The medical products and services concern reported that after currency adjustments, fourth-quarter 2004 revenue of $2.6 billion was essentially flat compared with the same period in 2003. Net income was more disappointing, declining 71% to $106 million from $364 million, in part because of a charge for halting a trial of the firm's influenza vaccine program. Full-year results were just a little better: Currency-adjusted revenue rose 3% to $9.5 billion, and earnings fell 58% to $383 million.
The company is well aware that it needs to improve and, as a result, it continues to give itself a makeover. The firm has eliminated half of the 4,000 jobs it plans to cut and expects to finish such layoffs by the end of 2005. Further, Baxter intends to exit lower-margin businesses this year, which will affect top-line growth.
Baxter has shown tangible progress on some fronts, although even its steps forward have to be taken with a grain of salt. For example, the firm reduced its net debt by $464 million in 2004. Still, interest expense in 2005 is expected to be up by $30 million to $35 million per quarter, in part because the company had to clean up an investment hedge designed to protect itself if the dollar rose against the euro. In addition, 2004 free cash flow rose 29% to $814 million, but this was in the midst of a 30% cut in capital expenditures to $558 million.
Nevertheless, Baxter should hardly be written off. The long-term prospects for the firm's drug delivery area, which provides products for intravenous drug delivery, look good, as companies such as Amgen
Fool contributor Brian Gorman is a freelance writer in Chicago. He does not own shares of any companies mentioned in this article.