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SECURITIES AND EXCHANGE COMMISSION
FORM 10-K
WASHINGTON, D. C. 20549
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(MARK ONE)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
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FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995. COMMISSION FILE NUMBER 1-2189
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[LOGO] ABBOTT LABORATORIES
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AN ILLINOIS CORPORATION 36-0698440
(I.R.S. employer identification number)
100 ABBOTT PARK ROAD (847) 937-6100
ABBOTT PARK, ILLINOIS 60064-3500 (telephone number)
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SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
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NAME OF EACH EXCHANGE
ON WHICH REGISTERED
TITLE OF EACH CLASS
Common Shares, Without Par Value New York Stock Exchange
Chicago Stock Exchange
Pacific Stock Exchange
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INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE PRECEDING 12 MONTHS, AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS
FOR THE PAST 90 DAYS.
YES __X__ NO _____
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM 405
OF REGULATION S-K IS NOT CONTAINED HEREIN AND WILL NOT BE CONTAINED, TO THE BEST
OF THE REGISTRANT'S KNOWLEDGE, IN THE PROXY STATEMENT INCORPORATED BY REFERENCE
IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS FORM 10-K. [ ]
THE AGGREGATE MARKET VALUE OF THE 719,359,387 SHARES OF VOTING STOCK HELD BY
NONAFFILIATES OF THE REGISTRANT, COMPUTED BY USING THE CLOSING PRICE AS REPORTED
ON THE CONSOLIDATED TRANSACTION REPORTING SYSTEM FOR ABBOTT LABORATORIES COMMON
SHARES WITHOUT PAR VALUE ON JANUARY 31, 1996, WAS APPROXIMATELY
$30,572,773,947.50.
NUMBER OF COMMON SHARES OUTSTANDING AS OF JANUARY 31, 1996: 786,075,095.
DOCUMENTS INCORPORATED BY REFERENCE
PORTIONS OF THE ABBOTT LABORATORIES ANNUAL REPORT FOR THE YEAR ENDED DECEMBER
31, 1995 ARE INCORPORATED BY REFERENCE INTO PARTS I, II, AND IV.
PORTIONS OF THE 1996 ABBOTT LABORATORIES PROXY STATEMENT ARE INCORPORATED BY
REFERENCE INTO PART III.
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PART I
ITEM 1. BUSINESS
GENERAL DEVELOPMENT OF BUSINESS
Abbott Laboratories is an Illinois corporation, incorporated in 1900. The
Company's* principal business is the discovery, development, manufacture, and
sale of a broad and diversified line of health care products and services.
FINANCIAL INFORMATION RELATING TO INDUSTRY SEGMENTS,
GEOGRAPHIC AREAS, AND CLASSES OF SIMILAR PRODUCTS
Incorporated herein by reference is the footnote entitled "Industry Segment
and Geographic Area Information" of the Consolidated Financial Statements in the
Abbott Laboratories Annual Report for the year ended December 31, 1995 (1995
Annual Report), filed as an exhibit to this report. Also incorporated herein by
reference is the text and table of sales by class of similar products included
in the section of the 1995 Annual Report captioned "Financial Review."
NARRATIVE DESCRIPTION OF BUSINESS
PHARMACEUTICAL AND NUTRITIONAL PRODUCTS
Included in this segment is a broad line of adult and pediatric
pharmaceuticals and nutritionals. These products are sold primarily on the
prescription or recommendation of physicians or other health care professionals.
The segment also includes agricultural and chemical products, bulk
pharmaceuticals, and consumer products.
Principal pharmaceutical and nutritional products include the
anti-infectives clarithromycin, sold in the United States under the trademark
Biaxin-Registered Trademark- and outside the United States primarily under the
trademark Klacid-Registered Trademark-, and tosufloxacin, sold in Japan under
the trademark Tosuxacin-Registered Trademark-; various forms of the antibiotic
erythromycin, sold primarily as PCE-Registered Trademark- or polymer coated
erythromycin, Erythrocin-Registered Trademark-, and
E.E.S.-Registered Trademark-; agents for the treatment of epilepsy and bipolar
disorder, including Depakote-Registered Trademark-; a broad line of
cardiovascular products, including Loftyl-Registered Trademark-, a vasoactive
agent sold outside the United States; Hytrin-Registered Trademark-, used as an
anti-hypertensive and for the treatment of benign prostatic hyperplasia;
Abbokinase-Registered Trademark-, a thrombolytic drug;
Survanta-Registered Trademark-, a bovine derived lung surfactant; various forms
of prepared infant formula, including Similac-Registered Trademark-,
Isomil-Registered Trademark-, Alimentum-Registered Trademark-, Toddler's
Best-TM-, and Similac NeoCare-TM-; and other medical and pediatric nutritionals,
including Ensure-Registered Trademark-, Ensure Plus-Registered Trademark-,
Ensure-Registered Trademark- High Protein, Jevity-Registered Trademark-,
Glucerna-Registered Trademark-, Advera-Registered Trademark-,
PediaSure-Registered Trademark-, Pedialyte-Registered Trademark-,
Pulmocare-Registered Trademark- and Gain-Registered Trademark-. Consumer
products include the dandruff shampoo Selsun Blue-Registered Trademark-;
Murine-Registered Trademark- eye care and ear care products;
Tronolane-Registered Trademark- hemorrhoid medication; and
Faultless-Registered Trademark- rubber sundry products. Agricultural, animal
health, and chemical products include plant growth regulators, including
ProGibb-Registered Trademark-; herbicides; larvicides, including
VectoBac-Registered Trademark-; biologically derived insecticides, including
DiPel-Registered Trademark- and XenTari-Registered Trademark-; and
anti-infectives, including Saraflox-Registered Trademark- and
Sarafin-Registered Trademark-.
Pharmaceutical and nutritional products are generally sold directly to
retailers, wholesalers, health care facilities, and government agencies. In most
cases, they are distributed from Company-owned distribution centers or public
warehouses. Certain products are co-marketed with other companies. In certain
overseas countries, some of these products are marketed and distributed through
distributors. Primary marketing efforts for pharmaceutical and nutritional
products are directed toward securing the prescription or recommendation of the
Company's brand of products by physicians or other health care professionals. In
the United States managed care purchasers, for example
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* As used throughout the text of this report on Form 10-K, the term "Company"
refers to Abbott Laboratories, an Illinois corporation, or Abbott Laboratories
and its consolidated subsidiaries, as the context requires.
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health maintenance organizations (HMOs) and pharmacy benefit managers, are
becoming increasingly important customers. Competition is generally from other
broad line and specialized health care manufacturers. A significant aspect of
competition is the search for technological innovations. The introduction of new
products by competitors and changes in medical practices and procedures can
result in product obsolescence. In addition, the substitution of generic drugs
for the brand prescribed has increased competitive pressures on pharmaceutical
products.
Consumer products are promoted directly to the public by consumer
advertising. These products are generally sold directly to retailers and
wholesalers. Competitive products are sold by other diversified consumer and
health care companies. Competitive factors include consumer advertising,
scientific innovation, price, and availability of generic product forms.
Agricultural, animal health and chemical products are generally sold to
agricultural distributors, animal health companies and pharmaceutical companies.
Competition is primarily from chemical, animal health and agricultural
companies. Competition is based on numerous factors depending on the market
served. Competitive factors include product performance, quality, price, and
technological advantages.
The Company is the leading worldwide producer of the antibiotic
erythromycin. Ensure-Registered Trademark- is the leading medical nutritional
worldwide. Similac-Registered Trademark- is a leading infant formula in the
United States.
Under an agreement between the Company and Takeda Chemical Industries, Ltd.
of Japan (Takeda), TAP Holdings Inc., (owned 50 percent by the Company and 50
percent by Takeda) together with its subsidiary, TAP Pharmaceuticals Inc. (TAP),
develops and markets products in the United States. TAP markets
Lupron-Registered Trademark-, an LH-RH analog, and Lupron
Depot-Registered Trademark- a sustained release form of
Lupron-Registered Trademark- in the United States. Lupron-Registered Trademark-
and Lupron Depot-Registered Trademark- are used for the palliative treatment of
advanced prostate cancer, treatment of endometriosis and central precocious
puberty, and for preoperative treatment of patients with anemia caused by
uterine fibroids. TAP also markets Prevacid-Registered Trademark-
(lansoprazole), a proton pump inhibitor, and has a co-promotion arrangement with
the Company for Prevacid-Registered Trademark-. Prevacid-Registered Trademark-
is indicated for short-term treatment of duodenal ulcers, esophagitis, and long-
term treatment of Zollinger-Ellison syndrome. The Company also has marketing
rights to certain Takeda products in select Latin American markets. The Company
also markets Lupron-Registered Trademark-, Lupron Depot-Registered Trademark-,
and Lupron Depot-Ped-Registered Trademark- in select markets outside the United
States.
HOSPITAL AND LABORATORY PRODUCTS
Hospital and laboratory products include diagnostic systems for blood banks,
hospitals, commercial laboratories, and alternate-care testing sites;
intravenous and irrigation fluids and related administration equipment,
including electronic drug delivery systems; drugs and drug delivery systems;
anesthetics; critical care products; and other medical specialty products for
hospitals and alternate-care sites.
The principal products included in this segment are parenteral (intravenous
or I.V.) solutions and related administration equipment sold as the
LifeCare-Registered Trademark- line of products,
LifeShield-Registered Trademark- needleless products, and
Venoset-Registered Trademark- products; irrigating fluids; parenteral
nutritionals such as Aminosyn-Registered Trademark- and
Liposyn-Registered Trademark-; Plum-Registered Trademark- and
Omni-Flow-Registered Trademark- electronic drug delivery systems; Abbott Pain
Manager-Registered Trademark-; patient-controlled analgesia (PCA) systems;
venipuncture products; hospital injectables including
FirstChoice-Registered Trademark- generics; premixed I.V. drugs in various
containers; ADD-Vantage-Registered Trademark- and Nutrimix-Registered Trademark-
drug and nutritional delivery systems; Anne-Registered Trademark- anesthetic
infusion systems; anesthetics, including Pentothal-Registered Trademark-,
Amidate-Registered Trademark-, sevoflurane (sold in the United States and a few
other markets as Ultane-Registered Trademark- and outside of the United States
primarily under the trademark Sevorane-Registered Trademark-), isoflurane and
enflurane; Calcijex-Registered Trademark-, an injectable agent for treatment of
bone disease in hemodialysis patients; critical care products including
Opticath-Registered Trademark- and OptiQue-TM- advanced sensor catheters,
Transpac-Registered Trademark- for hemodynamic monitoring, and specialty cardiac
products; screening tests for hepatitis B, HTLV-1, hepatitis B core, and
hepatitis C; tests for detection of AIDS antibodies and antigens, and other
infectious disease
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detection systems; tests for determining levels of abused drugs with the
ADx-Registered Trademark- instrument; physiological diagnostic tests; cancer
monitoring tests including tests for prostate specific antigen; laboratory tests
and therapeutic drug monitoring systems such as TDx-Registered Trademark-;
clinical chemistry systems such as Abbott Spectrum-Registered Trademark-, Abbott
Spectrum-Registered Trademark- EPx-Registered Trademark-, Abbott
Spectrum-Registered Trademark- CCx-TM-, and Quantum-TM-;
AxSYM-Registered Trademark-, Commander-Registered Trademark-,
IMx-Registered Trademark-, and Abbott Prism-Registered Trademark- lines of
diagnostic instruments and chemical reagents used with immunoassay diagnostics;
the LCx-Registered Trademark- amplified DNA probe system and reagents; Abbott
Vision-Registered Trademark-, a desk-top blood analyzer; the Abbott
TestPack-Registered Trademark- system for diagnostic testing; and a full line of
hematology systems and reagents known as the Cell-Dyn-Registered Trademark-
series.
The Company markets hospital and laboratory products in the United States
and many other countries. These products are generally distributed to
wholesalers and directly to hospitals, laboratories, and physicians' offices
from distribution centers maintained by the Company. Sales are also made in the
home infusion services market, directly to patients receiving treatment outside
the hospital through marketing arrangements with hospitals and other health care
providers. Overseas sales are made either directly to customers or through
distributors, depending on the market served.
The hospital and laboratory products industry segment is highly competitive,
both in the United States and overseas. This segment is subject to competition
in technological innovation, price, convenience of use, service, instrument
warranty provisions, product performance, long-term supply contracts, and
product potential for overall cost effectiveness and productivity gains.
Products in this segment can be subject to rapid product obsolescence. The
Company has benefitted from technological advantages of certain of its current
products; however, these advantages may be reduced or eliminated as competitors
introduce new products.
The Company is one of the leading domestic manufacturers of I.V. and
irrigating solutions and related administration equipment, parenteral
nutritional products, anesthesia products, and drug delivery systems. It is also
the worldwide leader in in vitro diagnostic products, including thyroid tests,
therapeutic drug monitoring, cancer monitoring tests, diagnostic tests for the
detection of hepatitis and AIDS antibodies, and immunodiagnostic instruments.
INFORMATION WITH RESPECT TO THE COMPANY'S BUSINESS IN GENERAL
SOURCES AND AVAILABILITY OF RAW MATERIALS
The Company purchases, in the ordinary course of business, necessary raw
materials and supplies essential to the Company's operations from numerous
suppliers in the United States and overseas. There have been no recent
availability problems or significant supply shortages.
PATENTS, TRADEMARKS, AND LICENSES
The Company is aware of the desirability for patent and trademark protection
for its products. Accordingly, where possible, patents and trademarks are sought
and obtained for the Company's products in the United States and all countries
of major marketing interest to the Company. The Company owns, has applications
pending for, and is licensed under a substantial number of patents. Principal
trademarks and the products they cover are discussed in the Narrative
Description of Business on pages 1, 2 and 3. These, and various patents which
expire during the period 1996 to 2016, in the aggregate, are believed to be of
material importance in the operation of the Company's business. The Company
believes that no single patent, license, trademark (or related group of patents,
licenses, or trademarks), except for those related to clarithromycin, is
material in relation to the Company's business as a whole. Clarithromycin is
licensed from Taisho Pharmaceutical Co., Ltd. of Tokyo, Japan. Prior to the
implementation of the Uruguay Round of the General Agreement on Tariffs and
Trade (GATT) by the United States, the patent on clarithromycin was scheduled to
expire in the United States in 2003. The intellectual property provisions of
GATT appear to extend this expiration date to 2005.
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SEASONAL ASPECTS, CUSTOMERS, BACKLOG, AND RENEGOTIATION
There are no significant seasonal aspects to the Company's business. The
incidence of certain infectious diseases which occur at various times in
different areas of the world does, however, affect the demand for the Company's
anti-infective products. Orders for the Company's products are generally filled
on a current basis, and order backlog is not material to the Company's business.
No single customer accounted for sales equaling 10 percent or more of the
Company's consolidated net sales. No material portion of the Company's business
is subject to renegotiation of profits or termination of contracts at the
election of the government.
RESEARCH AND DEVELOPMENT
The Company spent $1,072,745,000 in 1995, $963,516,000 in 1994, and
$880,974,000 in 1993 on research to discover and develop new products and
processes and to improve existing products and processes. The Company continues
to concentrate research expenditures in pharmaceutical and diagnostic products.
ENVIRONMENTAL MATTERS
The Company believes that its operations comply in all material respects
with applicable laws and regulations concerning environmental protection.
Regulations under federal and state environmental laws impose stringent
limitations on emissions and discharges to the environment from various
manufacturing operations. The Company's capital and operating expenditures for
pollution control in 1995 were approximately $18 million and $43 million,
respectively. Capital and operating expenditures for pollution control are
estimated to approximate $19 million and $43 million, respectively, in 1996.
The Company is participating as one of many potentially responsible parties
in investigation
and/or remediation at nine locations in the United States and Puerto Rico under
the Comprehensive Environmental Response, Compensation, and Liability Act,
commonly known as Superfund. The aggregate costs of remediation at these sites
by all identified parties are uncertain but have been subject to widely ranging
estimates totaling as much as several hundred million dollars. In many cases,
the Company believes that the actual costs will be lower than these estimates,
and the fraction for which the Company may be responsible is anticipated to be
considerably less and will be paid out over a number of years. The Company
expects to participate in the investigation or cleanup at these sites. The
Company is also voluntarily investigating potential contamination at one
Company-owned site, and has initiated voluntary remediation at three sites, in
cooperation with the Environmental Protection Agency (EPA) or similar state
agencies.
While it is not feasible to predict with certainty the costs related to the
previously described investigation and cleanup activities, the Company believes
that such costs, together with other expenditures to maintain compliance with
applicable laws and regulations concerning environmental protection, should not
have a material adverse effect on the Company's financial position, cash flows,
or results of operations.
EMPLOYEES
The Company employed 50,241 persons as of December 31, 1995.
REGULATION
The development, manufacture, sale, and distribution of the Company's
products are subject to comprehensive government regulation, and the general
trend is toward more stringent regulation. Government regulation by various
federal, state, and local agencies, which includes detailed inspection of and
controls over research and laboratory procedures, clinical investigations, and
manufacturing, marketing, sampling, distribution, recordkeeping, storage and
disposal practices, substantially increases the time, difficulty, and costs
incurred in obtaining and maintaining the approval to market newly developed and
existing products. Government regulatory actions can result in the seizure or
recall of products, suspension or revocation of the authority necessary for
their production and sale, and other civil or criminal sanctions.
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Continuing studies of the utilization, safety, and efficacy of health care
products and their components are being conducted by industry, government
agencies, and others. Such studies, which employ increasingly sophisticated
methods and techniques, can call into question the utilization, safety, and
efficacy of previously marketed products and in some cases have resulted, and
may in the future result, in the discontinuance of marketing of such products
and give rise to claims for damages from persons who believe they have been
injured as a result of their use.
The cost of human health care products continues to be a subject of
investigation and action by governmental agencies, legislative bodies, and
private organizations in the United States and other countries. In the United
States, most states have enacted generic substitution legislation requiring or
permitting a dispensing pharmacist to substitute a different manufacturer's
version of a pharmaceutical product for the one prescribed. Federal and state
governments continue to press efforts to reduce costs of Medicare and Medicaid
programs, including restrictions on amounts agencies will reimburse for the use
of products. Manufacturers must pay certain statutorily-prescribed rebates on
Medicaid purchases for reimbursement on prescription drugs under state Medicaid
plans. In addition, the federal government follows a diagnosis-related group
(DRG) payment system for certain institutional services provided under Medicare
or Medicaid. The DRG system entitles a health care facility to a fixed
reimbursement based on discharge diagnoses rather than actual costs incurred in
patient treatment, thereby increasing the incentive for the facility to limit or
control expenditures for many health care products. The Veterans Health Care Act
of 1992 requires manufacturers to extend additional discounts on pharmaceutical
products to various federal agencies, including the Department of Veterans
Affairs, Department of Defense, and Public Health Service entities and
institutions.
In the United States, governmental cost-containment efforts have extended to
the federally funded Special Supplemental Food Program for Women, Infants, and
Children (WIC). All states participate in WIC and have sought and obtained
rebates from manufacturers of infant formula whose products are used in the
program. All of the states have also conducted competitive bidding for infant
formula contracts which require the use of specific infant formula products for
the state WIC program. The Child Nutrition and WIC Reauthorization Act of 1989
requires all states participating in WIC to engage in competitive bidding or to
use any other cost containment measure that yields savings equal to or greater
than the savings generated by a competitive bidding system.
Governmental regulatory agencies now require manufacturers to pay additional
fees. Under the Prescription Drug User Fee Act of 1992, the Federal Food and
Drug Administration (FDA) imposes substantial fees on various aspects of the
approval, manufacture and sale of prescription drugs. Congress is now
considering expanding user fees to medical devices. The Company believes that
such legislation, if enacted, will add considerable expense for the Company.
The Company expects debate to continue during 1996 at both the federal and
the state level over the availability, method of delivery, and payment for
health care products and services. The Company believes that if legislation is
enacted, it could have the effect of reducing prices, or reducing the rate of
price increases, for medical products and services.
International operations are also subject to a significant degree of
government regulation. Many countries, directly or indirectly through
reimbursement limitations, control the selling price of most health care
products. Furthermore, many developing countries limit the importation of raw
materials and finished products. International regulations are having an impact
on United States regulations, as well. The International Organization for
Standardization ("ISO") provides the voluntary criteria for regulating medical
devices within the European Economic Community. The Company has made significant
strides in gaining ISO 9000 and European Union 46000 certification for
facilities that manufacture devices for European markets. The FDA has announced
that it will attempt to harmonize its regulation of medical devices with that of
the ISO. Proposed changes to the FDA's regulations governing the manufacture of
medical devices appear to encompass and exceed the ISO's approach to
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regulating medical devices. The FDA's adoption of the ISO's approach to
regulation and other changes to the manner in which the FDA regulates medical
devices will increase the cost of compliance with those regulations.
Efforts to reduce health care costs are also being made in the private
sector. Health care providers have responded by instituting various cost
reduction and containment measures.
It is not possible to predict the extent to which the Company or the health
care industry in general might be affected by the matters discussed above.
INTERNATIONAL OPERATIONS
The Company markets products in approximately 130 countries through
affiliates and distributors. Most of the products discussed in the preceding
sections of this report are also sold outside the United States. In addition,
certain products of a local nature and variations of product lines to meet local
regulatory requirements and marketing preferences are manufactured and marketed
to customers outside the United States. International operations are subject to
certain additional risks inherent in conducting business outside the United
States, including price and currency exchange controls, changes in currency
exchange rates, limitations on foreign participation in local enterprises,
expropriation, nationalization, and other governmental action.
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ITEM 2. PROPERTIES
The Company's corporate offices are located at 100 Abbott Park Road, Abbott
Park, Illinois 60064-3500. The locations of a number of the Company's principal
plants are listed below.
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LOCATION INDUSTRY SEGMENTS OF PRODUCTS PRODUCED
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Abbott Park, Illinois Pharmaceutical and Nutritional Products, and
Hospital and Laboratory Products
Altavista, Virginia Pharmaceutical and Nutritional Products
Austin, Texas Hospital and Laboratory Products
Barceloneta, Puerto Rico Pharmaceutical and Nutritional Products, and
Hospital and Laboratory Products
Campoverde, Italy Pharmaceutical and Nutritional Products, and
Hospital and Laboratory Products
Casa Grande, Arizona Pharmaceutical and Nutritional Products
Columbus, Ohio Pharmaceutical and Nutritional Products
Delkenheim, Germany Hospital and Laboratory Products
Irving, Texas Hospital and Laboratory Products
Laurinburg, North Carolina Pharmaceutical and Nutritional Products, and
Hospital and Laboratory Products
Mexico City, Mexico Pharmaceutical and Nutritional Products, and
Hospital and Laboratory Products
Montreal, Canada Pharmaceutical and Nutritional Products, and
Hospital and Laboratory Products
Mountain View, California Hospital and Laboratory Products
North Chicago, Illinois Pharmaceutical and Nutritional Products, and
Hospital and Laboratory Products
Queenborough, England Pharmaceutical and Nutritional Products, and
Hospital and Laboratory Products
Rocky Mount, North Carolina Hospital and Laboratory Products
Salt Lake City, Utah Hospital and Laboratory Products
Santa Clara, California Hospital and Laboratory Products
Sligo/Donegal/Cootehill/ Pharmaceutical and Nutritional Products, and
Finisklin, Ireland Hospital and Laboratory Products
Sturgis, Michigan Pharmaceutical and Nutritional Products
St. Remy, France Pharmaceutical and Nutritional Products, and
Hospital and Laboratory Products
Tokyo, Japan Hospital and Laboratory Products
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In addition to the above, the Company has manufacturing facilities in six
other locations in the United States and Puerto Rico. Overseas manufacturing
facilities are located in 18 other countries. The Company's facilities are
deemed suitable, provide adequate productive capacity, and are utilized at
normal and acceptable levels.
In the United States and Puerto Rico, the Company owns seven distribution
centers. The Company also has eleven United States research and development
facilities located at Abbott Park, Illinois; Ashland, Ohio; Columbus, Ohio (2
locations); Irving, Texas; Long Grove, Illinois; Madera,
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California; Mountain View, California; North Chicago, Illinois; Salt Lake City,
Utah; and Santa Clara, California. Overseas, the Company has research and
development facilities in Argentina, Australia, Canada, Germany, Italy, Japan,
The Netherlands, and the United Kingdom.
The corporate offices, and those principal plants in the United States that
are listed above are owned, other than the plants located in Mountain View,
California which are leased. The remaining manufacturing plants and all other
facilities are owned or leased by the Company or subsidiaries of the Company.
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in various claims and legal proceedings including
(as of January 31, 1996) 23 antitrust suits, one shareholder derivative suit,
and 5 investigations in connection with the Company's sale and marketing of
infant formula products, and 133 antitrust suits in connection with the
Company's pricing of prescription pharmaceuticals. The Company is also involved
in a civil proceeding involving certain Illinois environmental laws.
The infant formula antitrust suits allege that the Company conspired with
one or more of its competitors to fix prices, restrain trade and monopolize the
market for infant formula products in violation of state and federal antitrust
laws. The suits have been brought on behalf of individuals, the Nestle Food
Company, and state government agencies and name the Company, certain other
infant formula manufacturers and, in some instances, the American Academy of
Pediatrics as defendants. The cases seek treble damages, civil penalties and
other relief.
A total of twelve infant formula antitrust suits are currently pending in
the following state courts: Calhoun County, Alabama (2 cases); St. Clair County,
Illinois; Sedgwick County, Kansas; Hennepin County, Minnesota; Ramsey County,
Minnesota; Holmes County, Mississippi; Burleigh County, North Dakota; Holmes
County, South Dakota; Kanwaha County, West Virginia; and Milwaukee County,
Wisconsin (2 cases). The case pending in Sedgwick County, Kansas was certified
as a class action on March 2, 1995 and went to trial on October 10, 1995. On
December 6, 1995 the jury returned a verdict in favor of the Company. The
plaintiffs filed a motion for a new trial on December 28, 1995. This motion was
denied on February 15, 1996. The plaintiffs are expected to appeal. On December
4, 1995,
the court granted summary judgment in favor of the Company with respect to the
case that had been pending in Calhoun County, Michigan, having previously denied
class certification on May 22, 1995. Plaintiffs filed a notice of appeal on
December 26, 1995. On November 13, 1995 the case that had been pending in
Harrison County, Texas was voluntarily dismissed by the plaintiffs. On November
17, 1995 the parties settled the case which had been brought by the Texas
Attorney General and which had been pending in Travis County, Texas. Under the
terms of the settlement the Company does not admit any liability but does agree
to pay approximately $250,000 in cash and $500,000 in nutritional products. The
two cases that are pending in Milwaukee County, Wisconsin have been certified as
a class action. They are scheduled to go to trial on June 10, 1996. On October
20, 1995, the case pending in Holmes County, South Dakota was certified as a
class action. The case that had been pending in Jefferson County, Kentucky was
dismissed on December 12, 1995. The plaintiffs have appealed. Five other cases
that had been pending in the following state courts have also been dismissed and
are now on appeal: Boulder County, Colorado; Okaloosa County, Florida; Washoe
County, Nevada; Jackson County, North Carolina; and Blount County, Tennessee.
Three infant formula antitrust cases are pending in federal courts in Florida,
Louisiana, and Massachusetts and all purport to be state-wide consumer class
actions. The Company has filed or intends to file a response to each of the
complaints denying all substantive allegations. In addition, on June 19, 1995, a
jury in federal court in Los Angeles, California found in favor of the Company
and the American Academy of Pediatrics in the infant formula antitrust case
brought by Nestle Food Company ("Nestle"). Nestle has appealed this verdict. The
shareholder derivative suit that had been pending in state court in Cook County,
Illinois was dismissed on December 15, 1995. The plaintiffs have appealed. The
shareholder derivative suit named all of the Company's present directors (other
than Allen F. Jacobson) and a former executive officer as defendants and alleged
that the defendants breached their fiduciary duty to the Company by permitting
antitrust violations in connection with the Company's sale and marketing of
infant
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formula products. The plaintiffs sought to hold the defendants liable for an
amount exceeding $140 million in connection with the Company's settlement of
certain antitrust litigation arising out of its marketing of infant formula. The
investigations are being conducted by the Attorneys General of the states of
California, Connecticut, New York, Pennsylvania and Wisconsin. On January 23,
1996, the Canadian Bureau of Competition Policy closed both its civil and its
criminal investigations.
As of January 31, 1996, 114 prescription pharmaceutical pricing antitrust
cases were pending in federal court and 19 were pending in state court. The
prescription pharmaceutical pricing antitrust suits allege that various
pharmaceutical manufacturers have conspired to fix prices for prescription
pharmaceuticals and/or to discriminate in pricing to retail pharmacies by
providing discounts to mail-order pharmacies, institutional pharmacies and HMOs
in violation of state and federal antitrust laws. The suits have been brought on
behalf of individuals and retail pharmacies and name both the Company and
certain other pharmaceutical manufacturers and pharmaceutical wholesalers and at
least one mail-order pharmacy company as defendants. The cases seek treble
damages, civil penalties, injunctive and other relief. The Company has filed or
intends to file a response to each of the complaints denying all substantive
allegations. The state cases are pending in the following state courts: Clarke
County and Greene County, Alabama; Yavapai County, Arizona; Alameda County,
California; Monterey County, California; San Francisco County, California (8
cases); San Joaquin County, California; New York County, New York; Oakland
County, Michigan; Hennepin County, Minnesota; and Dane County and Washington
County, Wisconsin. The cases which had been pending in King County, Washington
and Denver County, Colorado have been dismissed. The federal cases are pending
in the United States District Court for the Northern District of Illinois under
the Multidistrict Litigation Rules as IN RE: BRAND NAME PRESCRIPTION DRUG
ANTITRUST LITIGATION, MDL 997. One of the cases which is pending in the MDL 997
litigation has been certified as a class action on behalf of certain retail
pharmacies. The Company has entered into an agreement to settle the class action
portion of the MDL 997 litigation. The agreement does not become final until it
is approved by the United States District Court for the Northern District of
Illinois.
On March 31, 1995 the Illinois Attorney General informed the Company that it
proposed the assessment of a civil penalty of $750,000 in connection with an
administrative enforcement action initiated in May of 1993 by the Illinois
Environmental Protection Agency against the Company. The enforcement action
alleges that the Company violated its waste water discharge permits and certain
Illinois environmental laws at its North Chicago, Illinois facility. The Company
intends to defend itself in this matter and to deny all substantive allegations.
While it is not feasible to predict the outcome of such pending claims,
proceedings, and investigations with certainty, management is of the opinion
that their ultimate disposition should not have a material adverse effect on the
Company's financial position, cash flows, or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
EXECUTIVE OFFICERS OF THE REGISTRANT
Officers of the Company are elected annually by the board of directors at
the first meeting held after the annual shareholders meeting. Each officer holds
office until a successor has been duly elected and qualified or until the
officer's death, resignation, or removal. Vacancies may be filled at any meeting
of the board. Any officer may be removed by the board of directors when, in its
judgment, removal would serve the best interests of the Company.
Current corporate officers, and their ages as of February 9, 1996, are
listed below. The officers' principal occupations and employment from January
1991 to the present and the dates of their first election as officers of the
Company are also shown. Unless otherwise stated, employment was by the Company
for the period indicated. There are no family relationships between any
corporate officers or directors.
9
<PAGE>
DUANE L. BURNHAM**, 54
1991 to present -- Chairman of the Board and Chief Executive Officer, and
Director.
Elected Corporate Officer -- 1982.
THOMAS R. HODGSON**, 54
1991 to present -- President and Chief Operating Officer, and Director.
Elected Corporate Officer -- 1980.
JOY A. AMUNDSON**, 41
1991 to 1994 -- Vice President, Corporate Hospital Marketing.
1994 to 1995 -- Vice President, HealthSystems.
1995 to present -- Senior Vice President, Chemical and Agricultural
Products.
Elected Corporate Officer -- 1990.
PAUL N. CLARK**, 49
1991 to present -- Senior Vice President, Pharmaceutical Operations.
Elected Corporate Officer -- 1985.
GARY P. COUGHLAN**, 51
1991 to present -- Senior Vice President, Finance and Chief Financial
Officer.
Elected Corporate Officer -- 1990.
JOSE M. DE LASA**, 54
1991 to 1994 -- Vice President and Associate General Counsel, Bristol-Myers
Squibb Company (Health and personal care products company).
1994 -- Vice President, Secretary and Associate General Counsel,
Bristol-Myers Squibb Company.
1994 to present -- Senior Vice President, Secretary and General Counsel.
Elected Corporate Officer -- 1994.
JOHN G. KRINGEL**, 56
1991 to present -- Senior Vice President, Hospital Products.
Elected Corporate Officer -- 1981.
THOMAS M. MCNALLY**, 48
1991 to 1993 -- Senior Vice President, Chemical and Agricultural Products.
1993 to present -- Senior Vice President, Ross Products.
Elected Corporate Officer -- 1989.
DAVID V. MILLIGAN**, 55
1991 to 1992 -- Vice President, Diagnostic Products Research and
Development.
1992 to 1994 -- Vice President, Pharmaceutical Products Research and
Development.
1994 to present -- Senior Vice President, Chief Scientific Officer.
Elected Corporate Officer -- 1984.
10
<PAGE>
ROBERT L. PARKINSON, JR.**, 45
1991 to 1993 -- Vice President, European Operations.
1993 to 1995 -- Senior Vice President, Chemical and Agricultural Products.
1995 to present -- Senior Vice President, International Operations.
Elected Corporate Officer -- 1989.
ELLEN M. WALVOORD**, 56
1991 -- Director, Corporate Communications.
1991 -- Vice President, Investor Relations.
1991 to 1995 -- Vice President, Investor Relations and Public Affairs.
1995 to present -- Senior Vice President, Human Resources.
Elected Corporate Officer -- 1991.
MILES D. WHITE**, 40
1991 to 1992 -- Divisional Vice President and General Manager, Hospital
Laboratory Sector.
1992 to 1993 -- Divisional Vice President and General Manager, Diagnostic
Systems and Operations.
1993 to 1994 -- Vice President, Diagnostic Systems and Operations.
1994 to present -- Senior Vice President, Diagnostic Operations.
Elected Corporate Officer -- 1993.
CATHERINE V. BABINGTON**, 43
1991 to 1995 -- Director, Corporate Communications.
1995 to present -- Vice President, Investor Relations and Public Affairs.
Elected Corporate Officer -- 1995.
MARK E. BARMAK, 54
1991 to 1995 -- Divisional Vice President, Associate General Counsel,
Litigation.
1995 to present -- Vice President, Litigation and Government Affairs.
Elected Corporate Officer -- 1995.
CHRISTOPHER B. BEGLEY, 43
1991 to 1993 -- Divisional Vice President and General Manager, Hospital
Products Business Sector.
1993 to present -- Vice President, Hospital Products Business Sector.
Elected Corporate Officer -- 1993.
THOMAS D. BROWN, 47
1991 to 1992 -- Divisional Vice President, Western Hemisphere.
1992 to 1993 -- Divisional Vice President, Diagnostic Commercial Operations.
1993 to present -- Vice President, Diagnostic Commercial Operations.
Elected Corporate Officer -- 1993.
11
<PAGE>
GARY R. BYERS**, 54
1991 to 1993 -- Divisional Vice President, Corporate Auditing.
1993 to present -- Vice President, Internal Audit.
Elected Corporate Officer -- 1993.
KENNETH W. FARMER**, 50
1991 to present -- Vice President, Management Information Services and
Administration.
Elected Corporate Officer -- 1985.
THOMAS C. FREYMAN**, 41
1991 -- Treasurer, Abbott International Ltd. (a subsidiary of the Company).
1991 to present -- Vice President and Treasurer.
Elected Corporate Officer -- 1991.
DAVID B. GOFFREDO, 41
1991 to 1993 -- Divisional Vice President, Pharmaceutical Marketing.
1993 to 1995 -- Divisional Vice President, Pharmaceutical Sales and
Marketing.
1995 to present -- Vice President, Pharmaceutical Products Marketing and
Sales.
Elected Corporate Officer -- 1995.
RICHARD A. GONZALEZ**, 42
1991 to 1995 -- Divisional Vice President and General Manager, U.S./Canada
Diagnostics.
1995 to present -- Vice President, HealthSystems.
Elected Corporate Officer -- 1995.
JAY B. JOHNSTON, 52
1991 to 1992 -- President, Dainabot Co., Ltd. (an affiliate of the Company)
and General Manager Asia Pacific, Abbott Diagnostics
Division.
1992 -- Divisional Vice President, Business Development.
1992 to 1993 -- Divisional Vice President and General Manager, Diagnostic
Assays and Operations.
1993 to present -- Vice President, Diagnostic Assays and Systems.
Elected Corporate Officer -- 1993.
JAMES J. KOZIARZ, 47
1991 to 1992 -- Divisional Vice President and General Manager, Diagnostic
Assays.
1992 to 1993 -- Divisional Vice President, Diagnostic Products Research and
Development.
1993 to present -- Vice President, Diagnostic Products Research and
Development.
Elected Corporate Officer -- 1993.
JOHN F. LUSSEN**, 54
1991 to present -- Vice President, Taxes.
Elected Corporate Officer -- 1985.
12
<PAGE>
RICHARD H. MOREHEAD**, 61
1991 to present -- Vice President, Corporate Planning and Development.
Elected Corporate Officer -- 1985.
THEODORE A. OLSON**, 57
1991 to present -- Vice President and Controller.
Elected Corporate Officer -- 1988.
ANDRE G. PERNET, 51
1991 to 1992 -- Divisional Vice President, Therapeutic Area Ventures,
Pharmaceutical Products Division.
1992 to 1994 -- Divisional Vice President, Pharmaceutical Development,
Pharmaceutical Products Division.
1994 to present -- Vice President, Pharmaceutical Products Research and
Development.
Elected Corporate Officer -- 1994.
CARL A. SPALDING, 50
1991 to 1992 -- Vice President, International, Johnson & Johnson
(manufacturer of health care products serving the consumer,
pharmaceutical and professional markets).
1992 to 1993 -- Divisional Vice President/General Manager, Ross Pediatric
Products.
1993 to present -- Vice President, Ross Pediatric Products.
Elected Corporate Officer -- 1993.
WILLIAM H. STADTLANDER, 50
1991 to 1992 -- Divisional Vice President, Medical Nutritionals.
1992 to 1993 -- Divisional Vice President and General Manager, Medical
Nutritionals.
1993 to present -- Vice President, Ross Medical Nutritional Products.
Elected Corporate Officer -- 1993.
JOSEF WENDLER, 46
1991 to 1992 -- Regional Director, Europe, Diagnostic Division.
1992 to 1993 -- Divisional Vice President, Pacific, Asia, Africa.
1993 to 1995 -- Vice President, Pacific/Asia /Africa Operations.
1995 to present -- Vice President, European Operations.
Elected Corporate Officer -- 1993.
DON G. WRIGHT**, 53
1991 to present -- Vice President, Corporate Quality Assurance and
Regulatory Affairs.
Elected Corporate Officer -- 1988.
LANCE B. WYATT**, 51
1991 to 1995 -- Divisional Vice President, Quality Assurance and Regulatory
Affairs.
1995 to present -- Vice President, Corporate Engineering.
Elected Corporate Officer -- 1995.
- ------------------------
** Pursuant to Item 401(b) of Regulation S-K the Company has identified these
persons as "executive officers" within the meaning of Item 401(b).
13
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
PRINCIPAL MARKET
The principal market for the Company's common shares is the New York Stock
Exchange. Shares are also listed on the Chicago and Pacific Stock Exchanges and
are traded on the Boston, Cincinnati, and Philadelphia Exchanges. Overseas, the
Company's shares are listed on the London Stock Exchange and the Swiss Stock
Exchanges of Zurich, Basel, and Geneva.
<TABLE>
<CAPTION>
MARKET PRICE PER SHARE
------------------------------------------
1995 1994
-------------------- --------------------
HIGH LOW HIGH LOW
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
First Quarter....................................................... 38 3/8 30 5/8 30 5/8 25 5/8
Second Quarter...................................................... 42 3/8 35 5/8 31 3/8 25 3/8
Third Quarter....................................................... 43 7/8 36 1/8 32 26 5/8
Fourth Quarter...................................................... 44 3/4 38 1/2 34 30 1/8
</TABLE>
Market prices are as reported by the New York Stock Exchange composite
transaction reporting system.
SHAREHOLDERS
There were 89,831 shareholders of record of Abbott common shares as of
December 31, 1995.
DIVIDENDS
Quarterly dividends of $.21 per share and $.19 per share were declared on
common shares in 1995 and 1994, respectively.
ITEM 6. SELECTED FINANCIAL DATA
Incorporated herein by reference for the years 1991 through 1995 are the
applicable portions of the section captioned "Summary of Selected Financial
Data" of the 1995 Annual Report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Incorporated herein by reference is management's discussion and analysis of
financial condition and results of operations for the years 1995, 1994, and 1993
found under the section captioned "Financial Review" of the 1995 Annual Report.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Incorporated herein by reference are the portions of the 1995 Annual Report
captioned Consolidated Balance Sheet, Consolidated Statement of Earnings,
Consolidated Statement of Cash Flows, Consolidated Statement of Shareholders'
Investment, Notes to Consolidated Financial Statements and Report of Independent
Public Accountants (which contains the related report of Arthur Andersen LLP
dated January 15, 1996). Data relating to quarterly results is found in Note 8.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Incorporated herein by reference are "Committees of the Board of Directors,"
"Information Concerning Nominees for Directors" and "Compliance with Section
16(a) of The Securities Exchange Act of 1934" found in the 1996 Abbott
Laboratories Proxy Statement ("1996 Proxy Statement").
14
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
The material in the 1996 Proxy Statement under the heading "Executive
Compensation," other than the Report of the Compensation Committee, the
Performance Graph, and Security Ownership of Officers and Directors are hereby
incorporated by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated herein by reference is the text found under the caption
"Information Concerning Security Ownership" and the material under the heading
"Security Ownership of Officers and Directors" in the 1996 Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) DOCUMENTS FILED AS PART OF THIS FORM 10-K.
1. FINANCIAL STATEMENTS: The Consolidated Financial Statements for the
years ended December 31, 1995, 1994, and 1993 and the related report of Arthur
Andersen LLP dated January 15, 1996 appearing under the portions of the 1995
Annual Report captioned Consolidated Balance Sheet, Consolidated Statement of
Earnings, Consolidated Statement of Cash Flows, Consolidated Statement of
Shareholders' Investment, Notes to Consolidated Financial Statements and Report
of Independent Public Accountants, respectively, are incorporated by reference
in response to Item 14(a)1. With the exception of the portions of the 1995
Annual Report specifically incorporated herein by reference, such Report shall
not be deemed filed as part of this Annual Report on Form 10-K or otherwise
deemed subject to the liabilities of Section 18 of the Securities Exchange Act
of 1934.
2. FINANCIAL STATEMENT SCHEDULES: The required financial statement
schedules are found on the pages indicated below. These schedules should be read
in conjunction with the Consolidated Financial Statements in the 1995 Annual
Report:
<TABLE>
<CAPTION>
SCHEDULES PAGE NO.
- ----------------------------------------------------------------- --------
<S> <C>
Valuation and Qualifying Accounts (Schedule II).................. 20
Schedules I, III, IV, and V are not submitted because they are
not applicable or not required.
Supplemental Report of Independent Public Accountants............ 21
Individual Financial Statements of the registrant have been
omitted pursuant to Rule 3.05, paragraph (1) of Regulation S-X.
</TABLE>
3. EXHIBITS REQUIRED BY ITEM 601 OF REGULATION S-K: The information called
for by this paragraph is incorporated herein by reference to the Exhibit Index
on pages 18 and 19 of this Form 10-K.
(b) REPORTS ON FORM 8-K DURING THE QUARTER ENDED DECEMBER 31, 1995:
No reports on Form 8-K were filed during the quarter ended December 31,
1995.
(c) EXHIBITS FILED (SEE EXHIBIT INDEX ON PAGES 18 AND 19).
(d) FINANCIAL STATEMENT SCHEDULES FILED (PAGE 20).
15
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Abbott Laboratories has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
ABBOTT LABORATORIES
By /s/ DUANE L. BURNHAM
Duane L. Burnham
Chairman of the Board and
Chief Executive Officer
Date: February 9, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of Abbott
Laboratories on February 9, 1996 in the capacities indicated below.
/s/ DUANE L. BURNHAM
Duane L. Burnham
Chairman of the Board,
Chief Executive Officer and
Director of Abbott Laboratories
(principal executive officer)
/s/ GARY P. COUGHLAN
Gary P. Coughlan
Senior Vice President, Finance and
Chief Financial Officer
(principal financial officer)
/s/ THOMAS R. HODGSON
Thomas R. Hodgson
President, Chief Operating Officer
and Director of Abbott Laboratories
/s/ THEODORE A. OLSON
Theodore A. Olson
Vice President and Controller
(principal accounting officer)
/s/ K. FRANK AUSTEN
K. Frank Austen, M.D.
Director of Abbott Laboratories
/s/ H. LAURANCE FULLER
H. Laurance Fuller
Director of Abbott Laboratories
/s/ BERNARD J. HAYHOE
Bernard J. Hayhoe
Director of Abbott Laboratories
/s/ ALLEN F. JACOBSON
Allen F. Jacobson
Director of Abbott Laboratories
/s/ DAVID A. JONES
David A. Jones
Director of Abbott Laboratories
/s/ BOONE POWELL, JR.
Boone Powell, Jr.
Director of Abbott Laboratories
/s/ A. BARRY RAND
A. Barry Rand
Director of Abbott Laboratories
16
<PAGE>
/s/ W. ANN REYNOLDS
W. Ann Reynolds
Director of Abbott Laboratories
/s/ WILLIAM D. SMITHBURG
William D. Smithburg
Director of Abbott Laboratories
/s/ JOHN R. WALTER
John R. Walter
Director of Abbott Laboratories
17
<PAGE>
EXHIBIT INDEX
ABBOTT LABORATORIES
ANNUAL REPORT
FORM 10-K
1995
<TABLE>
<CAPTION>
10-K
EXHIBIT
TABLE
ITEM NO.
- ----------
<S> <C>
3.1 * Articles of Incorporation-Abbott Laboratories, filed as
Exhibit 3.1 to the Abbott Laboratories Quarterly Report on
Form 10-Q for the Quarter ended March 31, 1994.
3.2 * Corporate ByLaws-Abbott Laboratories, filed as Exhibit 3.2
to the 1994 Abbott Laboratories Annual Report on Form 10-K.
4.1 * Indenture dated as of October 1, 1993 between Abbott
Laboratories and Harris Trust and Savings Bank, filed as
Exhibit 4.1 to the Abbott Laboratories Quarterly Report for
the Quarter ended September 30, 1993 on Form 10-Q.
4.2 * Form of 5.6% Note issued pursuant to the Indenture filed as
Exhibit 4.2 to the Abbott Laboratories Quarterly Report for
the Quarter ended September 30, 1993 on Form 10-Q.
4.3 * Form of Medium-Term Note, Series A (Fixed Rate) to be issued
pursuant to the Indenture filed as Exhibit 4.3 to the Abbott
Laboratories Quarterly Report for the Quarter ended
September 30, 1993 on Form 10-Q.
4.4 * Form of Medium-Term Note, Series A (Floating Rate) to be
issued pursuant to the Indenture filed as Exhibit 4.4 to the
Abbott Laboratories Quarterly Report for the Quarter ended
September 30, 1993 on Form 10-Q.
4.5 * Resolution of the Company's Board of Directors filed as
Exhibit 4.5 to the Abbott Laboratories Quarterly Report for
the Quarter ended September 30, 1993 on Form 10-Q.
4.6 * Actions of the Authorized Officers with respect to the
Company's $200,000,000 5.6% Notes filed as Exhibit 4.6 to
the Abbott Laboratories Quarterly Report for the Quarter
ended September 30, 1993 on Form 10-Q.
4.7 * Actions of the Authorized Officers with respect to the
Company's Medium-Term Notes, Series A filed as Exhibit 4.7
to the Abbott Laboratories Quarterly Report for the Quarter
ended September 30, 1993 on Form 10-Q.
4.8 * Officers' Certificate and Company Order with respect to the
Company's $200,000,000 5.6% Notes filed as Exhibit 4.8 to
the Abbott Laboratories Quarterly Report for the Quarter
ended September 30, 1993 on Form 10-Q.
4.9 Form of 6.8% Note issued pursuant to Indenture.
4.10 Actions of Authorized Officers with respect to the Company's
$150,000,000 6.8% Notes.
4.11 Officers' Certificate and Company Order with respect to the
Company's $150,000,000 6.8% Notes.
10.1 * Supplemental Plan -- Abbott Laboratories Extended Disability
Plan, filed as an exhibit (pages 50-51) to the 1992 Abbott
Laboratories Annual Report on Form 10-K.**
10.2 * The Abbott Laboratories 1986 Incentive Stock Program, filed
as an exhibit (pages 37-59) to the 1989 Abbott Laboratories
Annual Report on Form 10-K.**
10.3 * The Abbott Laboratories 1991 Incentive Stock Program, filed
as an exhibit (pages 128-149) to the 1990 Abbott
Laboratories Annual Report on Form 10-K.**
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
10-K
EXHIBIT
TABLE
ITEM NO.
- ----------
<S> <C>
10.4 * Consulting agreement between Abbott Laboratories and K.
Frank Austen, M.D. dated September 13, 1991, filed as an
exhibit (pages 63-66) to the 1992 Abbott Laboratories Annual
Report on Form 10-K.**
10.5 * Abbott Laboratories 401(k) Supplemental Plan, filed as
Exhibit 10.7 to the Abbott Laboratories 1993 Annual Report
on Form 10-K.**
10.6 Abbott Laboratories Supplemental Pension Plan.**
10.7 * The 1986 Abbott Laboratories Management Incentive Plan,
filed as Exhibit 10.9 to the Abbott Laboratories 1993 Annual
Report on Form 10-K.**
10.8 * Abbott Laboratories Non-Employee Directors' Fee Plan, filed
as Exhibit 10.10 to the Abbott Laboratories 1993 Annual
Report on Form 10-K.**
11 Calculation of Fully Diluted Earnings Per Share.
12 Computation of Ratio of Earnings to Fixed Charges.
13 The portions of the Abbott Laboratories Annual Report for
the year ended December 31, 1995 captioned Financial Review,
Consolidated Balance Sheet, Consolidated Statement of
Earnings, Consolidated Statement of Cash Flows, Consolidated
Statement of Shareholders' Investment, Notes to Consolidated
Financial Statements, Report of Independent Public
Accountants, and the applicable portions of the section
captioned Summary of Financial Data for the years 1991
through 1995.
21 Subsidiaries of Abbott Laboratories.
23 Consent of Independent Public Accountants.
27 Financial Data Schedule.
The 1996 Abbott Laboratories Proxy Statement will be filed
with the Commission under separate cover on or about March
11, 1996.
</TABLE>
- ---------
* Incorporated herein by reference.
** Denotes management contract or compensatory plan or arrangement required to
be filed as an exhibit hereto.
The Company will furnish copies of any of the above exhibits to a
shareholder upon written request to the Corporate Secretary, Abbott
Laboratories, 100 Abbott Park Road, Abbott Park, Illinois 60064-3500.
19
<PAGE>
ABBOTT LABORATORIES AND SUBSIDIARIES
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AMOUNTS
BALANCE AT PROVISIONS CHARGED OFF, BALANCE AT
ALLOWANCES FOR DOUBTFUL BEGINNING CHARGED TO NET OF END OF
ACCOUNTS AND SALES DEDUCTIONS OF YEAR INCOME (a) RECOVERIES YEAR
- --------------------------------------------------------------------------- ---------- ----------- ------------ ----------
<S> <C> <C> <C> <C>
1995 $128,929 $32,462 $ (3,401) $157,990
---------- ----------- ------------ ----------
---------- ----------- ------------ ----------
1994 $116,925 $18,123 $ (6,119) $128,929
---------- ----------- ------------ ----------
---------- ----------- ------------ ----------
1993 $106,857 $29,441 $(19,373) $116,925
---------- ----------- ------------ ----------
---------- ----------- ------------ ----------
</TABLE>
- ---------
(a) Represents provisions related to allowances for doubtful accounts and the
net change in the allowances for sales deductions.
20
<PAGE>
SUPPLEMENTAL REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Abbott Laboratories:
We have audited in accordance with generally accepted auditing standards,
the financial statements included in the Company's Annual Report incorporated by
reference in this Form 10-K, and have issued our report thereon dated January
15, 1996. Our audits were made for the purpose of forming an opinion on those
statements taken as a whole. Schedule II is the responsibility of the Company's
management, is presented for purposes of complying with the Securities and
Exchange Commission's rules, and is not part of the basic financial statements.
This schedule has been subjected to the auditing procedures applied in the
audits of the basic financial statements and, in our opinion, fairly states in
all material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Chicago, Illinois,
January 15, 1996
21
<PAGE>
ABBOTT LABORATORIES
6.80% NOTE DUE MAY 15, 2005
NO. 1001 $150,000,000
CUSIP NO. 002824AG5
This Security is a Security in a global form within the meaning of the
Indenture hereinafter referred to and is registered in the name of the
Depositary or a nominee of a Depositary. This global Security is exchangeable
for Securities registered in the name of a Person other than the Depositary or
its nominee only in the limited circumstances described in the Indenture, and no
transfer of this Security (other than a transfer of this Security as a whole by
the Depositary to a nomine of the Depositary or by a nominee of the Depositary
to the Depositary or another nominee of the Depositary) may be registered except
in such limited circumstances.
Unless this Security is presented by an authorized representative of
The Depositary Trust Company (55 Water Street, New York, New York) to the issuer
or its agent for registration of transfer, exchange or payment, and any Security
issued upon registration of transfer of, or in exchange for, or in lieu of, this
Security is registered in the name of Cede & Co. or such other name as requested
by an authorized representative of The Depository Trust Company and any payment
hereon is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE
OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL since the registered owner hereof,
Cede & Co., has an interest herein.
<PAGE>
ABBOTT LABORATORIES
ABBOTT LABORATORIES, a corporation duly organized and existing under
the laws of Illinois (herein called the "Company," which term includes any
successor Person under the Indenture hereinafter referred to), for value
received, hereby promises to pay to Cede & Co., as nominee for The Depository
Trust Company, or registered assigns, the principal sum of One Hundred Fifty
Million Dollars ($150,000,000) on May 15, 2005 and to pay interest thereon from
May 15, 1995 or from the most recent Interest Payment Date to which interest has
been paid or duly provided for, semi-annually on May 15 and November 15 in each
year, commencing November 15, 1995, at the rate of 6.80% per annum, until the
principal hereof is paid or made available for payment. The interest so
payable, and punctually paid or duly provided for, on any Interest Payment Date
will, as provided in such Indenture, be paid to the Person in whose name this
Security (or one or more Predecessor Securities) is registered at the close of
business on the Regular Record Date for such interest, which shall be the May 1
or November 1 (whether or not a Business Day), as the case may be, next
preceding such Interest Payment Date. Any such interest not so punctually paid
or duly provided for will forthwith cease to be payable to the Holder on such
Regular Record Date and may either be paid to the Person in whose name this
Security (or one or more Predecessor Securities) is registered at the close of
business on a Special Record Date for the payment of such Defaulted Interest to
be fixed by the Trustee, notice whereof shall be given to Holders of Securities
of this series not less than 10 days prior to such Special Record Date, or be
paid at any time in any other lawful manner not inconsistent with the
requirements of any securities exchange on which the Securities of this series
may be listed, and upon such notice as may be required by such exchange, all as
more fully provided in said Indenture.
Payment of the principal of (and premium, if any) and any such
interest on this Security will be made at the office or agency of the Company
maintained for that purpose in Chicago, Illinois, in such coin or currency of
the United States of America as at the time of payment is legal tender for
payment of public and private debts; PROVIDED, HOWEVER, that at the option of
the Company payment of interest may be made by check mailed to the address of
the Person entitled thereto as such address shall appear in the Security
Register.
Unless the certificate of authentication hereon has been executed by
the Trustee referred to herein by manual signature, this Security shall not be
entitled to any benefit under the Indenture or be valid or obligatory for any
purpose.
This Security is one of a duly authorized issue of securities of the
Company (herein called the "Securities"), issued and to be issued in one or more
series under an Indenture, dated as of October 1, 1993 (herein called the
"Indenture"), between the Company and Harris Trust and Savings Bank, as Trustee
(herein called the "Trustee," which term includes any successor trustee under
the Indenture), to which Indenture and all indentures
<PAGE>
supplemental thereto reference is hereby made for a statement of the respective
rights, limitations of rights, duties and immunities thereunder of the Company,
the Trustee and the Holders of the Securities and of the terms upon which the
Securities are, and are to be, authenticated and delivered. This Security is
one of the series designated on the face hereof, limited in aggregate principal
amount to $150,000,000.
The Securities of this Series are not redeemable prior to maturity and
do not provide for a sinking fund.
If an Event of Default with respect to Securities of this series shall
occur and be continuing, the principal of the Securities of this series may be
declared due and payable in the manner and with the effect provided in the
Indenture.
The Indenture contains provisions for defeasance at any time of the
entire indebtedness of this Security or certain restrictive covenants and Events
of Default with respect to this Security, in each case upon compliance with
certain conditions set forth therein.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities of each series to be
affected under the Indenture at any time by the Company and the Trustee with the
consent of the Holders of a majority in principal amount of the Securities at
the time Outstanding of each series to be affected. The Indenture also contains
provisions permitting the Holders of specified percentages in principal amount
of the Securities of each series at the time Outstanding, on behalf of the
Holders of all Securities of such series, to waive compliance by the Company
with certain provisions of the Indenture and certain past defaults under the
Indenture and their consequences. Any such consent or waiver by the Holder of
this Security shall be conclusive and binding upon such Holder and upon all
future Holders of this Security and of any Security issued upon the registration
of transfer hereof or in exchange herefor or in lieu hereof, whether or not
notation of such consent or waiver is made upon this Security.
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of and any premium and
interest on this Security at the times, place and rate, and in the coin or
currency, herein prescribed.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Security is registerable in the Security
Register, upon surrender of this Security for registration of transfer at the
office or agency of the Company in any place where the principal of and any
premium and interest on this Security are payable, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Company and the Security Registrar duly executed by, the Holder hereof or his
attorney duly
<PAGE>
authorized in writing, and thereupon one or more new Securities of this series
and of like tenor, of authorized denominations and for the same aggregate
principal amount, will be issued to the designated transferee or transferees.
The Securities of this series are issuable only in registered form
without coupons in denominations of $1,000 and any integral multiple thereof.
As provided in the Indenture and subject to certain limitations therein set
forth, Securities of this series are exchangeable for a like aggregate principal
amount of Securities of this series and of like tenor of a different authorized
denomination, as requested by the Holder surrendering the same.
No service charge shall be made for any such registration of transfer
or exchange, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name this Security is registered as the owner
hereof for all purposes, whether or not this Security be overdue, and neither
the Company, the Trustee nor any such agent shall be affected by notice to the
contrary.
All terms used in this Security which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
Dated: May 17, 1995
ABBOTT LABORATORIES
By
----------------------------------
Name:
Title:
Attest:
______________________________
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
HARRIS TRUST AND SAVINGS BANK,
as Trustee, certifies that this is one of the
Securities referred to in the within-mentioned
Indenture.
By
--------------------------------------
Authorized Signature
<PAGE>
ABBOTT LABORATORIES
ACTIONS OF THE AUTHORIZED OFFICERS
Pursuant to the authority granted by the Board of Directors of Abbott
Laboratories ("Corporation") in its September 10, 1993 resolutions, the
undersigned agree as follows:
1. The Corporation shall issue $150,000,000 aggregate principal amount of
the Corporation's 6.80% Notes due May 15, 2005 ("Notes").
2. The Corporation shall issue and sell Notes to Goldman, Sachs & Co.,
Lehman Brothers, Inc., Lazard Freres & Co., LLC and Salomon Brothers Inc
(collectively, "Underwriters") pursuant to an Underwriting Agreement dated
October 4, 1993 and a Pricing Agreement dated May 10, 1995 ("Pricing Agreement")
between the Corporation and the Underwriters, upon the terms and conditions set
forth therein, to be issued under and in accordance with an Indenture dated as
of October 1, 1993, between the Corporation and the Harris Trust and Savings
Bank, as Trustee ("Trustee"), relating to the Corporation's Notes and other
obligations ("Indenture").
3. In addition to the other terms provided in the Indenture with respect
to securities issued thereunder, all as more particularly described in the
Pricing Agreement, the Prospectus and the Prospectus Supplement relating to the
Notes and the form of Note referred to below, the Notes shall contain the
following terms:
(a) The Notes shall be entitled "6.80% Notes due May 15, 2005";
(b) The Notes shall be limited in aggregate principal amount to
$150,000,000;
(c) Interest shall be payable to the persons in whose names the Notes are
registered at the close of business on the applicable Regular Record Date
(as defined below);
(d) The principal of the Notes is payable on May 15, 2005;
(e) The Notes shall bear interest at the rate of 6.80% per annum beginning
May 15, 1995. Interest on the Notes will be payable semi-annually on the
fifteenth day of May and November of each year (each an "Interest Payment
Date"), commencing on November 15, 1995. Interest shall be paid to persons
in whose names the Notes are registered on the May 1
<PAGE>
or November 1 preceding the Interest Payment Date (each a "Regular Record
Date");
(f) Payment of the principal of, and any premium and interest on, the
Notes will be made at the office or agency of the Corporation maintained
for that purpose in Chicago, Illinois;
(g) The Notes shall not be redeemable or repayable prior to maturity;
(h) The Notes shall not provide for any sinking fund;
(i) The Notes are issuable only in registered form without coupons in
denominations of $1,000 and any integral multiple thereof;
(j) The payment of the principal of, and any premium and interest on, the
Notes shall be made in such coin or currency of the United States of
America as at the time of payment is legal tender for payment of public and
private debts;
(k) The payment of principal of, and any premium and interest on, the
Notes shall not be determined with reference to an index or formula;
(l) There shall be no optional currency or currency unit in which the
payment of principal of, and any premium and interest on, the Notes shall
be payable;
(m) Both Section 13.2 and 13.3 of the Indenture shall apply to the Notes;
(n) The Notes shall be in global form as set forth in Section 3.5 of the
Indenture;
(o) The principal amount of the Notes shall be payable upon declaration of
acceleration pursuant to Section 5.2 of the Indenture; and
(p) The other terms and conditions of the Notes shall be substantially as
set forth in the Indenture and in the Prospectus and the Prospectus
Supplement relating to the Notes.
4. The form of the Notes shall be substantially as attached hereto as
EXHIBIT A.
5. The price at which the Notes shall be sold by the Corporation to the
Underwriters pursuant to the Pricing Agreement
-2-
<PAGE>
shall be 99.35% of the principal amount thereof, plus accrued interest from
May 15, 1995 to the time of Delivery;
6. The Notes initially will be offered to the public by the Underwriters
at 100% of the principal amount thereof, plus accrued interest from May 15, 1995
to the time of Delivery;
7. The execution and delivery of the Pricing Agreement, dated May 10,
1995, and substantially in the form attached hereto as EXHIBIT B, is hereby
approved.
8. Any officer of this Corporation is hereby authorized and empowered to
execute the Notes of this Corporation in the form he deems appropriate, and to
deliver such Notes to the Trustee with a written order directing the Trustee to
have the Notes authenticated and delivered to such persons as such officer
designates.
9. The Harris Trust and Savings Bank is hereby designated and appointed
as Paying Agent and Securities Registrar with respect to the Notes.
-3-
<PAGE>
Dated: May 10, 1995
AUTHORIZED OFFICERS OF
ABBOTT LABORATORIES
By____________________________
By____________________________
-4-
<PAGE>
ABBOTT LABORATORIES
OFFICERS' CERTIFICATE
and
COMPANY ORDER
With respect to the issuance by Abbott Laboratories (the "Company") of
$150,000,000 in aggregate principle amount of 6.80% Notes due May 15, 2005 (the
"Notes"), Jose M. de Lasa and Thomas C. Freyman, officers of the Company,
certify pursuant to Sections 2.1, 3.1 and 3.3 of the Indenture, dated as of
October 1, 1993 (the "Indenture"), between the Company and Harris Trust and
Savings Bank, as Trustee (the "Trustee"), as follows:
1. We have read Sections 2.1, 3.1 and 3.3 of the Indenture and the
definitions therein relating hereto, reviewed the resolutions of the
Board of Directors of the Company adopted on September 10, 1993
(attached as Exhibit B to the Secretary's Certificate of even date
herewith), the Action of Authorized Officers of May 10, 1995 (attached
as Exhibit C to the Secretary's Certificate of even date herewith),
conferred with executive officers of the Company and, in our opinion,
made such other examinations and investigations as are necessary to
enable us to express an informed opinion as to whether Sections 2.1,
3.1 and 3.3 of the Indenture have been complied with.
2. Based on the above-described examinations and investigations, in our
opinion, all conditions precedent relating to the authentication and
delivery of the Notes, including those conditions under Sections 2.1,
3.1 and 3.3 of the Indenture, have been complied with.
3. The terms of the Notes are set forth in the Action of Authorized
Officers, dated May 10, 1995 (attached as Exhibit C to the Secretary's
Certificate of even date herewith).
4. In accordance with the provisions of Section 3.3 of the Indenture, the
Trustee is hereby authorized and requested to authenticate the Notes
and to deliver the Notes to or at the direction of Goldman, Sachs &
Co., Lazard Freres & Co., LLC, Lehman Brothers, Inc. and Salomon
Brothers Inc.
Capitalized terms used herein and not otherwise defined herein shall have
the respective meanings assigned thereto in the Indenture.
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Officers'
Certificate as of this 17th day of May, 1995.
ABBOTT LABORATORIES
By:____________________________
Jose M. de Lasa, Senior Vice
President, Secretary and
General Counsel
By:____________________________
Thomas C. Freyman, Vice
President and Treasurer
<PAGE>
Exhibit 10.6
Adopted by Board of Directors
12/13/85. Amended by Board of
Review 3/13/86, 12/11/86,
3/ll/87, 3/4/88, 12/9/88,
3/9/89, 10/1/89, 12/21/90,
6/1/92, 9/30/93 and 9/1/95.
ABBOTT LABORATORIES SUPPLEMENTAL PENSION PLAN
SECTION 1
INTRODUCTION
1-1. On September 9, 1977, December 14, 1979 and February 10, 1984 the
Board of Directors of Abbott Laboratories ("Abbott") adopted certain resolutions
providing for payment of (i) pension benefits calculated under the Abbott
Laboratories Annuity Retirement Plan ("Annuity Plan") in excess of those which
may be paid under that plan under the limits imposed by Section 415 of the U.S.
Internal Revenue Code, as amended, and the Employee Retirement Income Security
Act ("ERISA") and (ii) the additional pension benefits that would be payable
under the Annuity Plan if deferred awards under the Abbott Laboratories
Management Incentive Plan were included in "final earnings" as defined in the
Annuity Plan.
On February 10, 1984 the Board of Directors of Abbott also adopted a
resolution (this and the resolutions described above being hereinafter referred
to as the "prior resolutions") allowing participants in the Abbott Laboratories
Stock Retirement Plan ("Stock Plan") to elect "supplemental pay conversion"
contributions under the Stock Plan in excess of the limits imposed by Section
415 of the U.S. Internal Revenue Code, as amended.
<PAGE>
- 2 -
The purpose of this ABBOTT LABORATORIES SUPPLEMENTAL PENSION PLAN (the
"Supplemental Plan") is to clarify, restate and supersede the prior resolutions.
1-2. The Supplemental Plan shall apply to employees of Abbott and its
subsidiaries and affiliates existing as of the date of adoption of the
Supplemental Plan or thereafter created or acquired. (Abbott and each of such
subsidiaries and affiliates are hereinafter referred to as an "employer" and
collectively as the "employers").
1-3. All benefits provided under the Supplemental Plan shall be
provided from the general assets of the employers and not from any trust fund or
other designated asset. All participants in the Supplemental Plan shall be
general creditors of the employers with no priority over other creditors.
1-4. The Supplemental Plan shall be administered by the Abbott
Laboratories Employee Benefit Board of Review appointed and acting under the
Annuity Plan ("Board of Review"). Except as stated below, the Board of Review
shall perform all powers and duties with respect to the Supplemental Plan,
including the power to direct payment of benefits, allocate costs among
employers, adopt amendments and determine questions of interpretation. The
Board of
<PAGE>
- 3 -
Directors of Abbott shall have the sole authority to terminate the
Supplemental Plan.
SECTION 2
ERISA ANNUITY PLAN SUPPLEMENTAL BENEFIT
2-1. The benefits described in this Section 2 shall apply to all
participants in the Annuity Plan who retire, or terminate with a vested pension
under that plan, on or after September 9, 1977.
2-2. Each Annuity Plan participant whose retirement or vested pension
under that plan would otherwise be limited by Section 415, Internal Revenue
Code, shall receive a supplemental pension under this Supplemental Plan in an
amount, which, when added to his or her Annuity Plan pension, will equal the
amount the participant would be entitled to under the Annuity Plan as in effect
from time to time, based on the particular option selected by the participant,
without regard to the limitations imposed by Section 415, Internal Revenue Code.
SECTION 3
1986 TAX REFORM ACT SUPPLEMENTAL BENEFIT
3-1. The benefits described in this Section 3 shall apply to all
participants in the Annuity Plan who retire, or terminate with a vested pension
under that plan, after December 31, 1988.
<PAGE>
- 4 -
3-2. Each Annuity Plan participant shall receive a supplemental
pension under this Supplemental Plan in an amount determined as follows:
(a) The supplemental pension shall be the difference, if any,
between:
(i) The monthly benefit payable under the Annuity Plan plus any
supplement provided by Section 2; and
(ii) The monthly benefit which would have been payable under the
Annuity Plan (without regard to the limits imposed by
Section 415, Internal Revenue Code) if the participant's
"final earnings", as defined in the Annuity Plan had
included compensation in excess of the limits imposed by
Section 401(a)(17), Internal Revenue Code, and any "pre-tax
contributions" made by the participant under the Abbott
Laboratories Supplemental 401(k) Plan.
SECTION 4
DEFERRED MIP ANNUITY PLAN SUPPLEMENTAL BENEFIT
4-1. The benefits described in this Section 4 shall apply to all
participants in the Annuity Plan who retire, or terminate with a vested pension,
under that plan, on or after December 14, 1979 and who were awarded Management
Incentive Plan awards for any calendar year during the ten consecutive calendar
years ending with the year of retirement or termination of employment.
4-2. Each Annuity Plan participant shall receive a supplemental
pension under this Supplemental Plan in an amount determined as follows:
<PAGE>
- 5 -
(a) The supplemental pension shall be the difference, if any,
between:
(i) The monthly benefit payable under the Annuity Plan plus any
supplement provided by Section 2 and Section 3; and
(ii) the monthly benefit which would have been payable under the
Annuity Plan (without regard to the limits imposed by
Section 415, Internal Revenue Code) if the participant's
"final earnings", as defined in the Annuity Plan, were
one-sixtieth of the sum of:
(A) the participant's total "basic earnings"
(excluding any payments under the Management
Incentive Plan or any Division Incentive Plan)
received in the sixty consecutive calendar months
for which his basic earnings (excluding any
payments under the Management Incentive Plan or
any Division Incentive Plan) were highest within
the last one hundred twenty consecutive calendar
months immediately preceding his retirement or
termination of employment; and
(B) the amount of the participant's total awards under
the Management Incentive Plan and any Division
Incentive Plan (whether paid immediately or
deferred) made for the five consecutive calendar
years during the ten consecutive calendar years
ending with the year of retirement or termination
for which such amount is the greatest and (for
participants granted Management Incentive Plan
awards for less than five consecutive calendar
years during such ten year period) which include
all Management Incentive Plan awards granted for
consecutive calendar years within such ten year
period.
(b) That portion of any Management Incentive Plan award which the
Compensation Committee has determined shall be excluded from the
participant's "basic earnings" shall be excluded from the
calculation of "final earnings" for
<PAGE>
- 6 -
purposes of this subsection 4-2. "Final earnings" for purposes
of this subsection 4-2 shall include any compensation in excess
of the limits imposed by Section 401(a)(17), Internal Revenue
Code.
(c) In the event the period described in subsection 4-2(a)(ii)(B) is
the final five calendar years of employment and a Management
Incentive Plan award is made to the participant subsequent to
retirement for the participant's final calendar year of
employment, the supplemental pension shall be adjusted by adding
such new award and subtracting a portion of the earliest
Management Incentive Plan award included in the calculation, from
the amount determined under subsection 4-2(a)(ii)(B). The
portion subtracted shall be equal to that portion of the
participant's final calendar year of employment during which the
participant was employed by Abbott. If such adjustment results
in a greater supplemental pension, the greater pension shall be
paid beginning the first month following the date of such new
award.
Section 5
RESTRICTED STOCK AWARD SUPPLEMENTAL BENEFIT
5-1. The benefits described in this Section 5 shall apply to all
participants in the Annuity Plan who retire or terminate with a vested pension,
under that plan, after September 1, 1995.
5-2. For purposes of this Supplemental Plan, the phrase "Eligible
Restricted Stock Award" shall mean a restricted stock award granted under the
Abbott Laboratories 1991 Incentive Stock Program, or any successor plan or
program, (the "Incentive Stock Program"), which is designated by the
Compensation Committee of the Board of Directors of Abbott, at any time prior to
retirement or termination of the participant, as includable in "final earnings"
for purposes of this Supplemental Plan.
5-3. Each Annuity Plan participant shall receive a supplemental
pension under this Supplemental Plan in an amount determined as follows:
(a) The supplemental pension shall be the difference, if any, between:
<PAGE>
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(i) The monthly benefit payable under the Annuity Plan
plus any supplement provided by Sections 2, 3 and
4; and
(ii) The monthly benefit which would have been payable
under the Annuity Plan (without regard to the
limits imposed by Section 415, Internal Revenue
Code) if the participant's "final earnings", as
defined in the Annuity Plan, were one-sixtieth of
the sum of:
(A) the participant's earnings described in
subsection 4-2(a)(ii)(A);
(B) the participant's awards described in
subsection 4-2(a)(ii)(B) (adjusted as
provided in subsections 4-2(b) and (c)); and
(C) the total value of those installments of
Eligible Restricted Stock Awards granted the
participant which become non-forfeitable
during the sixty consecutive calendar months
for which his basic earnings (as defined in
subsection 4-2(a)(ii)(A)) are highest within
the last one hundred twenty consecutive
calendar months immediately preceding his
retirement or termination of employment.
(b) For purposes of this subsection 5-3:
(i) The value of an Eligible Restricted Stock Award
shall be the fair market value of such award
(as determined under the Incentive Stock Program)
on the date the award is granted;
(ii) No more than five installments of Eligible
Restricted Stock Awards shall be included in
the amount calculated under subsection
5-3(a)(ii)(C); and
(iii) "Final earnings" shall include compensation in
excess of the limits imposed by Section
401(a)(17), Internal Revenue Code."
In the event the limitation described in subsection 5-3(b)(ii) would be
exceeded for a participant, those installments in
<PAGE>
- 8 -
excess of five with the lowest fair market value (as defined in subsection
5-3(b)(i)) shall be disregarded in calculating the benefit due under this
Section 5.
SECTION 6
CORPORATE OFFICER ANNUITY PLAN SUPPLEMENTAL BENEFIT
6-1. The benefits described in this Section 6 shall apply to all
participants in the Annuity Plan who are corporate officers of Abbott as of
September 30, 1993 or who become corporate officers thereafter, and who retire,
or terminate with a vested pension under that plan on or after September 30,
1993. The term "corporate officer" for purposes of this Section 6 shall mean an
individual elected an officer of Abbott by its Board of Directors (or designated
as such for purposes of this Section 6 by the Compensation Committee of the
Board of Directors of Abbott), but shall not include assistant officers.
6-2. Subject to the limitations and adjustments described below, each
participant described in subsection 6-1 shall receive a monthly supplemental
pension under this Supplemental Plan commencing on the participant's normal
retirement date under the Annuity Plan and payable as a life annuity, equal to
6/10 of 1 percent (.006) of the participant's final earnings (as that phrase is
used in subsection 5-3(a)(ii), adjusted as provided in subsections
<PAGE>
- 9 -
5-3(b)(ii) and (iii)) for each of the first twenty years of the participant's
benefit service (as defined in the Annuity Plan) occurring after the
participant's attainment of age 35.
6-3. In no event shall the sum of (a) the participant's aggregate
percentage of final earnings calculated under subsection 6-2 and (b) the
participant's aggregate percentage of final earnings calculated under subsection
5-1(b)(i) of the Annuity Plan, exceed the maximum aggregate percentage of final
earnings allowed under subsection 5-1(b)(i) of the Annuity Plan (without regard
to any limits imposed by the Internal Revenue Code), as in effect on the date of
the participant's retirement or termination. In the event the limitation
described in this subsection 6-3 would be exceeded for any participant, the
participant's aggregate percentage calculated under subsection 6-2 shall be
reduced until the limit is not exceeded.
6-4. Benefit service occurring between the date a participant ceases to be
a corporate officer of Abbott and the date the participant again becomes a
corporate officer of Abbott shall be disregarded in calculating the
participant's aggregate percentage under subsection 6-2.
<PAGE>
- 10 -
6-5. Any supplemental pension otherwise due a participant under this
Section 6 shall be reduced by the amount (if any) by which:
(a) the sum of (i) the benefits due such participant under the Annuity
Plan and this Supplemental Plan, plus (ii) the actuarially
equivalent value of the employer-paid portion of all benefits due
such participant under the primary retirement plans of all non-
Abbott employers of such participant; exceeds
(b) the maximum benefit that would be due under the Annuity Plan
(without regard to the limits imposed by Section 415, Internal
Revenue Code) based on the participant's final earnings (as that
phrase is used in subsection 5-3(a)(ii), adjusted as provided in
subsections 5-3(b)(ii) and (iii), if the participant had accrued
the maximum benefit service recognized by the Annuity Plan.
The term "primary retirement plan" shall mean any pension benefit plan as
defined in ERISA, whether or not qualified under the Internal Revenue Code,
which is determined by the Board of Review to be the primary pension plan of its
sponsoring employer. The term "non-Abbott employer" shall mean any employer
other than Abbott or a subsidiary or affiliate of Abbott. A retirement plan
maintained by an employer prior to such employer's acquisition by Abbott shall
be deemed a retirement plan maintained by a non-Abbott employer for purposes of
this subsection 6-5.
6-6. Any supplemental pension due a participant under this Section 6 shall
be actuarially adjusted as provided in the Annuity Plan to reflect the pension
form selected by the participant and the
<PAGE>
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participant's age at commencement of the pension, and shall be paid as
provided in subsection 7-2.
SECTION 7
CORPORATE OFFICER ANNUITY PLAN
SUPPLEMENTAL EARLY RETIREMENT BENEFIT
7-1. The benefits described in this Section 7 shall apply to all persons
described in subsection 6-1.
7-2. The supplemental pension due under Sections 2, 3, 4, 5 and 6 to each
participant described in subsection 7-1 shall be reduced as provided in
subsections 5-3 and 5-6 of the Annuity Plan for each month by which its
commencement date precedes the last day of the month in which the participant
will attain age 60. No reduction will be made for the period between the last
day of the months the participant will attain age 60 and age 62.
7-3. Each participant described in subsection 7-1 shall receive a monthly
supplemental pension under this Supplemental Plan equal to any reduction made in
such participant's Annuity Plan pension under subsections 5-3 or 5-6 of the
Annuity Plan for the period between the last day of the months the participant
will attain age 60 and age 62.
SECTION 8
ERISA STOCK PLAN SUPPLEMENTAL BENEFIT
8-1. This Section 8 shall apply to any employee who participates in the
Stock Plan at any time during the period
<PAGE>
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commencing January l, 1984 and ending December 31, 1986 and shall apply only
to supplemental pay conversion contributions made by such participant during
such period.
8-2. All "supplemental pay conversion" contributions as defined in the
Stock Plan elected by participants in that plan in excess of the limits imposed
on each such participant by Section 415, Internal Revenue Code, (the
"supplemental contributions") shall not be paid over to the Abbott Laboratories
Stock Retirement Trust (the "Stock Trust"), but shall be retained by the
participant's employer and credited by Abbott to bookkeeping accounts maintained
for each such participant corresponding to the investment alternatives available
under the Stock Plan (the "bookkeeping accounts").
8-3. Each participant's supplemental contributions shall be allocated
among his or her bookkeeping accounts in the same proportions as the
participant's supplemental pay conversion contributions are allocated among the
investment alternatives available under the Stock Plan.
8-4. Each participant's supplemental contributions allocated to his or her
bookkeeping account for Abbott common shares shall be credited with the same
dividends and appreciation such contributions would have earned had they been
deposited in the Stock Trust and
<PAGE>
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invested solely in Abbott common shares. Each participant's supplemental
contributions allocated to his or her bookkeeping accounts for other
investment alternatives shall be credited with the same rate of return such
contributions would have earned had they been deposited in the Stock Trust
and invested solely in such investment alternative.
8-5. The amounts credited to each participant's bookkeeping accounts shall
be distributed to such participant or his or her beneficiary in the manner
described in subsection 9-2 or 9-3.
8-6. Each distribution from a participant's bookkeeping account for Abbott
common shares shall be increased by an amount which, after provision for any
federal income tax applicable to such amount, will equal the difference between
the then applicable maximum ordinary income and long-term capital gain federal
income tax rates applied to that portion of the distribution which exceeds the
sum of the participant's supplemental contributions allocated to that account
and the imputed dividends thereon.
SECTION 9
MISCELLANEOUS
9-1. For purposes of this Supplemental Plan, the term "Management Incentive
Plan" shall mean the Abbott Laboratories 1971 Management Incentive Plan, the
Abbott Laboratories 1981 Management Incentive Plan and all successor plans to
those plans.
<PAGE>
- 14 -
9-2. The supplemental pensions described in Sections 2, 3, 4, 5, 6 and 7
shall be paid to the participant or his or her beneficiary based on the
particular pension option elected by the participant, in the same manner, at the
same time, for the same period and on the same terms and conditions as the
pension payable to the participant or his beneficiary under the Annuity Plan.
In the event a participant is paid his or her pension under the Annuity Plan in
a lump sum, any supplemental pension due under Sections 2, 3, 4, 5, 6 or 7 shall
likewise be paid in a lump sum. All amounts credited to a participant under
Section 8 shall be distributed to the participant or his or her beneficiary in
the same manner, at the same time and on the same terms and conditions as the
distribution of the participant's interest in the Stock Trust. Notwithstanding
the foregoing provisions of this subsection 9-2: (a) if the present value of the
vested supplemental pensions described in Sections 2, 3, 4, 5, 6 and 7 of a
participant who is actively employed by Abbott exceeds $100,000, then payment of
such pensions shall be made to the participant under Section 10 below; and (b)
the amount credited to a participant under Section 8 shall be paid to the
participant under Section 11 below; and (c) if the monthly vested supplemental
pensions, expressed as a straight life annuity, due a participant or his or her
beneficiary under Sections 2, 3, 4,
<PAGE>
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5, 6 and 7 do not exceed an aggregate of One Hundred Fifty Dollars ($150.00)
as of the commencement date of the pension payable such participant or his or
her beneficiary under the Annuity Plan, and payment of such supplemental
pension has not previously been made under Section 10, the present value of
such supplemental pensions shall be paid such participant or beneficiary in a
lump-sum.
9-3. Notwithstanding any other provisions of this Supplemental Plan, if
employment of any participant with Abbott and its subsidiaries and affiliates
should terminate for any reason within five (5) years after the date of a Change
in Control:
(a) All amounts credited to the participant under Section 8
shall be paid to the participant in a lump sum within thirty
(30) days following such termination;
(b) The present value of any supplemental pension due the
participant under Section 2 (whether or not then payable)
shall be paid to the participant in a lump sum within thirty
(30) days following such termination; and
(c) The present value of any supplemental pension due the
participant under Sections 3 or 4 (whether or not then
payable) shall be paid to the participant in a lump sum
within thirty (30) days following such termination.
The supplemental pension described in paragraph (b) shall be computed using as
the applicable limit under Section 415, Internal Revenue Code, such limit as is
in effect on the termination date and based on the assumption that the
participant will receive his or her
<PAGE>
- 16 -
Annuity Plan pension in the form of a straight life annuity with no ancillary
benefits. The present values of the supplemental pensions described in
paragraphs (b) and (c) shall be computed as of the date of payment by using
an interest rate equal to the Pension Benefit Guaranty Corporation interest
rate applicable to an immediate annuity, as in effect on the date of payment.
9-4. For purposes of subsection 9-3, a "Change in Control" shall be deemed
to have occurred on the earliest of the following dates:
(a) The date any entity or person (including a "group" as
defined in Section 13(d)(3) of the Securities Exchange Act
of 1934 (the "Exchange Act")) shall have become the
beneficial owner of, or shall have obtained voting control
over thirty percent (30%) or more of the outstanding common
shares of the Company;
(b) The date the shareholders of the Company approve a
definitive agreement (A) to merge or consolidate the Company
with or into another corporation, in which the Company is
not the continuing or surviving corporation or pursuant to
which any common shares of the Company would be converted
into cash, securities or other property of another
corporation, other than a merger of the Company in which
holders of common shares immediately prior to the merger
have the same proportionate ownership of common stock of the
surviving corporation immediately after the merger as
immediately before, or (B) to sell or otherwise dispose of
substantially all the assets of the Company; or
<PAGE>
- 17 -
(c) The date there shall have been a change in a majority of the
Board of Directors of the Company within a twelve (12) month
period unless the nomination for election by the Company's
shareholders of each new director was approved by the vote
of two-thirds of the directors then still in office who were
in office at the beginning of the twelve (12) month period.
9-5. The provisions of subsections 9-3, 9-4 and this subsection 9-5 may
not be amended or deleted, nor superseded by any other provision of this
Supplemental Plan, during the period beginning on the date of a Change in
Control and ending on the date five years following such Change in Control.
9-6. All benefits due under this Supplement Plan shall be paid by Abbott
and Abbott shall be reimbursed for such payments by the employee's employer. In
the event the employee is employed by more than one employer, each employer
shall reimburse Abbott in proportion to the period of time the employee was
employed by such employer, as determined by the Board of Review in its sole
discretion.
9-7. The benefits under the Supplemental Plan are not in any way subject
to the debts or other obligations of the persons entitled to benefits and may
not be voluntarily or involuntarily sold, transferred to assigned.
<PAGE>
- 18 -
9-8. Nothing contained in this Supplemental Plan shall confer on any
employee the right to be retained in the employ of Abbott or any of its
subsidiaries or affiliates.
9-9. Upon adoption of this Supplemental Plan, the prior resolutions shall
be deemed rescinded.
SECTION 10
ALTERNATE PAYMENT OF SUPPLEMENTAL PENSIONS
10-1. If, as of any December 31, the present value of the supplemental
pensions described in Sections 2, 3, 4, 5, 6 and 7 of a participant who is
actively employed by Abbott exceeds $100,000, then payment of such present value
shall be made, at the direction of the participant, by either of the following
methods: (a) current payment in cash directly to the participant; or (b)
current payment of a portion of such present value (determined as of that
December 31) in cash for the participant directly to a Grantor Trust established
by the participant, provided such trust is in a form which Abbott determines to
be substantially similar to the trust attached to this Plan as Exhibit A; and
current payment of the balance of such present value in cash directly to the
participant, provided that the payment made directly to the participant shall
approximate the aggregate federal, state and local individual income taxes
attributable to the amount paid pursuant to this subparagraph
<PAGE>
- 19 -
10-l(b). If a participant fails to make an election under this subsection
10-l, or if a participant makes an election under subparagraph 10-1(b) but
fails to establish a Grantor Trust, then payment shall be made in cash
directly to the participant. Each payment required under this subsection 10-l
shall be made as soon as practicable after the amount thereof can be
ascertained by Abbott, but in no event later than the last day of the
calendar year following the calendar year in which the present value of the
participant's supplemental pensions described in Sections 2, 3, 4, 5, 6 and 7
first exceeds $100,000.
10-2. If the present value of a participant's supplemental pensions has
been paid to the participant (including amounts paid to the participant's
Grantor Trust) pursuant to subsection 10-1, then as of each subsequent December
31, such participant shall be entitled to a payment in an amount equal to: (a)
the present value (as of that December 31) of the participant's supplemental
pensions described in Sections 2, 3, 4, 5, 6 and 7; less (b) the current value
(as of that December 31) of the payments previously made to the participant
under subsections 10-1 and 10-2; less (c) the excess, if any, of (1) the Tax
Gross Up payment made to the participant under subsection 12-1 for the
immediately preceding calendar year, over (2) the net increase in the
participant's
<PAGE>
- 20 -
federal, state and local income taxes as a result of the inclusion in his or
her taxable income of the income of the participant's Grantor Trust and any
Guaranteed Rate Payments for that year. Payments under this subsection 10-2
shall be made, at the direction of the participant, by either of the
following methods: (i) current payment in cash directly to the participant;
or (ii) current payment of a portion of such amount in cash for the
participant directly to the Grantor Trust established by the participant; and
current payment of the balance of such amount in cash directly to the
participant, provided that the payment made directly to the participant shall
approximate the aggregate federal, state and local individual income taxes
attributable to the amount paid pursuant to this subparagraph 10-2(ii). If a
participant fails to make an election under this subsection 10-2, then
payment shall be made in cash directly to the participant. Each payment
required under this subsection 10-2 shall be made as soon as practicable
after the amount thereof can be ascertained by Abbott, but in no event later
than the last day of the calendar year following the December 31 as of which
such payment becomes due. No payments shall be made under this subsection
10-2 as of any December 31 after the calendar year in which the participant
retires or otherwise terminates employment with Abbott.
<PAGE>
- 21 -
10-3. Present values shall be determined using reasonable actuarial
assumptions specified for this purpose by Abbott and consistently applied. The
"current value" of the payments previously made to a participant under
subsections 10-1 and 10-2 means the aggregate amount of such payments, with
interest thereon (at the rate specified for this purpose by Abbott) from January
1 of the year of payment.
10-4. Abbott will establish and maintain a separate Supplemental Pension
Account in the name of each participant, which shall reflect any amounts paid to
a participant (including amounts paid to a participant's Grantor Trust) pursuant
to subsections 10-1 and 10-2, and any adjustments made pursuant to subsection
10-5. The accounts established pursuant to this subsection 10-4 are for the
convenience of the administration of the Plan and no trust relationship with
respect to such accounts is intended or should be implied.
10-5. As of the end of each calendar year, Abbott shall adjust each
participant's Supplemental Pension Account as follows:
(a) FIRST, charge an amount equal to the product of: (i) any
payments made (or which would have been made) to the
participant during that year from his or her Grantor Trust
(other than distributions of earnings in excess of the Net
Interest Accrual to provide for the Tax Gross Up under
subsection 11-1); multiplied by (ii) a
<PAGE>
- 22 -
fraction, the numerator of which is the balance in the
participant's Supplemental Pension Account as of the end of the
prior calendar year and the denominator of which is the balance (or
the amount which would have been the balance) in the participant's
Grantor Trust as of that same date;
(b) NEXT, credit an amount equal to the Interest Accrual for
that year pursuant to subsection 10-6; and
(c) FINALLY, credit an amount equal to the amount that is paid
for that year to the participant (including the amount paid
to the participant's Grantor Trust) pursuant to subsections
10-1 and 10-2.
10-6. As of the end of each calendar year, a participant's Supplemental
Pension Account shall be credited with interest calculated at a reasonable rate
of interest specified for this purpose by Abbott and consistently applied. Any
amount so credited shall be referred to as a participant's "Interest Accrual."
10-7. In addition to any payment made to a participant for any calendar
year pursuant to subsection 10-1 or 10-2, Abbott shall also make a payment to a
participant's Grantor Trust (a "Guaranteed Rate Payment"), for any year in which
the net income of such trust does not equal or exceed the participant's Net
Interest Accrual for that year. A participant's "Net Interest Accrual" for a
year is an amount equal to: (a) the Interest Accrual credited to the
participant's Supplemental Pension Account for that year; less (b)
<PAGE>
- 23 -
the product of (i) the amount of such Interest Accrual, multiplied by (ii)
the aggregate of the federal, state and local individual income tax rates
(determined in accordance with subsection 12-2). The Guaranteed Rate Payment
shall equal the difference between the participant's Net Interest Accrual and
the net income of the participant's Grantor Trust for the year, and shall be
paid within 180 days of the end of that year. No payments shall be made
under this subsection 10-7 for any year following the year of the
participant's death.
10-8. If at any time after a participant's retirement or other
termination of employment with Abbott, there is no longer a balance in his or
her Grantor Trust, then such participant (or his or her surviving spouse if
such spouse is entitled to periodic payments from the Grantor Trust) shall be
entitled to a "Continuation Payment" under this subsection 10-8. The amount
of the Continuation Payment shall be equal to the amount of the supplemental
pension that would have been payable to the participant (or surviving spouse)
had no payments been made to or for the participant under subsections 10-1
and 10-2. Continuation Payments shall be made monthly, beginning with the
month following the month in which there is no longer a balance in the
participant's Grantor Trust and ending with the month of the participant's
(or
<PAGE>
- 24 -
surviving spouse's) death. Payments under this subsection
10-8 shall be made by the employers (in such proportions as Abbott shall
designate) directly from their general corporate assets. Appropriate
adjustments to the Continuation Payments shall be made in the event
distributions have been made from a participant's Grantor Trust for reasons
other than benefit payments to the participant or surviving spouse.
SECTION 11
PAYMENT OF SUPPLEMENTAL CONTRIBUTIONS
Notwithstanding any other provisions of the plan, the amount credited to a
participant under Section 8 shall be paid in cash directly to the participant on
or before December 31, 1990.
SECTION 12
TAX GROSS UP PAYMENTS
12-1. In addition to the payments provided under subsections 10-1 and
10-2, each participant shall also be entitled to a Tax Gross Up payment for each
year there is a balance in his or her Supplemental Pension Account. The "Tax
Gross Up" shall approximate: (a) the product of (i) the participant's Net
Interest Accrual for the year (calculated using the greater of the rate of
return of the Grantor Trusts or the rate specified in subsection 10-6),
multiplied by (ii) the aggregate of the federal, state and local tax rates
(determined in accordance with subsection 12-2);
<PAGE>
- 25 -
less (b) the excess, if any, of (i) the participant's Net Interest Accrual
for the year calculated using the rate of return of the Grantor Trusts; over
(ii) such Net Interest Accrual calculated using the rate specified in
subsection 10-6; plus (c) an amount equal to the product of (i) any payment
made pursuant to this subsection 12-1, multiplied by (ii) the aggregate tax
rate determined under subparagraph 12-1(a)(ii) above. Payment of the Tax
Gross Up shall be made by the employers (in such proportions as Abbott shall
designate) directly from their general corporate assets. The Tax Gross Up
for a year shall be paid to the participant as soon as practicable after the
amount of the Tax Gross Up can be ascertained by Abbott, but in no event
later than the last day of the calendar year following the calendar year to
which the Tax Gross Up relates. No payments shall be made under this
subsection 12-1 for any year following the year of the participant's death.
12-2. For purposes of Sections 10 and 12, a participant's federal income
tax rate shall be deemed to be the highest marginal rate of federal individual
income tax in effect in the calendar year in which a calculation under those
Sections is to be made, and state and local tax rates shall be deemed to be the
highest marginal rates of individual income tax in effect in the state and
locality
<PAGE>
- 26 -
of the participant's residence in the calendar year for which such a
calculation is to be made, net of any federal tax benefits.
<PAGE>
EXHIBIT A
----------------------
SUPPLEMENTAL BENEFIT
GRANTOR TRUST
THIS AGREEMENT, made this ______ day of _______________, 199_, by and
between __________________, ____________________________ (the "grantor"), and
The Northern Trust Company, located at Chicago, Illinois, as trustee (the
"trustee"),
WITNESSETH THAT:
WHEREAS, the grantor desires to establish and maintain a trust to hold
certain benefits received by the grantor under the Abbott Laboratories
Supplemental Pension Plan, as it may be amended from time to time;
NOW, THEREFORE, IT IS AGREED as follows:
ARTICLE I
INTRODUCTION
I-1. NAME. This agreement and the trust hereby evidenced (the
"trust") may be referred to as the "________________________ Supplemental
Benefit Grantor Trust."
I-2. THE TRUST FUND. The "trust fund" as at any date means all
property then held by the trustee under this agreement.
I-3. STATUS OF THE TRUST. The trust shall be irrevocable. The
trust is intended to constitute a grantor trust under Sections 671-678 of the
Internal Revenue Code, as amended, and shall be construed accordingly.
I-4. THE ADMINISTRATOR. Abbott Laboratories ("Abbott") shall
act as the "administrator" of the trust, and as such shall have certain powers,
rights and duties under this agreement as described below. Abbott will certify
to the trustee from time to time the
<PAGE>
- 2 -
person or persons authorized to act on behalf of Abbott as the administrator.
The trustee may rely on the latest certificate received without further
inquiry or verification.
I-5. ACCEPTANCE. The trustee accepts the duties and obligations
of the "trustee" hereunder, agrees to accept funds delivered to it by the
grantor or the administrator, and agrees to hold such funds (and any proceeds
from the investment of such funds) in trust in accordance with this agreement.
<PAGE>
- 3 -
ARTICLE II
DISTRIBUTION OF THE TRUST FUND
II-1. SEPARATE ACCOUNTS. The administrator shall maintain two
separate accounts under the trust, a "supplemental pension account" and a
"supplemental contribution account." Funds delivered to the trustee shall be
allocated between the accounts as directed by the administrator. As of the end
of each calendar year, the administrator shall charge each account with all
distributions made from such account during that year; and credit each account
with its share of trust income and realized gains and charge each account with
its share of trust expenses and realized losses for the year. The trustee shall
not be required to make any separate investment of the trust fund for the
accounts, and may administer and invest all funds delivered to it under the
trust as one trust fund.
II-2. DISTRIBUTIONS PRIOR TO THE GRANTOR'S DEATH. Principal and
accumulated income shall not be distributed from the trust prior to the
grantor's retirement or other termination of employment with Abbott or a
subsidiary of Abbott (the grantor's "settlement date"); provided that, each year
the administrator may direct the trustee to distribute to the grantor a portion
of the income of the trust fund for that year, with the balance of such income
to be accumulated in the trust. The administrator shall inform the trustee of
the grantor's settlement date. Thereafter, the trustee shall distribute the
amounts from time to time credited to the supplemental pension account to the
grantor, if then living, in the same manner, at the same time and over the same
period as the pension payable to the grantor under Abbott Laboratories Annuity
Retirement Plan; and the trustee shall distribute the amounts from time to time
credited to the supplemental contribution account to the grantor, if then
living, in the same manner, at the same time and over the same period as the
distribution of the grantor's benefits from Abbott Laboratories Stock Retirement
Plan.
II-3. DISTRIBUTIONS AFTER THE GRANTOR'S DEATH. On the death of
the grantor, the entire principal of the trust fund and all accrued or
undistributed income thereof shall be distributed in a lump sum to or for the
benefit of such one or more persons designated by the grantor in a beneficiary
designation provided by the administrator. If the grantor fails to designate a
beneficiary as provided above, then on the grantor's death, the trustee shall
<PAGE>
- 4 -
distribute the balance of the trust fund to the executor or administrator of the
grantor's estate.
II-4. FACILITY OF PAYMENT. When a person entitled to a distribution
hereunder is under legal disability, or, in the trustee's opinion, is in any way
incapacitated so as to be unable to manage his or her financial affairs, the
trustee may make such distribution to such person's legal representative, or to
a relative or friend of such person for such person's benefit. Any distribution
made in accordance with the preceding sentence shall be a full and complete
discharge of any liability for such distribution hereunder.
II-5. PERPETUITIES. Notwithstanding any other provisions of
this agreement, on the day next preceding the end of 21 years after the death of
the last to die of the grantor and the grantor's descendants living on the date
of this instrument, the trustee shall immediately distribute any remaining
balance in the trust to the beneficiaries then entitled to distributions
hereunder.
ARTICLE III
MANAGEMENT OF THE TRUST FUND
III-1. GENERAL POWERS. The trustee shall, with respect to the
trust fund, have the following powers, rights and duties in addition to those
provided elsewhere in this agreement or by law:
(a) Subject to the limitations of subparagraph (b) next below,
to sell, contract to sell, purchase, grant or exercise
options to purchase, and otherwise deal with all assets of
the trust fund, in such way, for such considerations, and on
such terms and conditions as the trustee decides.
(b) To retain in cash such amounts as the trustee considers
advisable; and to invest and reinvest the balance of the
trust fund, without distinction between principal and
income, in an annuity contract or contracts issued by a
legal reserve life insurance company or in obligations of
the United States Government and its agencies or which are
backed by the full faith and credit of the United States
Government; and any such investment made or retained by the
trustee in good faith shall be proper
<PAGE>
- 5 -
despite any resulting risk or lack of diversification or
marketability.
(c) To deposit cash in any depositary (including the banking
department of the bank acting as trustee) without liability
for interest, and to invest cash in savings accounts or time
certificates of deposit bearing a reasonable rate of
interest in any such depositary.
(d) To invest, subject to the limitations of subparagraph (b)
above, in any common or commingled trust fund or funds
maintained or administered by the trustee solely for the
investment of trust funds.
(e) To borrow from anyone, with the administrator's approval,
such sum or sums from time to time as the trustee considers
desirable to carry out this trust, and to mortgage or pledge
all or part of the trust fund as security.
(f) To retain any funds or property subject to any dispute
without liability for interest and to decline to make
payment or delivery thereof until final adjudication by a
court of competent jurisdiction or until an appropriate
release is obtained.
(g) To begin, maintain or defend any litigation necessary in
connection with the administration of this trust, except
that the trustee shall not be obliged or required to do
so unless indemnified to the trustee's satisfaction.
(h) To compromise, contest, settle or abandon claims or demands.
(i) To give proxies to vote stocks and other voting securities,
to join in or oppose (alone or jointly with others) voting
trusts, mergers, consolidations, foreclosures,
reorganizations, liquidations, or other changes in the
financial structure of any corporation, and to exercise or
sell stock subscription or conversion rights.
<PAGE>
- 6 -
(j) To hold securities or other property in the name of a
nominee, in a depositary, or in any other way, with or
without disclosing the trust relationship.
(k) To divide or distribute the trust fund in undivided
interests or wholly or partly in kind.
(l) To pay any tax imposed on or with respect to the trust; to
defer making payment of any such tax if it is indemnified to
its satisfaction in the premises; and to require before
making any payment such release or other document from any
lawful taxing authority and such indemnity from the intended
payee as the trustee considers necessary for its protection.
(m) To deal without restriction with the legal representative of
the grantor's estate or the trustee or other legal
representative of any trust created by the grantor or a
trust or estate in which a beneficiary has an interest, even
though the trustee, individually, shall be acting in such
other capacity, without liability for any loss that may
result.
(n) To appoint or remove by written instrument any bank or
corporation qualified to act as successor trustee, wherever
located, as special trustee as to part or all of the trust
fund, including property as to which the trustee does not
act, and such special trustee, except as specifically
limited or provided by this or the appointing instrument,
shall have all of the rights, titles, powers, duties,
discretions and immunities of the trustee, without liability
for any action taken or omitted to be taken under this or
the appointing instrument.
(o) To appoint or remove by written instrument any bank,
wherever located, as custodian of part or all of the trust
fund, and each such custodian shall have such rights,
powers, duties and discretions as are delegated to it by the
trustee.
(p) To employ agents, attorneys, accountants or other persons,
and to delegate to them such powers as the trustee considers
desirable, and the trustee shall be
<PAGE>
- 7 -
protected in acting or refraining from acting on the advise
of persons so employed without court action.
(q) To perform any and all other acts which in the trustee's
judgment are appropriate for the proper management,
investment and distribution of the trust fund.
III-2. PRINCIPAL AND INCOME. Any income earned on the trust
fund which is not distributed as provided in Article II shall be accumulated and
from time to time added to the principal of the trust. The grantor's interest
in the trust shall include all assets or other property held by the trustee
hereunder, including principal and accumulated income.
III-3. ANNUAL STATEMENTS. Periodically, but at least within a
reasonable time after the close of each calendar year, the trustee shall prepare
and deliver to the administrator and to the grantor, if then living, otherwise
to each beneficiary then entitled to distributions under this agreement, a
statement (or series of statements) setting forth (or which taken together set
forth) all investments, receipts, disbursements and other transactions effected
by the trustee during the calendar year; and showing the trust fund and the
value thereof at the end of the year.
III-4. COMPENSATION AND EXPENSES. All reasonable costs, charges
and expenses incurred in the administration of this trust, including
compensation to the trustee, any compensation to agents, attorneys, accountants
and other persons employed by the trustee, and expenses incurred in connection
with the sale, investment and reinvestment of the trust fund shall be paid from
the trust fund.
ARTICLE IV
GENERAL PROVISIONS
IV-1. INTERESTS NOT TRANSFERABLE. The interests of the grantor
or other persons entitled to distributions hereunder are not subject to their
debts or other obligations and may not be voluntarily or involuntarily sold,
transferred, alienated, assigned or encumbered.
<PAGE>
- 8 -
IV-2. DISAGREEMENT AS TO ACTS. If there is a disagreement
between the trustee and anyone as to any act or transaction reported in any
accounting, the trustee shall have the right to a settlement of its account by
any proper court.
IV-3. TRUSTEE'S OBLIGATIONS. No power, duty or responsibility
is imposed on the trustee except as set forth in this agreement. The trustee is
not obliged to determine whether funds delivered to or distributions from the
trust are proper under the trust, or whether any tax is due or payable as a
result of any such delivery or distribution. The trustee shall be protected in
making any distribution from the trust as directed pursuant to Article II
without inquiring as to whether the distributee is entitled thereto; the trustee
shall not be liable for any distribution made in good faith without written
notice or knowledge that the distribution is not proper under the terms of this
agreement; and the trustee shall not be liable for any action taken because of
the specific direction of the administrator.
IV-4. GOOD FAITH ACTIONS. The trustee's exercise or
non-exercise of its powers and discretions in good faith shall be conclusive on
all persons. No one shall be obliged to see to the application of any money
paid or property delivered to the trustee. The certificate of the trustee that
it is acting according to this agreement will fully protect all persons dealing
with the trustee.
IV-5. WAIVER OF NOTICE. Any notice required under this
agreement may be waived by the person entitled to such notice.
IV-6. CONTROLLING LAW. The laws of the State of Illinois shall
govern the interpretation and validity of the provisions of this agreement and
all questions relating to the management, administration, investment and
distribution of the trust hereby created.
IV-7. SUCCESSORS. This agreement shall be binding on all
persons entitled to distributions hereunder and their respective heirs and legal
representatives, and on the trustee and its successors.
ARTICLE V
CHANGES IN TRUSTEE
<PAGE>
- 9 -
V-1. RESIGNATION OR REMOVAL OF TRUSTEE. The trustee may resign
at any time by giving thirty days' advance written notice to the administrator
and the grantor. The administrator may remove a trustee by written notice to
the trustee and the grantor.
V-2. APPOINTMENT OF SUCCESSOR TRUSTEE. The administrator shall
fill any vacancy in the office of trustee as soon as practicable by written
notice to the successor trustee; and shall give prompt written notice thereof to
the grantor, if then living, otherwise to each beneficiary then entitled to
payments or distributions under this agreement. A successor trustee shall be a
bank (as defined in Section 581 of the Internal Revenue Code, as amended).
V-3. DUTIES OF RESIGNING OR REMOVED TRUSTEE AND OF SUCCESSOR
TRUSTEE. A trustee that resigns or is removed shall furnish promptly to the
administrator and the successor trustee an account of its administration of the
trust from the date of its last account. Each successor trustee shall succeed
to the title to the trust fund vested in its predecessor without the signing or
filing of any instrument, but each predecessor trustee shall execute all
documents and do all acts necessary to vest such title of record in the
successor trustee. Each successor trustee shall have all the powers conferred
by this agreement as if originally named trustee. No successor trustee shall be
personally liable for any act or failure to act of a predecessor trustee. With
the approval of the administrator, a successor trustee may accept the account
furnished and the property delivered by a predecessor trustee without incurring
any liability for so doing, and such acceptance will be complete discharge to
the predecessor trustee.
ARTICLE VI
AMENDMENT AND TERMINATION
VI-1. AMENDMENT. With the consent of the administrator, this
trust may be amended from time to time by the grantor, if then living, otherwise
by a majority of the beneficiaries then entitled to payments or distributions
hereunder, except as follows:
(a) The duties and liabilities of the trustee cannot be
changed substantially without its consent.
<PAGE>
- 10 -
(b) This trust may not be amended so as to make the trust
revocable.
VI-2. TERMINATION. This trust shall not terminate, and all
rights, titles, powers, duties, discretions and immunities imposed on or
reserved to the trustee, the administrator, the grantor and the beneficiaries
shall continue in effect, until all assets of the trust have been distributed by
the trustee as provided in Article II.
<PAGE>
- 11 -
IN WITNESS WHEREOF, the grantor and the trustee have executed this
agreement as of the day and year first above written.
____________________________________
Grantor
________________________, as Trustee
By _________________________________
Its ______________________________
<PAGE>
EXHIBIT 11
ABBOTT LABORATORIES AND SUBSIDIARIES
CALCULATION OF FULLY DILUTED EARNINGS PER SHARE
(Dollars and Shares in Millions Except Per Share Amounts)
<TABLE>
<CAPTION>
Year Ended December 31
---------------------------------
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
1. Net earnings $ 1,688.7 $ 1,516.7 $ 1,399.1
--------- --------- ---------
2. Average number of shares outstanding
during the year 795.4 812.2 829.0
--------- --------- ---------
3. Earnings per share based upon average
outstanding shares (1 divided by 2) $ 2.12 $ 1.87 $ 1.69
--------- --------- ---------
--------- --------- ---------
4. Fully diluted earnings per share:
a. Stock options granted and outstanding
for which the market price at
quarter-end exceeds the option price 29.4 17.4 18.7
--------- --------- ---------
--------- --------- ---------
b. Aggregate proceeds to the Company
from the exercise of options in 4.a. $ 816.9 $ 317.4 $ 297.0
--------- --------- ---------
--------- --------- ---------
c. Market price of the Company's common
stock at quarter-end $ 41.625 $ 32.625 $ 29.625
--------- --------- ---------
--------- --------- ---------
d. Shares which could be repurchased
under the treasury stock
method (4.b. divided by 4.c.) 19.6 9.7 10.0
--------- --------- ---------
--------- --------- ---------
e. Addition to average outstanding
shares (4.a. - 4.d.) 9.8 7.7 8.7
--------- --------- ---------
--------- --------- ---------
f. Shares for fully diluted earnings
per share calculation (2. + 4.e.) 805.2 819.9 837.7
--------- --------- ---------
--------- --------- ---------
g. Fully diluted earnings per share
(1. divided by 4.f.) $ 2.10 $ 1.85 $ 1.67
--------- --------- ---------
--------- --------- ---------
</TABLE>
<PAGE>
EXHIBIT 12
ABBOTT LABORATORIES
CALCULATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Unaudited)
(Millions of Dollars Except Ratios)
<TABLE>
<CAPTION>
Year Ended December 31
------------------------------------------
1995 1994 1993 1992 1991
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net Earnings................................ $1,689 $1,517 $1,399 $1,239 $1,089
Add (deduct):
Income Taxes................................ 706 650 544 500 456
Capitalized interest cost, net of
amortization.............................. (7) (7) (6) (14) (10)
Equity in earnings of 20%-49% owned
companies, less dividends received........ 2 ... (1) ... (9)
Minority interest........................... 18 12 13 7 3
------ ------ ------ ------ ------
Net earnings as adjusted.................... $2,408 $2,172 $1,949 $1,732 $1,529
------ ------ ------ ------ ------
Fixed Charges:
Interest on long-term and
short-term debt........................... $ 70 $ 50 $ 54 $ 53 $ 64
Capitalized interest cost................... 19 18 16 24 18
Rental expense representative of an
interest factor........................... 26 26 26 25 20
------ ------ ------ ------ ------
Total Fixed Charges......................... 115 94 96 102 102
------ ------ ------ ------ ------
Total adjusted earnings available for
payment of fixed charges.................. $2,523 $2,266 $2,045 $1,834 $1,631
------ ------ ------ ------ ------
------ ------ ------ ------ ------
Ratio of earnings to fixed charges.......... 21.9 24.1 21.3 18.0 16.0
------ ------ ------ ------ ------
------ ------ ------ ------ ------
</TABLE>
NOTE: For the purpose of calculating this ratio, (i) earnings have been
calculated by adjusting net earnings for taxes on earnings; interest expense;
capitalized interest cost, net of amortization; minority interest; and the
portion of rentals representative of the interest factor, (ii) the Company
considers one-third of rental expense to be the amount representing return on
capital, and (iii) fixed charges comprise total interest expense, including
capitalized interest and such portion of rentals.
<PAGE>
Exhibit 13
The portions of the Abbott Laboratories Annual Report for the year ended
December 31, 1995 captioned Financial Review, Consolidated Balance Sheet,
Consolidated Statement of Earnings, Consolidated Statement of Cash Flows,
Consolidated Statement of Shareholders' Investment, Notes to Consolidated
Financial Statements, Report of Independent Public Accountants, and the
applicable portions of the section captioned Summary of Financial Data for the
Years 1991 through 1995.
Abbott Laboratories and Subsidiaries
CONSOLIDATED BALANCE SHEET
(Dollars in Thousands)
ASSETS
<TABLE>
<CAPTION>
December 31
----------------------------------------
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Current Assets:
Cash and cash equivalents $ 281,197 $ 290,272 $ 300,676
Investment securities 34,500 25,056 78,149
Trade receivables, less allowances of -
1995: $157,990; 1994: $128,929; 1993: $116,925 1,563,038 1,468,519 1,336,222
Inventories -
Finished products 560,637 514,715 476,548
Work in process 238,943 218,643 216,493
Materials 311,361 284,833 247,492
---------- ---------- ----------
Total inventories 1,110,941 1,018,191 940,533
Prepaid income taxes 651,436 549,091 458,026
Other prepaid expenses and receivables 585,599 525,199 471,929
---------- ---------- ----------
Total Current Assets 4,226,711 3,876,328 3,585,535
---------- ---------- ----------
Investment Securities Maturing after One Year 422,547 316,195 221,815
---------- ---------- ----------
Property and Equipment, at Cost:
Land 152,401 145,634 137,636
Buildings 1,531,202 1,349,668 1,261,620
Equipment 5,518,210 4,764,296 4,169,279
Construction in progress 560,629 794,006 652,611
---------- ---------- ----------
7,762,442 7,053,604 6,221,146
Less: accumulated depreciation
and amortization 3,512,904 3,132,754 2,710,155
---------- ---------- ----------
Net Property and Equipment 4,249,538 3,920,850 3,510,991
Deferred Charges and Other Assets 513,784 410,351 370,228
---------- ---------- ----------
$9,412,580 $8,523,724 $7,688,569
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of this statement.
<PAGE>
Abbott Laboratories and Subsidiaries
CONSOLIDATED BALANCE SHEET
(Dollars in Thousands)
LIABILITIES AND SHAREHOLDERS' INVESTMENT
<TABLE>
<CAPTION>
December 31
----------------------------------------
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Current Liabilities:
Short-term borrowings and current portion of
long-term debt. . . . . . . . . . . . . . . . . $ 1,049,863 $ 772,503 $ 843,594
Trade accounts payable . . . . . . . . . . . . . . 755,921 671,100 638,509
Salaries, wages and commissions. . . . . . . . . . 286,186 270,539 215,432
Other accrued liabilities. . . . . . . . . . . . . 1,217,016 1,140,154 933,049
Dividends payable. . . . . . . . . . . . . . . . . 165,354 152,515 139,600
Income taxes payable . . . . . . . . . . . . . . . 315,974 469,055 324,749
---------- ---------- ----------
Total Current Liabilities . . . . . . . . . . . 3,790,314 3,475,866 3,094,933
---------- ---------- ----------
Long-Term Debt . . . . . . . . . . . . . . . . . . . 435,198 287,091 306,840
---------- ---------- ----------
Other Liabilities and Deferrals:
Deferred income taxes. . . . . . . . . . . . . . . 67,993 55,597 51,383
Other. . . . . . . . . . . . . . . . . . . . . . . 722,228 655,770 560,484
---------- ---------- ----------
Total Other Liabilities and Deferrals. . . . . . . 790,221 711,367 611,867
---------- ---------- ----------
Shareholders' Investment:
Preferred shares, one dollar par value
Authorized - 1,000,000 shares, none issued . . . --- --- ---
Common shares, without par value
Authorized - 1,200,000,000 shares
Issued at stated capital amount -
Shares: 1995: 797,021,211; 1994: 813,046,602;
1993: 830,941,614 . . . . . . . . . . . . . . . 581,562 505,170 469,828
Earnings employed in the business. . . . . . . . . . 3,926,917 3,652,434 3,364,952
Cumulative translation adjustments . . . . . . . . . (55,646) (51,124) (100,716)
---------- ---------- ----------
4,452,833 4,106,480 3,734,064
Less:
Common shares held in treasury, at cost -
Shares: 1995: 9,714,379; 1994: 9,766,880;
1993: 9,811,930. . . . . . . . . . . . . . . . . . 51,268 51,545 51,783
Unearned compensation - restricted stock awards. . . 4,718 5,535 7,352
---------- ---------- ----------
Total Shareholders' Investment . . . . . . . . . . 4,396,847 4,049,400 3,674,929
---------- ---------- ----------
$9,412,580 $8,523,724 $7,688,569
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
<PAGE>
Abbott Laboratories and Subsidiaries
CONSOLIDATED STATEMENT OF EARNINGS
(Dollars in Thousands Except Per Share Data)
<TABLE>
<CAPTION>
Year Ended December 31
-----------------------------------------
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Net Sales. . . . . . . . . . . . . . . . . . . . . . $10,012,194 $ 9,156,009 $ 8,407,843
----------- ----------- -----------
Cost of products sold. . . . . . . . . . . . . . . . 4,325,805 3,993,831 3,684,727
Research and development . . . . . . . . . . . . . . 1,072,745 963,516 880,974
Selling, general and administrative. . . . . . . . . 2,230,740 2,054,455 1,988,176
Provision for product withdrawal . . . . . . . . . . --- --- (70,000)
----------- ----------- -----------
Total Operating Cost and Expenses. . . . . . . . . 7,629,290 7,011,802 6,483,877
----------- ----------- -----------
Operating Earnings . . . . . . . . . . . . . . . . . 2,382,904 2,144,207 1,923,966
Interest expense . . . . . . . . . . . . . . . . . . 69,532 49,722 54,283
Interest income. . . . . . . . . . . . . . . . . . . (51,783) (36,907) (37,821)
Other (income) expense, net. . . . . . . . . . . . . (30,164) (35,298) (35,726)
----------- ----------- -----------
Earnings Before Taxes. . . . . . . . . . . . . . . 2,395,319 2,166,690 1,943,230
Taxes on earnings. . . . . . . . . . . . . . . . . . 706,619 650,007 544,104
----------- ----------- -----------
Net Earnings . . . . . . . . . . . . . . . . . . . . $ 1,688,700 $ 1,516,683 $ 1,399,126
----------- ----------- -----------
----------- ----------- -----------
Earnings Per Common Share. . . . . . . . . . . . . . $2.12 $1.87 $1.69
----------- ----------- -----------
----------- ----------- -----------
Average Number of Common Shares Outstanding. . . . . 795,362,000 812,236,000 828,988,000
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of this statement.
<PAGE>
Abbott Laboratories and Subsidiaries
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in Thousands)
<TABLE>
<CAPTION>
Year Ended December 31
----------------------------------------
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Cash Flow From (Used in) Operating Activities:
Net earnings . . . . . . . . . . . . . . . . . . . $1,688,700 $1,516,683 $1,399,126
Adjustments to reconcile net earnings to
net cash from operating activities -
Depreciation and amortization. . . . . . . . . . . 566,423 510,504 484,081
Exchange (gains) losses, net . . . . . . . . . . . 5,035 8,600 41,795
Investing and financing (gains) losses, net. . . . 43,020 21,834 (6,038)
Trade receivables. . . . . . . . . . . . . . . . . (91,349) (109,623) (192,451)
Inventories. . . . . . . . . . . . . . . . . . . . (93,184) (52,293) (91,490)
Prepaid expenses and other assets. . . . . . . . . (255,764) (183,705) (93,759)
Trade accounts payable and other liabilities . . . 256,549 360,216 96,095
Income taxes payable . . . . . . . . . . . . . . . (153,849) 139,921 279,550
Provision for product withdrawal . . . . . . . . . --- --- (70,000)
---------- ---------- ----------
Net Cash From Operating Activities. . . . . . . 1,965,581 2,212,137 1,846,909
---------- ---------- ----------
Cash Flow From (Used in) Investing Activities:
Acquisitions of property, equipment and
businesses . . . . . . . . . . . . . . . . . . . (947,021) (929,488) (952,732)
Purchases of investment securities . . . . . . . . (183,443) (226,728) (335,915)
Proceeds from sales of investment securities . . . 67,130 185,268 447,983
Other. . . . . . . . . . . . . . . . . . . . . . . 25,611 26,863 46,826
---------- ---------- ----------
Net Cash Used in Investing Activities. . . . . . (1,037,723) (944,085) (793,838)
---------- ---------- ----------
Cash Flow From (Used in) Financing Activities:
Proceeds from borrowings with original
maturities of more than three months . . . . . . 353,317 107,868 289,429
Repayments of borrowings with original
maturities of more than three months . . . . . . (221,506) (89,977) (197,090)
Proceeds from (repayments of) other borrowings . . 282,754 (115,725) 30,124
Purchases of common shares . . . . . . . . . . . . (771,411) (615,946) (465,822)
Proceeds from stock options exercised. . . . . . . 76,540 36,214 27,536
Dividends paid . . . . . . . . . . . . . . . . . . (653,567) (602,356) (548,044)
---------- ---------- ----------
Net Cash Used in Financing Activities. . . . . . (933,873) (1,279,922) (863,867)
---------- ---------- ----------
</TABLE>
<PAGE>
Abbott Laboratories and Subsidiaries
CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)
(Dollars in Thousands)
<TABLE>
<CAPTION>
Year Ended December 31
---------------------------------------
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Effect of exchange rate changes on cash and
cash equivalents . . . . . . . . . . . . . . . . . (3,060) 1,466 (5,104)
--------- --------- ---------
Net Increase (Decrease) in Cash and
Cash Equivalents . . . . . . . . . . . . . . . . . (9,075) (10,404) 184,100
Cash and Cash Equivalents, Beginning of Year . . . . 290,272 300,676 116,576
--------- --------- ---------
Cash and Cash Equivalents, End of Year . . . . . . . $ 281,197 $ 290,272 $ 300,676
--------- --------- ---------
--------- --------- ---------
Supplemental Cash Flow Information:
Income taxes paid. . . . . . . . . . . . . . . . . $ 954,861 $ 571,215 $ 332,834
Interest paid. . . . . . . . . . . . . . . . . . . 67,917 50,157 52,477
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of this statement.
<PAGE>
Abbott Laboratories and Subsidiaries
CONSOLIDATED STATEMENT OF SHAREHOLDERS' INVESTMENT
(Dollars in Thousands Except Per Share Data)
<TABLE>
<CAPTION>
Year Ended December 31
---------------------------------------
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Common Shares:
Issued at Beginning of Year
Shares: 1995: 813,046,602; 1994: 830,941,614;
1993: 846,017,815. . . . . . . . . . . . . . . . $ 505,170 $ 469,828 $ 442,390
Issued under incentive stock programs
Shares: 1995: 4,332,070; 1994: 3,247,207;
1993: 2,602,920. . . . . . . . . . . . . . . . . 70,842 38,638 29,619
Tax benefit from sale of option shares and
vesting of restricted stock awards
(no share effect). . . . . . . . . . . . . . . . 19,303 9,800 8,300
Retired - Shares: 1995: 20,357,461;
1994: 21,142,219; 1993: 17,679,121 . . . . . . . (13,753) (13,096) (10,481)
--------- --------- ---------
Issued at End of Year
Shares: 1995: 797,021,211; 1994: 813,046,602;
1993: 830,941,614. . . . . . . . . . . . . . . . $ 581,562 $ 505,170 $ 469,828
--------- --------- ---------
--------- --------- ---------
Earnings Employed in the Business:
Balance at Beginning of Year . . . . . . . . . . . $3,652,434 $3,364,952 $2,990,689
Net earnings . . . . . . . . . . . . . . . . . . . 1,688,700 1,516,683 1,399,126
Unrealized gain on marketable
equity securities, net of income taxes . . . . . 21,600 - -
Cash dividends declared on common shares
(per share-1995: $.84; 1994: $.76; 1993: $.68) . (666,406) (615,271) (562,344)
Cost of common shares retired in excess
of stated capital amount . . . . . . . . . . . . (771,263) (615,074) (465,724)
Cost of treasury shares issued below market
value of restricted stock awards . . . . . . . . 1,852 1,144 3,205
--------- --------- ---------
Balance at End of Year . . . . . . . . . . . . . . $3,926,917 $3,652,434 $3,364,952
--------- --------- ---------
--------- --------- ---------
Cumulative Translation Adjustments:
Balance at Beginning of Year . . . . . . . . . . . $ (51,124) $ (100,716) $ (23,131)
Translation adjustments. . . . . . . . . . . . . . (4,522) 49,592 (77,585)
--------- --------- ---------
Balance at End of Year . . . . . . . . . . . . . . $ (55,646) $ (51,124) $ (100,716)
--------- --------- ---------
--------- --------- ---------
</TABLE>
<PAGE>
Abbott Laboratories and Subsidiaries
CONSOLIDATED STATEMENT OF SHAREHOLDERS' INVESTMENT (CONTINUED)
(Dollars in Thousands Except Per Share Data)
<TABLE>
<CAPTION>
Year Ended December 31
---------------------------------------
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Common Shares Held in Treasury:
Balance at Beginning of Year
Shares: 1995: 9,766,880; 1994: 9,811,930;
1993: 9,965,386 . . . . . . . . . . . . . . . $ 51,545 $ 51,783 $ 52,593
Issued under incentive stock programs
Shares: 1995: 52,501; 1994: 45,050;
1993: 153,456. . . . . . . . . . . . . . . . . . (277) (238) (810)
--------- --------- ---------
Balance at End of Year
Shares: 1995: 9,714,379; 1994: 9,766,880;
1993: 9,811,930. . . . . . . . . . . . . . . . . $ 51,268 $ 51,545 $ 51,783
--------- --------- ---------
--------- --------- ---------
Unearned Compensation - Restricted Stock Awards:
Balance at Beginning of Year . . . . . . . . . . . $ 5,535 $ 7,352 $ 9,714
Issued at market value - Shares: 1995: 45,000;
1994: 35,000; 1993: 144,000 . . . . . . . . . . 1,829 1,094 3,771
Lapses - Shares: 1995: 4,800; 1994: 21,600;
1993: 42,800 . . . . . . . . . . . . . . . . . . (137) (575) (887)
Amortization . . . . . . . . . . . . . . . . . . . (2,509) (2,336) (5,246)
--------- --------- ---------
Balance at End of Year . . . . . . . . . . . . . . . $ 4,718 $ 5,535 $ 7,352
--------- --------- ---------
--------- --------- ---------
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of this statement.
<PAGE>
Abbott Laboratories and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Summary of Significant Accounting Policies
BASIS OF CONSOLIDATION
The consolidated financial statements include the accounts of the parent
company and subsidiaries, after elimination of intercompany transactions. The
accounts of foreign subsidiaries are consolidated as of November 30.
USE OF ESTIMATES
The financial statements have been prepared in accordance with generally
accepted accounting principles and necessarily include amounts based on
estimates and assumptions by management. Actual results could differ from those
amounts.
CASH AND CASH EQUIVALENTS
Cash equivalents consist of time deposits and certificates of deposit with
original maturities of three months or less.
INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out basis) or
market. Cost includes material and conversion costs.
PROPERTY AND EQUIPMENT
Depreciation and amortization are provided on the straight-line method over
the estimated useful lives of the assets.
PRODUCT LIABILITY
Provisions are made for the portions of probable losses that are not
covered by product liability insurance.
TRANSLATION ADJUSTMENTS
For foreign operations in highly inflationary economies, translation gains
and losses are included in other (income) expense, net. For remaining foreign
operations, translation adjustments are included as a component of shareholders'
investment.
EARNINGS PER COMMON SHARE
Earnings per common share amounts are computed using the weighted average
number of common shares outstanding.
<PAGE>
REVENUE RECOGNITION
The Company recognizes revenue from product sales upon shipment to
customers. Provisions for discounts and rebates to customers, and returns and
other adjustments are provided for in the same period the related sales are
recorded.
<PAGE>
Abbott Laboratories and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Note 2 - Taxes on Earnings
(dollars in thousands)
Deferred income taxes reflect the tax consequences on future years of
temporary differences between the tax bases of assets and liabilities and their
financial reporting amounts. U.S. income taxes are provided on those earnings
of foreign subsidiaries and subsidiaries operating in Puerto Rico under tax
incentive grants, which are intended to be remitted to the parent company.
Undistributed earnings reinvested indefinitely in foreign subsidiaries as
working capital and plant and equipment aggregated $1,053,000 at December 31,
1995. Deferred income taxes not provided on these earnings would be
approximately $167,000.
Earnings before taxes, and the related provisions for taxes on earnings,
are as follows:
<TABLE>
<CAPTION>
Earnings Before Taxes 1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Domestic . . . . . . . . . . . . . $1,711,188 $1,595,279 $1,480,163
Foreign. . . . . . . . . . . . . . 684,131 571,411 463,067
---------- ---------- ----------
Total. . . . . . . . . . . . . . . . $2,395,319 $2,166,690 $1,943,230
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
<TABLE>
<CAPTION>
Taxes on Earnings 1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Current:
U.S. Federal and Possessions . . $495,692 $487,977 $355,813
State. . . . . . . . . . . . . . 47,656 56,548 49,222
Foreign. . . . . . . . . . . . . 251,339 192,509 175,455
---------- ---------- ----------
Total current. . . . . . . . . . . 794,687 737,034 580,490
---------- ---------- ----------
Deferred:
Domestic . . . . . . . . . . . . (81,264) (96,679) (29,461)
Foreign. . . . . . . . . . . . . (6,332) 9,801 2,066
Enacted tax rate changes . . . . (472) (149) (8,991)
---------- ---------- ----------
Total deferred . . . . . . . . . . (88,068) (87,027) (36,386)
---------- ---------- ----------
Total. . . . . . . . . . . . . . . . $706,619 $650,007 $544,104
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
<PAGE>
Abbott Laboratories and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Differences between the effective income tax rate and the U.S. statutory
tax rate were as follows:
<TABLE>
<CAPTION>
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Statutory tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . 35.0% 35.0% 35.0%
Benefit of tax exemptions in Puerto Rico, the Dominican Republic,
Italy, Ireland, and The Netherlands . . . . . . . . . . . . . . . . (5.7) (5.1) (6.7)
State taxes, net of federal benefit. . . . . . . . . . . . . . . . . . . 1.3 1.7 1.7
All other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1.1) (1.6) (2.0)
------ ------ ------
Effective tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . 29.5% 30.0% 28.0%
------ ------ ------
------ ------ ------
</TABLE>
As of December 31, 1995, 1994, and 1993, total deferred tax assets
were $858,045, $767,857, and $632,112, respectively, and total deferred tax
liabilities were $265,388, $263,734, and $211,839, respectively. Valuation
allowances for deferred tax assets are not significant. The temporary
differences that give rise to deferred tax assets and liabilities are as
follows:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Compensation and employee benefits . . . . . . . . . . . . . . . $ 161,547 $ 157,374 $ 113,927
Trade receivable reserves. . . . . . . . . . . . . . . . . . . . . 126,209 107,320 81,293
Inventory reserves . . . . . . . . . . . . . . . . . . . . . . . . 101,835 77,787 81,201
Deferred intercompany profit . . . . . . . . . . . . . . . . . . . 97,555 78,317 72,129
State income taxes . . . . . . . . . . . . . . . . . . . . . . . . 25,602 37,394 30,715
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . (178,025) (167,773) (145,767)
Other, primarily other accruals and
reserves not currently deductible. . . . . . . . . . . . . . . . 248,720 203,075 173,145
-------- -------- --------
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 583,443 $ 493,494 $ 406,643
-------- -------- --------
-------- -------- --------
</TABLE>
<PAGE>
Abbott Laboratories and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Note 3 - Financial Instruments
The Company enters into foreign currency forward exchange contracts to
hedge intercompany loans and trade accounts payable where the functional
currency of the lending and borrowing entities are not the same. Such contracts
are also used to hedge foreign currency denominated third party trade payables
and receivables. For intercompany loans, the contracts require the Company to
sell foreign currencies, primarily Japanese yen and European currencies, in
exchange for primarily U.S. dollars. For intercompany and trade payables and
receivables, the currencies hedged are primarily the U.S. dollar, Japanese yen
and European currencies. At December 31, 1995, 1994, and 1993, the Company held
$723 million, $717 million, and $477 million, respectively, of foreign currency
forward exchange contracts. The contracts outstanding at December 31, 1995
mature in 1996. These contracts are marked to market each month. The resulting
gains or losses are reflected in income and are generally offset by losses or
gains on the exposures being hedged.
The Company purchases U.S. dollar call options as a hedge of anticipated
intercompany purchases by foreign subsidiaries whose functional currency is not
the U.S. dollar. These contracts give the Company the right, but not the
requirement, to purchase U.S. dollars in exchange for foreign currencies,
primarily Japanese yen and European currencies, at predetermined exchange rates.
At December 31, 1995, 1994, and 1993, the Company held $330 million, $370
million, and $59 million, respectively, of U.S. dollar call option contracts.
The contracts outstanding at December 31, 1995 mature in 1996. Realized and
unrealized gains and losses on contracts that qualify as hedges of anticipated
purchases by foreign subsidiaries are recognized in the same period that the
foreign currency exposure is recognized. Contracts that do not qualify for
hedge accounting are marked to market each month, and the resulting gains or
losses are reflected in income.
The Company purchases foreign currency put options as a hedge against the
effect of exchange rate fluctuations on income. These contracts give the
Company the right, but not the requirement, to sell foreign currencies,
primarily Japanese yen and European currencies, in exchange for U.S. dollars at
predetermined exchange rates. These contracts are marked to market each month.
The resulting gains or losses are reflected in income and are generally offset
by losses or gains on the exposures being hedged. There were no such contracts
outstanding at December 31, 1995, 1994, and 1993.
The Company manages its exposure to short-term interest rate changes by
entering into interest rate swap contracts which effectively convert the
floating interest rate on commercial paper borrowings to fixed rates. There
were no such contracts outstanding at December 31, 1995. At December 31, 1994
and 1993, the Company held a $200 million contract, which matured in 1995.
For 1995, the average floating rate received was 6.0% and the fixed rate paid
was 4.7%. Gains or losses are recognized in income in the same period that
the interest rate exposure is recognized.
The gross unrealized holding gains/(losses) on current investment
securities and those maturing after one year totalled $5.6 million and $(4.3)
million at December 31, 1995, respectively, and $2.5 million and $(9.2) million
at December 31, 1994, respectively.
<PAGE>
Abbott Laboratories and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The carrying values and fair values of certain of the Company's financial
instruments as of December 31 are shown in the table below. The carrying values
of all other financial instruments approximate their estimated fair values.
Fair value is the quoted market price of the instrument held or the quoted
market price of a similar instrument. The counterparties to financial
instruments consist of select major international financial institutions. The
Company does not expect any losses from nonperformance by these counterparties.
<TABLE>
<CAPTION>
(dollars in thousands)
1995 1994 1993
-----------------------------------------------------------------------------------
Carrying Fair Carrying Fair Carrying Fair
Value Value Value Value Value Value
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Current Investment
Securities $ 34,500 $ 34,596 $ 25,056 $ 25,160 $ 78,149 $ 78,319
Investment Securities
Maturing after One Year 422,547 423,745 316,195 309,362 221,815 231,879
Long-Term Debt, Including
Current Maturities (436,635) (441,791) (308,750) (276,134) (308,920) (304,038)
Foreign Currency Forward
Exchange Contracts:
In a (payable) position (2,615) (2,615) (1,564) (1,564) - -
In a receivable position 5,220 5,220 6,528 6,528 - -
In a net receivable position - - - - 7,830 7,830
Foreign Currency Option
Contracts 10,623 7,831 14,660 744 2,014 0
Interest Rate Swap Contract:
In a receivable (payable)
position - - 0 3,150 0 (2,280)
</TABLE>
<PAGE>
Abbott Laboratories and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Note 4 - Retirement Plans
(dollars in thousands)
Retirement plans consist of defined benefit, defined contribution, and medical
and dental plans.
Pension benefits for the Company's defined benefit plans generally are
based on an employee's years of service and compensation near retirement.
Certain plan benefits would vest and certain restrictions on the use of plan
assets would take effect upon a change in control of the Company.
Net pension cost for the Company's significant defined benefit plans
includes the following components:
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ---------
<S> <C> <C> <C>
Service cost - benefits earned during the year . . . $ 59,636 $ 67,768 $ 59,381
Interest cost on projected benefit obligations . . . 94,101 85,414 84,864
Return on assets . . . . . . . . . . . . . . . . . . (274,844) 915 (128,221)
Net amortization and deferral. . . . . . . . . . . . 139,491 (125,186) (729)
---------- ---------- ---------
Net pension cost . . . . . . . . . . . . . . . . . . $ 18,384 $ 28,911 $ 15,295
---------- ---------- ---------
---------- ---------- ---------
</TABLE>
The plans' funded status at December 31 was as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ---------
<S> <C> <C> <C>
Actuarial present value of benefit obligations -
Vested benefits. . . . . . . . . . . . . . . . . . $1,036,937 $799,425 $791,435
Nonvested benefits . . . . . . . . . . . . . . . . 140,232 104,120 97,985
---------- ---------- ---------
Accumulated benefit obligations. . . . . . . . . . . $1,177,169 $903,545 $889,420
---------- ---------- ---------
---------- ---------- ---------
Plans' assets at fair value, principally
listed securities. . . . . . . . . . . . . . . . . $1,600,368 $1,321,051 $1,342,541
Actuarial present value of projected
benefit obligations. . . . . . . . . . . . . . . . 1,494,348 1,147,024 1,198,768
---------- ---------- ---------
Projected benefit obligations less
than plans' assets . . . . . . . . . . . . . . . . 106,020 174,027 143,773
Unrecognized net transitional asset. . . . . . . . . (52,915) (63,866) (74,710)
Unrecognized prior service cost. . . . . . . . . . . 12,532 15,274 30,951
Unrecognized net gain. . . . . . . . . . . . . . . . (11,315) (101,139) (57,724)
---------- ---------- ---------
Net prepaid pension cost . . . . . . . . . . . . . . $ 54,322 $ 24,296 $ 42,290
---------- ---------- ---------
---------- ---------- ---------
</TABLE>
<PAGE>
Abbott Laboratories and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Assumptions used for the Company's major defined benefit plan as of December 31
include:
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Discount rate for determining obligations
and interest cost. . . . . . . . . . . . . . . . . 7 1/4% 8 1/2% 7 1/4%
Expected aggregate average long-term change
in compensation. . . . . . . . . . . . . . . . . . 4% 4% 4%
Expected long-term rate of return on assets. . . . . 9% 9% 9%
</TABLE>
The Stock Retirement Plan is the principal defined contribution plan. Company
contributions to this plan were $48,845 in 1995, $45,124 in 1994, and $41,225 in
1993, equal to 7.33 percent of dividends declared, as provided under the plan.
The Company provides certain medical and dental benefits to qualifying
domestic retirees. Net post-retirement health care cost includes the following
components:
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Service cost - benefits earned during the year . . . $21,328 $27,605 $16,823
Interest cost on accumulated post-retirement
benefit obligations. . . . . . . . . . . . . . . . 36,412 35,578 29,266
Return on assets . . . . . . . . . . . . . . . . . . (16,798) 810 (9,239)
Net amortization and deferral. . . . . . . . . . . . 11,980 (1,561) 2,393
------- ------- -------
Net post-retirement health care cost . . . . . . . . $52,922 $62,432 $39,243
------- ------- -------
------- ------- -------
</TABLE>
The plans' funded status at December 31 was as follows:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Actuarial present value of benefit obligations -
Retirees . . . . . . . . . . . . . . . . . . . . . $ 174,782 $ 164,153 $ 171,231
Fully eligible active participants . . . . . . . . 131,669 113,128 117,158
Other active participants. . . . . . . . . . . . . 250,518 186,778 162,219
-------- -------- --------
Accumulated post-retirement benefit obligations. . . 556,969 464,059 450,608
Plans' assets at fair value, principally
listed securities. . . . . . . . . . . . . . . . . 95,530 94,297 100,920
-------- -------- --------
Accumulated post-retirement benefit obligations
in excess of plans' assets . . . . . . . . . . . . (461,439) (369,762) (349,688)
Unrecognized net loss. . . . . . . . . . . . . . . . 168,307 129,477 161,692
-------- -------- --------
Accrued post-retirement health care cost . . . . . . $(293,132) $(240,285) $(187,996)
-------- -------- --------
-------- -------- --------
</TABLE>
<PAGE>
Abbott Laboratories and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The discount rate and expected long-term rate of return on assets assumptions
are identical to those used for the Company's major defined benefit plan. A
6 percent annual rate of increase in the per capita cost of covered health
care benefits was assumed for 1996. This rate is assumed to decrease to 5
percent in 1998 and remain at that level thereafter. A one-percentage-point
increase in the assumed health care cost trend rates would increase the
accumulated post-retirement benefit obligations as of December 31, 1995 by
approximately $91,800 and the total of the service and interest cost
components of net post-retirement health care cost for the year then ended by
approximately $12,900.
The Company provides certain other post-employment benefits, primarily
salary continuation plans, to qualifying domestic employees, and accrues for the
related cost over the service lives of the employees.
<PAGE>
Abbott Laboratories and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Note 5 - Investment Securities
(dollars in thousands)
The following is a summary of investment securities at December 31:
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- --------
<S> <C> <C> <C>
Current Investment Securities
Time deposits and certificates of deposit. . . . . . . . . . $ 10,000 $ 8,050 $ 32,350
Corporate debt obligations . . . . . . . . . . . . . . . . . - - 40,155
Debt obligations issued or guaranteed
by various governments or government agencies. . . . . . . 24,500 17,006 5,644
--------- --------- --------
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 34,500 $ 25,056 $ 78,149
--------- --------- --------
--------- --------- --------
</TABLE>
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- --------
<S> <C> <C> <C>
Investment Securities Maturing after One Year
Time deposits and certificates of deposit,
maturing through 2000. . . . . . . . . . . . . . . . . . . $ 161,500 $ 66,500 $ 34,500
Corporate debt obligations, maturing through 2008. . . . . . 86,728 104,696 44,703
Debt obligations issued or guaranteed
by various governments or government agencies,
maturing through 2023. . . . . . . . . . . . . . . . . . . 174,319 144,999 142,612
--------- --------- --------
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $422,547 $316,195 $221,815
--------- --------- --------
--------- --------- --------
</TABLE>
The Company generally holds investment securities until maturity. All
investment securities classified as current as of December 31, 1995 mature
before January 1, 1997.
Of the investment securities listed above, $452,445, $334,128, and
$293,888, were held at December 31, 1995, 1994, and 1993, respectively, by
subsidiaries operating in Puerto Rico under tax incentive grants expiring from
2002 through 2007. In addition, these subsidiaries held cash equivalents of
$197,600, $164,700, and $197,200 at December 31, 1995, 1994, and 1993,
respectively.
<PAGE>
Abbott Laboratories and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Note 6 - Incentive Stock Program
The 1991 Incentive Stock Program authorizes the granting of stock options,
stock appreciation rights, limited stock appreciation rights, restricted stock
awards, performance units, and foreign qualified benefits. Stock options,
limited stock appreciation rights, restricted stock awards, and foreign
qualified benefits have been granted and are currently outstanding under this
program and prior programs. The purchase price of the shares under option must
be at least 100 percent of the fair market value of the common stock on the date
of grant.
Limited stock appreciation rights have been granted to certain holders of
stock options and can be exercised, by surrendering related stock options, only
upon a change in control of the Company. At December 31, 1995, 5,238,078
options, with purchase prices from $10.62 to $41.44 per share, were subject to
limited stock appreciation rights. Upon a change in control of the Company, all
outstanding stock options become fully exercisable, and all terms and conditions
of all restricted stock awards are deemed satisfied.
At December 31, 1995, 6,524,432 shares were reserved for future grants
under the 1991 Program.
Data with respect to stock options under the 1991 Program and prior
programs are as follows:
<TABLE>
<CAPTION>
Options Outstanding
------------------------------
Shares Price per Share
---------- ----------------
<S> <C> <C>
January 1, 1995. . . . . . . . . . . 28,288,158 $ 6.31 to $33.82
Granted . . . . . . . . . . . . . 5,827,269 31.50 to 42.70
Exercised . . . . . . . . . . . . . (4,332,070) 6.31 to 33.47
Lapsed . . . . . . . . . . . . . (282,570) 23.64 to 42.70
---------- ----------------
December 31, 1995. . . . . . . . . . 29,500,787 $ 8.10 to $42.70
---------- ----------------
---------- ----------------
Exercisable at December 31, 1995 . . 18,654,652 $ 8.10 to $33.82
---------- ----------------
---------- ----------------
</TABLE>
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123 "Accounting for Stock-Based
Compensation." The Company will continue to measure compensation cost using the
intrinsic value-based method of accounting prescribed by Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees."
<PAGE>
Abbott Laboratories and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Note 7 - Debt and Lines of Credit
(dollars in thousands)
The following is a summary of long-term debt at December 31:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
5.6% debentures, due 2003. . . . . . . $200,000 $200,000 $200,000
6.8% debentures, due 2005. . . . . . . 150,000 - -
Industrial revenue bonds at various
rates of interest, averaging 5.2%
at December 31, 1995, and due at
various dates through 2023 . . . . . 81,600 82,600 82,600
Other. . . . . . . . . . . . . . . . . 3,598 4,491 24,240
-------- -------- --------
Total, net of current maturities . . . $435,198 $287,091 $306,840
-------- -------- --------
-------- -------- --------
</TABLE>
Payments required on long-term debt outstanding at December 31, 1995 are:
$1,437 in 1996, $3,269 in 1997, $2,519 in 1998, $800 in 1999, and none
in 2000.
At December 31, 1995, the Company had $400,000 of unused domestic lines of
credit which support domestic commercial paper borrowing arrangements. Related
compensating balances, which are subject to withdrawal by the Company at its
option, and commitment fees are not material.
The Company's weighted average interest rate on short-term borrowings
was 5.8%, 6.1%, and 4.1% at December 31, 1995, 1994, and 1993, respectively.
The Company may issue up to $150,000 of senior debt securities in the
future under a registration statement filed with the Securities and Exchange
Commission in 1993.
<PAGE>
Abbott Laboratories and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Note 8 - Quarterly Results (Unaudited)
(dollars in millions except per share data)
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
FIRST QUARTER
Net Sales. . . . . . . . . . . . . . . $2,524.4 $2,215.2 $2,045.6
Gross Profit . . . . . . . . . . . . . 1,435.5 1,251.0 1,112.4
Net Earnings . . . . . . . . . . . . . 417.3 366.2 345.5
Earnings Per Common Share. . . . . . . .52 .45 .41
SECOND QUARTER
Net Sales. . . . . . . . . . . . . . . $2,500.3 $2,204.1 $2,073.8
Gross Profit . . . . . . . . . . . . . 1,414.3 1,257.2 1,186.8
Net Earnings . . . . . . . . . . . . . 424.0 376.6 346.1
Earnings Per Common Share. . . . . . . .53 .46 .42
THIRD QUARTER
Net Sales. . . . . . . . . . . . . . . $2,390.8 $2,254.8 $2,060.4
Gross Profit . . . . . . . . . . . . . 1,320.5 1,239.0 1,143.4
Net Earnings . . . . . . . . . . . . . 382.0 351.3 316.2
Earnings Per Common Share. . . . . . . .48 .43 .38
FOURTH QUARTER
Net Sales. . . . . . . . . . . . . . . $2,596.7 $2,481.9 $2,228.0
Gross Profit . . . . . . . . . . . . . 1,516.1 1,415.0 1,280.5
Net Earnings . . . . . . . . . . . . . 465.4 422.6 391.3
Earnings Per Common Share. . . . . . . .59 .53 .48
</TABLE>
<PAGE>
Abbott Laboratories and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Note 9 - Litigation and Environmental Matters
The Company is involved in various claims and legal proceedings including
numerous antitrust suits and investigations in connection with the sale and
marketing of infant formula products and the pricing of prescription
pharmaceuticals. In addition, the Company has been identified as a potentially
responsible party for investigation and cleanup costs at a number of locations
in the United States and Puerto Rico under Federal remediation laws and is
voluntarily investigating potential contamination at a number of Company-owned
locations.
The matters above are discussed more fully in Item 1, Business -
Environmental Matters, and Item 3, Legal Proceedings, in the Annual Report on
Form 10-K, which is available upon request.
The Company expects that within the next year, progress in the legal
proceedings described above may cause a change in the estimated reserves
recorded by the Company. While it is not feasible to predict the outcome of
such pending claims, proceedings, investigations and remediation activities
with certainty, management is of the opinion that their ultimate disposition
should not have a material adverse effect on the Company's financial
position, cash flows, or results of operations.
Note 10 - Other Significant Events
In the first quarter 1993, the Company sold its peritoneal dialysis product
line. The gain on the sale is reported in other (income) expense, net. In the
second quarter 1993, the Company resolved various contingencies related to a
1992 product withdrawal and recorded a credit of $70 million for these items.
The Company currently owns 70% of the capital stock of a Japanese
subsidiary. Subsequent to year-end, the Company entered into an agreement
with the minority interest shareholder to purchase their 30% ownership over a
ten-year period.
<PAGE>
Abbott Laboratories and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Note 11 - Industry Segment and Geographic Area Information
(dollars in millions)
The Company's principal business is the discovery, development, manufacture, and
sale of a broad and diversified line of health care products and services. The
Company's products are generally sold directly to retailers, wholesalers,
hospitals, health care facilities, laboratories, physicians' offices and
government agencies throughout the world. These products have been classified
into the following industry segments:
PHARMACEUTICAL AND NUTRITIONAL PRODUCTS - Included are a broad line of adult and
pediatric pharmaceuticals and nutritionals, which are sold primarily on the
prescription or recommendation of physicians or other health care professionals;
consumer products; agricultural and chemical products; and bulk pharmaceuticals.
HOSPITAL AND LABORATORY PRODUCTS - Included are diagnostic systems for blood
banks, hospitals, commercial laboratories and alternate-care testing sites;
intravenous and irrigation fluids and related administration equipment; drugs
and drug delivery systems; anesthetics; critical care products; and other
medical specialty products for hospitals and alternate-care sites.
In the following tables, net sales by industry segment and geographic area
include both sales to customers, as reported in the Consolidated Statement of
Earnings, and inter-area sales (for geographic areas) at sales prices which
approximate market. Operating profit excludes corporate expenses.
<PAGE>
Abbott Laboratories and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
Industry Segments (a) 1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Net Sales
Pharmaceutical and nutritional. . . . . . . . . . $5,629 $4,951 $4,389
Hospital and laboratory . . . . . . . . . . . . . 4,383 4,205 4,019
------ ------ ------
Total. . . . . . . . . . . . . . . . . . . . . . . $10,012 $9,156 $8,408
------ ------ ------
------ ------ ------
Operating Profit
Pharmaceutical and nutritional (b). . . . . . . . $1,586 $1,385 $1,211
Hospital and laboratory (c) . . . . . . . . . . . 853 818 794
------ ------ ------
Operating Profit. . . . . . . . . . . . . . . . . 2,439 2,203 2,005
Corporate expenses, net (d) . . . . . . . . . . . 26 23 46
Interest (income) expense, net. . . . . . . . . . 18 13 16
------ ------ ------
Earnings Before Taxes. . . . . . . . . . . . . . . $2,395 $2,167 $1,943
------ ------ ------
------ ------ ------
Identifiable Assets
Pharmaceutical and nutritional. . . . . . . . . . $3,866 $3,415 $3,046
Hospital and laboratory . . . . . . . . . . . . . 3,782 3,596 3,296
General corporate (e) . . . . . . . . . . . . . . 1,765 1,513 1,347
------ ------ ------
Total. . . . . . . . . . . . . . . . . . . . . . . $9,413 $8,524 $7,689
------ ------ ------
------ ------ ------
Capital Expenditures
Pharmaceutical and nutritional. . . . . . . . . . $ 459 $ 478 $ 475
Hospital and laboratory . . . . . . . . . . . . . 483 447 474
General corporate . . . . . . . . . . . . . . . . 5 4 4
------ ------ ------
Total. . . . . . . . . . . . . . . . . . . . . . . $ 947 $ 929 $ 953
------ ------ ------
------ ------ ------
Depreciation and Amortization
Pharmaceutical and nutritional. . . . . . . . . . $ 252 $ 213 $ 189
Hospital and laboratory . . . . . . . . . . . . . 311 295 292
General corporate . . . . . . . . . . . . . . . . 3 3 3
------ ------ ------
Total. . . . . . . . . . . . . . . . . . . . . . . $ 566 $ 511 $ 484
------ ------ ------
------ ------ ------
</TABLE>
<PAGE>
Abbott Laboratories and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
Geographic Areas (a) 1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Net Sales
United States:
Domestic and export customers. . . . . . . . . . $6,121 $5,758 $5,347
Inter-area . . . . . . . . . . . . . . . . . . . 1,371 1,143 932
------ ------ ------
Total United States . . . . . . . . . . . . . . . 7,492 6,901 6,279
Latin America . . . . . . . . . . . . . . . . . . 540 490 413
Europe, Mideast and Africa. . . . . . . . . . . . 1,918 1,662 1,554
Pacific, Far East and Canada. . . . . . . . . . . 1,433 1,246 1,094
Eliminations. . . . . . . . . . . . . . . . . . . (1,371) (1,143) (932)
------ ------ ------
Total. . . . . . . . . . . . . . . . . . . . . . . $10,012 $9,156 $8,408
------ ------ ------
------ ------ ------
Operating Profit (b) and (c)
United States . . . . . . . . . . . . . . . . . . $1,653 $1,558 $1,390
Latin America . . . . . . . . . . . . . . . . . . 177 131 106
Europe, Mideast and Africa. . . . . . . . . . . . 385 352 301
Pacific, Far East and Canada. . . . . . . . . . . 234 182 189
Eliminations. . . . . . . . . . . . . . . . . . . (10) (20) 19
------ ------ ------
Total. . . . . . . . . . . . . . . . . . . . . . . $2,439 $2,203 $2,005
------ ------ ------
------ ------ ------
Identifiable Assets,
Excluding General Corporate Assets (e)
United States . . . . . . . . . . . . . . . . . . $5,081 $4,809 $4,492
Latin America . . . . . . . . . . . . . . . . . . 330 274 228
Europe, Mideast and Africa. . . . . . . . . . . . 1,517 1,298 1,096
Pacific, Far East and Canada. . . . . . . . . . . 927 827 703
Eliminations. . . . . . . . . . . . . . . . . . . (207) (197) (177)
------ ------ ------
Total. . . . . . . . . . . . . . . . . . . . . . . $7,648 $7,011 $6,342
------ ------ ------
------ ------ ------
</TABLE>
<PAGE>
Abbott Laboratories and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(a) The 1995 net sales and operating profit were favorably affected by the
relatively weaker U.S. dollar, while 1993 was unfavorably affected by the
relatively stronger U.S. dollar. In 1994, net sales and operating profit were
not significantly impacted by the fluctuations in the U.S. dollar.
(b) The 1993 operating profit was favorably impacted by a $70 pretax credit
resulting from resolution of various contingencies related to a 1992 product
withdrawal. The operating profit for 1993 was unfavorably impacted by the $104
pretax charge reflecting the settlement of certain claims and legal proceedings
in connection with the sale and marketing of infant formula products. In 1994,
a similar pretax amount was charged against earnings for other pending and
settled litigation, while a significantly lower amount was charged against
earnings in 1995.
(c) The 1993 operating profit was favorably impacted by the gain on the sale of
the peritoneal dialysis product line.
(d) Corporate expenses not allocated to segments include results from joint
ventures, net foreign exchange losses, minority interest expense and other
general corporate income and expense. Net foreign exchange losses were $25.2 in
1995, $30.8 in 1994, and $41.3 in 1993.
(e) General corporate assets are principally prepaid income taxes, cash and
cash equivalents, investment securities, and investments in joint ventures.
<PAGE>
Abbott Laboratories and Subsidiaries
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of Abbott Laboratories:
We have audited the accompanying consolidated balance sheet of Abbott
Laboratories (an Illinois corporation) and Subsidiaries as of December 31, 1995,
1994, and 1993, and the related consolidated statements of earnings,
shareholders' investment, and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Abbott Laboratories and
Subsidiaries as of December 31, 1995, 1994, and 1993, and the results of their
operations and their cash flows for the years then ended in conformity with
generally accepted accounting principles.
Chicago, Illinois, Arthur Andersen LLP
January 15, 1996
AUDIT COMMITTEE CHAIRMAN'S REPORT
The Audit Committee of the Board of Directors is composed of six non-
employee directors. The Audit Committee oversees the Company's financial
reporting process on behalf of the Board of Directors. The Committee held two
meetings during 1995. In fulfilling its responsibility, the Committee
recommended to the Board of Directors, subject to shareholder approval, the
selection of the Company's independent public accountants. The Audit Committee
discussed with the internal auditors and the independent public accountants the
overall scope and specific plans for their respective audits. The Committee
also discussed the Company's consolidated financial statements and the adequacy
of the Company's internal controls. During the Audit Committee meetings the
Committee met with the internal auditors and independent public accountants,
without management present, to discuss the results of their audits, their
evaluations of the Company's internal controls, and the overall quality of the
Company's financial reporting. The meetings also were designed to facilitate
any private communication with the Committee desired by the internal auditors or
independent public accountants.
John R. Walter
Chairman, Audit Committee
<PAGE>
Abbott Laboratories and Subsidiaries
MANAGEMENT REPORT ON FINANCIAL STATEMENTS
Management has prepared, and is responsible for, the Company's consolidated
financial statements and related notes. They have been prepared in accordance
with generally accepted accounting principles and necessarily include amounts
based on judgments and estimates by management. All financial information in
this annual report is consistent with the consolidated financial statements.
The Company maintains internal accounting control systems and related
policies and procedures designed to provide reasonable assurance that assets are
safeguarded, that transactions are executed in accordance with management's
authorization and properly recorded, and that accounting records may be relied
upon for the preparation of consolidated financial statements and other
financial information. The design, monitoring, and revision of internal
accounting control systems involve, among other things, management's judgment
with respect to the relative cost and expected benefits of specific control
measures. The Company also maintains an internal auditing function which
evaluates and formally reports on the adequacy and effectiveness of internal
accounting controls, policies, and procedures.
The Company's consolidated financial statements have been audited by
independent public accountants who have expressed their opinion with respect to
the fairness of these statements.
Duane L. Burnham
Chairman and Chief Executive Officer
Gary P. Coughlan
Senior Vice President, Finance and Chief Financial Officer
Theodore A. Olson
Vice President and Controller
<PAGE>
Abbott Laboratories and Subsidiaries
FINANCIAL REVIEW
RESULTS OF OPERATIONS
SALES
The following table details the components of sales growth by industry segment
and geographic area for the last three years:
<TABLE>
<CAPTION>
Components of Change %
Total % ---------------------------
Worldwide Sales Change Price Volume Exchange
- --------------- ------ ----- ------ --------
<S> <C> <C> <C> <C>
Total Worldwide
1995 vs. 1994 9.4 (0.1) 8.0 1.5
1994 vs. 1993 8.9 0.8 8.0 0.1
1993 vs. 1992 7.1 0.9 8.6 (2.4)
Domestic
1995 vs. 1994 6.2 (0.8) 7.0 -
1994 vs. 1993 7.6 1.0 6.6 -
1993 vs. 1992 8.7 0.6 8.1 -
International
1995 vs. 1994 14.5 1.1 9.5 3.9
1994 vs. 1993 11.1 0.5 10.4 0.2
1993 vs. 1992 4.5 1.4 9.5 (6.4)
Pharmaceutical and
Nutritional Products
- ---------------------
Total Worldwide
1995 vs. 1994 13.7 1.0 12.1 0.6
1994 vs. 1993 12.8 1.8 11.1 (0.1)
1993 vs. 1992 9.0 1.7 9.2 (1.9)
Domestic
1995 vs. 1994 9.0 0.1 8.9 -
1994 vs. 1993 10.8 1.8 9.0 -
1993 vs. 1992 10.2 1.0 9.2 -
International
1995 vs. 1994 23.6 2.9 18.8 1.9
1994 vs. 1993 17.2 1.9 15.6 (0.3)
1993 vs. 1992 6.5 3.4 9.2 (6.1)
</TABLE>
<PAGE>
Abbott Laboratories and Subsidiaries
FINANCIAL REVIEW (CONTINUED)
<TABLE>
<CAPTION>
Hospital and
Laboratory Products
- ---------------------
<S> <C> <C> <C> <C>
Total Worldwide
1995 vs. 1994 4.2 (1.3) 3.0 2.5
1994 vs. 1993 4.6 (0.4) 4.7 0.3
1993 vs. 1992 5.0 -- 8.0 (3.0)
Domestic
1995 vs. 1994 2.1 (2.1) 4.2 -
1994 vs. 1993 3.1 (0.2) 3.3 -
1993 vs. 1992 6.6 0.1 6.5 -
International
1995 vs. 1994 6.9 (0.5) 1.9 5.5
1994 vs. 1993 6.5 (0.6) 6.5 0.6
1993 vs. 1992 3.0 (0.1) 9.8 (6.7)
</TABLE>
Sales of new products in the pharmaceutical and nutritional segment and the
hospital and laboratory segment in 1995 are estimated to be $225 million and
$525 million, respectively. Sales in international markets represented 40
percent of worldwide sales in 1995 and approximately 38 percent in 1994 and
1993.
<PAGE>
Abbott Laboratories and Subsidiaries
FINANCIAL REVIEW
The classes of products which contributed at least 10 percent to
consolidated net sales in at least one of the last three years were:
<TABLE>
<CAPTION>
(dollars in millions) 1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Anti-Infectives $1,291 $ 994 $ 784
Medical Nutritionals 1,172 1,011 864
Infant Formula 1,109 1,180 1,147
</TABLE>
Increases in anti-infectives and medical nutritionals were primarily due to unit
increases. Worldwide sales of infant formula decreased in 1995 primarily due to
unit decreases, and increased in 1994 primarily due to net price increases.
OPERATING EARNINGS
Gross profit margins (sales less cost of products sold, including freight and
distribution expenses) were 56.8 percent of sales in 1995, 56.4 percent in 1994,
and 56.2 percent in 1993. The increase in 1995 was due to favorable product
mix, especially higher sales of pharmaceuticals, and productivity improvements,
partially offset by higher project expenses for new products, higher
manufacturing capacity costs for anticipated unit growth, and the effects of
inflation and competitive pricing pressures in some product lines. The
increases in 1994 and 1993 are the result of favorable product mix, especially
higher sales of pharmaceuticals, productivity improvements, and net price
increases in some product lines, partially offset by the impacts of inflation
and competitive pricing pressures in some product lines. Gross profit margins
were favorably affected by the relatively weaker U.S. dollar in 1995, while
fluctuations in the U.S. dollar had an insignificant impact on gross profit
margins in 1994. Gross profit margins in 1993 were unfavorably impacted by the
relatively stronger U.S. dollar. In the U.S., states receive price rebates from
manufacturers of infant formula under the federally subsidized Special
Supplemental Food Program for Women, Infants, and Children (WIC). The WIC
rebate programs continue to have a negative effect on the gross profit margins
of this portion of the infant formula business.
Research and development expense increased to $1.073 billion in 1995, and
represented 10.7 percent of net sales, compared to 10.5 percent of net sales in
both 1994 and 1993. Research and development expenditures continue to be
concentrated on pharmaceutical and diagnostic products.
<PAGE>
Abbott Laboratories and Subsidiaries
FINANCIAL REVIEW (CONTINUED)
Selling, general and administrative expenses increased 8.6 percent in
1995, including the effects of the relatively weaker dollar of 1.8 percent,
compared to increases of 3.3 percent in 1994, and 8.5 percent in 1993. The 1995
increase reflects a higher level of selling and marketing to support new product
launches in the pharmaceutical and nutritional segment, and contributions to the
Company's charitable foundation. The 1994 increase reflects additional
selling and marketing to support new product launches in the pharmaceutical and
nutritional segment. The 1993 increase reflects a pretax charge to
earnings of approximately $104 million for the settlement of certain claims and
legal proceedings in connection with the sale and marketing of infant formula
products. A similar amount was charged against earnings in 1994 for other
pending and settled litigation, while a significantly lower amount was charged
against earnings in 1995.
In 1993, the Company resolved various contingencies related to a 1992
product withdrawal and recorded a pretax credit to earnings of $70 million for
these items.
OTHER (INCOME) EXPENSE, NET
Other (income) expense, net, includes net foreign exchange losses of
$25.2 million in 1995, $30.8 million in 1994, and $41.3 million in 1993,
including net exchange (gains) losses on foreign currency contracts. These
contracts were purchased to manage the Company's exposure to foreign currency
rate changes. Other (income) expense, net, also includes the Company's share of
the income from joint ventures, primarily TAP Holdings Inc., minority interest
expense, and, in 1993, the gain on the sale of the Company's peritoneal dialysis
product line.
<PAGE>
Abbott Laboratories and Subsidiaries
FINANCIAL REVIEW (CONTINUED)
TAXES ON EARNINGS
The Company's effective income tax rate for 1995 was 29.5 percent, compared
to 30.0 percent for 1994 and 28.0 percent for 1993. The 1994 and 1995 tax
rates were unfavorably impacted by the reduction in tax incentive grants for
Puerto Rico operations.
FINANCIAL CONDITION
CASH FLOW
The Company expects positive cash flow from operating activities to continue to
approximate or exceed the Company's capital expenditures and cash dividends.
DEBT AND CAPITAL
The Company has maintained its favorable bond ratings (AAA by Standard & Poor's
Corporation and Aa1 by Moody's Investors Service) and continues to have readily
available financial resources, including unused domestic lines of credit of
$400 million at December 31, 1995. These lines of credit support domestic
commercial paper borrowing arrangements.
In 1993, the Company filed a registration statement with the Securities and
Exchange Commission for the issuance of $500 million of senior debt securities
and issued $200 million of 5.6% notes due 2003. In 1995, the Company issued
$150 million of 6.8% notes due 2005. Net proceeds were used to retire short-
term borrowings and for the purchase of the Company's common shares. The
Company may issue up to an additional $150 million of debt securities in the
future under this registration statement.
During the last three years, the Company purchased 58,030,000 of its common
shares at a cost of $1.853 billion, including 6,630,000 shares of the 20,000,000
shares authorized for purchase by the Board of Directors in September 1995.
CAPITAL EXPENDITURES
Capital expenditures of $947 million in 1995, $929 million in 1994, and
$953 million in 1993, were principally for upgrading and expanding manufacturing
and research and development facilities in both segments, for laboratory
instruments and hospital equipment leased to customers, and for administrative
support facilities. This level of capital expenditures is expected to continue
over the next few years, with a relatively equal proportion dedicated to each
segment.
BUSINESS ACQUISITION
In December 1994, a United Kingdom subsidiary of the Company purchased the
operating assets of the nutritional business of Puleva Union Industrial y
Agroganadera, S.A. for $106 million. Had this acquisition taken place on
January 1, 1994, consolidated sales and income would not have been significantly
different from reported amounts.
<PAGE>
Abbott Laboratories and Subsidiaries
FINANCIAL REVIEW (CONTINUED)
LEGISLATIVE ISSUES
The Company's primary markets are highly competitive and subject to substantial
government regulation. The Company expects debate to continue at both the
federal and state level over the availability, method of delivery, and payment
for health care products and services. The Company believes that if legislation
is enacted, it could have the effect of reducing prices, or reducing the rate of
price increases for medical products and services. International operations are
also subject to a significant degree of government regulation. It is not
possible to predict the extent to which the Company or the health care industry
in general might be adversely affected by these factors in the future. A more
complete discussion of these factors is contained in Item 1, Business, in the
Annual Report on Form 10-K, which is available upon request.
<PAGE>
Exhibit 13
Abbott Laboratories and Subsidiaries
SUMMARY OF SELECTED FINANCIAL DATA
Year Ended December 31
(Dollars in Millions Except Per Share Data)
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
-------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Summary of Operations:
Net sales. . . . . . . . . . . . . . . . . . . . $ 10,012.2 9,156.0 8,407.8 7,851.9 6,876.6
Cost of products sold. . . . . . . . . . . . . . $ 4,325.8 3,993.8 3,684.7 3,505.3 3,140.0
Research and development . . . . . . . . . . . . $ 1,072.7 963.5 881.0 772.4 666.3
Selling, general and administrative. . . . . . . $ 2,230.7 2,054.5 1,988.2 1,833.2 1,513.3
Operating earnings (1) . . . . . . . . . . . . . $ 2,382.9 2,144.2 1,924.0 1,526.0 1,557.0
Interest expense . . . . . . . . . . . . . . . . $ 69.5 49.7 54.3 53.0 63.8
Interest income. . . . . . . . . . . . . . . . . $ (51.8) (36.9) (37.8) (42.3) (45.1)
Other (income) expense, net. . . . . . . . . . . $ (30.2) (35.3) (35.7) 48.5 (5.9)
Earnings before taxes (2). . . . . . . . . . . . $ 2,395.3 2,166.7 1,943.2 1,738.8 1,544.2
Taxes on earnings. . . . . . . . . . . . . . . . $ 706.6 650.0 544.1 499.7 455.5
Earnings before extraordinary gain and
accounting change (3) . . . . . . . . . . . . . $ 1,688.7 1,516.7 1,399.1 1,239.1 1,088.7
Earnings per common share before extra-
ordinary gain and accounting change (3) . . . . $ 2.12 1.87 1.69 1.47 1.27
Financial Position:
Working capital. . . . . . . . . . . . . . . . . $ 436.4 400.5 490.6 449.2 661.7
Investment securities maturing after one year. . $ 422.5 316.2 221.8 270.6 340.2
Net property and equipment . . . . . . . . . . . $ 4,249.5 3,920.9 3,511.0 3,099.2 2,662.1
Total assets . . . . . . . . . . . . . . . . . . $ 9,412.6 8,523.7 7,688.6 6,941.2 6,255.3
Long-term debt . . . . . . . . . . . . . . . . . $ 435.2 287.1 306.8 110.0 125.1
Shareholders' investment.. . . . . . . . . . . . $ 4,396.8 4,049.4 3,674.9 3,347.6 3,203.0
Return on shareholders' investment . . . . . . . % 40.0 39.3 39.8 37.8 36.1
Book value per share . . . . . . . . . . . . . . $ 5.58 5.04 4.48 4.00 3.77
Other Statistics:
Gross profit margin. . . . . . . . . . . . . . . % 56.8 56.4 56.2 55.4 54.3
Research and development to net sales. . . . . . % 10.7 10.5 10.5 9.8 9.7
Capital expenditures . . . . . . . . . . . . . . $ 947.0 929.5 952.7 1,007.2 732.8
Cash dividends declared per common share . . . . $ .84 .76 .68 .60 .50
Common shares outstanding (in thousands) . . . . 787,307 803,280 821,130 836,052 850,530
Number of common shareholders. . . . . . . . . . 89,831 86,324 82,947 75,703 56,541
Number of employees. . . . . . . . . . . . . . . 50,241 49,464 49,659 48,118 45,694
Sales per employee (in dollars). . . . . . . . . $ 199,283 185,105 169,312 163,180 150,492
Market price per share-high. . . . . . . . . . . $ 44 3/4 34 30 7/8 34 1/8 34 3/4
Market price per share-low . . . . . . . . . . . $ 30 5/8 25 3/8 22 5/8 26 1/8 19 5/8
Market price per share-close . . . . . . . . . . $ 41 5/8 32 5/8 29 5/8 30 3/8 34 3/8
</TABLE>
<PAGE>
Abbott Laboratories and Subsidiaries
SUMMARY OF SELECTED FINANCIAL DATA (CONTINUED)
Year Ended December 31
(Dollars in Millions Except Per Share Data)
(1) In 1992, the Company recorded a pretax charge of $215 for costs associated
with the voluntary withdrawal of temafloxacin from the worldwide market.
In 1993, the Company resolved various contingencies related to the withdrawal
and recorded a pretax credit of $70.
(2) In 1992, the Company recorded a pretax gain of $272 on the sale of its
investment in Boston Scientific Corporation.
(3) In 1991, the Company realized an after-tax gain of $128, or $.15 per share,
on the sale of an investment. The Company also adopted Statement of Financial
Accounting Standards No. 106, which resulted in an after-tax transition expense
of $128, or $.15 per share.
<PAGE>
EXHIBIT 21
EXHIBIT
SUBSIDIARIES OF ABBOTT LABORATORIES
The following is a list of subsidiaries of the Company. Abbott
Laboratories is not a subsidiary of any other corporation.
State of
Domestic Subsidiaries Incorporation
- --------------------- -------------
Abbott Chemicals, Inc. Delaware
Abbott Chemicals Plant, Inc. Puerto Rico
Abbott Health Products, Inc. Delaware
Abbott Home Infusion Services New York
of New York, Inc.
Abbott International Ltd. Delaware
Abbott International Ltd. of Puerto Rico Puerto Rico
Abbott Laboratories International Co. Illinois
Abbott Laboratories Pacific Ltd. Illinois
Abbott Laboratories (Puerto Rico)
Incorporated Puerto Rico
Abbott Laboratories Residential
Development Fund, Inc. Illinois
Abbott Laboratories Services Corp. Illinois
Abbott Manufacturing, Inc. Delaware
Abbott Trading Company, Inc. Virgin Islands
Abbott Universal Ltd. Delaware
<PAGE>
- 2 -
CMM Transportation, Inc. Delaware
Corporate Alliance, Inc. Delaware
Fuller Research Corporation Delaware
Laser Surgery Partnership Illinois
Medlase Holding Corporation Delaware
North Shore Properties, Inc. Delaware
Oximetrix de Puerto Rico, Inc. Delaware
Oximetrix, Inc. Delaware
Sequoia Turner Corporation California
Sequoia Turner Export Corporation California
Solartek Products, Inc. Delaware
Sorenson Research Co., Inc. Utah
Swan-Myers, Incorporated Indiana
TAP Holdings Inc. Delaware
TAP Pharmaceuticals Inc. Delaware
Tobal Products Incorporated Illinois
<PAGE>
- 3 -
Country
in Which
Foreign Subsidiaries Organized
- -------------------- ---------
Abbott Laboratories Argentina, S.A. Argentina
Abbott Australian Holdings Pty.
Limited Australia
Abbott Australasia Pty. Limited Australia
Abbott Laboratories Executive Superannuation Australia
Pty. Limited
Abbott Laboratories Superannuation Pty. Limited Australia
Abbott Gesellschaft m.b.H. Austria
Abbott Hospitals Limited Bahamas
Abbott Laboratories (Bangladesh) Ltd. Bangladesh
Abbott, S.A. Belgium
Abbott Ireland (formerly Abbott Ireland Limited) Bermuda
Abbott Laboratorios do Brasil Ltda. Brazil
Abbott Laboratories Limited Canada
Abbott Laboratories de Chile
Limitada Chile
Ningbo Asia-Pacific Biotechnology Ltd. China, People's
Republic of
Abbott Laboratories de Colombia, S.A. Colombia
Abbott Laboratories A/S Denmark
Abbott Laboratorios del Ecuador, S.A. Ecuador
<PAGE>
- 4 -
Abbott, S.A. de C.V. El Salvador
Abbott Investments Limited England
Abbott Laboratories Limited England
Abbott Laboratories Trustee
Company Limited England
Abbott France S.A. France
Abbott G.m.b.H. Germany
Abbott Diagnostics G.m.b.H. Germany
Abbott Laboratories (Hellas) S.A. Greece
FAMAR Panos A. Marinopoulos S.A. Greece
FAMAR Anonymous Industrial Co. of Greece
Pharmaceuticals and Cosmetics
Abbott Grenada Limited Grenada
Abbott Laboratorios, S.A. Guatemala
Abbott Laboratories Limited Hong Kong
Abbott Laboratories (India) Limited India
Abind Healthcare Private Limited India
P. T. Abbott Indonesia Indonesia
Abbott Laboratories, Ireland,
Limited Ireland
Abbott Ireland Ltd. Ireland
<PAGE>
- 5 -
Abbott S.p.A. Italy
Laboratori Abbott S.p.A. Italy
Abbott West Indies Limited Jamaica
Consolidated Laboratories Limited Jamaica
Abbott Japan K.K. Japan
Dainabot K.K. Japan
Abbott Korea Limited Korea
Abbott Middle East S.A.R.L. Lebanon
Abbott Laboratories (Malaysia) Sdn. Bhd. Malaysia
Abbott Laboratories de Mexico, S.A. de C.V. Mexico
Abbott Laboratories (Mozambique)
Limitada Mozambique
Abbott B.V. The Netherlands
Abbott Finance B.V. The Netherlands
Abbott Holdings B.V. The Netherlands
Abbott Laboratories B.V. (formerly M & R The Netherlands
Laboratoria B.V.)
Edisco B.V. The Netherlands
Abbott Laboratories (N.Z.) Limited New Zealand
Abbott Laboratories Nigeria Limited Nigeria
Abbott Laboratories (Pakistan) Limited Pakistan
Abbott Laboratories, C.A. Panama
<PAGE>
- 6 -
Abbott Overseas, S.A. Panama
Abbott Laboratorios S.A. Peru
Abbott Laboratories Philippines
l02 E. de los Santos Realty Co., Inc. Philippines
Union-Madison Realty Company, Inc. Philippines
Abbott Laboratorios, Limitada Portugal
Abbott Laboratories (Singapore)
Private Limited Singapore
Abbott Laboratories South Africa
(Pty.) Limited South Africa
Abbott Laboratories, S.A. Spain
Abbott Cientifica, S.A. Spain
Abbott Scandinavia A.B. Sweden
Abbott A.G. Switzerland
Abbott Laboratories S.A. Switzerland
Abbott Finance Company S.A. (formerly
Abbott Finance Company S.a r.l.) Switzerland
Abbott Laboratories Taiwan Limited Taiwan
Abbott Laboratories Limited Thailand
Abbott Laboratuarlari Ithalat Ihracat
Ve Tecaret Anonim Sirketi Turkey
Abbott Laboratories Uruguay Limitada Uruguay
<PAGE>
- 7 -
Abbott Laboratories, C.A. Venezuela
Medicamentos M & R, S.A. Venezuela
Date: as of January 31, 1996
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference of the following into the Company's previously filed S-8 Registration
Statements 33-4368 for the Abbott Laboratories 1986 Incentive Stock Program,
33-39798 for the Abbott Laboratories 1991 Incentive Stock Program, and 33-26685,
33-51585, 33-56897, and 33-65127 for the Abbott Laboratories Stock Retirement
Plan and Trust and into the Company's previously filed S-3 Registration
Statement Number 33-50253:
1. Our supplemental report dated January 15, 1996 included in this
Annual Report on Form 10-K for the year ended December 31, 1995; and
2. Our report dated January 15, 1996 incorporated by reference in this
Annual Report on Form 10-K for the year ended December 31, 1995.
ARTHUR ANDERSEN LLP
Chicago, Illinois,
March 6, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS TWELVE MONTH YEAR-TO-DATE SUMMARY FINANCIAL
INFORMATION EXTRACTED FROM ABBOTT LABORATORIES 1995 FORM 10-K AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-K FILING
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 281,197
<SECURITIES> 34,500
<RECEIVABLES> 1,721,028
<ALLOWANCES> 157,990
<INVENTORY> 1,110,941
<CURRENT-ASSETS> 4,226,711
<PP&E> 7,762,442
<DEPRECIATION> 3,512,904
<TOTAL-ASSETS> 9,412,580
<CURRENT-LIABILITIES> 3,790,314
<BONDS> 435,198
0
0
<COMMON> 581,562
<OTHER-SE> 3,815,285
<TOTAL-LIABILITY-AND-EQUITY> 9,412,580
<SALES> 10,012,194
<TOTAL-REVENUES> 10,012,194
<CGS> 4,325,805
<TOTAL-COSTS> 4,325,805
<OTHER-EXPENSES> 1,072,745<F1>
<LOSS-PROVISION> 32,462
<INTEREST-EXPENSE> 69,532
<INCOME-PRETAX> 2,395,319
<INCOME-TAX> 706,619
<INCOME-CONTINUING> 1,688,700
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,688,700
<EPS-PRIMARY> 2.12
<EPS-DILUTED> 2.10
<FN>
<F1>30) OTHER EXPENSES CONSIST OF RESEARCH AND DEVELOPMENT EXPENSES
</FN>
</TABLE>
