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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Form 11-K
[X] ANNUAL REPORT PURSUANT TO SECTION 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the year ended December 31, 2002
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____ to ____
Commission file number 1-4448
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A. Full title of the plan and the address of the plan, if different from that
of the issuer named below:
Baxter Healthcare Corporation of
Puerto Rico Savings and Investment Plan
B. Name of issuer of the securities held pursuant to the plan and the address
of its principal executive office:
Baxter International Inc.
One Baxter Parkway
Deerfield, IL 60015
(847) 948-2000
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BAXTER HEALTHCARE
CORPORATION OF PUERTO RICO
SAVINGS AND INVESTMENT PLAN
Financial Statements and Supplemental Schedule
December 31, 2002 and 2001
BAXTER HEALTHCARE CORPORATION OF PUERTO RICO
SAVINGS AND INVESTMENT PLAN
Financial Statements and Supplemental Schedule
December 31, 2002 and 2001
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Page
Financial statements:
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Report of Independent Auditors ....................................... 1
Statements of Net Assets Available for
Benefits as of December 31, 2002 and 2001............................ 2
Statements of Changes in Net Assets
Available for Benefits for the years ended
December 31, 2002 and 2001 .......................................... 3
Notes to Financial Statements ........................................ 4-8
Supplemental Schedule:*
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Exhibit I - Schedule of Assets
(Held at End of Year) at December 31, 2002
* Other schedules required by Section 2520.103-10 of the Department of Labor's
Rules and Regulations for Reporting and Disclosure under ERISA have been
omitted because they are not applicable.
Report of Independent Auditors
To the Participants and Administrative Committee of the
Baxter Healthcare Corporation of Puerto Rico
Savings and Investment Plan
In our opinion, the accompanying statements of net assets available for benefits
and the related statements of changes in net assets available for benefits
present fairly, in all material respects, the net assets available for benefits
of the Baxter Healthcare Corporation of Puerto Rico Savings and Investment Plan
at December 31, 2002 and 2001, and the changes in net assets available for
benefits for the years then ended in conformity with accounting principles
generally accepted in the United States of America. These financial statements
are the responsibility of the Plan's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States of America, which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental Schedule of Assets (Held
at End of Year) is presented for the purpose of additional analysis and is not a
required part of the basic financial statements but is supplementary information
required by the Department of Labor's Rules and Regulations for Reporting and
Disclosure under the Employee Retirement Income Security Act of 1974. This
supplemental schedule is the responsibility of the Plan's management. This
supplemental schedule has been subjected to the auditing procedures applied in
the audit of the basic financial statements and, in our opinion, is fairly
stated in all material respects in relation to the basic financial statements
taken as a whole.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
San Juan, Puerto Rico
May 30, 2003
BAXTER HEALTHCARE CORPORATION OF PUERTO RICO
SAVINGS AND INVESTMENT PLAN
Statements of Net Assets Available for Benefits
As of December 31, 2002 and 2001
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2002 2001
Assets:
Investments, at fair value:
Investments $17,638,900 $18,565,544
Participants' loans 1,720,308 1,514,979
Cash 14,636 14,237
Receivables:
Employer's contribution - 79,026
Participants' contributions - 161,470
Other - loan repayments not yet paid by participants - 54,284
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Total assets 19,373,844 20,389,540
Liabilities:
Other liabilities 3,125 -
Refunds and forfeitures due to employer 4,369 688
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Net assets available for benefits $19,366,350 $20,388,852
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The accompanying notes are an integral part of these financial statements.
2
BAXTER HEALTHCARE CORPORATION OF PUERTO RICO
SAVINGS AND INVESTMENT PLAN
Statements of Changes in Net Assets Available for Benefits
For the Years Ended December 31, 2002 and 2001
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2002 2001
Additions to net assets attributed to:
Investment income:
Net (depreciation) appreciation in fair value of assets $(4,958,477) $ 217,365
Interest and dividends 130,412 106,161
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(4,828,065) 323,526
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Contributions:
Employer's contributions 1,700,068 1,423,016
Participants' contributions 3,475,206 2,938,943
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5,175,274 4,361,959
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Total additions 347,209 4,685,485
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Deductions from net assets attributed to:
Benefits paid 1,125,797 1,033,214
Administrative expenses 243,914 234,967
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Total deductions 1,369,711 1,268,181
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Net (decrease) increase (1,022,502) 3,417,304
Net assets available for benefits:
Beginning of year 20,388,852 16,971,548
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End of year $19,366,350 $20,388,852
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The accompanying notes are an integral part of these financial statements.
3
BAXTER HEALTHCARE CORPORATION OF PUERTO RICO
SAVINGS AND INVESTMENT PLAN
Notes to Financial Statements
December 31, 2002 and 2001
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1. General Description of the Plan
The following brief description of Baxter Healthcare Corporation of Puerto
Rico Savings and Investment Plan (the "Plan") is provided for general
information purposes only. Participants should refer to the Plan agreement
for more complete information.
General
The Plan is a defined contribution plan which became effective on January 1,
1998. The Plan covers substantially all employees of Baxter Healthcare
Corporation of Puerto Rico, Baxter Sales and Distribution Corporation and
Baxter Pharmacy Services Corporation (collectively, the "Company") who have
one month of service. Baxter Healthcare Corporation of Puerto Rico is the
sponsor of the Plan. The Plan was created for the purpose of providing
retirement benefits to employees and to encourage and assist employees in
adopting a regular savings program by means of payroll deductions through a
plan that qualifies under the applicable laws of the Commonwealth of Puerto
Rico and the United States Internal Revenue Code ("IRS"). The Plan is
subject to the provisions of the Employee Retirement Income Security Act of
1974 ("ERISA").
Contributions
Plan participants may authorize the Company to make payroll deductions under
the Plan ranging from 1% to 10% of their pre-tax monthly compensation,
limited to a maximum of $8,000 a year. The Company matches a participant's
savings contributions at the rate of 50 cents for each dollar of a
participant's pre-tax contribution, up to a maximum of 6% of a participant's
compensation. The Company may make additional distributions in such amounts
as the Company may determine.
Participant Accounts
Each participant's account is credited with the participant's contribution
and allocations of (a) the Company's contribution, and (b) Plan earnings.
Allocations are based on participant earnings or account balances, as
defined. The benefit to which a participant is entitled is the benefit that
can be provided from the participant's vested account. The net income of the
Plan is posted to the participant's accounts on a quarterly basis.
Vesting
Participants are immediately vested in their contributions plus actual
earnings thereon. Vesting in the Company's matching and discretionary
contributions portion of their accounts plus actual earnings thereon is
based on years of service. The contributions vest in accordance with the
following vesting schedule:
Years of Service Vesting %
1 20
2 40
3 60
4 80
5 or more 100
Employees are fully vested in the Company's matching contributions account,
regardless of years of service with the Company, upon attaining age 65 or
becoming disabled in accordance with the provisions of the Plan or when
dying while employed by the Company.
4
BAXTER HEALTHCARE CORPORATION OF PUERTO RICO
SAVINGS AND INVESTMENT PLAN
Notes to Financial Statements
December 31, 2002 and 2001
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Participants' Loans
The shares placed into the Edwards Lifesciences Common Stock Fund are in
connection with Baxter's 2000 spin-off of its cardiovascular Business Group.
Participants may borrow from their vested accounts a minimum of $500 up to a
maximum equal to the lesser of $50,000 or 50% of their account balance. The
loans are secured by the balance in the participant's account and bear
interest at prime rate, at the last day of the month prior to loan request,
plus one percent. Principal and interest are paid through monthly payroll
deductions.
Forfeitures
The portion of any participant's matching contribution account which is not
vested will become a forfeiture upon such participant's termination of
employment and will be applied to reduce future Company's matching
contributions on a periodic basis. Forfeitures for the years ended December
31, 2002 and 2001 amounted to $15,099 and $15,112, respectively.
Investment Options
The Plan has the following investment funds:
Fund: Description:
Stable Income Fund The Fund invests in fixed income securities
with a book value guarantee.
Composite Fund The Fund invests in stocks of U.S.
companies and government and corporate
bonds.
General Equity Fund The Fund invests in stocks from U.S.
companies that are considered to have
growth potential.
S&P 500 Equity Index Fund The Fund attempts to duplicate the
performance of the Standard and Poor's 500
Index, which consists of the stocks of 500
of the largest companies in the U.S.
Small Cap Fund The fund invests in small U.S. Companies
that are considered to have growth
potential.
International EAFE Equity The Fund invests in equities of large
Index Fund companies in Europe, Australia and the Far
East.
Baxter Common Stock Fund The primary investment of this fund is in
Baxter International Inc. common stock.
Edwards Lifesciences Common The primary investment of this fund is in
Stock Fund Edwards Lifesciences Corporation common
stock.
Participants may change their investment options quarterly.
5
BAXTER HEALTHCARE CORPORATION OF PUERTO RICO
SAVINGS AND INVESTMENT PLAN
Notes to Financial Statements
December 31, 2002 and 2001
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The shares placed into the Edwards Lifesciences Common Stock Fund are in
connection with Baxter's 2000 spin-off of its Cardiovascular Business Group.
Participants are allowed to make investment election changes quarterly to
transfer balances out of Edwards Lifesciences Common Stock Fund into other
funds, but are not allowed to transfer existing account balances or to make
contributions into the Edwards Lifesciences Common Stock Fund.
Payments of Benefits
Plan participants can not request withdrawals from the Plan unless they are
59 1/2 years old or incur a financial hardship. If a participant suffers
financial hardship, as defined in the Plan agreement, the participant may
request a withdrawal only from his or her contributions. On termination of
service due to disability, retirement or other reasons, a participant may
elect to receive either a lump sum amount equal to their entire account
balance or installment payments. On termination of service due to other
reasons, participants are entitled to receive their vested account balance.
In the case of a participant termination because of death, the entire vested
amount is paid to the person or persons legally entitled thereto.
Plan Expenses and Administration
Banco Popular de Puerto Rico and State Street Bank and Trust Company serve
as trustees for the Plan.
The Administrative Committee is responsible for the general administration
of the Plan and for carrying out the provisions thereof. The Investment
Committee has authority, responsibility and control over the management of
the assets of the Plan. Members of both committees are appointed by the
Board of Directors of Baxter International Inc. ("Baxter"), the Company's
parent.
All expenses of the Plan are paid from assets of the Plan.
2. Summary of Significant Accounting Policies
Basis of Accounting
The financial statements of the Plan are prepared under the accrual method
of accounting.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Investments Valuation and Income Recognition
Shares of registered investment companies are valued at quoted market prices
which represent their net asset value at year end. Baxter common stock and
Edwards common stock are valued at its quoted market price. Participant
loans are valued at cost which approximates fair value.
6
BAXTER HEALTHCARE CORPORATION OF PUERTO RICO
SAVINGS AND INVESTMENT PLAN
Notes to Financial Statements
December 31, 2002 and 2001
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Plan investment return includes dividend and interest income, gains and
losses on sales of investments and unrealized appreciation or depreciation
of investments. The financial statements reflect the net appreciation in the
fair value of the Plan's investments. This net appreciation consists of
realized gains and losses calculated as the difference between proceeds from
a sales transaction and cost determined on a moving average basis, and
unrealized gains and losses calculated as the change in the fair value
between beginning of the year (or purchase date if later) and the end of the
year.
Purchases and sales of securities are recorded on the trade-date basis.
Interest income is recorded on the accrual basis. Dividends are recorded on
the declaration date.
Contributions
Employee and Company matching contributions are recorded in the plan year
period in which the Company makes the payroll deductions from the
participant's earnings.
Transfer of Assets to Other Plans
Company employees or retirees may elect to transfer their savings to other
plans qualified by the Puerto Rico Department of the Treasury or by the IRS.
Payment of Benefits
Benefits are recorded when paid.
3. Investments
The following presents the Plan's investments that represent five percent or
more of the Plan's net assets at December 31:
2002 2001
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# of # of
Shares Amount Shares Amount
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Fund options:
Stable Income 1,963,017 $7,453,466 991,825 $3,578,274
Composite 331,486 1,736,663 325,214 1,894,025
General Equity 194,995 1,252,654 197,434 1,653,452
S&P 500 Equity Index 1,547,904 2,913,981 1,421,966 3,442,148
Baxter Common Stock Fund 719,409 3,443,536 818,258 7,155,189
During 2002 and 2001, the Plan's investments, including gains and losses on
investments bought and sold, as well as held during the year (depreciated)
and appreciated in value by ($4,958,477) and $217,365, respectively, as
follows:
2002 2001
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Common stock $(3,552,230) $ 967,750
Mutual funds (1,406,247) (750,385)
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$(4,958,477) $ 217,365
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7
BAXTER HEALTHCARE CORPORATION OF PUERTO RICO
SAVINGS AND INVESTMENT PLAN
Notes to Financial Statements
December 31, 2002 and 2001
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4. Plan Termination
Although it has not expressed any intent to do so, the Company has the right
under the Plan to reduce, suspend or discontinue its contributions at any
time and to terminate the Plan subject to the provisions of ERISA. In the
event the Plan terminates, the interest of each participating employee in
the Plan shall be fully vested and such termination shall not reduce the
interest of any participating employee or their beneficiaries accrued under
the Plan up to the date of such termination.
5. Tax Status
The Puerto Rico Treasury Department has determined and informed the Company
that the Plan and the related trust are designed in accordance with
applicable sections entitling exemption from income taxes. The Company has
also obtained a favorable determination letter from the Internal Revenue
Service stating that the Plan is in compliance with the Internal Revenue
Code regulations. The Plan has been amended since receiving the
determination letters. However, the Plan administrator believes that the
Plan is designed and is currently being operated in compliance with the
applicable tax requirements. Therefore, no provision for income taxes has
been included in the Plan's financial statements.
The Plan participants are not taxed on the income and contributions made to
their accounts until such time as the participant or the participant's
beneficiary receives distributions from the Plan.
6. Related Parties
At December 31, 2002 and 2001, the Plan held shares of common stock of
Baxter, the Company's parent and units of participation in certain
investment funds of State Street Bank and Trust Company, one of the Plan's
Trustees. These transactions are allowable party-in-interest transactions
under ERISA and the regulations promulgated thereunder.
7. Risks and Uncertainties
The Plan's investments are exposed to various risks, such as interest rate,
market and credit risks. Due to the level of risk associated with certain
investments and level of uncertainty related to changes in the values of
investments, it is at least reasonably possible that changes in risks in
near term would materially affect participants' account balances and the
amounts reported in the statement of net assets available for benefits and
the statement of changes in net assets available for benefits.
8
SUPPLEMENTAL SCHEDULE
EXHIBIT I
BAXTER HEALTHCARE CORPORATION OF PUERTO RICO
SAVINGS AND INVESTMENT PLAN
Schedule of Assets (Held at End of Year) at December 31, 2002
(Schedule H, Part IV, Line 4i on From 5500)
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Identity of issuer Description of Investment Current Value
* State Street Bank and Trust Company:
Stable Income Fund 1,963,017 units $ 7,453,466
Composite Fund 331,486 units 1,736,663
General Equity Fund 194,995 units 1,252,654
S&P 500 Equity Index Fund 1,547,904 units 2,913,981
International EAFE Equity Index Fund 585,455 units 543,646
Small Cap Fund 29,272 units 241,737
* Baxter Common Stock Fund 719,409 units 3,443,536
Edwards Lifesciences Common Stock Fund 2,882 units 53,217
* Participants' Loans Maturing - January 1, 2003 to 2012
5.75% to 11% 1,720,308
* Banco Popular de Puerto Rico Cash 14,636
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$19,373,844
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* Party-in-interest
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Plan Administrator has duly caused this annual report to be signed on its behalf
by the undersigned thereunto duly authorized.
BAXTER HEALTHCARE CORPORATION OF
PUERTO RICO SAVINGS AND INVESTMENT
PLAN
Date: June 27, 2003 By: /s/ Brian P. Anderson
---------------------------------
Brian P. Anderson
Senior Vice President and
Chief Financial Officer
Exhibit Index
Exhibit
Number Description
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23 Consent of PricewaterhouseCoopers LLP
99.1 Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section
1350
99.2 Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section
1350