<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from___________________________ to___________________
Commission File No. 1-2189
ABBOTT LABORATORIES
An Illinois Corporation I.R.S. Employer Identification
No. 36-0698440
100 Abbott Park Road
Abbott Park, Illinois 60064-6400
Telephone: (847) 937-6l00
Indicate by check mark whether the registrant (l) has filed all reports required
to be filed by Section l3 or l5(d) of the Securities Exchange Act of l934 during
the preceding l2 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes / X / No / /
As of April 14, 2000 the Corporation had 1,549,423,189 common shares without par
value outstanding.
<PAGE>
PART I. FINANCIAL INFORMATION
Abbott Laboratories and Subsidiaries
Condensed Consolidated Financial Statements
(Unaudited)
<PAGE>
Abbott Laboratories and Subsidiaries
Condensed Consolidated Statement of Earnings
(Unaudited)
(dollars and shares in thousands except per share data)
<TABLE>
<CAPTION>
Three Months Ended
March 31
--------------------------
2000 1999
---------- ----------
<S> <C> <C>
Net Sales $3,353,178 $3,313,320
---------- ----------
Cost of products sold ......................................... 1,496,447 1,453,016
Research and development ...................................... 321,367 269,497
Selling, general and administrative ........................... 730,304 685,480
Gain on sale of business ...................................... (46,304) --
---------- ----------
Total Operating Cost and Expenses ........................ 2,501,814 2,407,993
---------- ----------
Operating Earnings ............................................ 851,364 905,327
Net interest expense .......................................... 12,034 25,852
Income from TAP Pharmaceutical Products Inc. joint venture .... (118,914) (71,569)
Net foreign exchange loss ..................................... 841 20,559
Other (income) expense, net ................................... 8,147 1,731
---------- ----------
Earnings Before Taxes ...................................... 949,256 928,754
Taxes on earnings ............................................. 256,299 260,051
---------- ----------
Net Earnings .................................................. $ 692,957 $ 668,703
========== ==========
Basic Earnings Per Common Share ............................... $0.45 $0.44
===== =====
Diluted Earnings Per Common Share ............................. $0.44 $0.43
===== =====
Cash Dividends Declared Per Common Share ...................... $0.19 $0.17
===== =====
Average Number of Common Shares Outstanding
Used for Basic Earnings Per Common Share ................... 1,548,066 1,532,325
Dilutive Common Stock Options ................................. 11,489 25,106
---------- ----------
Average Number of Common Shares Outstanding
Plus Dilutive Common Stock Options ......................... 1,559,555 1,557,431
========= =========
Outstanding Common Stock Options Having No Dilutive Effect .... 49,936 1,709
====== =====
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of this statement.
2
<PAGE>
Abbott Laboratories and Subsidiaries
Condensed Consolidated Statement of Cash Flows
(Unaudited)
(dollars in thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31
---------------------------
2000 1999
---------- ----------
<S> <C> <C>
Cash Flow From (Used in) Operating Activities:
Net earnings .................................................. $ 692,957 $ 668,703
Adjustments to reconcile net earnings to
net cash from operating activities -
Depreciation and amortization ................................. 172,561 212,211
Trade receivables ............................................. 80,183 (86,703)
Inventories ................................................... (166,898) (911)
Gain on sale of business ...................................... (46,304) ---
Other, net .................................................... (352,534) 26,840
--------- ----------
Net Cash From Operating Activities .......................... 379,965 820,140
--------- ----------
Cash Flow From (Used in) Investing Activities:
Proceeds from sale of business ................................ 116,000 ---
Acquisitions of property and equipment ........................ (241,804) (211,908)
Investment securities transactions ............................ (39,410) 90,450
Other ......................................................... 63,761 7,439
--------- ----------
Net Cash Used in Investing Activities ....................... (101,453) (114,019)
--------- ----------
Cash Flow From (Used in) Financing Activities:
Repayments of commercial paper, net ........................... (25,000) (491,000)
Other borrowing transactions, net ............................. 31,216 23,180
Common share transactions ..................................... 54,821 35,748
Dividends paid ................................................ (263,062) (227,519)
--------- ----------
Net Cash Used in Financing Activities ....................... (202,025) (659,591)
--------- ----------
Effect of exchange rate changes on cash and cash equivalents .... (3,690) (7,104)
--------- ----------
Net Increase in Cash and Cash Equivalents ....................... 72,797 39,426
Cash and Cash Equivalents, Beginning of Year .................... 608,097 315,238
--------- ----------
Cash and Cash Equivalents, End of Period ........................ $ 680,894 $ 354,664
========= =========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of this statement.
3
<PAGE>
Abbott Laboratories and Subsidiaries
Condensed Consolidated Balance Sheet
(dollars in thousands)
<TABLE>
<CAPTION>
March 31 December 31
2000 1999
----------- -----------
<S> <C> <C>
(Unaudited)
Assets
Current Assets:
Cash and cash equivalents ....................................................... $ 680,894 $ 608,097
Investment securities ........................................................... 94,453 115,199
Trade receivables, less allowances of $235,001 in 2000 and $238,956 in 1999 ..... 1,941,480 2,055,839
Inventories:
Finished products ............................................................. 864,116 772,478
Work in process ............................................................... 368,784 338,818
Materials ..................................................................... 389,409 384,148
----------- -----------
Total inventories ........................................................... 1,622,309 1,495,444
Prepaid expenses, income taxes, and other receivables ............................. 2,388,770 2,145,175
----------- -----------
Total Current Assets ........................................................ 6,727,906 6,419,754
----------- -----------
Investment Securities Maturing after One Year ..................................... 1,014,931 954,778
----------- -----------
Property and Equipment, at Cost ................................................... 9,891,241 9,797,567
Less: accumulated depreciation and amortization ................................. 5,110,228 5,027,508
----------- -----------
Net Property and Equipment ...................................................... 4,781,013 4,770,059
Deferred Charges, Intangible and Other Assets ..................................... 2,437,073 2,326,453
----------- -----------
$14,960,923 $14,471,044
=========== ===========
Liabilities and Shareholders' Investment
Current Liabilities:
Short-term borrowings and current portion of long-term debt ..................... $ 909,117 $ 896,271
Trade accounts payable .......................................................... 1,203,779 1,226,854
Salaries, income taxes, dividends payable, and other accruals ................... 2,387,749 2,393,586
----------- ---------
Total Current Liabilities .................................................. 4,500,645 4,516,711
----------- ---------
Long-Term Debt .................................................................... 1,326,746 1,336,789
----------- ---------
Other Liabilities and Deferrals ................................................... 1,259,965 1,189,949
----------- ---------
Shareholders' Investment:
Preferred shares, one dollar par value
Authorized - 1,000,000 shares, none issued .................................... --- ---
Common shares, without par value
Authorized - 2,400,000,000 shares
Issued at stated capital amount -
Shares: 2000: 1,566,756,449; 1999: 1,564,670,440 .............................. 2,001,434 1,939,673
Common shares held in treasury, at cost -
Shares: 2000: 17,622,834 ; 1999: 17,650,834 .................................. (257,347) (257,756)
Unearned compensation - restricted stock awards.................................. (21,965) (23,028)
Earnings employed in the business................................................ 6,566,506 6,174,007
Accumulated other comprehensive loss............................................. (415,061) (405,301)
----------- -----------
Total Shareholders' Investment................................................ 7,873,567 7,427,595
----------- -----------
$14,960,923 $14,471,044
=========== ===========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of this statement.
4
<PAGE>
Abbott Laboratories and Subsidiaries
Notes to Condensed Consolidated Financial Statements
March 31, 2000
(Unaudited)
Note 1 - Basis of Presentation
The accompanying unaudited, condensed consolidated financial statements have
been prepared pursuant to rules and regulations of the Securities and Exchange
Commission and, therefore, do not include all information and footnote
disclosures normally included in audited financial statements. However, in the
opinion of management, all adjustments (which include only normal adjustments)
necessary to present fairly the results of operations, financial position and
cash flows have been made. It is suggested that these statements be read in
conjunction with the financial statements included in Abbott's Annual Report on
Form 10-K for the year ended December 31, 1999.
Note 2 - Supplemental Financial Information
(dollars in thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31
------------------------
2000 1999
-------- --------
<S> <C> <C>
Net interest expense:
Interest expense................... $ 32,215 $ 40,348
Interest income.................... (20,181) (14,496)
-------- --------
Total................................. $ 12,034 $ 25,852
======== ========
</TABLE>
Note 3 - Taxes on Earnings
Taxes on earnings reflect the estimated annual effective tax rates. The
effective tax rates are less than the statutory U.S. Federal income tax rate
principally due to the domestic dividend exclusion and tax incentive grants
related to subsidiaries operating in Puerto Rico, the Dominican Republic,
Ireland, and the Netherlands.
Note 4 - Litigation and Environmental Matters
Abbott is involved in various claims and legal proceedings including numerous
antitrust suits and investigations in connection with the pricing of
prescription pharmaceuticals. These suits and investigations 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 Abbott 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, and injunctive and other relief. Abbott has filed or intends to
file a response to each of the remaining complaints denying all substantive
allegations.
In addition, there are several lawsuits and one investigation pending in
connection with the sales of HYTRIN. These suits and the investigation allege
that Abbott violated state or federal antitrust laws and, in some cases,
unfair competition laws by signing separate agreements with Geneva
Pharmaceuticals, Inc. and Zenith Laboratories, Inc. Those agreements related
to pending patent infringement lawsuits between Abbott and the two companies.
Some of the suits also allege that Abbott violated various state or federal
laws by filing frivolous patent infringement lawsuits to protect HYTRIN from
generic competition. The cases seek treble damages, civil penalties and other
relief. Abbott has filed or intends to file a response to each of the
complaints denying all substantive allegations.
Abbott has also 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 and state remediation laws and is investigating
potential contamination at a number of Company-owned locations.
Abbott expects that within the next year, legal proceedings will occur that
may result in a change in the estimated reserves recorded by Abbott. 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 Abbott's financial position, cash flows, or results of
operations.
5
<PAGE>
Notes to Condensed Consolidated Financial Statements
March 31, 2000
(Unaudited), continued
The matters above are discussed more fully in Note 14 to the financial
statements included in Abbott's Annual Report on Form 10-K, which is
available upon request.
Note 5 - U.S. Food and Drug Administration Consent Decree
In November 1999, Abbott reached agreement with the U.S. Food and Drug
Administration to have a consent decree entered to settle issues involving
Abbott's diagnostics manufacturing operations in Lake County, Ill. The decree
requires Abbott to ensure its diagnostics manufacturing processes in Lake
County, Ill., conform with the FDA's current Quality System Regulation. The
decree allows for the continued manufacture and distribution of medically
necessary diagnostic products made in Lake County, Ill. However, Abbott is
prohibited from manufacturing or distributing certain diagnostic products
until Abbott ensures the processes in its Lake County, Ill., diagnostics
manufacturing operations conform with the current Quality System Regulation.
Under the terms of the consent decree, among other actions, Abbott has
submitted to the FDA a proposed master compliance and validation plan to
ensure its processes conform with the current Quality System Regulation. The
decree requires Abbott to ensure its facilities are in conformance with the
current Quality System Regulation within one year from the date of the
consent decree. The consent decree allows Abbott to export diagnostic
products and components for sale and distribution outside the United States
if they meet the export requirements of the Federal Food, Drug and Cosmetic
Act.
Note 6 - Comprehensive Income
(dollars in thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31
-------------------------
2000 1999
-------- ---------
<S> <C> <C>
Foreign currency translation adjustments.............................. $(31,062) $ (79,537)
Tax (expense) benefit related to foreign
currency translation adjustments................................... (418) 126
Unrealized gains (losses) on marketable equity securities............. 32,566 (27,999)
Tax (expense) benefit related to unrealized gains (losses)
on marketable equity securities.................................... (10,846) 11,184
-------- ---------
Other comprehensive loss, net of tax.................................. (9,760) (96,226)
Net Earnings.......................................................... 692,957 668,703
-------- ---------
Comprehensive Income.................................................. $683,197 $ 572,477
======== =========
Supplemental Comprehensive Income Information:
Cumulative foreign currency translation loss adjustments, net of tax.. $463,422 $340,122
Cumulative unrealized (gains) on marketable equity securities,
net of tax.......................................................... (48,361) (16,203)
======== ========
</TABLE>
6
<PAGE>
Notes to Condensed Consolidated Financial Statements
March 31, 2000
(Unaudited), continued
Note 7 - Segment Information
(dollars in millions)
REVENUE SEGMENTS-- Abbott's principal business is the discovery, development,
manufacture and sale of a broad line of health care products and services.
Abbott's products are generally sold directly to retailers, wholesalers,
hospitals, health care facilities, laboratories, physicians' offices and
government agencies throughout the world. Segments are identified as those
revenue divisions that report directly to the chief operating officer of
Abbott. Abbott's reportable segments are as follows:
PHARMACEUTICAL PRODUCTS-- U.S. sales of a broad line of pharmaceuticals.
DIAGNOSTIC PRODUCTS-- Worldwide sales of diagnostic systems for blood banks,
hospitals, consumers, commercial laboratories and alternate-care testing sites.
HOSPITAL PRODUCTS-- U.S. sales of 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.
ROSS PRODUCTS-- U.S. sales of a broad line of adult and pediatric nutritional
products, pediatric pharmaceuticals and consumer products.
INTERNATIONAL-- Non-U.S. sales of all of Abbott's pharmaceutical, hospital and
nutritional products. Products sold by International are manufactured by
domestic segments and by international manufacturing locations.
Abbott's underlying accounting records are maintained on a legal entity basis
for government and public reporting requirements. Segment disclosures are on a
performance basis consistent with internal management reporting. Intersegment
transfers of inventory are recorded at standard cost and are not a measure of
segment operating earnings. The cost of some corporate functions and the cost of
certain employee benefits are sold to segments at predetermined rates which
approximate cost. Remaining costs, if any, are not allocated to revenue
segments. The following segment information has been prepared in accordance with
the internal accounting policies of Abbott, as described above, and may not be
presented in accordance with generally accepted accounting principles.
<TABLE>
<CAPTION>
Three Months Ended March 31
--------------------------------------------
Net Sales to Operating
External Customers Earnings
------------------- ----------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Pharmaceutical (a) ..................................... $ 607 $ 624 $ 234 $ 348
Diagnostics ............................................ 708 715 60 110
Hospital (a) ........................................... 570 576 126 152
Ross ................................................... 550 501 222 185
International .......................................... 852 832 227 213
----- ----- ---- -----
Total Reportable Segments .............................. 3,287 3,248 869 1,008
Other................................................... 66 65
------ ------
Net Sales .............................................. $3,353 $3,313
====== ======
Corporate functions ............................................................... 41 27
Benefit plans costs ............................................................... 19 27
Non-reportable segments ........................................................... (7) (13)
Gain on sale of business .......................................................... (46) --
Net interest expense .............................................................. 12 26
Income from TAP Pharmaceutical Products Inc. ...................................... (119) (72)
Net foreign exchange loss ......................................................... 1 21
Other expense (income), net ....................................................... 19 63
------ ------
Consolidated Earnings Before Taxes ................................................ $ 949 $ 929
====== ======
</TABLE>
(a) In 2000, management of the cardiovascular medicine franchise was transferred
from the Pharmaceutical segment to the Hospital segment. Net sales and operating
earnings for 1999 have been restated to reflect this reclassification.
7
<PAGE>
Notes to Condensed Consolidated Financial Statements
March 31, 2000
(Unaudited), continued
Note 8 -- Sale of Agricultural Products Business
On January 20, 2000, Abbott sold its agricultural products business to
Sumitomo Chemical Co., Ltd., resulting in a $46 million gain recorded in the
first quarter 2000. In addition, under the terms of the agreement, upon
Sumitomo achieving a specified sales milestone, an additional $80 to $90
million would be due to Abbott. This could occur as early as the second
quarter of 2000. Under the transaction, Sumitomo acquired research and
development, sales, marketing, and support operations for Abbott's entire
line of naturally occurring biopesticides, plant growth regulators and other
products for agriculture, public health and forestry. Bulk active ingredient
manufacturing rights were retained by Abbott. For the full year 1999, Abbott
recorded approximately $102 million in sales from this business.
8
<PAGE>
FINANCIAL REVIEW
RESULTS OF OPERATIONS - FIRST QUARTER 2000 COMPARED WITH FIRST QUARTER 1999
The following table details sales by segment for the first quarter 2000:
(dollars in millions)
<TABLE>
<CAPTION>
Net Sales to Percentage
External Customers Change (a)
------------------- -----------
Three Months Ended March 31
---------------------------------------
2000 1999
------ ------
<S> <C> <C> <C>
Pharmaceutical (b).............................. $ 607 $ 624 (2.7)
Diagnostics..................................... 708 715 (1.1)
Hospital (b).................................... 570 576 (1.1)
Ross............................................ 550 501 9.7
International................................... 852 832 2.5
------ ------
Total Reportable Segments....................... 3,287 3,248 1.2
Other........................................... 66 65
------ ------
Net Sales....................................... $3,353 $3,313 1.2
====== ======
Total U.S....................................... $2,061 $2,055 0.3
====== ======
Total International............................. $1,292 $1,258 2.7
====== ======
</TABLE>
(a) Percentage changes are based on unrounded numbers.
(b) In 2000, management of the cardiovascular medicine franchise was transferred
from the Pharmaceutical segment to the Hospital segment. Net sales for 1999 have
been restated to reflect this reclassification.
Worldwide sales for the first quarter reflect primarily unit growth. Excluding
the negative effect of the relatively stronger U.S. dollar, sales increased 2.8
percent over the first quarter 1999. Pharmaceutical segment sales decreased
primarily due to volume shortfalls for HYTRIN. Diagnostics segment sales
decreased primarily due to the effect of the consent decree as discussed in
Note 5 and due to the negative effect of the relatively stronger U.S. Dollar.
Excluding exchange, Diagnostics and International segment sales increased 1.9
and 6.3 percent, respectively. Diluted earnings per common share for the
quarter rose to 44 cents, up 2.3 percent from 43 cents a year ago. Net earnings
increased 3.6 percent to $693 million, from $669 million in the first quarter
of 1999.
In late 1998, the U.S. Food and Drug Administration (FDA) suspended its
approval of the release of production lots of Abbott's pharmaceutical product
ABBOKINASE due to Current Good Manufacturing Practice concerns raised by the
FDA following inspections of Abbott and its raw material supplier. On December
10, 1999, Abbott met with the FDA to review Abbott's plan for the qualification
of new raw materials and reinitiation of manufacturing. In the future, Abbott
will sell only ABBOKINASE that is manufactured with new raw materials that meet
the FDA's criteria. Abbott cannot predict, however, whether it will be
successful in qualifying new raw material sources or the effect of this matter
on future sales of ABBOKINASE. It is anticipated, however, that sales of
ABBOKINASE will resume after 2000. In 1999, sales of ABBOKINASE were
approximately $47 million, all of which were recorded in the first quarter.
In August 1999, Geneva Pharmaceuticals, Inc. began shipments of generic
HYTRIN in the United States, which has adversely impacted Abbott's HYTRIN
sales. Full year U.S sales of HYTRIN amounted to $466 million in 1999. For
the first quarter 2000, U.S. Sales of HYTRIN were $34 million.
As a result of the consent decree entered into with the U.S. Food and Drug
Administration in 1999, as discussed in Note 5, Abbott is prohibited from
manufacturing or distributing certain diagnostic products until Abbott ensures
the processes in its Lake County, Ill., diagnostics manufacturing operations
conform with the current Quality System Regulation. The consent decree resulted
in a one-time charge of $168 million in 1999. In addition, Abbott estimates that
2000 sales may be negatively impacted up to $250 million and earnings per share
may be negatively impacted up to 10 cents per share.
Gross profit margin (sales less cost of products sold, including freight and
distribution expenses) was 55.4 percent for the 2000 first quarter, compared to
56.1 percent for the 1999 first quarter. This decrease was primarily due to
unfavorable product mix, primarily lower sales of pharmaceuticals.
9
<PAGE>
FINANCIAL REVIEW
(continued)
Research and development expenses for the first quarter 2000 increased 19.2
percent over the comparable 1999 period and includes charges relating to several
research and development collaboration agreements entered into in the first
quarter 2000. The majority of research and development expenditures continues to
be concentrated on pharmaceutical and diagnostic products.
Selling, general and administrative expenses for the first quarter 2000
increased 6.5 percent over the comparable 1999 period, due primarily to
increased selling and marketing support for new and existing products.
SALE OF AGRICULTURAL PRODUCTS BUSINESS
On January 20, 2000, Abbott sold its agricultural products business to
Sumitomo Chemical Co., Ltd., resulting in a $46 million gain recorded in the
first quarter 2000. In addition, under the terms of the agreement, upon
Sumitomo achieving a specified sales milestone, an additional $80 to $90
million would be due to Abbott. This could occur as early as the second
quarter of 2000. Under the transaction, Sumitomo acquired research and
development, sales, marketing, and support operations for Abbott's entire
line of naturally occurring biopesticides, plant growth regulators and other
products for agriculture, public health and forestry. Bulk active ingredient
manufacturing rights were retained by Abbott. For the full year 1999, Abbott
recorded approximately $102 million in sales from this business.
INTEREST (INCOME) EXPENSE, NET
Net interest expense decreased in 2000 due primarily to a lower level of
borrowings as a result of the termination of the common share purchase program.
TAXES ON EARNINGS
The effective income tax rate was 27.0 percent in 2000 and 28.0 percent in
1999. The tax rate for 2000 was reduced primarily due to the domestic
dividend exclusion.
LIQUIDITY AND CAPITAL RESOURCES AT MARCH 31, 2000 COMPARED WITH
DECEMBER 31, 1999
Net cash from operating activities for the first quarter 2000 totaled $380
million. Abbott expects annual cash flow from operating activities to continue
to approximate or exceed Abbott's capital expenditures and cash dividends.
Abbott 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
$2.505 billion at March 31, 2000. These lines of credit support domestic
commercial paper borrowing arrangements.
Abbott may issue up to $521 million of securities in the future under a
registration statement filed with the Securities and Exchange Commission in
1999. Of the $521 million, Abbott may issue up to $271 million either in the
form of debt securities or common shares without par value. The remaining $250
million may only be issued in the form of debt securities.
LEGISLATIVE ISSUES
Abbott's primary markets are highly competitive and subject to substantial
government regulation. Abbott expects debate to continue at both the federal and
the state levels over the availability, method of delivery, and payment for
health care products and services. Abbott 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 Abbott 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.
10
<PAGE>
FINANCIAL REVIEW
(continued)
RECENTLY ISSUED ACCOUNTING STANDARD
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities." This statement requires the recognition of the fair
value of derivatives as either assets or liabilities. The statement is effective
for fiscal years beginning after June 15, 2000. Adoption of the provisions of
this statement will not have a material effect on the financial statements of
Abbott.
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 -- A CAUTION CONCERNING
FORWARD-LOOKING STATEMENTS
Under the safe harbor provisions of the Private Securities Litigation Reform Act
of 1995, Abbott cautions investors that any forward-looking statements or
projections made by Abbott, including those made in this document, are subject
to risks and uncertainties that may cause actual results to differ materially
from those projected. Economic, competitive, governmental, technological and
other factors that may affect Abbott's operations are discussed in Exhibit 99.1
to the Annual Report on Form 10-K.
11
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Abbott is involved in various claims and legal proceedings, including
those described below.
In its 1999 Annual Report on Securities and Exchange Commission
Form 10-K (the "1999 Form 10-K"), Abbott reported that two lawsuits were
pending involving Abbott's patents for divalproex sodium. Three additional
lawsuits have been filed. On March 9, 2000, after having been notified that
Andrx Corporation had filed an abbreviated new drug application to market a
generic divalproex sodium, Abbott filed a patent infringement lawsuit against
Andrx Corporation, Andrx Pharmaceutical, and Andrx Pharmaceutical, L.L.C. in
the United States District Court for the Northern District of Illinois. The
defendants have filed a motion to dismiss this complaint. On April 14, 2000,
Abbott filed patent infringement lawsuits against these three Andrx companies
in the United States District Court for the Southern District of Florida and
against Andrx L.L.C. in the United States District Court for the Eastern
District of Virginia.
As of April 14, 2000, 17 antitrust lawsuits and one antitrust
investigation involving Abbott's patents for terazosin hydrochloride, a drug
that Abbott sells under the trademark Hytrin-Registered Trademark-, were
pending. The final patent infringement lawsuit involving Abbott's patents for
terazosin hydrochloride was resolved during the first quarter of 2000. As
previously reported, Abbott sued Mylan Pharmaceuticals, Inc. ("Mylan")
alleging patent infringement. Mylan contended that Abbott's patent which
covers their version of terazosin hydrochloride is invalid and unenforceable.
On October 4, 1999, Mylan's motion in the appellate court for Summary
Affirmance was granted. In February 2000, the United States Supreme Court
denied Abbott's petition for a writ of certiorari.
In its 1999 Form 10-K, Abbott reported that 13 lawsuits were
pending relating to Abbott's agreements with Geneva Pharmaceuticals, Inc.
("Geneva") and Zenith Laboratories, Inc. ("Zenith") regarding terazosin
hydrochloride. During the first quarter of 2000, two of these lawsuits, SCAFANI
V. ABBOTT and VALENTINE V. ABBOTT, were removed from state court to the United
States District Court for the Southern District of Florida. In addition, four
new lawsuits were filed. Three of these new lawsuits are pending in the United
States District Court for the Southern District of Florida: on January 19, 2000,
William Mednick filed a lawsuit on behalf of himself and others; on January 27,
2000, Clarence Reid filed a lawsuit on behalf of himself and others; and, on
April 7, 2000, Blue Cross and Blue Shield of Alabama filed a lawsuit on behalf
of itself and others. The plaintiffs in the REID and MEDNICK lawsuits allege
Abbott violated antitrust and/or consumer protection laws and seek actual
damages, treble damages, civil penalties and other relief. The plaintiffs in the
BLUE CROSS case allege Abbott violated federal racketeering statutes and seek
unspecified damages. The BLUE CROSS case purports to be a class action.
<PAGE>
Finally, on April 10, 2000, Merit Aid Pharmacy filed a lawsuit on behalf of
itself and others in San Diego Superior Court, San Diego, California, alleging
Abbott violated antitrust laws and seeking actual damages, treble damages,
civil penalties and other relief.
Abbott also reported that the Federal Trade Commission was
conducting an investigation regarding Abbott's agreements with Geneva and
Zenith. On March 13, 2000, Abbott and the Federal Trade Commission entered
into a consent agreement regarding this matter which has been placed in the
public record for comments.
In its 1999 Form 10-K, Abbott reported that eighteen lawsuits,
including five derivative lawsuits, were pending relating to Abbott's alleged
noncompliance with the Food and Drug Administration's Quality System
Regulation at Abbott's Diagnostics Division facilities in Lake County,
Illinois. During the first quarter of 2000, the plaintiff in SEINFELD V.
ABBOTT filed a lawsuit in the United States District Court for the Northern
District of Illinois, where it was consolidated with the three other
shareholder derivative lawsuits that were already pending in that court as IN
RE ABBOTT LABORATORIES DERIVATIVE SHAREHOLDER LITIGATION and then voluntarily
dismissed his lawsuit that was pending in Illinois state court. The fifth
shareholder derivative suit was filed by Craig Heneghan and Marjory Motiaytis
in the Circuit Court for the Nineteenth Judicial Circuit, Lake County,
Illinois. On April 6, 2000, the Lake County Circuit Court granted Abbott's
motion to stay the Heneghan/Motiaytis lawsuit until the shareholder
derivative suits pending in federal court are decided. One new case relating
to the alleged regulatory noncompliance was filed in the first quarter of
2000. On February 7, 2000, Lena Gallagher sued Abbott and Miles White,
Abbott's Chief Executive Officer, claiming the defendants violated Sections
10(b) and 20(a) of the Securities and Exchange Act of 1934 by allegedly
misrepresenting or omitting material information about the alleged regulatory
noncompliance. The complaint, which was filed in the United States District
Court for the Eastern District of Illinois, purports to be a class action on
behalf of purchasers of ALZA Corporation stock between June 22, 1999 and
November 1, 1999, and seeks unspecified monetary damages and relief.
The United States Department of Justice is investigating the
marketing and sales practices of TAP Pharmaceutical Products Inc. for
leuprolide acetate depot suspension (a drug TAP markets as Lupron
Depot-Registered Trademark-). Various state and federal agencies including the
Office of the Inspector General, the United States Department of Justice and
the Texas Attorney General, are also investigating the pricing practices of
TAP with respect to Lupron Depot and/or of Abbott with respect to certain
other Medicare and Medicaid reimbursable products. These investigations seek
to determine whether these practices resulted in any violations of civil
and/or criminal laws, including the Federal False Claims Act and the
Anti-Kickback Act, or fraud in connection with the Medicare and/or Medicaid
reimbursement paid to third parties. Abbott owns 50 percent of TAP.
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.
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its Annual Meeting of Shareholders on April 28, 2000. The
following is a summary of the matters voted on at that meeting.
(a) The shareholders elected the Company's entire Board of Directors. The
persons elected to the Company's Board of Directors and the number of shares
cast for and the number of shares withheld, with respect to each of these
persons, were as follows:
<TABLE>
<CAPTION>
Name Votes For Votes Withheld
------ ----------- ----------------
<S> <C> <C>
H. Laurance Fuller 1,247,829,128 66,669,298
David A. Jones 1,244,586,940 69,911,486
Jeffrey M. Leiden, M.D., Ph.D. 1,247,893,732 66,604,694
The Lord Owen CH 1,247,984,397 66,514,029
Robert L. Parkinson Jr. 1,246,091,752 68,406,674
Boone Powell Jr. 1,248,195,317 66,303,109
Addison Barry Rand 1,247,589,123 66,909,303
W. Ann Reynolds, Ph.D. 1,245,426,341 69,072,085
Roy S. Roberts 1,247,476,037 67,022,389
William D. Smithburg 1,245,633,391 68,865,035
John R. Walter 1,246,494,483 68,003,943
Miles D. White 1,242,324,783 72,173,643
</TABLE>
(b) The shareholders approved the amendment of the Abbott Laboratories
1996 Incentive Stock Program. The number of shares cast in favor of the
approval of the Abbott Laboratories 1996 Incentive Stock Program, the number
against, the number abstaining, and the number of broker non-votes were as
follows:
<TABLE>
<CAPTION>
For Against Abstain Broker Non-Vote
----- --------- --------- -----------------
<S> <C> <C> <C>
850,977,581 254,891,780 13,839,465 194,789,600
</TABLE>
(c) The shareholders ratified the appointment of Arthur Andersen LLP as
Abbott's auditors. The number of shares cast in favor of the ratification of
Arthur Andersen LLP, the number against, and the number abstaining were as
follows:
<TABLE>
<CAPTION>
For Against Abstain
----- --------- ---------
<S> <C> <C>
1,301,783,279 7,044,021 5,671,126
</TABLE>
<PAGE>
(d) The shareholders rejected a shareholder proposal that Abbott implement
a policy of price restraint on pharmaceutical products. The number of shares
cast in favor of the shareholder proposal, the number against, the number
abstaining, and the number of broker non-votes were as follows:
<TABLE>
<CAPTION>
For Against Abstain Broker Non-Vote
----- --------- --------- -----------------
<S> <C> <C> <C>
51,502,535 1,028,301,673 39,903,871 194,790,347
</TABLE>
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
3.1 By-Laws of Abbott Laboratories, as amended and
effective April 28, 2000 - attached hereto.
12. Statement re: computation of ratio of earnings to
fixed charges - attached hereto.
27. Financial Data Schedule - attached hereto.
b) Reports on Form 8-K
None
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ABBOTT LABORATORIES
/s/ Gary L. Flynn
- -------------------------------------------------
Gary L. Flynn, Vice President
and Controller (Principal Accounting Officer)
Date: May 15, 2000
<PAGE>
Exhibit 3.1
BY-LAWS
OF
ABBOTT LABORATORIES
Adopted by the Board of Directors
of Abbott Laboratories at the
Annual Meeting, April 11, 1963
as amended and restated, effective April 28, 2000
<PAGE>
BY-LAWS OF ABBOTT LABORATORIES
ARTICLE I
OFFICES
The principal office of the Corporation in the State of Illinois shall be
located at the intersection of State Routes 43 and 137 in the County of Lake.
The Corporation may have such other offices either within or without the State
of Illinois as the business of the Corporation may require from time to time.
The registered office of the Corporation may be, but need not be, identical
with the principal office in the State of Illinois. The address of the
registered office may be changed from time to time by the Board of Directors.
ARTICLE II
SHAREHOLDERS
SECTION 1. ANNUAL MEETING; TRANSACTION OF BUSINESS, NOMINATION OF
DIRECTORS. The annual meeting of the shareholders shall be held in the month of
April in each year on such date and at such time as the Board of Directors shall
provide. The meeting shall be held for the purpose of electing Directors and for
the transaction of such other business as is properly brought before the meeting
in accordance with these By-Laws. If the election of Directors shall not be held
on the day designated for any annual meeting, or at any adjournment thereof, the
Board of Directors shall cause the election to be held at a meeting of the
shareholders as soon thereafter as conveniently may be.
To be properly brought before the meeting, business must be either (a)
specified in the notice of meeting (or any supplement thereto) given by or at
the direction of the Board of Directors, (b) otherwise properly brought before
the meeting by or at the direction of the Board of Directors or (c) otherwise
properly brought before the meeting by a shareholder. In addition to any other
applicable requirements, for business to be properly brought before an annual
meeting by a shareholder, the shareholder must have given timely notice thereof
in writing to the Secretary. To be timely, a shareholder's notice must be
delivered to or mailed and received at the principal office of the Corporation,
not earlier than October 1 nor later than the first business day of January
immediately prior to the date of the meeting; PROVIDED, HOWEVER, that in the
event that the date of such meeting is not in the month of April and less than
sixty-five days' notice or prior public disclosure of the date of the meeting is
given or made to shareholders, notice by the shareholder to be timely must be so
received not later than the close of business on the fifteenth day following the
day on which such notice of the date of the annual meeting was mailed or such
public disclosure was made, whichever first occurs. A shareholder's notice to
the Secretary shall set forth as to each matter the shareholder proposes to
bring before the annual meeting (i) a brief
<PAGE>
BY-LAWS
description of the business desired to be brought before the annual meeting and
the reasons for conducting such business at the annual meeting, (ii) the name
and record address of the shareholder proposing such business, (iii) the class
and number of shares of the Corporation which are beneficially owned by the
shareholder and (iv) any material interest of the shareholder in such business.
Notwithstanding anything in these By-Laws to the contrary, no business
shall be conducted at the annual meeting except in accordance with the
procedures set forth in this Section 1, PROVIDED, HOWEVER, that nothing in this
Section 1 shall be deemed to preclude discussion by any shareholder of any
business properly brought before the annual meeting.
The Chairman of an annual meeting shall, if the facts warrant, determine
and declare to the meeting that business was not properly brought before the
meeting in accordance with the provisions of this Section 1, and if he should so
determine, he shall so declare to the meeting and such business not properly
brought before the meeting shall not be transacted.
Only persons who are nominated in accordance with the following procedures
shall be eligible for election as directors. Nominations of persons for election
to the Board of Directors of the Corporation at the annual meeting may be made
at such annual meeting of shareholders by or at the direction of the Board of
Directors, by any nominating committee or person appointed by the Board of
Directors, or by any shareholder of the Corporation entitled to vote for the
election of directors at such meeting who complies with the notice procedures
set forth in this Section 1. Such nominations, other than those made by or at
the direction of the Board of Directors or by a committee or person appointed by
the Board of Directors, shall be made pursuant to timely notice in writing to
the Secretary. To be timely, a shareholder's notice shall be delivered to or
mailed and received at the principal office of the Corporation not earlier than
October 1 nor later than the first business day of January immediately prior to
the date of the meeting; PROVIDED, HOWEVER, that in the event that the date of
such meeting is not in the month of April and less than sixty-five days' notice
or prior public disclosure of the date of the meeting is given or made to
shareholders, notice by the shareholder to be timely must be so received not
later than the close of business on the fifteenth day following the day on which
such notice of the date of the meeting was mailed or such public disclosure was
made, whichever first occurs. Such shareholder's notice to the Secretary shall
set forth: (a) as to each person whom the shareholder proposes to nominate for
election or re-election as a director, (i) the name, age, business address and
residence address of the person, (ii) the principal occupation or employment of
the person, (iii) the class and number of shares of capital stock of the
Corporation which are beneficially owned by the person and (iv) any other
information relating to the person that is required to be disclosed in
solicitations for proxies for election of directors pursuant to Regulation 14A
under the Securities Exchange Act of 1934, as amended; and (b) as to the
shareholder giving the notice, (i) the name and record address of such
shareholder and (ii) the class and number of shares of the Corporation which are
beneficially owned by such shareholder. The Corporation may require any proposed
nominee to furnish such other information as may reasonably be required by the
Corporation to determine the eligibility of such proposed nominee to serve as
<PAGE>
BY-LAWS
director of the Corporation. No person shall be eligible for election as a
director of the Corporation unless nominated in accordance with the procedures
set forth herein.
The Chairman of the meeting shall, if the facts warrant, determine and
declare to the meeting that a nomination was not made in accordance with the
foregoing procedure, and if he should so determine, he shall so declare to the
meeting and the defective nomination shall be disregarded.
SECTION 2. SPECIAL MEETINGS. Special meetings of the shareholders may be
called by the Chairman of the Board, the Chief Executive Officer, the President,
the Board of Directors or by the holders of not less than one-fifth of all the
outstanding shares entitled to vote on the matter for which the meeting is
called.
SECTION 3. PLACE OF MEETING. The Board of Directors may designate any
place, either within or without the State of Illinois, as the place of meeting
for any annual meeting or for any special meeting called by the Board of
Directors. If no designation is made, or if a special meeting be otherwise
called, the place of meeting shall be the principal office of the Corporation in
the State of Illinois.
SECTION 4. NOTICE OF MEETINGS. Written notice stating the place, day and
hour of the meeting and, in the case of a special meeting, the purpose or
purposes for which the meeting is called, shall be delivered not less than ten
nor more than sixty days before the date of the meeting, or in the cases of a
merger, consolidation, share exchange, dissolution or sale, lease or exchange of
assets not less than twenty nor more than sixty days before the meeting, either
personally or by mail, by or at the direction of the Chairman of the Board, the
Chief Executive Officer, the President, or the Secretary or the persons calling
the meeting, to each shareholder of record entitled to vote at such meeting. If
mailed, such notice shall be deemed to be delivered when deposited in the United
States mail, addressed to the shareholder at his or her address as it appears on
the records of the Corporation, with postage thereon prepaid.
SECTION 5. FIXING RECORD DATE. For the purpose of determining shareholders
entitled to notice of or to vote at any meeting of shareholders, or shareholders
entitled to receive payment of any dividend, or in order to make a determination
of shareholders for any other proper purpose, the Board of Directors of the
Corporation may fix in advance a date as the record date for any such
determination of shareholders, such date in any case to be not more than sixty
days and, for a meeting of shareholders, not less than ten days, or in the case
of a merger, consolidation, share exchange, dissolution or sale, lease or
exchange of assets not less than twenty days, immediately preceding such
meeting.
SECTION 6. VOTING LISTS. The Secretary shall make, or cause to have made,
within twenty days after the record date for a meeting of shareholders or ten
days before such meeting, whichever is earlier, a complete list of the
shareholders entitled to vote at such meeting, arranged in alphabetical order,
with the address of and the number of shares held by each, which list, for a
period of ten days prior to such meeting, shall be kept on file at the
registered office of the
<PAGE>
BY-LAWS
Corporation and shall be subject to inspection by any shareholder and to copying
at the shareholder's expense, at any time during usual business hours. Such list
shall also be produced and kept open at the time and place of the meeting and
shall be subject to the inspection of any shareholder during the whole time of
the meeting. The original share ledger or transfer book, or a duplicate thereof
kept in this State, shall be prima facie evidence as to who are the shareholders
entitled to examine such list or share ledger or transfer book or to vote at any
meeting of shareholders.
SECTION 7. QUORUM. A majority of the outstanding shares of the Corporation
entitled to vote on a matter, represented in person or by proxy, shall
constitute a quorum for consideration of such matter at a meeting of
shareholders. If a quorum is present, the affirmative vote of the majority of
the shares represented at the meeting and entitled to vote on a matter shall be
the act of the shareholders, unless the vote of a greater number or voting by
classes is required by The Business Corporation Act of 1983 or the Articles of
Incorporation, as in effect on the date of such determination. If a quorum is
not present, a majority of the shares of the Corporation entitled to vote on a
matter and represented in person or by proxy at such meeting may adjourn the
meeting from time to time without further notice.
SECTION 8. PROXIES. A shareholder may appoint a proxy to vote or otherwise
act for the shareholder by delivering a valid appointment to the person so
appointed or such person's agent; PROVIDED, HOWEVER, no shareholder may name
more than three persons as proxies to attend and to vote the shareholder's
shares at any meeting of shareholders. Without limiting the manner in which a
shareholder may appoint such a proxy pursuant to these By-Laws, the following
shall constitute valid means by which a shareholder may make such an
appointment:
(a) A shareholder may sign a proxy appointment form. The shareholder's
signature may be affixed by any reasonable means, including, but not
limited to, by facsimile signature.
(b) A shareholder may transmit or authorize the transmission of a
telegram, cablegram, or other means of electronic transmission;
provided that any such transmission must either set forth or be
submitted with information from which it can be determined that the
telegram, cablegram, or other electronic transmission was authorized
by the shareholder. If it is determined that the telegram, cablegram,
or other electronic transmission is valid, the inspectors or, if there
are no inspectors, such other persons making that determination shall
specify the information upon which they relied.
No proxy shall be valid after the expiration of eleven months from the date
thereof unless otherwise provided in the proxy. Each proxy continues in full
force and effect until revoked by the person appointing the proxy prior to the
vote pursuant thereto, except as otherwise provided by law. Such revocation may
be effected by a writing delivered to the secretary of the Corporation stating
that the proxy is revoked or by a subsequent delivery of a valid proxy by, or
<PAGE>
BY-LAWS
by the attendance at the meeting and voting in person by the person appointing
the proxy. The dates of the proxy shall presumptively determine the order of
appointment.
SECTION 9. VOTING OF SHARES. Each outstanding share, regardless of class,
shall be entitled to one vote in each matter submitted to a vote at a meeting of
shareholders and, in all elections for Directors, every shareholder shall have
the right to vote the number of shares owned by such shareholder for as many
persons as there are Directors to be elected, or to cumulate such votes and give
one candidate as many votes as shall equal the number of Directors multiplied by
the number of such shares or to distribute such cumulative votes in any
proportion among any number of candidates; provided that, vacancies on the Board
of Directors may be filled as provided in Section 9, Article III of these
By-Laws. A shareholder may vote either in person or by proxy.
SECTION 10. VOTING OF SHARES BY CERTAIN HOLDERS. Shares of this Corporation
held by the Corporation in a fiduciary capacity may be voted and shall be
counted in determining the total number of outstanding shares entitled to vote
at any given time.
Shares registered in the name of another corporation, domestic or foreign,
may be voted by any officer, agent, proxy or other legal representative
authorized to vote such shares under the law of incorporation of such
corporation.
Shares registered in the name of a deceased person, a minor ward or a
person under legal disability may be voted by his or her administrator,
executor, or court appointed guardian, either in person or by proxy without a
transfer of such shares into the name of such administrator, executor, or court
appointed guardian. Shares registered in the name of a trustee may be voted by
him or her, either in person or by proxy.
Shares registered in the name of a receiver may be voted by such receiver,
and shares held by or under the control of a receiver may be voted by such
receiver without the transfer thereof into his or her name if authority so to do
is contained in an appropriate order of the court by which such receiver was
appointed.
A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred.
SECTION 11. VOTING BY BALLOT. Voting on any question or in any election may
be viva voce unless the presiding officer shall order that voting be by ballot.
SECTION 12. INSPECTORS OF ELECTION. The Board of Directors in advance of
any meeting of shareholders may appoint inspectors to act at such meeting or any
adjournment thereof. If inspectors of election are not so appointed, the officer
or person acting as chairman at any such meeting may, and on the request of any
shareholder or his proxy, shall make such appointment. In case any person
appointed as inspector shall fail to appear or to act, the vacancy
<PAGE>
BY-LAWS
may be filled by appointment made by the Board of Directors in advance of the
meeting or at the meeting by the officer or person acting as chairman.
Such inspectors shall ascertain and report the number of shares represented
at the meeting, based upon their determination of the validity and effect of
proxies; count all votes and report the results; and do such other acts as are
proper to conduct the election and voting with impartiality and fairness to all
the shareholders.
Each report of an inspector shall be in writing and signed by him or her or
by a majority of them if there be more than one inspector acting at such
meeting. If there is more than one inspector, the report of a majority shall be
the report of the inspectors. The report of the inspector or inspectors on the
number of shares represented at the meeting and the results of the voting shall
be prima facie evidence thereof.
ARTICLE III
DIRECTORS
SECTION 1. GENERAL POWERS. The business and affairs of the Corporation
shall be managed under the direction of the Board of Directors.
SECTION 2. NUMBER, TENURE AND QUALIFICATIONS. The number of Directors of
the Corporation shall be twelve. The terms of all Directors shall expire at the
next annual meeting of shareholders following their election. Despite the
expiration of a Director's term, he or she shall continue to serve until the
next meeting of shareholders at which Directors are elected. Directors need not
be residents of Illinois or shareholders of the Corporation.
SECTION 3. REGULAR MEETINGS. A regular annual meeting of the Board of
Directors shall be held without other notice than this By-Law, immediately
after, and at the same place as, the annual meeting of shareholders. Other
regular meetings of the Board of Directors shall be held at the principal office
of the Corporation on the second Friday of every month at 9:00 a.m. without
other notice than this By-Law. The Board of Directors may provide, by
resolution, for the holding of the regular monthly meetings at a different time
and place, either within or without the State of Illinois, or for the omission
of the regular monthly meeting altogether. Where the Board of Directors has, by
resolution, changed or omitted regular meetings, no other notice than such
resolution shall be given.
SECTION 4. SPECIAL MEETINGS. Special meetings of the Board of Directors may
be called by or at the request of the Chairman of the Board, the Chairman of the
Executive Committee, the Chief Executive Officer, the President, or of any four
Directors. The persons authorized to call special meetings of the Board of
Directors may fix any place, either within or without the State of Illinois, as
the place for holding any special meeting of the Board of Directors.
<PAGE>
BY-LAWS
SECTION 5. NOTICE. Notice of any special meeting shall be given: (i) at
least one day prior thereto if the notice is given personally or by an
electronic transmission, (ii) at least two business days prior thereto if the
notice is given by having it delivered by a third party entity that provides
delivery services in the ordinary course of business and guarantees delivery of
the notice to the Director no later than the following business day, and (iii)
at least seven days prior thereto if the notice is given by mail. For this
purpose, the term "electronic transmission" may include, but shall not be
limited to, a telex, facsimile, or other electronic means. Notice shall be
delivered to the Director's business address and/or telephone number and shall
be deemed given upon electronic transmission, upon delivery to the third party
delivery service, or upon being deposited in the United States mail with postage
thereon prepaid. Any Director may waive notice of any meeting by signing a
written waiver of notice either before or after the meeting. Attendance of a
Director at any meeting shall constitute a waiver of notice of such meeting,
except where a Director attends a meeting for the express purpose of objecting
to the transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the Board of Directors need to be specified in the
notice or waiver of notice of such meeting.
SECTION 6. QUORUM. A majority of the number of Directors fixed by these
By-Laws shall constitute a quorum for transaction of business at any meeting of
the Board of Directors; provided, that if less than a majority of such number of
Directors are present at said meeting, a majority of the Directors present may
adjourn the meeting from time to time without further notice.
SECTION 7. MANNER OF VOTING. The act of the majority of the Directors
present at a meeting at which a quorum is present shall be the act of the Board
of Directors.
SECTION 8. INFORMAL ACTION BY DIRECTORS. Any action required to be taken at
a meeting of the Board of Directors, or any other action which may be taken at a
meeting of the Board of Directors or a committee thereof, may be taken without a
meeting if a consent in writing, setting forth the action so taken, shall be
signed by all of the Directors entitled to vote with respect to the subject
matter thereof, or by all the members of such committee, as the case may be.
The consent shall be evidenced by one or more written approvals, each of
which sets forth the action taken and bears the signature of one or more
Directors. All the approvals evidencing the consent shall be delivered to the
Secretary of the Corporation to be filed in the corporate records. The action
taken shall be effective when all the Directors have approved the consent unless
the consent specifies a different effective date.
Any such consent signed by all the Directors or all the members of a
committee shall have the same effect as a unanimous vote.
SECTION 9. VACANCIES. Any vacancy occurring in the Board of Directors and
any directorship to be filled by reason of an increase in the number of
Directors, may be filled by
<PAGE>
BY-LAWS
election at an annual meeting or at a special meeting of shareholders called for
that purpose. A Director elected to fill a vacancy shall serve until the next
annual meeting of shareholders. A majority of Directors then in office may also
fill one or more vacancies arising between meetings of shareholders by reason of
an increase in the number of Directors or otherwise, and any Director so
selected shall serve until the next annual meeting of shareholders, provided
that at no time may the number of Directors selected to fill vacancies in this
manner during any interim period between meetings of shareholders exceed 33-1/3
per cent of the total membership of the Board of Directors.
SECTION 10. PRESUMPTION OF ASSENT. A Director of the Corporation who is
present at a meeting of the Board of Directors or any committee thereof at which
action on any corporate matter is taken is conclusively presumed to have
assented to the action taken unless his or her dissent is entered in the minutes
of the meeting or unless he or she files his or her written dissent to such
action with the person acting as the secretary of the meeting before the
adjournment thereof or forwards such dissent by registered or certified mail to
the Secretary of the Corporation immediately after the adjournment of the
meeting. Such right to dissent shall not apply to a Director who voted in favor
of such action.
SECTION 11. APPOINTMENT OF AUDITORS. Upon the recommendation of the Audit
Committee, the Board of Directors shall appoint annually a firm of independent
public accountants as auditors of the Corporation. Such appointment shall be
submitted to the shareholders for ratification at the Annual Meeting next
following such appointment. Should the holders of a majority of the shares
represented at the meeting fail to ratify the appointment of any firm as
auditors of the Corporation, or should the Board of Directors for any reason
determine that such appointment be terminated, the Board of Directors shall
appoint another firm of independent public accountants to act as auditors of the
Corporation and such appointment shall be submitted to the shareholders for
ratification at the Annual or Special Shareholders Meeting next following such
appointment.
ARTICLE IV
COMMITTEES
SECTION 1. APPOINTMENT. A majority of the Board of Directors may create one
or more committees and appoint members of the Board to serve on the committee or
committees. Each committee shall have three or more members, who serve at the
pleasure of the Board. The Board shall designate one member of each committee to
be chairman of the committee. The Board shall designate a secretary of each
committee who may be, but need not be, a member of the committee or the Board.
SECTION 2. COMMITTEE MEETINGS. A majority of any committee shall constitute
a quorum and a majority of the committee is necessary for committee action. A
committee may act by unanimous consent in writing without a meeting. Committee
meetings may be called by the Chairman of the Board, the chairman of the
committee, or any two of the committee's
<PAGE>
BY-LAWS
members. The time and place of committee meetings shall be designated in the
notice of such meeting. Notice of each committee meeting shall be given to each
committee member. Each Committee shall keep minutes of its proceedings and such
minutes shall be distributed to the Board of Directors.
SECTION 3. EXECUTIVE COMMITTEE. The Board shall appoint an Executive
Committee. A majority of the members of the Committee shall be selected from
those Directors who are not then serving as full-time employees of the
Corporation or any of its subsidiaries.
SECTION 4. DUTIES OF THE EXECUTIVE COMMITTEE. The Executive Committee may,
when the Board of Directors is not in session, exercise the authority of the
Board in the management of the business and affairs of the Corporation;
provided, however, the Committee may not:
(1) authorize distributions;
(2) approve or recommend to shareholders any act the Business
Corporation Act of 1983 requires to be approved by shareholders.
(3) fill vacancies on the Board or on any of its committees;
(4) elect or remove Officers or fix the compensation of any member of
the Committee;
(5) adopt, amend or repeal the By-Laws;
(6) approve a plan of merger not requiring shareholder approval;
(7) authorize or approve reacquisition of shares, except according to
a general formula or method prescribed by the Board;
(8) authorize or approve the issuance or sale, or contract for sale,
of shares or determine the designation and relative rights,
preferences, and limitations of a series of shares, except that
the Board may direct the Committee to fix the specific terms of
the issuance or sale or contract for sale or the number of shares
to be allocated to particular employees under an employee benefit
plan; or
(9) amend, alter, repeal, or take action inconsistent with any
resolution or action of the Board of Directors when the
resolution or action of the Board of Directors provides by its
terms that it shall not be amended, altered or repealed by action
of the Committee.
<PAGE>
BY-LAWS
SECTION 5. AUDIT COMMITTEE. The Board of Directors shall appoint an Audit
Committee. All of the members of the Committee shall be selected from those
Directors who are not then serving as full-time employees of the Corporation or
any of its subsidiaries.
SECTION 6. DUTIES OF THE AUDIT COMMITTEE. The Audit Committee shall:
(1) recommend to the Board of Directors annually a firm of
independent public accountants to act as auditors of the
Corporation;
(2) review with the auditors in advance the scope of and fees for
their annual audit;
(3) review with the auditors and the management, from time to time,
the Corporation's accounting principles, policies, and practices
and its reporting policies and practices;
(4) review with the auditors annually the results of their audit; and
(5) review from time to time with the auditors and the Corporation's
financial personnel the adequacy of the Corporation's accounting,
financial and operating controls.
SECTION 7. COMPENSATION COMMITTEE. The Board of Directors shall appoint a
Compensation Committee. The members of the Committee shall be selected from
those Directors who are not then serving as full-time employees of the
Corporation or any of its subsidiaries and who are "non-employee directors"
under Rule 16b-3 promulgated under the Securities Exchange Act of 1934, or any
similar successor rule.
SECTION 8. DUTIES OF THE COMPENSATION COMMITTEE. The Compensation Committee
shall:
(1) administer the stock option plans of the Corporation;
(2) review, at least annually, the compensation of Directors who are
not then serving as full-time employees of the Corporation or any
of its subsidiaries and recommend for approval by the Board any
change in the compensation of such Directors;
(3) review, at least annually, the compensation of all Officers of
the Corporation. The committee shall have the authority to
approve changes in the base compensation, and any proposed
special separation arrangements of Officers, except the Chairman
of the Board of Directors, the Chief Executive Officer, and the
President, whose base compensation,
<PAGE>
BY-LAWS
and any special separation arrangements, shall be subject to
approval by the Board of Directors.
SECTION 9. NOMINATIONS AND BOARD AFFAIRS COMMITTEE. The Board of Directors
shall appoint a Nominations and Board Affairs Committee. A majority of the
members of the Committee shall be selected from those Directors who are not then
serving as full-time employees of the Corporation or any of its subsidiaries.
SECTION 10. DUTIES OF THE NOMINATIONS AND BOARD AFFAIRS COMMITTEE. The
Nominations and Board Affairs Committee shall:
(1) develop general criteria for selection of and qualifications
desirable in members of the Board of Directors and Officers of
the Corporation and aid the Board in identifying and attracting
qualified candidates to stand for election to such positions;
(2) recommend to the Board annually a slate of nominees to be
proposed by the Board to the shareholders as nominees for
election as Directors, and, from time to time, recommend persons
to fill any vacancy on the Board;
(3) review annually, or more often if appropriate, the performance of
individual members of the management of the Corporation and the
membership and performance of committees of the Board and make
recommendations deemed necessary or appropriate to the Board;
(4) recommend to the Board persons to be elected as Officers of the
Corporation; and
(5) serve in an advisory capacity to the Board of Directors and
Chairman of the Board on matters of organization, management
succession plans, major changes in the organizational structure
of the Corporation, and the conduct of Board activities,
including assisting in the evaluation of the Board's own
performance.
SECTION 11. PUBLIC POLICY COMMITTEE. The Board of Directors shall appoint a
Public Policy Committee. A majority of the members of the Committee shall be
selected from those Directors who are not then serving as full time employees of
the Corporation or any of its subsidiaries.
SECTION 12. DUTIES OF THE PUBLIC POLICY COMMITTEE. The Public Policy
Committee shall have an advisory role with respect to public policy, regulatory
and government affairs issues that affect the Corporation.
<PAGE>
BY-LAWS
ARTICLE V
OFFICERS
SECTION 1. NUMBER. The Officers of the Corporation shall be the Chairman of
the Board, the Chief Executive Officer, the President, one or more Executive,
Group or Senior Vice Presidents, one or more Vice Presidents, a Treasurer, a
Secretary, a Controller, a General Counsel and such Assistant Treasurers and
Assistant Secretaries as the Board of Directors may elect. Any two or more
offices may be held by the same person.
SECTION 2. ELECTION AND TERM OF OFFICE. The Officers of the Corporation
shall be elected annually by the Board of Directors at the first meeting of the
Board of Directors held after each annual meeting of shareholders. If the
election of Officers shall not be held at such meeting, such election shall be
held as soon thereafter as conveniently may be. Vacancies or new offices may be
filled at any meeting of the Board of Directors. Each Officer shall hold office
until his or her successor shall have been duly elected and shall have qualified
or until his or her death or until he or she shall resign or shall have been
removed in the manner hereinafter provided.
SECTION 3. REMOVAL OF OFFICERS. Any Officer may be removed by the Board of
Directors whenever in its judgment the best interests of the Corporation will be
served thereby.
SECTION 4. VACANCIES. A vacancy in any office because of death,
resignation, removal, disqualification or otherwise, may be filled by the Board
of Directors for the unexpired portion of the term.
SECTION 5. CHAIRMAN OF THE BOARD OF DIRECTORS AND CHIEF EXECUTIVE OFFICER.
The Chairman shall preside at all meetings of the Board of Directors and the
shareholders. The Chief Executive Officer shall be responsible for the overall
management of the Corporation subject to the direction of the Board of
Directors.
SECTION 6. PRESIDENT. The President shall be the Chief Operating Officer.
The President shall perform such duties as may be prescribed by the Board of
Directors or by the Chief Executive Officer.
SECTION 7. EXECUTIVE, GROUP AND SENIOR VICE PRESIDENTS. Each Executive,
Group, or Senior Vice President shall be responsible for supervising and
coordinating a major area of the Corporation's activities subject to the
direction of the Chief Executive Officer or the President.
SECTION 8. VICE PRESIDENTS. Each of the Vice Presidents shall be
responsible for those activities designated by an Executive, Group, or Senior
Vice President, the President, the Chief Executive Officer or by the Board of
Directors.
<PAGE>
BY-LAWS
SECTION 9. TREASURER. The Treasurer shall administer the investment,
financing, insurance and credit activities of the Corporation.
SECTION 10. SECRETARY. The Secretary will be the custodian of the corporate
records and of the seal of the Corporation, will countersign certificates for
shares of the Corporation, and in general will perform all duties incident to
the office of the Secretary. The Secretary shall have the authority to certify
the By-Laws, resolutions of the shareholders and the Board of Directors and
committees thereof, and other documents of the Corporation as true and correct
copies hereof.
SECTION 11. CONTROLLER. The Controller will conduct the accounting
activities of the Corporation, including the maintenance of the Corporation's
general and supporting ledgers and books of account, operating budgets, and the
preparation and consolidation of financial statements.
SECTION 12. GENERAL COUNSEL. The General Counsel will be the chief
consultant of the Corporation on legal matters. He or she will supervise all
matters of legal import concerning the interests of the Corporation.
SECTION 13. ASSISTANT TREASURER. The Assistant Treasurer shall, in the
absence or incapacity of the Treasurer, perform the duties and exercise the
powers of the Treasurer, and shall perform such other duties as shall from time
to time be given to him or her by the Treasurer.
SECTION 14. ASSISTANT SECRETARY. The Assistant Secretary shall, in the
absence or incapacity of the Secretary, perform the duties and exercise the
powers of the Secretary, and shall perform such other duties as shall from time
to time be given to him or her by the Secretary. The Assistant Secretary shall
be, with the Secretary, keeper of the books, records, and the seal of the
Corporation, and shall have the authority to certify the By-Laws, resolutions
and other documents of the Corporation.
SECTION 15. GENERAL POWERS OF OFFICERS. The Chairman of the Board, the
Chief Executive Officer, the President, and any Executive, Group or Senior Vice
President, may sign without countersignature any deeds, mortgages, bonds,
contracts, reports to public agencies, or other instruments whether or not the
Board of Directors has expressly authorized execution of such instruments,
except in cases where the signing and execution thereof shall be expressly
delegated by the Board of Directors or by these By-Laws solely to some other
Officer or agent of the Corporation, or shall be required by law to be otherwise
signed or executed. Any other Officer of this Corporation may sign contracts,
reports to public agencies, or other instruments which are in the regular course
of business and within the scope of his or her authority, except where the
signing and execution thereof shall be expressly delegated by the Board of
Directors or by these By-Laws to some other Officer or agent of the Corporation,
or shall be required by law to be otherwise signed or executed.
<PAGE>
BY-LAWS
ARTICLE VI
CERTIFICATES FOR SHARES AND THEIR TRANSFER
SECTION 1. CERTIFICATES FOR SHARES. Certificates representing shares of the
Corporation shall be in such form as may be determined by the Board of
Directors. Such certificates shall be signed by any one of the Chairman of the
Board, the Chief Executive Officer, the President or an Executive Vice
President, and shall be countersigned by the Secretary or an Assistant Secretary
and shall be sealed with the seal, or a facsimile of the seal, of the
Corporation. If a certificate is countersigned by a Transfer Agent or Registrar,
other than the Corporation itself or its employee, any other signatures or
countersignature on the certificate may be facsimiles. In case any Officer of
the Corporation, or any officer or employee of the Transfer Agent or Registrar
who has signed or whose facsimile signature has been placed upon such
certificate ceases to be an Officer of the Corporation, or an officer or
employee of the Transfer Agent or Registrar before such certificate is issued,
the certificate may be issued by the Corporation with the same effect as if the
Officer of the Corporation, or the officer or employee of the Transfer Agent or
Registrar had not ceased to be such at the date of its issue. Each certificate
representing shares shall state: that the Corporation is organized under the
laws of the State of Illinois; the name of the person to whom issued; the number
and class of shares; and the designation of the series, if any, which such
certificate represents. Each certificate shall be consecutively numbered or
otherwise identified. The name of the person to whom the shares represented
thereby are issued, with the number of shares and date of issue, shall be
entered on the books of the Corporation. All certificates surrendered to the
Corporation for transfer shall be canceled, and no new certificate shall be
issued in replacement until the former certificate for a like number of shares
shall have been surrendered and canceled, except in the case of lost, destroyed
or mutilated certificates.
SECTION 2. TRANSFER AGENT AND REGISTRAR. The Board of Directors may from
time to time appoint such Transfer Agents and Registrars in such locations as it
shall determine, and may, in its discretion, appoint a single entity to act in
the capacity of both Transfer Agent and Registrar in any one location.
SECTION 3. TRANSFER OF SHARES. Transfers of shares of the Corporation shall
be made only on the books of the Corporation at the request of the holder of
record thereof or of his attorney, lawfully constituted in writing, and on
surrender for cancellation of the certificate for such shares. The person in
whose name shares stand on the books of the Corporation shall be deemed the
owner thereof for all purposes as regards the Corporation.
SECTION 4. LOST, DESTROYED OR MUTILATED CERTIFICATES. In case of lost,
destroyed or mutilated certificates, duplicate certificates shall be issued to
the person claiming the loss, destruction or mutilation, provided:
(a) That the claimant furnishes an affidavit stating the facts of such
loss, destruction or mutilation so far as known to him or her and
further stating that the affidavit is
<PAGE>
BY-LAWS
made to induce the Corporation to issue a duplicate certificate or
certificates; and that issuance of the duplicate certificate or
certificates is approved:
(i) in a case involving a certificate or certificates for more than
1,000 shares, by the Chairman of the Board, the Chief Executive
Officer, the President, an Executive Vice President, or the
Secretary; or
(ii) in a case involving a certificate or certificates for 1,000
shares or less, by the Transfer Agent appointed by the Board of
Directors for the transfer of the shares represented by such
certificate or certificates;
upon receipt of a bond, with one or more sureties, in the amount to be
determined by the party giving such approval; or
(b) that issuance of the said duplicate certificate or certificates is
approved by the Board of Directors upon such terms and conditions as
it shall determine.
ARTICLE VII
FISCAL YEAR
The fiscal year of the Corporation shall begin on the first day of January
in each year and end on the last day of December in each year.
ARTICLE VIII
VOTING SHARES OR INTERESTS IN OTHER CORPORATIONS
The Chairman of the Board, the Chief Executive Officer, the President, an
Executive, Group, or Senior Vice President and each of them, shall have the
authority to act for the Corporation by voting any shares or exercising any
other interest owned by the Corporation in any other corporation or other
business association, including wholly or partially owned subsidiaries of the
Corporation, such authority to include, but not be limited to, power to attend
any meeting of any such corporation or other business association, to vote
shares in the election of directors and upon any other matter coming before any
such meeting, to waive notice of any such meeting and to consent to the holding
thereof without notice, and to appoint a proxy or proxies to represent the
Corporation at any such meeting with all the powers that the said Officer would
have under this section if personally present.
<PAGE>
BY-LAWS
ARTICLE IX
DISTRIBUTIONS TO SHAREHOLDERS
BY-LAWS
The Board of Directors may authorize, and the Corporation may make,
distributions to its shareholders, subject to any restriction in the Articles of
Incorporation and subject also to the limitations prescribed by law.
ARTICLE X
SEAL
The Corporate Seal of the Corporation shall be in the form of a circle in
the center of which is the insignia "1" and shall have inscribed thereon the
name of the Corporation and the words "an Illinois Corporation."
ARTICLE XI
WAIVER OF NOTICE
Whenever any notice whatever is required to be given under the provisions
of these By-Laws or under the provisions of the Articles of Incorporation or
under the provisions of The Business Corporation Act of 1983, a waiver thereof
in writing, signed by the person or persons entitled to such notice, whether
before or after the time stated therein, shall be deemed equivalent to the
giving of such notice. Attendance at any meeting shall constitute waiver of
notice thereof unless the person at the meeting objects to the holding of the
meeting because proper notice was not given.
ARTICLE XII
AMENDMENTS
These By-Laws may be made, altered, amended or repealed by the shareholders
or the Board of Directors.
<PAGE>
Exhibit 12
Abbott Laboratories
Computation of Ratio of Earnings to Fixed Charges
(Unaudited)
(dollars in millions except ratios)
<TABLE>
<CAPTION>
Three Months Ended
March 31, 2000
------------------
<S> <C>
Net Earnings ...................................................... $693
Add (deduct):
Taxes on earnings ............................................ 256
Minority interest ............................................ 2
------
Net Earnings as adjusted .......................................... $951
------
Fixed Charges:
Interest on long-term and short-term debt .................... 32
Capitalized interest cost .................................... (1)
Rental expense representative of an interest factor .......... 11
------
Total Fixed Charges ............................................... 42
------
Total adjusted earnings available for payment of fixed charges .... $993
======
Ratio of earnings to fixed charges ................................ 23.6
======
</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) Abbott 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.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS FOR THE THREE MONTHS ENDED MARCH
31, 2000, AND THE CONDENSED CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 2000, AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S.DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1
<CASH> 680,894
<SECURITIES> 94,453
<RECEIVABLES> 2,176,481
<ALLOWANCES> 235,001
<INVENTORY> 1,622,309
<CURRENT-ASSETS> 6,727,906
<PP&E> 9,891,241
<DEPRECIATION> 5,110,228
<TOTAL-ASSETS> 14,960,923
<CURRENT-LIABILITIES> 4,500,645
<BONDS> 1,326,746
0
0
<COMMON> 2,001,434
<OTHER-SE> 5,872,133
<TOTAL-LIABILITY-AND-EQUITY> 14,960,923
<SALES> 3,353,178
<TOTAL-REVENUES> 3,353,178
<CGS> 1,496,447
<TOTAL-COSTS> 1,496,447
<OTHER-EXPENSES> 321,367<F1>
<LOSS-PROVISION> (2,256)
<INTEREST-EXPENSE> 32,215
<INCOME-PRETAX> 949,256
<INCOME-TAX> 256,299
<INCOME-CONTINUING> 692,957
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 692,957
<EPS-BASIC> 0.45
<EPS-DILUTED> 0.44
<FN>
<F1>OTHER EXPENSES CONSIST OF RESEARCH AND DEVELOPMENT EXPENSE.
</FN>
</TABLE>
