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Executives

Robert L. Parkinson - Chairman, Chief Executive Officer and President

David P. Scharf - General Counsel and Corporate Vice President

Robert J. Hombach - Chief Financial Officer and Corporate Vice President

Baxter International Inc (BAX) 2012 Annual Meeting of Shareholders May 8, 2012 10:00 AM ET

Robert L. Parkinson

Okay, it's 9 a.m. So good morning. This is a little more intimate group than up in the cafeteria last year, so it's great to see everyone. We'll now come to order for the 2012 Annual Meeting of Shareholders for Baxter International. As I think you know, my name is Bob Parkinson. I'm Chief Executive Officer and Chairman of the Board of the company. And I'm pleased to be here today, and I want to welcome all of you again to the 2012 Annual Meeting.

Before I move on this morning with today's business, I'd like to add that the meeting is being webcast and is accessible from a link on our website at www.baxter.com. When you arrived today, each of you, should have received an agenda outside for the meeting, which summarizes all the matters to be considered today, so hopefully you all have an agenda. At the conclusion of the meeting, as we always do, we'll open up the floor to general questions, so we look forward to that.

Let me now introduce Bob Hombach, Baxter's Chief Financial Officer, to my left; and also David Scharf, who is General Counsel with the company. I think most of you know Bob and David.

At this time, I'd like to introduce also the members of the Board of Directors who are seated here in the front row and in front of me. And what I would like to do is ask each director to briefly stand as I call her or his name. And I would ask the audience if you could please hold your applause until all the directors have been introduced. So thank you.

First, Peter Hellman. Mr. Hellman has been a director of Baxter since 2005 and serves as the company's lead director. He served as President and Chief Financial Administrative Officer of Nordson Corporation until his retirement in 2008. Prior to joining Nordson, Mr. Hellman was President and Chief Operating Officer of TRW.

Blake Devitt. Mr. Devitt has been a director of Baxter since 2005. He retired in 2004 from the public accounting firm of Ernst & Young, following a 33-year career.

John Forsyth. Mr. Forsyth has been a director of Baxter since 2003. He's Chairman and Chief Executive Officer of Wellmark, Blue Cross and Blue Shield. Mr. Forsyth also spent more than 25 years at the University of Michigan Health System, holding various positions, including President and Chief Executive Officer.

Gail Fosler. Ms. Fosler has been a director of Baxter since 2001. She's president of the GailFosler Group, a strategic advisory service for global business leaders and public policy makers. Ms. Fosler also spent more than 20 years with the Conference Board, where she held various positions including President -- Chief Executive -- Executive Vice President and Chief Economist.

Dr. James Gavin. Dr. Gavin has been a director of Baxter since 2003. He is the Chief Executive Officer and Chief Medical Officer of Healing Our Village and also serves as clinical professor of medicine and senior adviser of health affairs at Emory University. Dr. Gavin previously served as President of the Morehouse School of Medicine.

Dr. Wayne Hockmeyer. Dr. Hockmeyer has been a director of Baxter since 2011. He was a founder of MedImmune, a healthcare company focused on infectious diseases, cancer and inflammatory diseases and served as Chairman and Chief Executive Officer of MedImmune for 20 years.

Carole Shapazian. Ms. Shapazian has been a director of Baxter since 2003. She previously served as Executive Vice President of Maytag Corporation and President of Maytag's Home Solutions Group.

Thomas Stallkamp. Mr. Stallkamp has been a director of Baxter since 2000. He is founder and principal of Collaborative Management LLC, a private supply chain consulting firm. Previously, he served as an industrial partner in Ripplewood Holdings, Chairman of MSX International and in various positions with DaimlerChrysler Corporation and its predecessor, Chrysler Corporation, the most recent of which was Vice Chairman and President.

K. Storm. Mr. Storm has been a director of Baxter since 2003. He was Chief Executive Officer of AEGON N.V. until his retirement in 2002. Mr. Storm is a registered accountant, the Dutch equivalent of a certified public accountant.

Albert Stroucken. Mr. Stroucken has been a director of Baxter since 2004. He is chairman and Chief Executive Officer of Owens-Illinois. Previously, he served as chairman and chief executive officer of H.B. Fuller.

And finally, I'd like to thank General Walt Boomer, who is not here today, but who has retired from the board after 15 years of very loyal and dedicated service. We're most appreciative of Walt's service and commitment to Baxter. And certainly, we wish Walt and his wife Sandi all the best for the future.

All of the Baxter's directors have been and continue to be very generous in sharing their time and talent for our company. Please join me now in giving them a round of applause.

Thank you. All of Baxter's corporate officers are also with us today. I'd like to ask each to briefly stand as I call his or her name. And I'd ask again for the audience if your -- all the attendees to hold your applause until each of them have been introduced. We'll get through this fairly quickly.

Phil Batchelor, who's our Corporate Vice President of Quality; Mike Baughman, Controller; Jean-Luc Butel, President International; Rob Davis, President, Medical Products; Ludwig Hantson, President, BioScience; Bob Hombach, whom I already introduced, our CFO; Wolf Kupatt, President, Latin America and Canada; Mary Kay Ladone, Corporate Vice President, Investor Relations; Gerald Lema, President of Asia Pacific; Paul Martin, Chief Information Officer; Jeanne Mason, Corporate Vice President of Human Resources; Peter Nicklin, President of Europe; Dr. Norbert Riedel, Chief Science and Innovation Officer; James Saccaro, Treasurer; and Stephanie Shinn, who's our Corporate Secretary.

I will tell you that this is a very talented and capable management team, of which I'm very proud. So please join me in thanking our leadership team for their efforts. Thank you.

Thank you, everybody. Before we move on to today's business, I'd ask at this time, David, to provide our Safe Harbor statement, if you would. David.

David P. Scharf

Thank you, Bob. Our comments today will include forward-looking statements that involve risks and uncertainties. Actual results may differ materially from those forward-looking statements. Please refer to our annual filing on Form 10-K and our other filings with the Securities and Exchange Commission for more information. All of these are available on our website. In addition, today's presentation contains certain non-GAAP financial measures. A reconciliation of these measures to the most directly comparable GAAP measures is posted on the Investor Relations section of our website.

Robert L. Parkinson

Thank you, David. David has also informed me that copies of the notice of annual meeting of shareholders, the proxy statement, the proxy card were mailed to shareholders of record on or about March 23 of this year. The record date for the voting of shares at this meeting was March 12, 2012.

So, David, would you please give us your report of the number of shares of common stock that are entitled to vote and are present here at the meeting?

David P. Scharf

Yes, more than 85% of the approximately 556 million shares entitled to vote at this meeting are represented here today. There are no other securities entitled to vote at this meeting. Therefore, a quorum is present.

Robert L. Parkinson

Okay. Thank you, David. Since the quorum is present, we'll now proceed with today's business. Before we do that, I'd also like to point out that Susan Edwards is with us today on behalf of Broadridge Financial Solutions, and will act as inspector of elections this morning. Her oath of office has been filed with our Corporate Secretary.

I'd also like to introduce Jim Maurer and Peter Regis of PriceWaterhouse Coopers LLP, the independent registered public accounting firm that audits Baxter's financial statements. Okay, gentlemen, here, there you are. Mr. Maurer and Mr. Regis have advised me that they have no formal statement to make this morning. However, as always, they will be available on the Q&A session to respond to appropriate questions from the shareholders.

Before we begin with the formal business of the meeting, I'd like to take just a minute or 2 to review the procedures that we'd like to follow with this morning's meeting. As you know, as you look at the agenda, we have 5 items of business that need to be voted on this morning.

After the presentation of each agenda item, I will then open up the floor to questions that are related just for that item at that time. In order to ensure that the business of the meeting proceeds in a reasonably orderly fashion, I'd like to ask the questions to be limited to the agenda item that's being considered at that time.

When you are recognized to address the meeting, if you would, please state your name and affiliation, if any, state whether you're a Baxter shareholder or a proxy for a shareholder, and if you would please address your questions to me. Following the voting on the matters to be acted on at this meeting, then I will share a little later on some highlights of Baxter's 2011 performance and also our direction for the future. And as I said before, as always, after the presentation we'll open for any general questions that you might have about our company.

So we'll now proceed with the formal business of the meeting. As I said, there are 5 proposals on today's agenda. First, the election of 3 directors; second, the ratification of the appointment of the independent registered public accounting firm; thirdly, approval of named executive officer compensation; fourth, a shareholder proposal to repeal the classified board; and fifth and lastly, a shareholder proposal to adopt simple majority voting.

Most of our shareholders have already voted on all these proposals. If you have previously voted, you do not need to submit a ballot unless you wish to change your vote. Submission of a ballot will revoke any prior proxy that you may have submitted.

If any shareholder present today has not yet voted, you may do so by completing the ballot during our proceeding this morning. So if you need a ballot, I'd ask you now, please raise your hand and a host will bring one to you. So I see a couple of hands in the back.

Thank you. At the conclusion of the voting on all the proposals, I would ask you then to please hold the completed ballots up so that the host again can collect the cards. We have another hand here in the front.

We all set? Everybody have a ballot? That needs -- that wants a ballot, okay.

So let me now proceed through the proposals in the order in which they were discussed in the proxy statement and also presented on the proxy card. The first proposal to be considered is the election of 3 directors. So at this time may I have the nominations for directors, please?

Martin Glotzer

I like [indiscernible]

Robert L. Parkinson

Mr. Glotzer, can we make -- let's make a motion first and second and then we'll have discussion. That would be the right protocol. Okay, please.

Unknown Shareholder

Mr. Chairman, My name is Ryan [ph] I'm a shareholder. I nominate James Gavin, Peter Hellman and K. Storm.

Robert L. Parkinson

Okay. Thank you. Is there a second? A second? We have a second. Thank you. Okay. I appreciate that. So Baxter's, I would just inform you, Baxter's bylaws do require that the Corporate Secretary is informed, notified in writing of any nominations for director on a timely basis in advance of the Shareholders Meeting. The Corporate Secretary has informed me that she has not received notice of any other nominations for directors. So accordingly, the nominations for directors are closed. As you know the Board of Directors has recommended a vote in favor of these directors. Now does anyone wish to comment on this proposal? I think, Mr. Glotzer, you were up first. You do need to identify yourself. I know who you are but for the group.

Martin Glotzer

Well for the record, my name is Martin Glotzer. I'm from Chicago. I'm a long-time shareholder of the company. I have retired and still going to Baxter's shareholders meetings, so we've met at a Field Museum many, many years ago. [indiscernible] I voted so -- on the election of the 3 directors because I voted yes [indiscernible] business. So to be consistent, I can't vote for the directors even though I would vote for the directors [indiscernible], so...

Robert L. Parkinson

Okay. You're going to comment later I'm sure on that proposal, but I appreciate your comments in that regard, that makes sense. Thank you, Martin. Yes, please.

Ben-Chieh Liu

He's being positive. [indiscernible] are good.

Robert L. Parkinson

You have to identify yourself now for everyone.

Ben-Chieh Liu

My name is Ben-Chieh Liu, I'm a long-time holder of this company as well. I just thought I would have to hear from this meeting.

Robert L. Parkinson

You came last year, too?

Ben-Chieh Liu

Right. Thank you. And I'm an academician and also the author of the Quality of Life Indicators in the United States, which was published in the '70s. The first classical study.

Robert L. Parkinson

Okay. Is that... do you have a comment on the proposal? You need to get to that, though, because we got everybody waiting here.

Ben-Chieh Liu

First, I want to congratulate you for selecting all these directors because they are uniformly distributed. If you notice their ages are only from 61 to less than 70. So they are uniformly distributed with all academic preparations like a Ph.D, an M.D. and so forth. So I'm very impressed with your selection, especially you are the youngest one among them.

Robert L. Parkinson

Thank you. Thank you for mentioning that.

Ben-Chieh Liu

So I voted for them all, and congratulations to the Board of Directors. And you have definitely my vote, that's all, very small vote. But any way, congratulations.

Robert L. Parkinson

Thank you so much. Good, very good. Thank you so much, good to see again. Okay, the second proposal to be considered is ratification of the appointment of PricewaterhouseCoopers LLP as the independent registered public accounting firm for Baxter in 2012. So is there a motion in that regard?

Unknown Shareholder

My name is Luche Fee [ph], and I'm a Baxter shareholder and I so move.

Robert L. Parkinson

Okay, Luche [ph], thank you. Is there a second?

Okay. Good, we have a second. Thank you. The Board of Directors, as you know, has recommended the vote in favor of this proposal. Does anyone wish to comment on this proposal?

Martin Glotzer

Thank you, Mr. Chairman. Martin....

Robert L. Parkinson

This is your second. When you're done -- I don't know if you can do your proposal later because this is your second comment. Well, go ahead...

Martin Glotzer

To save time I took off my watch because the Annual Shareholders Meeting is once a year. And I've chaired at least 50 Annual Shareholders Meeting because I've run 3 publicly owned companies. In every meeting that I chair I take off my watch, and I let every shareholder speak as long as they want to speak. So I figured, if I do it, somebody else could do it also.

Robert L. Parkinson

We may have to run this a little differently. But go ahead, make your comment, please.

Martin Glotzer

Speaking on the election of auditors, I noticed that, interesting, one of our directors is a former partner at Ernst & Young, I used to know it as Ernst & Ernst in Cleveland. And I wondered if he urged Ernst & Young to submit a competing bid to do this engagement of Baxter. So I had a question on -- I wondered if he urged the Ernst & Young to put in a competing bid.

Robert L. Parkinson

We have a -- first of all, let me say this, we have a former partner of Ernst & Young serve as the Chair of our Audit Committee. He's a great asset for our company. I hope all the shareholders appreciate that. Blake Devitt does an outstanding job as Chair of our Audit Committee. Now having said that, we have a defined process, as you know, in terms of periodically reviewing -- actually annually reviewing the performance of the cost effectiveness and so on of our auditors. There's oversight by both the committee and the Board in that regard. And I can assure you Mr. Devitt has been both objective and impartial in that regard. Having said that, we continue to be open-minded to evaluate continued support by our outside auditing firm.

Martin Glotzer

But the question I asked, did Ernst & Young submit a competing bid to do this engagement?

Robert L. Parkinson

We didn't ask for a competing bid this year. We felt the renewal of our engagement with PwC was appropriate for a lot of reasons. One, their effectiveness, two, their cost. If you notice in the proxy, our expenditure associated with our outside auditor was reduced significantly this year from the previous year. They have a high degree of familiarity with the business. And therefore, as long as they continue to perform well, offer their services in a cost competitive way and are very familiar with our businesses -- our business, we feel they're very effective in that regard.

Martin Glotzer

I'm a pretty good listener. I picked up the word "familiarity." That's one of the reasons why you should consider changing auditors. Sometimes the auditors gets too familiar with the engagement, and it's really time to switch auditors so -- who are not familiar, using the word again, and sometimes to get a better audit by somebody -- an auditing...

Robert L. Parkinson

Well, I think change is important. It's one of the reasons that, and I know you're familiar with that -- the SEC rules require PwC to rotate both their lead partner and their concurring partner on an engagement every 5 years. In fact, we just recently went through a rotation in that regard. So it's to try to find the sweet spot, I think, between rotation and new people, but yet the knowledge level, and as I said, familiarity, but really awareness of what goes on in the company because we think that our firm could be most effective in that regard. But I appreciate, Martin, your comments in that regard. I think we have another -- there's another comment over here. Okay, any other comments on this? Thank you.

The third proposal to be considered by shareholders is an advisory vote on the compensation of the company's named executive officers. Is there a motion, please?

Unknown Shareholder

Mr. Chairman, my name is Carl Wilt [ph]. I'm a shareholder, and I so move.

Robert L. Parkinson

Okay, Carl [ph], thank you. Is there a second, please?

Unknown Shareholder

My name is Moira Knight [ph]. I'm a Baxter shareholder, and I second.

Robert L. Parkinson

Okay, Moira [ph], thank you. As you know, the Board of Directors has recommended in vote -- a vote in favor of this proposal. So at this time, is there anyone who wishes to comment on this particular proposal?

Ben-Chieh Liu

Ben-Chieh Liu, again. As a professor as well as an economist, I first like to know how many shareholder, individual shareholders are in attendance?

Robert L. Parkinson

Well, you have -- I don't know if we report that at the end. I think we have somewhere around 40, 45 or so.

Ben-Chieh Liu

45 individual shareholders here today? In the audience?

Robert L. Parkinson

Well, including the Board and management, obviously it's bigger than that. But if you just -- management, the Board, other employees, et cetera, et cetera.

Ben-Chieh Liu

Nonemployees?

Robert L. Parkinson

We haven't counted them. Let's just estimate 45 or 70 some place. Okay?

Ben-Chieh Liu

Okay. We have a -- how many million shares in the stock?

Robert L. Parkinson

What's that exact number, Bob, in terms of number...

Ben-Chieh Liu

You just mention it.

Robert J. Hombach

550 million shares.

Ben-Chieh Liu

500 million?

Robert L. Parkinson

550 million.

Robert J. Hombach

50 million.

Ben-Chieh Liu

That many?

Robert L. Parkinson

Yes.

Ben-Chieh Liu

According to the report from [indiscernible] and so forth, there are about 70% of stockholders are institutional.

Robert L. Parkinson

Correct. Actually our holding here...

Ben-Chieh Liu

So individual stockholder could be in meetings too, and we only have about 40 of them attending the meeting. My question is on this proposal #3. Because I looked at the -- all your stock hold -- and all your directors are paid beyond $200,000 per year. And I wonder how they feel about giving our office -- executive office compensation for all these years and how do they react to the so-called Obama's proposition for tax, those people with more than $200,000 a year with less than tax rates. But again really, I am thinking about our stockholders' dividends has not increased very much. But it's decent. It's decent, I agree. Okay. It's just…

Robert L. Parkinson

You'll see in 5 years, our dividend has more than doubled in the last 4 or 5 years.

Ben-Chieh Liu

Yes, from -- we have $0.58 from 2006 up to 2011, the last year. It's about doubled, okay?

Robert L. Parkinson

You'll see a slide on there in a minute, okay?

Ben-Chieh Liu

Yes. the dollar cents is very small. But the percentage is great, higher, but exactly other's compensation. The percentage may be smaller, maybe 20% or 10%, but at the base, it's so huge. So I wondered, if they have considered the comparison between stockholder's dividends about $1 a share or something, $0.50 versus millions and millions of dollars increases for the executive officers. And there's -- proportionally, yes we are above the half, we are better, right, 200% increase from 2006. But for your compensation, millions and millions of dollars even though that's not very small proportion, but it's a huge base. So I just wonder do they consider justification for comparison and so forth. I know you deserve that, but I just wanted to see how they view that, okay?

Robert L. Parkinson

Well we can't take the time to ask each of them. I can't speak for them collectively. So thank you, thank you for your...

Ben-Chieh Liu

Welcome. I wanted them to [indiscernible] us better next time.

Robert L. Parkinson

I think you've made some good points. Okay, thank you. Thank you very much.

Martin Glotzer

I have another comment. Martin Glotzer commenting. Shareholder attendance at the shareholders meeting, since the company is webcasting the meeting, any shareholder who can't come to the meeting could hear it on the webcast. And also I would believe if the shareholder wanted to have his questions answered at the shareholders meeting, they could ask the Corporate Secretary to present the question at the Shareholders Meeting. I wonder if any shareholders have written to the Corporate Secretary to read his questions for the meeting.

Robert L. Parkinson

I don't believe so. I don't think we've got any. Have we Stephanie? No? The answer to that is no. Those are good points, Martin, that you made in terms of the webcast and people's motivation to be in attendance, so thank you.

Okay, the fourth proposal to be considered was submitted by a shareholder. This proposal relates to the repeal of the classified board and appears as proposal for in the proxy statement. Is a representative of The Nathan Cummings Foundation present to make a motion in respect to proposal 4? Yes?

Unknown Shareholder

Proposal to repeal classified board resolved that shareholders of Baxter International Incorporated urge the Board of Directors to take all necessary steps other than any steps that must be taken by shareholders to eliminate the classification of the Board of Directors and to require that all directors elected at/or after the annual meeting held in 2013 be elected on an annual basis. Implementation of this proposal should not prevent any director elected prior to the annual meeting held in 2013 from completing the term for which such director was elected.

This resolution was submitted by The Nathan Cummings Foundation, The Nathan Cummings Foundation was represented and advised by the Harvard Law School Shareholders Rights Project. The resolution urges the Board of Directors to facilitate a declassification of the board. Such a change would enable shareholders to register their views on the performance of all directors at each annual meeting. Having directors stand for election annually makes directors more accountable to shareholders and could thereby contribute to improving performance and increasing firm value.

Please vote for this proposal to make directors more accountable to shareholders. Thank you.

Robert L. Parkinson

Okay, thank you very much. Is there a second on this motion, please -- on this proposal?

Unknown Shareholder

I'll make the motion, I'll second it. I voted for it, so I'm going to second.

Robert L. Parkinson

Okay. Does anyone wish to make a comment on this proposal?

Martin Glotzer

Thank you, Mr. Chairman. Yes, Martin Glotzer would like to make a comment.

Robert L. Parkinson

Okay, go ahead Martin.

Martin Glotzer

I'm commenting on the management's reasons. Even though the statement says that the management's -- that the Board of Directors supports this proposal in the past, it's sort of hollow. I believe the statement should have included the statement that nobody was paid to actively solicit shareholders to get yes votes for this proposal. I've been in several proxy contests over my career, so I have an experience of proxy solicitation. And I would believe if somebody was paid to actively solicit yes votes, the account would have been probably supported and passed, and we would have the election of directors on an annual basis. In addition, I was a long-time shareholder of Midway Games run by Mr. Sumner Redstone of CBS, Viacom. And I submitted a similar proposal in Midway Games. And Mr. Sumner Redstone agreed with me, and he had all the directors resign, and then immediately stand on an annual basis. I say, it's good enough for Sumner Redstone, it should be good enough for the Board of Directors of Baxter to adopt the proposal, and immediately next year have all the directors resign and then stand for election on an annual basis. Thank you.

Robert L. Parkinson

Okay, Martin. Thanks for your comments. And you see the company -- or the board's position in the proxy. I would say, Martin, this -- I think now is the third time since I've been at Baxter that this has come up. And you're correct the last time we did not enlist the services of a proxy solicitor. But the reason we did that is when it came up 2 or 3 years previously, we did in fact retain the services of a proxy solicitor, spent hundreds of thousands of dollars in that regard and if my recollection serves me correctly, it had about a 38% vote. And I will also say, at that time, I actually got calls from shareholders saying, "Would you have our proxy solicitor back off because they're harassing me at home during dinner and so on." So given that factor, given the money that we spent, which was in the hundreds of thousands of dollars the last time it came up, we opted to save that money on behalf of the shareholders. But we're supporting the proposal. It would be brought forward next year, and we'll move ahead, okay? Thank you.

The fifth proposal to be considered was also submitted by a shareholder. This proposal relates to simple majority voting and appears in -- appears as, excuse me, Proposal 5 in the proxy statement. So I would ask is either John Chevedden or his qualified representative present to make a motion with respect to Proposal 5. Martin Glotzer, I think, are you...

Martin Glotzer

Yes. Martin Glotzer standing in for Mr. Chevedden of Redondo Beach, California. And since I'm a shareholder, I second the proposal. And since I spoke so many times...

Robert L. Parkinson

I'm not sure you can do that. Can we have someone else?

Martin Glotzer

I own shares in the company. And I got to tell you, I'm an over 40-year member of the American Society of Corporate Secretary. I'm...

Robert L. Parkinson

You moved the proposal. Is there a second? Is there a second?

Unknown Shareholder

I second.

Robert L. Parkinson

Please. Okay, thank you. Go ahead now, Martin, please.

Martin Glotzer

As I said at the beginning, since I spoke a lot, let the record indicate that I introduce the proposal, the reason and we could hear the management's rebuttal, and we'll move on. Thanks.

Robert L. Parkinson

Okay. Let's move on to the similar dynamics to the previous proposal in terms of the 2/3 upholders that need to support it to move ahead. So it's the same issues as you know. But the board does support the proposal, and so we'll move ahead accordingly as we will in proposal form. Thank you so much, And thanks for coming.

Ben-Chieh Liu

Can I comment?

Robert L. Parkinson

Yes. Sure, please.

Ben-Chieh Liu

Well, I voted for this proposal despite that the Board Of Director recommends a nay. But this is simple majority of votes, right? We talk about minority...

Robert L. Parkinson

The board actually voted for it, so...

Unknown Attendee

On the proposal.

.

Robert L. Parkinson

Of course the proposal, too.

Ben-Chieh Liu

So majority, that's what my question was earlier. How many individual stockholders are on site here. So if you would think about the number of individual stockholders here on site, proportionately Mr. Martin Glotzer should have more time to give to him because we only -- a few individual stockholders to be here. So if you think about minority versus majority and so forth, then I think we should give whoever wants to make a comment a little bit more time. There should be proportionately, appropriately, positively adequate, all right? So since you were the dean of the management school, and I appreciate your managerial style. Next time, any stockholder who would like to comment, give them a little bit more time instead of stopping them from speaking because there are only a few here.

Robert L. Parkinson

We want to make sure others have an opportunity to speak as well. So...

Ben-Chieh Liu

Yes. But others didn't raise their hand, so right here I'm recommending this for you, okay?

Robert L. Parkinson

Okay. Very good, thanks for your interest.

Ben-Chieh Liu

Martin, you can say something if you want.

Martin Glotzer

No.

Robert L. Parkinson

Anyone else in the audience want to comment on this proposal?

Okay. Thank you. Okay, good.

Ben-Chieh Liu

Well then I want -- want to say, I want to ask you a couple questions now.

Robert L. Parkinson

No, no, we'll do questions at the end. There'll be plenty of time at the end for questions. These are comments just on the proposal, so we can move ahead. So remember your two questions, we'll take them at the end, okay?

So now we're going to proceed to vote on the agenda items. The time is now 9:32. I declare the polls open. So again, if you haven't already voted or if you wish to change your vote on any of the proposals, if you would raise your hand to receive a ballot. We'll pause for a moment while the ballots are completed.

All the ballots collected? Raise your hand if you have one, it needs to be collected. Okay, good. Thank you. I think we're all set. So the time is now 9:32, I declare the poll is closed. So that was efficient. Thank you.

The inspector of election will tabulate the votes and the final results will be presented as always at the end of the meeting. So thank you for that.

With the voting now completed and the ballots collected, I'd now like to provide all of you with a brief overview of our company, including business and financial highlights for 2011.

As you all know, Baxter is a recognized leader and a pioneer in health care. For more than 80 years, Baxter's success has been built on a simple mission, which is serving patients at their times of greatest need with a diverse portfolio of medically necessary products and therapies. We remain committed to advancing new therapies, improving the safety and cost effectiveness of treatments and expanding access to care, particularly in developing and emerging markets by bringing more products and therapies to patients who need them, and innovation is our key to success.

In health care, this means developing new and improved products in therapies to address unmet medical needs.

Finally, Baxter's definition of success goes beyond sound financial and operational performance, it reflects the commitment to be a responsible corporate citizen and a desire to make a difference in communities that we serve through various sustainability initiatives.

Turning to our company's proponents. Baxter delivered another strong year in 2011 through our focus on life-saving, licensing products and our ongoing commitment to innovation. In 2011, our company once again touched millions of lives through our core product offerings, while delivering record sales and earnings and generating significant cash flow. We accelerated investments in innovation, focused on reinforcing our leadership in critical therapeutic areas and advancing our new product pipeline. We are intensifying our efforts on selective development initiatives that complement our current businesses and also position our company well for future success.

Last year, worldwide sales, as you see here on an adjusted basis, increased 6% to $13.9 billion, as we continue to benefit from our diversified health care model, build on our existing market-leading position, expand geographically in emerging markets and also launch new products.

For the year, adjusted earnings increased 8% to $4.31 per diluted share. And going forward, we remain committed to accelerating annual EPS growth at a rate faster than our top line revenue growth.

We also continue to be particularly pleased with our sustainability to generate strong cash flow, which exceeded $2.8 billion last year, while maintaining a disciplined capital allocation strategy of returning value to our shareholders through both increased dividends and also share repurchases.

Baxter declared an annual dividend of $1.27 per share in 2011, reflecting a 7% increase. And over the last 5 years, we've more than doubled our dividends, as you can see here.

Total value return to shareholders last year was $2.3 billion. And over the last 5 years, the company has returned to shareholders more than $11 billion in cumulative value in the form of dividends and share repurchases. As you can see here, last year Baxter's annual shareholder return lagged the relative comparator indices, which include the Dow Jones industrial average and the S&P 500 Index and the S&P Healthcare Index.

However, over the last 5 years, Baxter has delivered shareholder returns that have outpaced all benchmark indices, and our entire management team continues to be committed to enhancing shareholder value over the long term.

And on a year-to-date basis, through May of 2012, I'm happy to report that Baxter has outperformed all benchmarks, with a total return advancing 15% since the end of last year.

Now with that in mind, let me highlight an array of Baxter's successes in 2011 from across our businesses. First, let's start with BioScience, which ended 2011 with record sales of more than $6.1 billion. This business includes antibody therapies, biosurgery products, plasma-based and recombinant proteins and vaccines. In BioScience, we continue to be pleased with the success of ADVATE, our leading recombinant Factor VIII therapy for hemophilia A, a genetic bleeding disorder.

With annual sales approaching $2 billion, ADVATE continues to be the gold standard treatment in the marketplace given its strong safety, efficacy and convenience profile. We continue to be well positioned with our diverse portfolio of plasma proteins, which includes GAMMAGARD LIQUID, for the treatment of immune disorders; FEIBA, for the treatment of patients with inhibitors to hemophilia therapy; and ARALAST, for the treatment of hereditary emphysema.

We remain very positive regarding the prospects of this business as we increase awareness and diagnosis for the differentiate our product offering and broaden access to care in developing markets.

Our confidence in the future of this business is reflected in our recent announcement of an investment of more than $1 billion over the next 5 years to expand capacity to support longer-term growth of plasma proteins. This investment will also result in the creation of more than 2,000 new jobs in the United States.

In 2011, the BioSurgery business once again posted double-digit growth as demand for our surgical sealants remained very strong. In addition, earlier this year, we completed the acquisition of Synovis, a leading provider of biological and mechanical products for soft tissue repair. This business is highly complementary and expands Baxter's existing product offering.

And finally, in 2011, we received approval in Europe for PREFLUCEL, our seasonal vero cell-based influenza vaccine.

And we continue to make progress on our collaboration with Takeda, for the development, production and supply of influenza vaccine to support Japan's public health efforts in the high-priority area of pandemic preparedness.

Turning to medical products. We delivered solid performance in 2011 with sales approaching $$8 billion. This business includes anesthesia products, injectable drugs, infusion systems, IV and nutritional therapies and products to treat end-stage renal disease. One of the key highlights is the continued strength of our parenteral nutrition business, which has been one of the fastest-growing businesses across Baxter for several years.

In 2011, we added to our unique product offering with the European launch of NUMETA, which is the first and only triple-chamber nutrition system designed to address important unmet medical needs of neonatal and pediatric patients.

In addition, we augmented our market leadership position in nutrition with the acquisition of Baxter Corporation and its pharmacy technology products, which are focused on proving -- improving the safety and efficacy of oral and intravenous drug preparation and delivery.

In 2011, we continued to make progress with our customer transition to the SIGMA Spectrum pump, which has been well accepted by customers as a product that addresses both their clinical and their economic needs.

Additionally, Baxter maintains our unique competitive advantage in the area of anesthesia, and remains the only global supplier to offer clinicians all 3 moderate inhaled anesthetics.

We successfully broadened our geographic reach with Sevoflurane, which is now available in more than 40 countries, and we continue to penetrate new markets like Japan with Suprane.

Lastly, our renal business continues to build on its market leadership in peritoneal dialysis, or PD, a therapy that can be done at home rather than in a hospital or clinic. While PD therapy is growing more rapidly in developing and emerging markets, where many people with end-stage renal disease are significantly undertreated, given recent reimbursement changes, we've also seen billing momentum in the United States.

As you may know in October of 2011, Baxter achieved an important milestone in celebrating our 80th anniversary, providing an opportunity to reflect on our great heritage as a pioneer in health care. As I've said many times, innovation remains our most important strategic priority, and will be the driving force behind our future success.

And 2011 was another outstanding year as we significantly increased our R&D investment to a new record level. This has resulted in a meaningful new product pipeline that's as strong as today as at any time in our company's history. I'm encouraged with our pipeline achievements as we've advanced 20 programs within late stage development during the year, and I'd like to take just a moment to highlight some of our key R&D accomplishments.

First, we continue to innovate and expand our current leadership in developing products to treat bleeding and clotting disorder. Last year, our market-leading therapy, ADVATE, was approved by the FDA as the only recombinant prophylactic treatment for both children and adults with hemophilia A. The approval was based on a study demonstrating ADVATE significantly reduced median annual bleed rate and provided enhanced convenience with a new dosing schedule offering some patients the choice of fewer infusions.

We're developing longer-acting forms of recombinant clotting factors, and we've recently initiated a Phase I clinical trial of a longer-acting Factor VIII therapy based on the ADVATE molecule. Results from this trial will serve as the foundation for advancing this important program through clinical development and determining whether this new therapy can offer a treatment regimen requiring even fewer infusions than ADVATE.

And we also have several other critical trials underway including one for recombinant Factor IX, which is a treatment for hemophilia B, a trial for the first and only recombinant therapy for people with von Willebrand Disease, and we expect to initiate a Phase III clinical study later this year for recombinant Factor VIIA, a therapy for hemophilia patients with inhibitors.

In the area of immunodeficiencies, we've been successful in driving differentiation of GAMMAGARD LIQUID by offering various dosage forms, enhancing delivery options and expanding the number of approved indications.

Early in 2011, we introduced the first and only 30 gram dose vial for GAMMAGARD LIQUID in the U.S, one of the most frequently prescribed doses.

In addition, we received FDA approval for a new subcutaneous route of administration for GAMMAGARD LIQUID for patients with primary immunodeficiency, allowing Baxter to participate for the first time in this fast-growing segment of the U.S. market.

During 2011, we submitted HyQ, for the approval in the U.S. and Europe. Although we've recently received the request from the FDA for additional information to complete their review, HyQ would offer a subcutaneous option that's comparable in clinical effectiveness to IV infusion and much more convenient for patients.

Last year, we received approval in Europe for GAMMAGARD LIQUID as a therapy to treat multifocal motor neuropathy, or MMN. This represents the first and only centrally licensed indication of MMN for that region, and Baxter's first on-label chronic neurological indication. We've also completed a Phase III clinical trial for this indication in the United States and have submitted our file for regulatory approval.

And lastly, we continue to advance development of GAMMAGARD LIQUID as a possible treatment for Alzheimer's disease. We enrolled the last patient in our first Phase III study for Alzheimer's in mid-2011, and we expect to complete the trial at the end of this year. And during the first quarter of 2012, we initiated a second confirmatory Phase III trial.

We continue to advance as well the science of regenerative medicine. For example, we launched our TISSEELL Fibrin sealant for use in facial surgery, and recently received FDA approval for TISSEEL as hemostatic agent in vascular surgery. And we're very pleased with the initiation of a Phase III trial to evaluate the safety and efficacy of an individual's own CD34 plus stem cells to increase exercise capacity in patients with chronic myocardial ischemia, one of the most severe forms of coronary artery disease, causing significant long-term damage to the heart muscle and disability to the patient.

We also continue to focus on leveraging our expertise in treating patients in the home, with the development of a home hemodialysis device, which has the potential to deliver enhanced clinical outcomes and greater patient convenience for those with end-stage renal disease.

In 2011, we initiated our first home hemodialysis trial in the United States to assess device performance and safety in patients undergoing in-center hemodialysis. Multiple trials are planned to support European CE marking in 2013 and a U.S. filing in 2014.

Last year, we also received FDA clearance for Baxter's next-generation automated PD cycler that offers added convenience and benefits to patients and extends the leadership in home dialysis therapy.

In summary, we have many new and exciting R&D initiatives, only some of which we'd cover with you this morning. Many of these programs have the potential to profoundly improve the treatment and delivery of care for chronic diseases like hemophilia, immunodeficiencies, Alzheimer's disease and end-stage renal disease, and we look forward to providing you with continued updates on our progress with these technologies, programs and opportunity in the future.

In addition to internal R&D, we're accelerating our efforts in pursuing acquisitions, collaborations and partnerships that bring complementary skills and resources that augment our internal expertise. Partners include companies like DEKA, Halozyme, Nektar and Momenta, just to name a few. And recently, we completed several acquisitions including, Prism Pharmaceuticals, Baxa Corporation, Synovis and most recently SIGMA.

And going forward, we'll continue to pursue selective acquisitions and partnerships using the same disciplines we've employed in the past, focusing on business development activities that complement or extend many of the businesses that we're in today.

Before closing this morning, I'd like to take just a moment as I do each year with you to talk about Baxter's sustainability efforts. At Baxter, we use the term sustainability to describe our long-term approach in addressing social, economic and environmental responsibilities to achieve the company's business objectives and contribute to a more sustainable world.

In 2011, Baxter was recognized for sustainability efforts and our ongoing commitment to environmental responsibility. Sustainability awards include being named for the 10th time as the medical products industry leader of the Dow Jones Sustainability Index. For the eighth consecutive year, as one of the most -- as one of the Global 100 most sustainable corporations by Corporate Knights Incorporated and as one of the 100 best corporate citizens by Corporate Responsibility Magazine.

In the area of environmental responsibility, Baxter was ranked 24th of the Fortune 500 by the U.S. EPA's Green Power Partnership with the company's use of clean energy. And Baxter was named among the top performers in the Maplecroft Climate Innovation Indexes for climate-related innovation and carbon management. And lastly, Baxter was recognized last year by Newsweek magazine where out of 500 largest firms, Baxter was ranked fourth in their green rankings of U.S. companies.

In the area of corporate giving, combined contributions by Baxter and the Baxter International Foundation, the philanthropic arm of the company, totaled more than $80 million last year. Financial contributions focused on increasing access to health care, providing product donations to address widespread cholera outbreak in Haiti and addressing critical community needs in the aftermath of the devastating flooding in Thailand.

Baxter's charitable-giving activities are aligned with both the company's mission of saving and sustaining lives, and Baxter remains committed to addressing global sustainability challenges and making a positive impact in the health and well-being of our local and global communities.

Let me conclude this morning by saying that we have entered 2012 with strong momentum and confidence in our sustained success. We continue to respond to considerable macroeconomic challenges by executing our strategies and defining new opportunities for growth that will serve us well in an evolving, external environment.

Our focus on medically necessary products will continue to drive increasing demand for our core product portfolio on a global basis. We're committed to applying innovative science to develop products that address unmet medical needs. And we'll continue to leverage our diversified health care model, broaden access to care and deliver enhanced value to shareholders over the long term.

Baxter employees around the world are connected by their enduring commitment to save and sustain lives. Together we'll continue to work diligently toward expanding patient access to care, achieving the highest standards of quality and safety and meeting the needs of customers in the most cost-effective manner.

I look forward to sharing with you next year the continued progress of the programs in our R&D pipeline and other highlights as we seek to make a meaningful difference in people's lives around the world. Thank you.

Thank you. So moving onto the next order of business, David, do you have the results of the voting?

David P. Scharf

Yes. Thank you. The number of shares voted for each director exceeded 88% of the number of votes cast with respect to each director. This is more than the required majority and thus, each of the nominees has been elected.

The proposal to ratify PricewaterhouseCoopers as the company's independent registered public accounting firm for 2012 received votes in favor of approval, representing approximately 98% of the shares present and entitled to vote. Therefore, the appointment of PricewaterhouseCoopers is ratified.

The advisory vote requesting that shareholders approve the compensation of the company's named executive officers as disclosed received votes in favor of approval, representing approximately 94% of the shares present and entitled to vote. Therefore, the compensation as disclosed in the proxy statement has been approved, and the company thanks you for your support.

The proposal relating to the repeal of the classified board received votes in favor of approval, representing approximately 98% of the shares present and entitled to vote. The proposal has passed.

The proposal relating to the adoption of simple majority voting received votes in favor of approval, representing approximately 98% of the shares present entitled to vote. The proposal has passed.

Robert L. Parkinson

Okay. Thank you, David. This completes now the formal business that comes before the meeting this morning. And at this time, I would like to now open up the floor for general questions about the company. Once again, I say before asking your question, if you please state your name and affiliation, if any, whether you're a Baxter shareholder or a proxy for a shareholder, and if you would address your questions to me. We have microphones, as you know, located on either side here, and so the floor is now open to questions. Sir, please, we'll start with you.

Question-and-Answer Session

Unknown Shareholder

I'm Jack Strom [ph], and I'm a shareholder. You touched briefly on HyQ and its stage of clinical trials and since it's so important to the future growth of Baxter, I'd like you to expand a little more on it, in particular when do you anticipate the additional studies and FDA review of HyQ to be finished? And what were the problems encountered in requiring the additional studies?

Robert L. Parkinson

Okay. So as I commented in my prepared comments, the FDA has recently come back to us and asked us for some additional information in terms of timing and specifics regarding the data or information they are requesting. Frankly, it's premature to comment on that. I will tell you that we are actively engaged in our discussions right now with the agency. As you probably know, given that you asked the question the way you did, this is a product for chronic use. And of course, safety is paramount for us and for the FDA to ensure that we collectively satisfy all of our questions in terms of the safety use of the product. So the questions they've asked have had to do with long-term chronic use of the product, certain effects of the product, and we have information, which we'll be providing the agency. There may be additional information that we need to generate, which is one of the reasons I can't be specific in terms of timing. But what I can tell you is that we are actively engaged with the agency, subsequent to receiving some of the questions a couple weeks ago. We'll go over here. Martin?

Martin Glotzer

Thank you, Mr. Chairman. For the record, my name is Martin Glotzer. I'm a long-time shareholder of the company. Since I was one of the presenters of the shareholder proposal, I wish to thank all the shareholders who put the time to participate in the voting, but especially the ones who voted yes for our proposal. And since you stated that the shareholder proposal is passed, hopefully, next year we'll start on implementing it.

Robert L. Parkinson

We'll try it again.

Martin Glotzer

In listening, I heard the word 80th year?

Robert L. Parkinson

Last year was our 80th anniversary, yes.

Martin Glotzer

I believe that the directors had an oversight. The 80th year only comes once in a company's year, I believe the directors should have declared a special commemorative dividend of $0.80 a share. Instead of buying back the shares, send an $0.80 commemorative dividend for all the shareholders who stay in the company and don't sell their shares and go away. I hope the Board of Directors give consideration for a commemorative dividend.

Robert L. Parkinson

Okay. We'll take that under advisement.

Martin Glotzer

Yes, I know. Whoever thought about the -- whoever thinks about giving a commemorative dividend.

Robert L. Parkinson

Do you have a question?

Martin Glotzer

Yes. Since I'm a long-time shareholder in the company, and the company seems to be -- have going up and going up in events, all of a sudden there's an event that causes a setback. I hope in this coming year or 2 years, we don't have too many setbacks so that the shares of the company shares keep going up and up instead of up and down like mountains and valleys.

Robert L. Parkinson

I think you have a lot of company with that, I hope Martin. Good, please.

Ben-Chieh Liu

Ben-Chieh Liu again. And first, I'm a very good student, listened to your presentation. First of all, sir, you made a small typo or mistake. The dividend you show here was $0.72 and this year the dividend -- and last year it's $1.27. So it's not doubled, the dividend has not been doubled.

Robert L. Parkinson

Show the slides.

Ben-Chieh Liu

No, you show your slides again. That's a small typo.

Robert J. Hombach

Right. But this one is [indiscernible] 2013 [indiscernible] 2006...

Robert L. Parkinson

[indiscernible] have the facts on that.

Ben-Chieh Liu

I know, that's what I'm saying. Because the slideshow is 2007, you did not show 2006.

Robert J. Hombach

Right. But the slide that we showed is 4 years. So we're saying from 5 years, it's doubled.

Ben-Chieh Liu

You're the assistant teacher, I'm asking the teacher I guess I don't know. No, assistant teacher...

Robert L. Parkinson

If you go back and get the base here and calculated it, that's the...

Ben-Chieh Liu

Yes, I know. I have calculated it...

Robert L. Parkinson

Okay. So is this a question or a compliment or what? I'm just trying to understand.

Ben-Chieh Liu

It's a compliment of a good student.

Robert L. Parkinson

Okay, thank you. [indiscernible] well ask it then.

Ben-Chieh Liu

Okay, question. Because I might figure that's not easily well [ph]. Anyway, my question to the company is first of all, we are expanding, we are globalized and we have all of those international connections. But I just wonder what's the proportion of employees still stay in the United States. They don't have to stay in the United States. I'm just -- a question because unemployment rate in this country has been skyrocketing. I just wondered, how do we keep some of our jobs domestically while maintaining our -- so what's the proportion plus the number, number first, proportion next. Total employee, how many are domestic and employed and how many are outside the country?

Robert L. Parkinson

Let me share a few facts with you. First of all, I don't have the exact number, but it's roughly 50% employees in the U.S., 50% outside the U.S.

Ben-Chieh Liu

Roughly 50%, okay.

Robert L. Parkinson

Roughly 50%. We are growing jobs and employment both in the U.S. and outside the US. I commented in my prepared presentation about the creation of 2,000 jobs in the United States. Of course, we create jobs in the U.S. to support our expansion internationally as well. I also would tell you that Baxter is a net exporter from the U.S., not an importer. So that gives you another perspective on both value creation, job creation in the U.S. versus OUS. So hopefully, that's helpful.

Ben-Chieh Liu

Yes, that's good, very good news. I congratulate you. Another question is you have lend help [ph] foreign markets, where is that majority share? From which part of the continent, Europe, Asia and South America, or whatever? Where were the highest revenue came from outside the United States by country, do you have any idea?

Robert L. Parkinson

Well, yes, we do have an idea. But that's a lot of data to share by country. What I can tell you is outside the U.S., Europe, I guess the largest of our...

Ben-Chieh Liu

Which country, which country? Not the continent.

Robert L. Parkinson

We have the largest countries in Europe, so Germany would be the largest, and after that U.K., France, and probably Italy and Spain, I think.

Ben-Chieh Liu

All those 6 countries?

Robert L. Parkinson

That's about what the order is. Asia Pacific and Latin America then are smaller but are both growing faster than Europe for reasons that I'm sure you understand.

Ben-Chieh Liu

Okay. Do you worry about the bankruptcy among the countries or the companies?

Robert L. Parkinson

Well I think the economic situation in Europe certainly is a concern.

Ben-Chieh Liu

Come to the R&Ds. How do you visualize the injection device without using needles? I'm afraid of the needle just like a kid. When you inject, normally for a blood test or anything, I see the needles, it's a threat in fact. So any R&D in this company has been -- developed something, the injection device on the site without using needle.

Robert L. Parkinson

I'm not sure that we have any active program today to look for an alternative way to infuse a critical therapeutic medication other than with a needle. I know some technologies that exist and some companies are working on that. But I'm not sure that we have a formal project underway today in that regard. But maybe it's something we have to look at, so we'll do that. You probably shouldn't provide a lot of questions. We have people that are behind, so if you would be kind enough to do that.

Ben-Chieh Liu

Last question, just last question. How do we provide our in-land security? I know you have a very good security here on campus. And how do we provide our patents to be outsourced or outleased.

Robert L. Parkinson

Well, if you're referring to security as it relates to securing intellectual property, you can be assured that we have a very strong patent department and our legal group that not only monitors that but manages that very proactively around the world. So we probably got to ask some other questions.

Unknown Shareholder

Mel Hollick [ph], long-time shareholder. The earnings for 2011 over 2010 were significantly higher. However, the cash flow from operations actually went down from 2010 to 2011. And if I'm looking at it correctly, one of the big factors was a rather significant increase in inventories. And the question is, is that one particular product that there was an emphasis on building inventory? Or just what created that big increase in inventory?

Robert L. Parkinson

There's a couple different dynamics. Bob, you want to talk about that?

Robert J. Hombach

Yes, I think you should look at cash flow. The single biggest reason why 2011 was not as much an increase versus 2010 as you saw in the earnings was related to the COLLEAGUE recall order and the fact that we had to provide refunds to a certain number of our customers as a result of that, that was about $230 million. Absent that, you would have seen very strong cash flow growth in 2011 versus 2010. As it relates to inventory there was no one single product line where there was significant inventory build. It was really growth to support the growth of the business.

Unknown Shareholder

Mr. Chairman, my name is Jim Nuttal [ph]. I'm a retiree, stockholder. And my question relates to your comments earlier about plans for new facility, Covington, in Georgia, I believe. On April 20, the Chicago Tribune ran an article about the HyQ and the new facility and it quoted that several financial analysts questioned the $1 billion. I wondered if you could shed some light on that for us.

Robert L. Parkinson

Well, it's the largest -- it will be the largest capital investment in the history of the company, okay? Some of the questions we've got from the analysts had to do with the magnitude that they were tending to focus just on the fractionation capacity that was being installed. And while that's a big part of it, that's only one part of the total investment. We also are investing in purification, fill-finishing facilities where today we have one location in Lessines, Belgium that does that, so we need a second source for that. We also are putting in a second testing lab for all of our plasma products. And so -- and we're also making investments in infrastructure to make sure we have a platform to expand beyond the 3 million liters of capacity that we defined as part of the announcement. Because, we believe, the long-term outlook for this business is very positive, it's going to continue to grow. And as we did the site selection and as we made the initial investment including infrastructure support, utilities and so on, we did it with an eye to the future to expand beyond the 3 million liters. And so that's why the number was as big as it was. But I think it's a great investment for the future of our company.

Unknown Shareholder

Mr. Chairman, Dr. Robert Austin [ph], shareholder. I traveled from London to be with you today. Page 3, you talked about sharing your manufacturing infrastructure with third parties. And throughout the document, our annual report reflects the emphasis on quality being job 1. My question goes to the issue of when you're sharing manufacturing capacity whether it's within the U.S. or outside of the U.S., what operating metrics are being used to take quality to a higher step than normally would be the case? Because it sits inside you're operating your own infrastructure, but if it's outside, it's not.

Robert L. Parkinson

Right. Well there are several aspects of that. First, I'm not sure if you're referring to when we do contract manufacturing for other companies in the industry. Well first and foremost, I think that speaks to how Baxter quality is recognized and valued because we manufacture injectable pharmaceuticals for many big-named pharmaceutical companies who come to us. I think that speaks to our quality standards. But the second part or another part of your question has to do with our global quality processes, which I think we've advanced in our company significantly in the recent years to ensure that we defined the highest quality standards, and we apply them consistently around the world whether it's Baxter plants making product for ourselves, Baxter plants making products for another company on a contract basis or a third-party manufacturer, which we periodically go to, so that the Baxter standards -- quality standards are imposed on that third-party manufacturer as well. So it's consistent globally.

Unknown Shareholder

It's that third part that I think brings the exposure because if it's in a foreign country, you've got some real culture issues, number one. You have the local standards, the state manufactures, which may, in case, it may not be an FDA compliant. And that really is where I was focusing.

Robert L. Parkinson

I see, okay, very good. And of course -- and it's not third-party manufacturers as much for finished products as it is raw materials, componentry and so on. And I will tell you that I believe our company has advanced significantly in recent years to ensure that the kind of supplier audit, the kind of quality standards we impose on third-party suppliers are equal to what we apply in our own facility. So I thank you for asking the question because it is an important issue.

Unknown Shareholder

It drives the whole business model. If it falls, then the business model is at risk.

Robert L. Parkinson

And the global supply chain is much more complex than it ever was, as you know.

Unknown Shareholder

So my last question. We've just seen in the last 30 days some things from Wal-Mart in terms of foreign corrupt practices, violations, bribery, and I'm not alluding to that being the case within Baxter. But when you start moving into third world countries or even offshore manufacturing or even further where you're sourcing from the raw materials from outside the U.S., how do you detect whether you're being compromised by the nature of somebody else's deception.

Robert L. Parkinson

Well, really, your question on business practices is a corollary to your earlier question on quality, because it's about defining a standard, whether it's applied to us or anyone that we work with, ensuring that we have a robust process of oversight, of monitoring to ensure that compliance of business practice is consistent around the world. So philosophically and actually in an applied away operationally, it's very similar to what we're doing with quality standards around the world.

Unknown Shareholder

And I'm really challenged to try and ask the question, your JD Edwards transformation for competitive resource planning. How is it progressing and do you see a time point when it finishes?

Robert L. Parkinson

Well, we have -- Bob, do you want to comment on that?

Robert J. Hombach

Sure. We're about 2/3 away -- 2/3 of the way through the implementation, including having just done the U.S., which is about 40% of the company. So we're feeling very good about where we're at, and we expect over the next 18 to 20 months to complete the full implementation globally.

Unknown Shareholder

So by the end of 2014?

Robert J. Hombach

Yes, end of 2013, mid 2014.

Unknown Shareholder

Mr. Chairman, I'm Bob Strosson [ph]. I'm a shareholder. The question I have is about Europe with the economic recession and the austerity measures that are going on, which will have more impact on the health care and other areas, how did that impact Baxter's business in this year and coming years?

Robert L. Parkinson

Well we -- it's impacting us in recent years. It clearly is going to continue perhaps even to intensify because of the broader macroeconomic environment in Europe. And if you look at a national budget, the #1 item on any national budget is health care spending. So you really can't separate the broader economic challenges from intensified focus on controlling health care costs. So I think we are objectively assessing that, that's going to continue to be a challenge, a headwind, I commented on it in my formal comments about the external environment. It's not unusual for governments to unilaterally impose price reductions and things of that nature. And that's going to continue, if not intensify. And I think as a leadership team and all of our employees around the world need to accept, which I think we are, and understand objectively what these challenges present. And so, but we've always had challenges in our business, and it gets back to our investment and R&D and innovation and making sure we can bring products to the market that advance clinical outcomes. And if we can do that and when we do that, successfully we'll be rewarded for that even in an environment where it's more challenging.

Unknown Shareholder

I'm Bob Matcka [ph]. I'm a shareholder of the company. And what I was wondering about is with the dire straits that we are in here economically in Illinois, has the company looked to moving facilities? I don't want you to move the facilities because my son works for Baxter. Has anyone looked into that?

Robert L. Parkinson

Yes. No, we don't plan on moving our corporate offices. And in fact, as part of this investment in Georgia, a corollary to that announcement, albeit much smaller, was the creation of some jobs in northern Illinois at -- up in Round Lake, primarily. But perhaps some other jobs over time in Illinois that will be necessary to support this. So we are actually adding a number of jobs in Illinois. We don't have any plans to move our corporate offices.

Unknown Shareholder

My name is Len Goickey [ph], stockholder and retiree. Reference was made to sustainable efforts on our part. Could you elaborate what efforts were made? Is there some report that says...

Robert L. Parkinson

Yes, we should provide you with our annual sustainability report.

Unknown Shareholder

I would like that.

Robert L. Parkinson

Yes, okay. We'll make sure when you leave, we'll have one of our -- if somebody could make sure you get your hands on that. And it details a lot of the specific information metrics. Greenhouse gas emissions, as an example, I think we have increased globally, I want to say 8% over the last, say, I think, 7 or 8 years or thereabouts, again the details in there, while our volumes have increased over 40%. So it gives you a relative feel for that particular metric. But you'll see a lot of the detail in the sustainability report in terms of water usage, greenhouse gas emissions, energy usage, which we held down considerably, so clearly environmentally friendly policy but also something that's cost-effective for the company.

Unknown Shareholder

And the disposal of waste vinyl? [ph]

Robert L. Parkinson

Yes. We'll make sure that we provide that.

Unknown Shareholder

Ron Reisner [ph], stockholder. I think a lot of us have read the FDA news release on the COLLEAGUE pump situation, which is quite damning. I wonder if you care to comment on that in regard to some of the comments they made.

Robert L. Parkinson

Well, I think many here this morning probably have some familiarity with what has been a multiyear issue with the COLLEAGUE IV infusion pump, a product that was designed back in the -- in the '90s where we had a number of quality issues with the product. As you know, we had engagement with the FDA. It actually led to, at one point a consent decree, and then a decision to remove the product from the market. So what the status is effectively today is all COLLEAGUE pumps will be off the U.S. market within the next, I think, approximately 60 days or so, Ron. And fortunately, we developed a distributor collaboration with a company called SIGMA, which we just recently announced the acquisition, which I commented on this morning. Which frankly, is a more advanced form of an infusion pump. We've been selling that in the U.S. market now going back over 2 years. It's been very well received. We've been able to hold our market share recently as we've replaced the COLLEAGUE pumps. The reality is the COLLEAGUE pump was a pump that had certain design deficiencies associated with it, despite our best efforts to correct them. I'm not sure we were ever in a position that we were going to get to a level that would have met the FDA's expectations, which was why ultimately we agreed to the consent decree and agreed to remove the product from the market. We're committed to stay in the infusion pump business with SIGMA, but also the advancement of next generation platform.

Unknown Shareholder

This is Mike Dennehey [ph], and I'm a long-term shareholder in Baxter. It come to my attention that Baxter is a member of the ALEC association, the American Legislative Exchange Council. This association has come under much criticism recently for the type of legislation that it writes and sponsors. In light of the Baxter position in the green movement and so forth, do you feel that it's wise to maintain a membership in ALEC?

Robert L. Parkinson

I have to admit, I don't think I'm familiar with the specific issue that you're raising, therefore I can't comment. David, are you?

David P. Scharf

No, I don't believe we are participating.

Unknown Shareholder

Okay. I have information that says that Baxter Corporation...

Robert L. Parkinson

Well I don't know that we do. I will tell you, if we do, I can't provide any more insight than what I just said. So why don't we follow up with you on that, and we'll surely provide that, Mike. Over here. Any other questions? Yes, please.

Unknown Attendee

Perhaps one more question, a lot of things we see in the media about the FDA and the problems that they have, would you care to comment about that? Perhaps some of that relates to the problems we had with COLLEAGUE.

Robert L. Parkinson

The FDA has a very difficult challenging job, okay? And my association with individuals in the FDA is they are very good public servants. They are committed to the security and safety of health and health care products, which is their mission. They're challenged also with evaluating new technologies, new pharmaceuticals, oftentimes things that can't be known about them, and they'll manifest themselves the years down the road. So it's this ongoing challenge between safety and supporting innovation, it's a very difficult job. And beyond that, I would just say our working relationship with the agency is very good from time to time, such as the COLLEAGUE pump matter, which we talked about. You end up with some certain differences and compromises that need to be made. But I have a high regard and respect for what they do. The difficulty of their job is balancing these various objectives that I described. And then I would just say our company has an outstanding working relationship with the agency.

Okay, good. Any other questions? If not, then our business this morning is completed. We stand adjourned. We look forward to seeing everyone next year. Thank you for your support.

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