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, 1994
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
One Abbott Park Road
Abbott Park, Illinois 60064-3500
Telephone: (708) 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 30, 1994, the Corporation had 815,359,828 common shares without par
value outstanding.
PART 1 FINANCIAL INFORMATION
ABBOTT LABORATORIES AND SUBSIDIARIES
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1
ABBOTT LABORATORIES AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
(UNAUDITED)
(Dollars in Thousands Except Per Share Data)
THREE MONTHS ENDED MARCH 31
---------------------------
1994 1993
---------- ----------
Net Sales................................... $2,215,248 $2,045,613
---------- ----------
Cost of products sold....................... 964,272 933,175
Research and development.................... 226,797 202,110
Selling, general and administrative......... 497,184 464,823
---------- ----------
Total Operating Cost and Expenses......... 1,688,253 1,600,108
---------- ----------
Operating Earnings.......................... 526,995 445,505
---------- ----------
Interest expense............................ 11,496 14,170
Interest and dividend income................ (8,430) (9,686)
Other (income) expense, net................. 738 (38,890)
---------- ----------
Earnings Before Taxes....................... 523,191 479,911
Taxes on earnings........................... 156,957 134,375
---------- ----------
Net Earnings................................ $ 366,234 $ 345,536
---------- ----------
---------- ----------
Net Earnings Per Common Share............... $.45 $.41
---------- ----------
---------- ----------
Cash Dividends Declared
Per Common Share.......................... $.19 $.17
---------- ----------
---------- ----------
The accompanying notes to condensed consolidated financial statements are an
integral part of this statement.
2
ABBOTT LABORATORIES AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(Dollars in Thousands)
MARCH 31 DECEMBER 31
----------- -----------
1994 1993
----------- -----------
ASSETS (unaudited)
Current Assets:
Cash and cash equivalents....................................... $ 171,063 $ 300,676
Investment securities........................................... 36,543 78,149
Trade receivables, less allowances of $117,365 in 1994
and $116,925 in 1993.......................................... 1,350,307 1,336,222
Inventories:
Finished products............................................. 509,341 476,548
Work in process............................................... 224,006 216,493
Materials..................................................... 249,892 247,492
----------- -----------
Total Inventories........................................... 983,239 940,533
Prepaid income taxes............................................ 466,673 458,026
Other prepaid expenses and receivables.......................... 512,659 471,929
----------- -----------
Total Current Assets........................................ 3,520,484 3,585,535
----------- -----------
Investment Securities Maturing after One Year..................... 289,563 221,815
----------- -----------
Property and Equipment, at Cost................................... 6,407,647 6,221,146
Less: accumulated depreciation and amortization................ 2,823,906 2,710,155
----------- -----------
Net Property and Equipment.................................. 3,583,741 3,510,991
Deferred Charges and Other Assets................................. 353,628 370,228
----------- -----------
$ 7,747,416 $ 7,688,569
----------- -----------
----------- -----------
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current Liabilities:
Short-term borrowings and current portion of long-term debt..... $ 675,432 $ 843,594
Trade accounts payable.......................................... 602,829 638,509
Salaries, income taxes, dividends payable, and other accruals... 1,775,869 1,612,830
----------- -----------
Total Current Liabilities................................... 3,054,130 3,094,933
----------- -----------
Long-Term Debt.................................................... 306,855 306,840
----------- -----------
Other Liabilities and Deferrals................................... 634,673 611,867
----------- -----------
Shareholders' Investment:
Preferred shares, $1 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 -
1994: 826,455,175 shares; 1993: 830,941,614 shares.......... 480,310 469,828
Earnings employed in the business................................. 3,422,903 3,364,952
Cumulative translation adjustments................................ (93,278) (100,716)
----------- -----------
3,809,935 3,734,064
Less:
Common shares held in treasury, at cost -
1994 and 1993: 9,811,930 shares................................. 51,783 51,783
Unearned compensation - restricted stock awards................... 6,394 7,352
----------- -----------
Total Shareholders' Investment.............................. 3,751,758 3,674,929
----------- -----------
$ 7,747,416 $ 7,688,569
----------- -----------
----------- -----------
The accompanying notes to condensed consolidated financial statements are an
integral part of this statement.
3
ABBOTT LABORATORIES AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
(Dollars in Thousands)
THREE MONTHS ENDED MARCH 31
---------------------------
1994 1993
--------- ---------
Cash Flow from (Used in) Operating Activities:
Net earnings....................................... $ 366,234 $ 345,536
Adjustments to reconcile net earnings to
net cash from operating activities -
Depreciation and amortization...................... 132,340 119,292
Trade receivables.................................. (17,441) (126,252)
Inventories........................................ (39,850) (29,575)
Other, net......................................... 105,562 126,952
--------- ---------
Net Cash from Operating Activities............. 546,845 435,953
--------- ---------
Cash Flow from (Used in) Investing Activities:
Acquisitions of property, equipment and businesses. (212,163) (211,840)
Investment securities transactions................. (26,092) (57,807)
Other.............................................. 12,968 30,623
--------- ---------
Net Cash (Used in) Investing Activities........ (225,287) (239,024)
--------- ---------
Cash Flow from (Used in) Financing Activities:
Borrowing transactions............................. (169,232) (45,359)
Common share transactions.......................... (142,625) (89,581)
Dividends paid..................................... (139,552) (125,391)
--------- ---------
Net Cash (Used in) Financing Activities........ (451,409) (260,331)
--------- ---------
Effect of exchange rate changes on cash and
cash equivalents................................... 238 (1,658)
--------- ---------
Net (Decrease) in Cash and Cash Equivalents.......... (129,613) (65,060)
Cash and Cash Equivalents, Beginning of Year......... 300,676 116,576
--------- ---------
Cash and Cash Equivalents, End of Period............. $ 171,063 $ 51,516
--------- ---------
--------- ---------
The accompanying notes to condensed consolidated financial statements are an
integral part of this statement.
4
ABBOTT LABORATORIES AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1994
(UNAUDITED)
NOTE 1 - BASIS OF PREPARATION:
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 financial position, cash flows, and results of
operations have been made. It is suggested that these statements be read in
conjunction with the financial statements included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1993.
NOTE 2 - EARNINGS PER COMMON SHARE:
Earnings per common share amounts are computed by using the weighted average
number of common shares outstanding. These shares averaged 818,988,000 for the
three months ended March 31, 1994 and 834,693,000 for the same period in 1993.
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 tax incentive grants related to subsidiaries operating in
Puerto Rico and Ireland. The increase in the effective tax rate from 28 percent
in 1993 to 30 percent in 1994 is due primarily to the increase in the statutory
U.S. federal income tax rate and the reduction in the tax incentive grants for
operations in Puerto Rico.
5
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1994
(Unaudited), Continued
NOTE 4 - 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 and pharmaceutical products.
The Company is also involved in numerous product liability cases, many of which
allege injuries to the offspring of women who ingested a synthetic estrogen
(DES) during pregnancy. 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, and in Part II, Item 1, Legal Proceedings, in this
Form.
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.
6
FINANCIAL REVIEW
RESULTS OF OPERATIONS - FIRST QUARTER 1994 COMPARED WITH FIRST QUARTER 1993
Worldwide sales for the first quarter increased 8.3 percent to $2.215 billion
from $2.046 billion in 1993. Net earnings and earnings per share increased
6.0 percent and 9.8 percent, respectively, over the prior year quarter.
Gross profit margin (sales less cost of products sold, including freight and
distribution expenses) of 56.5 percent for the first quarter was up from
54.4 percent a year ago. This increase was primarily due to product mix and
continued productivity improvements.
Research and development expenses increased to $226.8 million in the first
quarter 1994. This represented 10.2 percent of net sales, compared to
9.9 percent in 1993. The majority of research and development expenditures
continues to be concentrated on pharmaceutical and diagnostic products.
Selling, general and administrative expenses increased 7.0 percent over the
comparable 1993 quarter. The increase reflects additional selling and marketing
support for new and existing products, primarily for pharmaceutical and
nutritional products, and litigation expenses.
Other (income) expense, net, includes exchange losses of $12.2 million in the
1994 first quarter, compared with net losses of $4.3 million in the same quarter
last year. Also included in the 1993 first quarter is the gain on the sale of
the Company's peritoneal dialysis product line.
The effective income tax rate increased from 28 percent in 1993 to 30 percent in
1994 due primarily to the increase in the statutory U.S. federal income tax rate
and the reduction in tax incentive grants for Puerto Rico operations.
7
FINANCIAL REVIEW
(continued)
INDUSTRY SEGMENTS
Industry segment sales for the first quarter 1994 and the related change from
the comparable 1993 period are shown in the table below. The Pharmaceutical and
Nutritional Products segment includes 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. The
Hospital and Laboratory Products segment includes 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.
Domestic and international sales for the first quarter reflect unit growth, and
international sales were adversely affected 4.3 percent due to the relatively
stronger U.S. dollar.
First Quarter
- - ---------------------------------------------------------------------------
SEGMENT SALES 1994 Percent
(in millions of dollars) Sales Increase
- - ---------------------------------------------------------------------------
Pharmaceutical and Nutritional Products:
Domestic $ 845.1 15.7
- - ---------------------------------------------------------------------------
International 379.1 7.6
- - ---------------------------------------------------------------------------
1,224.2 13.1
Hospital and Laboratory Products:
Domestic 563.4 2.8
- - ---------------------------------------------------------------------------
International 427.6 3.1
- - ---------------------------------------------------------------------------
991.0 2.9
Total All Segments:
Domestic 1,408.5 10.2
- - ---------------------------------------------------------------------------
International 806.7 5.2
- - ---------------------------------------------------------------------------
$2,215.2 8.3
- - ---------------------------------------------------------------------------
- - ---------------------------------------------------------------------------
8
FINANCIAL REVIEW
(continued)
LIQUIDITY AND CAPITAL RESOURCES AT MARCH 31, 1994
COMPARED WITH DECEMBER 31, 1993
Net cash from operating activities for the first quarter 1994 totaled
$547 million. The Company expects annual cash flow from operating activities to
continue to approximate or exceed the Company's capital expenditures and cash
dividends.
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
$300 million at March 31, 1994.
During the first quarter 1994, the Company continued its program to purchase its
common shares. The Company purchased and retired 5,355,000 shares during this
period at a cost of $154 million. As of March 31, 1994, an additional 8,746,000
shares may be purchased in future periods under authorization granted by the
Board of Directors in September 1993.
LEGISLATIVE ISSUES
The Company's primary markets are highly competitive and subject to substantial
government regulation. In the U.S., comprehensive legislation may be enacted
that could make significant changes to the availability, delivery and payment
for health care 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.
9
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company's 10-K for the fiscal year ended December 31, 1993
described 7 antitrust suits and 6 investigations (as of January 31, 1994)
regarding the Company's marketing and sale of infant formula products. Five new
antitrust suits regarding the Company's marketing and sale of infant formula
products have commenced since January 31, 1994: on February 11, 1994, a case
was filed in the District Court of Harrison County, Texas; on March 2, 1994, a
case was filed in the Circuit Court for Okaloosa County, Florida; on March 2,
1994, a case was filed in the Circuit Court for Milwaukee County, Wisconsin (the
defendants have removed this case to federal court in Milwaukee); on March 9,
1994, a case was filed in the Circuit Court for the County of Calhoun, Michigan;
and on March 10, 1994, a case was filed in the Eighteenth Judicial District
court for Sedgwick County, Kansas. Each purports to be a state consumer class
action; alleges violation of state antitrust and trade practices laws; asks for
unspecified actual and punitive damages, injunctive relief, and declaratory
judgment; and names the Company and certain other infant formula manufacturers
as defendants. In addition, a purported class action filed on behalf Texas
consumers, which had been originally brought as a part of a case filed by the
State of Texas and which had been severed for appeal of the defendants'
successful motion for summary judgment, has been reinstated as a separate case,
SEGURA V. ABBOTT LABORATORIES, ET. AL., and is now pending in state court in
Travis County, Texas. The Company intends to defend itself in these suits and
to deny all substantive allegations. As of March 31, 1994 there are 13
antitrust suits and 6 investigations pending in connection with the Company's
sale and marketing of infant formula products.
The Company's 10-K for the fiscal year ended December 31, 1993
described 22 antitrust suits (as of January 31, 1994) regarding the Company's
sale of prescription pharmaceuticals. Additional lawsuits were filed in various
federal courts after January 31, 1994. On February 4, 1994 all pending federal
cases were consolidated in the United States District Court for the Northern
District of Illinois under Multidistrict Litigation rules. All of the federal
class action cases, except for BACON-NORMANDI V. ABBOTT LABORATORIES, ET AL.,
were withdrawn and refiled on March 7, 1994 in the United States District Court
for the Northern District of Illinois as a single purported class action known
as HJB, ET AL. V. ABBOTT LABORATORIES, ET AL.. Plaintiffs seek unspecified
treble damages, attorneys' fees, and declaratory and injunctive relief. As of
March 31, 1994, there are 16 antitrust suits pending in connection with the
Company's sale of prescription pharmaceuticals. The Company intends to defend
itself in these suits and to deny all substantive allegations.
On February 23, 1994, the United States Environmental Protection
Agency (the "EPA") instituted a civil administrative proceeding by filing a
complaint alleging that the Company burned hazardous waste at its North Chicago
facility in violation of the Resource Conservation and Recovery Act ("RCRA").
The complaint seeks penalties of $991,775. The EPA simultaneously issued an
Administrative Order requiring the Company to take certain actions to ensure
future compliance with the RCRA. The Company filed an answer to the complaint
denying all substantive allegations.
10
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its Annual Meeting of Shareholders on April 29, 1994.
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:
Director For Withheld
- - -------- --- --------
K. Frank Austen, M.D. 703,219,794 2,946,586
Duane L. Burnham 701,988,161 4,178,219
H. Laurance Fuller 703,311,909 2,854,471
The Lord Hayhoe PC 703,169,923 2,996,457
Thomas R. Hodgson 703,182,785 2,983,595
Allen F. Jacobson 702,405,668 3,760,712
David A. Jones 702,162,220 4,004,160
Boone Powell, Jr. 703,332,637 2,833,743
Addison Barry Rand 703,250,380 2,916,000
W. Ann Reynolds, Ph.D. 701,744,361 4,422,019
William D. Smithburg 703,303,070 2,863,310
John R. Walter 702,335,593 3,830,787
William L. Weiss 701,585,671 4,580,709
(b) The shareholders ratified the appointment of Arthur Andersen &
Co. as auditors of the Company.
For Against Abstaining
--- ------- ----------
701,969,583 2,016,938 2,179,859
(c) The shareholders approved the Amendment of the Company's Articles
of Incorporation which limits certain liabilities of directors and provides for
the indemnification of the Company's directors, officers and employees to the
extent permitted by Illinois law.
For Against Abstaining
--- ------- ----------
673,596,537 27,969,380 4,600,463
(d) The shareholders rejected a shareholder proposal that requested
the Company's Board of Directors to create and adopt a price policy for its
pharmaceutical products and to report to the shareholders on such policy.
For Against Abstain Broker Non-Vote
--- ------- ------- ---------------
16,569,362 602,533,406 11,735,125 75,328,487
11
(e) The shareholders rejected a shareholder proposal regarding infant
formula supply to hospitals.
For Against Abstain Broker Non-Votes
--- ------- ------- ----------------
23,076,687 551,757,669 56,003,537 75,328,487
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
3.1 Articles of Incorporation
3.2 Amendment to Articles of Incorporation
11 Statement re: computation of per share earnings - attached
hereto.
12 Statement re: computation of ratio of earnings to fixed
charges.
b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended
March 31, 1994.
SIGNATURE
Pursuant to the requirements of the Securities 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
Date: May 13, 1994 /s/Theodore A. Olson
---------------------------------------
Theodore A. Olson, Vice President
and Controller (Principal
Accounting Officer)
12
EXHIBIT 3.1
A B B 0 T T
L A B 0 R A T 0 R I E S
RESTATED ARTICLES OF INCORPORATION
RESTATED ARTICLE R-I
1. The name of the corporation is: Abbott Laboratories.
2. The corporation was incorporated March 6, 1900 under the name: The Abbott
Alkaloidal Company.
3. Subsequent corporate names and the dates of their adoption are:
Name Date Adopted
-------------------- ------------
Abbott Laboratories May 29, 1915
RESTATED ARTICLE R-II
The address of its registered office in the State of Illinois on the date of
adoption of this Amendment and Restatement of Articles of Incorporation was:
14th Street and Sheridan Road, North Chicago, Illinois, County of Lake, and the
name of its Registered Agent at said address was: Laurence R. Lee.
RESTATED ARTICLE R-III
The duration of the corporation is: Perpetual.
RESTATED ARTICLE R-IV
The purpose or purposes for which the corporation is organized are:
(1) To manufacture, purchase or otherwise acquire, own, sell, mortgage,
pledge, assign, convey, transfer, or otherwise dispose of, to invest, trade,
deal in and deal with all kinds of medicines, medicinal preparations and
supplies; chemical products, pharmaceutical products, drugs, druggists'
sundries, surgical instruments, dressings and supplies, dental instruments,
dressings and supplies, dentifrices, preparations used by dentists, and in
dentistry and oral surgery; hospital preparations and supplies; medicines,
preparations and instruments used in the cure and care
of animals; perfumes and perfumery, toilet preparations, and other articles
generally dealt in the retail drug trade; instruments, supplies and preparations
used for medicinal, sanitary and other health purposes; and in general all
instruments, preparations and supplies that appertain to pharmacy, pharmacology,
medicines, drugs, sanitation and health.
(2) To own and operate laboratories for experimentation and research in
the fields of chemistry, pharmacology, biology and physics, or such other fields
as the corporation may engage in under its charter.
(3) To manufacture, purchase, or in any manner acquire, own, mortgage,
pledge, sell, assign, convey, transfer, or otherwise dispose of, to invest,
trade, deal in and deal with, goods, wares and merchandise, and personal
property of every class and description wherever situated or located.
(4) To develop, apply for, purchase, lease, acquire, hold, use, take or
grant licenses in respect of, mortgage, pledge, lease, sell, assign or otherwise
dispose of, letters patent of the United States or any foreign country, patent
rights, licenses, privileges, inventions, devices, improvements, and processes,
formulas, copyrights, trade marks and trade names.
(5) To purchase or otherwise acquire the whole or any part of the
property, assets, business, good will and rights and to undertake or assume the
whole or any part of the bonds, mortgages, franchises, leases, contracts,
indebtedness, liabilities and obligations of any person, firm, association,
corporation or organization, and to pay for the same or any part or combination
thereof in cash, shares of the capital stock, bonds, debentures, debenture
stock, notes, or other obligations of the corporation or otherwise, or by
undertaking and assuming the whole or any part of the liabilities or obligations
of the transferor; and to hold or in any manner dispose of the whole or any part
of the property and assets so acquired, and to conduct in any lawful manner the
whole or any part of the business so acquired and to exercise all the powers
necessary or convenient in and about the conduct, management and carrying on of
such business.
(6) To purchase, subscribe for, acquire, own, hold, sell, exchange,
assign, transfer, mortgage, pledge or otherwise dispose of shares of voting
trust certificates for shares of the capital stock, or any bonds, notes,
securities or evidence of indebtedness created by any other corporation or
corporations organized under the laws of this state or any other state or
district or country, nation or government to issue in exchange therefor shares
of the capital stock, bonds, notes or other obligations of the corporation and
while the owners thereof to exercise all the rights, powers and privileges of
ownership including the right to
2
vote on any shares of stock or voting trust certificates so owned; to promote,
lend money to any corporation or association of which any bonds, stocks, voting
trust certificates, or other securities or evidences of indebtedness shall be
held by or for this corporation, or in which or in the welfare of which, this
corporation shall have any interest, and to do any acts and things permitted by
law and designed to protect, preserve, improve or enhance the value of any such
bonds, stocks or other securities or evidences of indebtedness or the property
of this corporation.
(7) In general, to carry on any other lawful business whatsoever in
connection with the foregoing or which is calculated directly or indirectly to
promote the interest of the corporation or to enhance the value of its
properties and to have and exercise all the rights, powers and privileges, which
are now or may hereafter be conferred by the laws of Illinois, to execute, from
time to time, general or special powers of attorney to persons, firms,
associations or corporations either in the United States or in any other
country, state or locality, and to revoke same as and when the Board of
Directors may determine; and so far as law will permit, to do any or all of the
things hereinbefore set forth to the same extent as natural persons might or
could do, and in any part of the world, either as principal, agent, contractor,
or otherwise, or through corporations of which it may own the stock or
securities, or any part thereof, or otherwise, and either alone or in company
with others.
(8) To have all other powers possessed by corporations organized or
operating under the general corporation law of the State of Illinois.
RESTATED ARTICLE R-V
The aggregate number of shares which the Corporation is authorized to issue is
1,201,000,000 divided into two classes. The designation of each class, the
number of shares of each class, and the par value, if any, of the shares of each
class, or a statement that the shares of any class are without par value, are as
follows:
3
Par Value per
Share or State-
ment that Shares
Series Number of are Without Par
Class (if any) Shares Value
- - --------------- -------- --------- ----------------
Preferred Shares Issuable in 1,000,000 $1 per share
series
Common Shares None 1,200,000,000 Without par value
The preferences, qualifications, limitations, restrictions and the special or
relative rights in respect of the shares of each class are:
SECTION A
The Preferred Shares
1. The Preferred Shares may be issued in one or more series and with such
designation for each such series sufficient to distinguish the shares thereof
from the shares of all other series and classes, as shall be stated and
expressed in the resolution or resolutions providing for the issue of each such
series adopted by the Board of Directors. The Board of Directors in any such
resolution or resolutions is hereby expressly authorized to divide the Preferred
Shares into series and to fix and determine the relative rights and preferences
of the shares of any series so established as to:
(i) The rate per annum at which the holders of shares shall be
entitled to receive dividends.
(ii) The price at and the terms and conditions on which shares may be
redeemed.
(iii) The amount payable upon shares in event of involuntary
liquidation.
(iv) The amount payable upon shares in event of voluntary liquidation.
(v) The sinking fund provisions, if any, for the redemption or
purchase of shares.
(vi) The terms and conditions on which shares may be converted, if the
shares are issued with the privilege of conversion.
The Board of Directors may increase the number of shares designated for any
existing series by a resolution adding to such
4
series authorized and unissued Preferred Shares not designated for any other
series.
2. All preferred Shares of any one series shall be identical with each other
in all respects, except that shares of any one series issued at different times
as provided in paragraph 3 of this Section A, may differ as to the dates from
which dividends thereon shall be cumulative.
3. Before any dividends on the Common Shares or on any other class or classes
of shares of the Corporation, ranking junior to the Preferred Shares with
respect to payment of dividends, shall be paid or declared or set apart for
payment, the holders of Preferred Shares shall be entitled to receive when and
as declared by the Board of Directors, cumulative cash dividends, out of any
funds legally available for the declaration of dividends and in the case of each
series at the rate per annum, and no more, for the particular series fixed in
the resolution or resolutions providing for the issue of such series of
Preferred Shares, adopted by the Board of Directors, payable quarterly on such
dates, in each year, as may be fixed in such resolution or resolutions. With
respect to each series of the Preferred Shares, such dividends shall be
cumulative from the respective dates of issue thereof. No dividends shall be
paid on any series of the Preferred Shares in respect of any dividend period
unless all cumulative dividends accrued prior to said dividend period with
respect to all Preferred Shares of each other series shall have been paid or
declared and set aside for payment.
4. The holders of Preferred Shares shall be entitled to vote as a class and
otherwise as provided by law.
5. Preferred shares which have been redeemed or shall have been purchased,
converted or otherwise acquired by the Corporation may thereafter be reissued
under such terms and conditions, not inconsistent with the provisions of this
Section A, as the Board of Directors may thereafter determine.
6. In the event of any voluntary or involuntary liquidation, dissolution or
winding up of the Corporation, and before any distribution of the assets of the
Corporation shall be made to or set apart for the holders of the Common Shares
or of any other class of shares of the Corporation ranking junior to the
Preferred Shares with respect to payment of dividends or upon dissolution,
liquidation or winding up of the Corporation, the holders of the shares of each
series of the Preferred Shares then outstanding shall be entitled to receive
payment of such amount, as shall be stated and expressed in the resolution or
resolutions adopted by the Board of Directors providing for the issue of such
series; but such holders upon receipt of such payment shall be entitled to no
further payment.
5
7. In case of any liquidation, dissolution or winding up of the Corporation,
if the amounts payable with respect to all series of Preferred Shares then
outstanding are not paid in full, the shares of all series of the Preferred
Shares shall share proportionately in accordance with the respective amounts
which would be payable on said shares if all amounts payable were paid in full.
8. A consolidation or merger of the Corporation with or into one or more
corporations shall not be deemed to be a liquidation, dissolution or winding up
within the meaning of this Section A.
SECTION B
The Common Shares
1. Subject to the limitations set forth in Section A of this Restated Article
R-V, the holders of Common Shares shall be entitled to dividends if, when and as
the same shall be declared by the Board of Directors out of funds of the
Corporation legally available thereof.
2. The holders of Common Shares shall be entitled to vote as provided by law.
SECTION C
The Preferred and Common Shares
No holder of shares of any class of the Corporation shall be entitled as of
right to subscribe to or purchase any additional or increased shares of any
class (whether now or hereafter authorized), or obligations convertible into any
class or classes of shares (whether now or hereafter authorized), or shares of
any class convertible into shares of any other class or classes (whether now or
hereafter authorized), or obligations, shares or other securities carrying
warrants or rights to subscribe to shares of the Corporation of any class or
classes (whether now or hereafter authorized), but any and all shares, bonds,
debentures or other securities or obligations, whether or not convertible into
shares or carrying warrants entitling the holders thereof to subscribe to
shares, may be issued, sold or disposed of from time to time by the board of
Directors to such persons, firms or corporations and for such consideration (so
far as may be permitted by law, by the Articles of Incorporation of the
Corporation, and by the terms of any resolution creating any series of Preferred
Shares) as the Board of Directors shall from time to time in its absolute
discretion determine. Among other things the Board of Directors shall have the
right at any time and from time to time to offer, sell and issue shares of any
class of the Corporation, or obligations, shares or other securities
6
carrying warrants or rights to subscribe to shares of the Corporation of any
class or classes, to employees of the Corporation and to employees of
subsidiaries of the Corporation without first offering the same to its share
holders, for such prices or considerations, and upon such terms and conditions
as the Board of Directors shall from time to time determine, and upon any such
issuance and sale, or plan or proposal to issue and sell, the Board of Directors
may classify employees as in its discretion it may deem advisable, and may
differentiate between classes, and exclude any class from participation. The
fact that an employee may be a director or an officer of the Corporation, or any
of its subsidiaries, shall not disqualify him from participation as an employee
in any such issuance or sale to employees.
RESTATED ARTICLE R-VI
1. A director of the corporation shall not be personally liable to the
corporation or its shareholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach
of the director's duty of loyalty to the corporation or its
shareholders, (ii) for acts or omissions not in good faith or that
involve intentional misconduct or a knowing violation of law, (iii)
under Section 8.65 of the Illinois Business Corporation Act, or (iv)
for any transaction from which the director derived an improper
personal benefit; provided that the foregoing provision shall not
eliminate or limit the liability of a director for any act or omission
occurring before the date this provision became effective.
2. Any person who was or is a party, or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of
the fact that he or she is or was a director, officer, employee or
agent of the corporation, or who is or was serving at the request of
the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise,
shall, in the case of persons who are or were directors or officers of
the corporation, and may, as to such other persons, be indemnified
(and the corporation shall, in the case of persons who are or were
directors or officers of the corporation, and may, as to such other
persons, advance expenses incurred in defending such actions, suits or
proceedings) to the fullest extent now or hereafter permitted by law.
7
3. The foregoing right of indemnification and advancement of expenses
shall not be deemed exclusive of any other rights to which those
seeking indemnification or advancement of expenses may be entitled
under any bylaw, agreement, vote of shareholders or disinterested
directors or otherwise.
RESTATED ARTICLE R-VII
1. The class and number of shares issued on the date of adoption of this
Restatement of the Articles of Incorporation and the stated capital and paid-in
surplus as of such date were:
Stated Capital
Series Number of Par with Respect
Class (If Any) Shares Value Thereto
- - ----- -------- --------- ----- --------------
Common None 4,388,318 $5 $41,889,395.75
Paid-in Surplus $ None
Total Stated Capital and Paid-in Surplus $41,889,395.75
2. The class and number of shares and the stated capital and paid-in
surplus set forth in paragraph 1 above are changed by this Amendment and
Restatement as follows:
Effective as of the close of business on the date of filing this Amendment and
Restatement with the Secretary of State of Illinois each of the presently issued
Common Shares of $5 par value is hereby changed into three Common Shares without
par value authorized by this amendment to and restatement of Articles of
Incorporation. The amendment does not affect stated capital or paid-in surplus.
RESTATED ARTICLE R-VIII
The foregoing Restated Articles R-I to R-VII are an amendment constituting a
restatement of the Articles of Incorporation of Abbott Laboratories, effective
as of the date of issuance of the Certificate of Amendment of Articles of
Incorporation by the Secretary of State, and shall from that time supersede and
stand in lieu of the Corporation's pre-existing Articles of Incorporation.
8
ARTICLE R-IX
A majority of the directors then in office may fill one or more vacancies
occurring in the board of directors arising between meetings of shareholders by
reason of an increase in the number of directors or otherwise and any director
so elected 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
percent of the total membership of the board of directors.
9
Exhibit 3.2
Amendment to the Restated Articles of Incorporation
RESOLVED: That the Restated Articles of Incorporation of this corporation
be amended by substituting the following for Restated Article R-VI thereof:
RESTATED ARTICLE R-VI
1. A director of the corporation shall not be personally liable to
the corporation or its shareholders for monetary damages for
breach of fiduciary duty as a director, except for liability (i)
for any breach of the director's duty of loyalty to the
corporation or its shareholders, (ii) for acts or omissions not
in good faith or that involve intentional misconduct or a knowing
violation of law, (iii) under Section 8.65 of the Illinois
Business Corporation Act, or (iv) for any transaction from which
the director derived an improper personal benefit; provided that
the foregoing provision shall not eliminate or limit the
liability of a director for any act or omission occurring before
the date this provision became effective.
2. Any person who was or is a party, or is threatened to be made a
party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he or she is or was a
director, officer, employee or agent of the corporation, or who
is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall, in
the case of persons who are or were directors or officers of the
corporation, and may, as to such other persons, be indemnified
(and the corporation shall, in the case of persons who are or
were directors or officers of the corporation, and may, as to
such other persons, advance expenses incurred in defending such
actions, suits or proceedings) to the fullest extent now or
hereafter permitted by law.
3. The foregoing right of indemnification and advancement of
expenses shall not be deemed exclusive of any other rights to
which those seeking indemnification or advancement of expenses
may be entitled under any bylaw, agreement, vote of shareholders
or disinterested directors or otherwise.
EXHIBIT 11
ABBOTT LABORATORIES AND SUBSIDIARIES
CALCULATION OF FULLY DILUTED EARNINGS PER SHARE
(Dollars and Shares in Millions Except Per Share Amounts)
THREE MONTHS ENDED MARCH 31
---------------------------
1994 1993
-------- --------
1. Net earnings $ 366.2 $ 345.5
-------- --------
2. Average number of shares outstanding 819.0 834.7
-------- --------
3. Earnings per share based upon average
outstanding shares (1 DIVIDED BY 2) $ .45 $ .41
-------- --------
-------- --------
4. Fully diluted earnings per share:
a. Stock options granted and outstanding for which the
market price at quarter-end exceeds the option price 17.4 19.2
-------- --------
-------- --------
b. Aggregate proceeds to the Company from the exercise
of options in 4.a. $ 278.6 $ 282.6
-------- --------
-------- --------
c. Market price of the Company's common stock at
quarter-end $ 26.625 $ 25.75
-------- --------
-------- --------
d. Shares which could be repurchased under the
treasury stock method (4.b. DIVIDED BY 4.c.) 10.5 11.0
-------- --------
-------- --------
e. Addition to average outstanding shares (4.a. - 4.d.) 6.9 8.2
-------- --------
-------- --------
f. Shares for fully diluted earnings per share
calculation (2. + 4.e.) 825.9 842.9
-------- --------
-------- --------
g. Fully diluted earnings per share (1. DIVIDED BY 4.f.) $ .44 $ .41
-------- --------
-------- --------
EXHIBIT 12
ABBOTT LABORATORIES AND SUBSIDIARIES
CALCULATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Unaudited)
(Millions of Dollars)
THREE MONTHS
ENDED MARCH 31
1994
--------------
Net Earnings $ 366
Add (deduct):
Income taxes 157
Capitalized interest cost, net
of amortization (2)
Minority interest 3
-------
Net earnings as adjusted $ 524
-------
Fixed Charges:
Interest on long-term
and short-term debt 11
Capitalized interest cost 5
Rental expense representative
of an interest factor 6
-------
Total Fixed Charges 22
-------
Total adjusted earnings available
for payment of fixed charges $ 546
-------
-------
Ratio of earnings to fixed charges 24.8
-------
-------
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.
