above, the Company may incur charges in excess of
presently established reserves. While such a future charge could have a material
adverse impact on the Company's net income in the period in which it is
recorded, management believes that any outcome of this litigation will not have
a material adverse effect on the Company's consolidated financial position.
Most of the individuals who served as directors of American in 1985, including
Mr. Cathcart and Ms. Evans, who currently are directors of the Company, are
defendants in a pending
<PAGE>
-17-
lawsuit filed as a derivative action. LEWIS V. BAYS, ET AL. was filed on March
23, 1990, in the Circuit Court of Cook County, Illinois. The plaintiffs allege
breach of fiduciary duty claims relating to American's buyout of an agreement
with Hospital Corporation of America ("HCA") in connection with the Company's
merger with American in 1985.
On April 12, 1994, the parties in this case filed a settlement agreement with
the court for approval. The Court entered a preliminary order of fairness, and,
on April 26, 1994, the Company began notifying its stockholders of the
settlement. A final hearing to approve the settlement is scheduled for June 15,
1994. Management believes that the terms of any possible resolution will
not have a material adverse effect on the Company's results of operations or
consolidated financial position.
Baxter Healthcare Corporation ("BHC") is one of ten defendants named in a
purported class action filed in August, 1993, on behalf of all medical and
dental personnel in the state of California who suffered allergic reactions to
natural rubber latex gloves and other protective equipment or who have been
exposed to natural rubber latex products. (KENNEDY, ET AL., V. BAXTER HEALTHCARE
CORPORATION, ET AL., Sup. Ct., Sacramento Co., Cal., #535632). The case alleges
that users of various natural rubber latex products, including medical gloves
made and sold by BHC and other manufacturers, suffered allergic reactions to the
products ranging from skin irritation to systemic anaphylaxis. The Court granted
the defendants' demurrer to the complaint which challenged the class action
allegations. The Court also granted the plaintiffs' leave to file an amended
complaint. The Court granted the defendants' demurrer to the amended complaint
and again granted the plaintiffs leave to file a second amended complaint. The
defendants' demurrer to the second amended complaint is presently before the
Court. The defendants have also requested, if the Court grants the demurrer,
that a further order be entered dismissing the class action allegations with
prejudice, operating as a final judgment on that issue. In April, 1994, a
similar purported class action, GREEN, ET AL. V. BAXTER HEALTHCARE CORPORATION,
ET AL., (Cir. Ct., Milwaukee Co., WI) was filed in Wisconsin against Baxter and
three other defendants. The defendants are preparing a response to that
complaint. Management believes that the outcome of these matters will not have a
material adverse effect on the Company's results of operations or consolidated
financial position.
All of the individuals who served as directors of the Company as of September 1,
1993, as well as Lester B. Knight, executive vice president of the Company, are
named as defendants in a pending lawsuits ostensibly filed as a "demand excused"
derivative action. SEIGEL V. LOUCKS, ET AL., was filed September 15, 1993, in
the Court of Chancery in New Castle County, Delaware Cir. Ct., New Castle Co.,
Del., Cir. Act #13130. On October 24, 1993, a substantially identical complaint
was filed in the same court by Bartholomew J. Millano. The two complaints have
been consolidated. The plaintiffs allege, among other things, that the directors
failed to oversee management in connection with actions which are the basis for
the dispute between the Company and the DVA which are described above, failed to
prevent such actions, and failed to create a compliance program to prevent or
detect such actions. The complaint seeks to recover alleged damages incurred by
the Company as the result of lost sales due to the proposed debarment discussed
above, as well as the compensation paid to Messrs. Gantz, Knight, Loucks and
Tobin since 1991. The Company and its directors have filed motions to dismiss
the suit, have answered the complaint and have filed a counterclaim seeking to
permanently bar and enjoin the plaintiff from prosecuting this case because her
claims have been disposed of and barred in a prior suit against the Company.
The Company has been named as a potentially responsible party for cleanup costs
at 18 hazardous waste sites. The Company was a significant contributor to waste
disposed on
<PAGE>
-18-
only one of these sites, the Thermo-Chem site in Muskegon, Michigan. The company
expects that the total cleanup costs for this site will be between $37 million
and $82 million, of which the Company's share will be approximately $5 million.
This amount has been reserved and reflected in the Company's financial
statements.
In all of the other sites, the Company was a minor contributor and, therefore,
does not have information on the total cleanup costs. The Company has, however,
in most of these cases been advised by the potentially responsible party of its
roughly estimated exposure at these sites. Those estimated exposures total
approximately $5 million. This amount has been reserved and reflected in the
Company's financial statements.
The Company is a defendant in a number of other claims, investigations and
lawsuits. Based on the advice of counsel, management does not believe that the
other claims, investigations and lawsuits individually or in the aggregate, will
have a material adverse effect on the Company's operations or its consolidated
financial condition.
Item 4. Submission of Matters to a Vote of Security Holders
The Company's 1994 annual meeting of stockholders was held on April 29, 1994.
At the annual meeting the stockholders elected the following four directors for
three-year terms:
Number of Votes
----------------------------------
In favor Withheld
----------------------------------
John W. Colloton 220,360,404 2,636,098
Susan Crown 220,119,866 2,876,636
Vernon R. Loucks, Jr. 215,857,876 7,138,626
Georges C. St. Laurent, Jr. 218,479,429 4,517,073
A list of nine directors continuing in office is included in the Board of
Directors proxy statement distributed in connection with the annual meeting.
The results of matters voted upon at the annual meeting are as follows:
<TABLE>
<CAPTION>
Number of Votes
------------------------------------------------------
In favor Against Abstained
------------------------------------------------------
<S> <C> <C> <C>
Approval of Price Waterhouse
as independent
accountants for the
Company for 1994 221,887,183 607,941 501,378
Approval of the adoption of the
1994 Incentive
Compensation Program 139,459,943 47,698,670 2,128,252
Defeat of the stockholder
proposal relating to
cumulative voting in the
election of directors 67,320,514 119,794,673 2,171,678
Defeat of the stockholder
proposal relating to
separating the offices of
chairman of the board and
chief executive officer 57,537,448 127,108,196 4,641,221
</TABLE>
<PAGE>
-19-
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibits required by Item 601 of Regulation S-K are listed in the Exhibit
Index hereto.
(b) Report on Form 8-K
None
<PAGE>
-20-
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BAXTER INTERNATIONAL INC.
---------------------------------
(Registrant)
Date: May 12, 1994 By:/s/Brian P. Anderson
--------------------
Brian P. Anderson, Controller
(Chief Accounting Officer)
<PAGE>
-21-
Appendices
Description Page Number
- - ----------- -----------
Computation of Primary Earnings Per Common Share
(Exhibit 11.1) 22
Computation of Fully Diluted Earnings Per Common Share
(Exhibit 11.2) 23
Computation of Ratio of Earnings to Fixed Charges
(Exhibit 12) 24
- - -------------------------------------------------------------------------------
Exhibits Filed with Securities and Exchange Commission
Number Description of Exhibit Page Number
- - ----- ---------------------- -----------
11.1 Computation of Primary
Earnings Per Common Share 22
11.2 Computation of Fully Diluted
Earnings Per Common Share 23
12 Computation of Ratio of
Earnings to Fixed Charges 24
15 Letter Re Unaudited Interim
Financial Information *
(All other exhibits are inapplicable.)
<PAGE>
-22-
Baxter International Inc. and Subsidiaries
Exhibit 11.1 - Computation of Primary Earnings Per Common Share
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------
(Unaudited - in millions, except per share data) Three Months Ended
March 31,
1994 1993
<S> <C> <C>
Earnings
Income before cumulative effect of accounting changes $131 $57
Cumulative effect of change in accounting for:
Income taxes 0 81
Other postemployment benefits 0 (11)
- - -------------------------------------------------------------------------------
Net income available for common stock $131 $127
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
Shares
Weighted average number of common
shares outstanding 277 278
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
Primary earnings (loss) per common share
Income before cumulative effect of accounting changes $0.47 $0.20
Cumulative effect of change in accounting for:
Income taxes 0.00 0.29
Other postemployment benefits 0.00 (0.04)
- - -------------------------------------------------------------------------------
Net income $0.47 $0.45
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
</TABLE>
<PAGE>
-23-
Baxter International Inc. and Subsidiaries
Exhibit 11.2 - Computation of Fully Diluted Earnings Per Common Share
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------
(Unaudited - in millions, except per share data) Three Months Ended
March 31,
1994 1993
<S> <C> <C>
Earnings
Income before cumulative effect of accounting changes $131 $57
Cumulative effect of change in accounting for:
Income taxes 0 81
Other postemployment benefits 0 (11)
- - -------------------------------------------------------------------------------
Pro forma net income available for common stock $131 $127
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
Shares
Weighted average number of common shares
outstanding 277 278
Additional shares assuming conversion of cumulative
convertible exchangeable preferred stock, exercise of
stock options, performance share awards and stock
purchase plan subscriptions -- 2
- - -------------------------------------------------------------------------------
Average common shares and equivalents outstanding 277 280
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
Fully diluted earnings (loss) per common share
Income before cumulative effect of accounting changes 0.47 0.20
Cumulative effect of change in accounting for:
Income taxes 0.00 0.29
Other postemployment benefits 0.00 (0.04)
- - -------------------------------------------------------------------------------
Net income $0.47 $0.45
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
</TABLE>
<PAGE>
-24-
Baxter International Inc. and Subsidiaries
Exhibit 12 - Computation of Ratio of Earnings to Fixed Charges
(Unaudited - in millions, except ratios)
<TABLE>
<CAPTION>
- - ---------------------------------------------------------------------------------------------------------------------
Year ended December 31 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
Income from continuing operations
before income tax expense and
cumulative effect of accounting change $(330) $753 $688 $ 16 $578
Add:
Interest costs 232 221 231 264 291
Estimated interest included
in rentals (1) 44 43 36 35 30
- - ---------------------------------------------------------------------------------------------------------------------
Fixed charges as defined 276 264 267 299 321
Interest costs capitalized (10) (10) (9) (5) (7)
Losses of less than majority owned
affiliates, net of dividends 27 34 32 22 15
- - ---------------------------------------------------------------------------------------------------------------------
Income as adjusted $(37) $1,041 $978 $332 $907
- - ---------------------------------------------------------------------------------------------------------------------
- - ---------------------------------------------------------------------------------------------------------------------
Ratio of earnings to fixed charges (0.13) 3.94 3.66 1.11 2.83
- - ---------------------------------------------------------------------------------------------------------------------
- - ---------------------------------------------------------------------------------------------------------------------
Three months ended March 31 1994
Income before income taxes and
cumulative effect of accounting change $174
Add:
Interest costs 58
Estimated interest included in rentals (1) 11
- - ---------------------------------------------------------------------------------------------------------------------
Fixed charges as defined 69
Interest costs capitalized (2)
Losses of less than majority
owned affiliates, net of dividends 3
- - ---------------------------------------------------------------------------------------------------------------------
Income as adjusted $244
- - ---------------------------------------------------------------------------------------------------------------------
- - ---------------------------------------------------------------------------------------------------------------------
Ratio of earnings to fixed charges 3.53
- - ---------------------------------------------------------------------------------------------------------------------
- - ---------------------------------------------------------------------------------------------------------------------
<FN>
(1) Represents the estimated interest portion of rents.
(2) Earnings were inadequate to cover fixed charges for the year-ended December
31, 1993, due to the provision for the restructuring program costs. The
amount of the coverage deficiency is $313 million.
</TABLE>
<PAGE>
-25-
EXHIBIT 15
May 12, 1994
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Dear Sirs:
We are aware that Baxter International Inc. has included our report dated May
12, 1994 (issued pursuant to the provisions of Statement on Auditing Standards
No. 71) in the Prospectus constituting part of its Registration Statements on
Form S-8 (Nos. 2-82667, 2- 86993, 2-97607, 33-8812, 33-15523, 33-15787, 33-28428
and 33-33750), on Form S- 3 (Nos. 33-5044, 33-23450, 33-27505, 33-31388 and
33-49820) and on Form S-4 (Nos. 33-808 and 33-15357). We are also aware of our
responsibilities under the Securities Act of 1933.
Yours very truly,
Price Waterhouse
