UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 16, 2004
ABBOTT LABORATORIES
(Exact name of registrant as specified in its charter)
Illinois (State or other Jurisdiction of Incorporation) |
1-2189 (Commission File Number) |
36-0698440 (IRS Employer Identification No.) |
||
100 Abbott Park Road Abbott Park, Illinois 60064-6400 (Address of principal executive offices)(Zip Code) |
||||
Registrant's telephone number, including area code: (847) 937-6100 |
Item 7. Financial Statements and Exhibits
This exhibit is furnished pursuant to Item 12 hereof and should not be deemed to be "filed" under the Securities Exchange Act of 1934.
Exhibit No. |
Exhibit |
|
---|---|---|
99.1 | Press Release, dated January 16, 2004 (furnished pursuant to Item 12). |
Item 12. Results of Operations and Financial Condition
On January 16, 2004, Abbott Laboratories announced its results of operations for the fourth quarter and full year of 2003.
Furnished as Exhibit 99.1, and incorporated herein by reference, is the news release issued by Abbott announcing those results. In that news release, Abbott uses various non-GAAP financial measures including, among others: net earnings excluding one-time charges, diluted earnings per share excluding one-time charges, and gross margin excluding one-time charges. These non-GAAP financial measures adjust for factors that are unusual or unpredictable. Abbott's management believes the presentation of these non-GAAP financial measures provides useful information to investors regarding Abbott's results of operations as these non-GAAP financial measures allow investors to better evaluate ongoing business performance. Abbott's management also uses these non-GAAP financial measures internally to monitor performance of the businesses. Abbott, however, cautions investors to consider these non-GAAP financial measures in addition to, and not as a substitute for, financial measures prepared in accordance with GAAP.
2
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, hereunto duly authorized.
ABBOTT LABORATORIES | |||
By: |
/s/ THOMAS C. FREYMAN Thomas C. Freyman Senior Vice President, Finance and Chief Financial Officer |
||
Date: January 16, 2004 |
3
Exhibit No. |
Exhibit |
|
---|---|---|
99.1 | Press Release, dated January 16, 2004 (furnished pursuant to Item 12). |
4
For Immediate Release
ABBOTT REPORTS 14.3 PERCENT SALES INCREASE IN
THE FOURTH QUARTER; 11.3 PERCENT INCREASE FOR 2003
Fourth-Quarter Growth Driven by a 28 Percent Increase in U.S.
Pharmaceuticals
ABBOTT PARK, Ill., Jan. 16, 2004Abbott Laboratories today announced financial results for the fourth quarter ended Dec. 31, 2003.
"2003 was a year of many accomplishments for Abbott as we continued to reshape our businesses for longer-term growth," said Miles D. White, chairman and chief executive officer. "Our Pharmaceutical Products Group had another outstanding year, with the successful U.S. launch of HUMIRA, as well as strong double-digit growth from many of our major pharmaceutical products. In our Medical Products Group, we created a new operating model aligned with our strategy to focus on higher-growth, higher-margin products and businesses. We are especially pleased with the significant progress we have made implementing our quality initiatives and the positive results of the FDA's recent inspection of our Lake County diagnostics facility. The FDA assessment reflects the considerable effort of a large number of dedicated Abbott employees.
"Moving into 2004, our top priorities will be the continued worldwide launch of HUMIRA, the launch of several new products in our U.S. immunoassay business and the successful spin-off of Hospira, which will be one of the largest manufacturers of hospital products in the United States."
1
The following is a summary of fourth-quarter 2003 sales for each of Abbott's major operating divisions.
Sales Summary Quarter Ended 12/31/03 |
4Q03 ($ millions) |
Percent Change vs. 4Q02 |
Impact of Exchange on Percent Change |
|||||
---|---|---|---|---|---|---|---|---|
Total Sales | $ | 5,531 | 14.3 | 4.4 | ||||
Total U.S. Sales |
$ |
3,327 |
12.5 |
|
||||
Total International Sales (including direct exports from U.S.) |
$ |
2,204 |
17.1 |
11.3 |
||||
U.S. Pharmaceutical Sales |
$ |
1,594 |
27.8 |
|
||||
TAP Pharmaceutical Products Sales* (not consolidated in Abbott's sales) |
$ |
1,027 |
(7.7 |
) |
|
|||
U.S. Hospital Products Sales |
$ |
822 |
1.5 |
|
||||
Ross Products (U.S.) Sales |
$ |
539 |
7.4 |
|
||||
Worldwide Diagnostics Sales |
$ |
806 |
7.5 |
8.2 |
||||
U.S. Diagnostics |
$ |
246 |
(11.7 |
) |
|
|||
International Diagnostics |
$ |
560 |
18.8 |
13.1 |
||||
International Division Sales |
$ |
1,587 |
15.9 |
11.0 |
||||
International Pharmaceuticals |
$ |
939 |
15.3 |
12.5 |
||||
International Hospital Products |
$ |
242 |
16.6 |
11.3 |
||||
International Nutritionals |
$ |
406 |
17.0 |
7.5 |
Note: See complete "Consolidated Statement of Earnings" for more information.
* Sales for TAP Pharmaceutical Products Inc., Abbott's joint venture with Takeda Chemical Industries Ltd. of Osaka, Japan. While sales from the joint venture are not consolidated in Abbott's net sales, Abbott's portion of TAP's net income is included in a separate income line on the "Consolidated Statement of Earnings."
2
The following is a summary of 2003 sales for each of Abbott's major operating divisions.
Sales Summary Year Ended 12/31/03 |
Year Ended 12/31/03 ($ millions) |
Percent Change vs. 2002 |
Impact of Exchange on Percent Change |
|||||
---|---|---|---|---|---|---|---|---|
Total Sales | $ | 19,681 | 11.3 | 3.5 | ||||
Total U.S. Sales |
$ |
11,801 |
9.2 |
|
||||
Total International Sales (including direct exports from U.S.) |
$ |
7,880 |
14.5 |
9.1 |
||||
U.S. Pharmaceutical Sales |
$ |
5,220 |
22.3 |
|
||||
TAP Pharmaceutical Products Sales* (not consolidated in Abbott's sales) |
$ |
3,980 |
(1.4 |
) |
|
|||
U.S. Hospital Products Sales |
$ |
3,078 |
3.3 |
|
||||
Ross Products (U.S.) Sales |
$ |
2,136 |
2.3 |
|
||||
Worldwide Diagnostics Sales |
$ |
3,040 |
5.0 |
6.8 |
||||
U.S. Diagnostics |
$ |
1,024 |
(12.0 |
) |
|
|||
International Diagnostics |
$ |
2,016 |
16.3 |
11.4 |
||||
International Division Sales |
$ |
5,685 |
12.9 |
8.5 |
||||
International Pharmaceuticals |
$ |
3,394 |
13.8 |
10.2 |
||||
International Hospital Products |
$ |
880 |
12.0 |
8.2 |
||||
International Nutritionals |
$ |
1,411 |
11.3 |
4.7 |
Note: See complete "Consolidated Statement of Earnings" for more information.
* Sales for TAP Pharmaceutical Products Inc., Abbott's joint venture with Takeda Chemical Industries Ltd. of Osaka, Japan. While sales from the joint venture are not consolidated in Abbott's net sales, Abbott's portion of TAP's net income is included in a separate income line on the "Consolidated Statement of Earnings."
3
The following is a summary of Abbott's fourth-quarter 2003 sales for selected products.
Quarter Ended 12/31/03 |
U.S. ($ millions) |
Percent Change vs. 4Q02 |
Rest of World ($ millions) |
Percent Change vs. 4Q02 |
||||||
---|---|---|---|---|---|---|---|---|---|---|
Pharmaceutical Products Group | ||||||||||
Depakote |
$ |
288 |
(2.7 |
) |
$ |
11 |
15.9 |
|||
Biaxin (clarithromycin)* |
$ |
225 |
21.4 |
$ |
186 |
15.1a |
||||
Flomax |
$ |
194 |
15.0 |
$ |
11 |
60.0 |
||||
TriCor |
$ |
163 |
41.3 |
|
|
|||||
Synthroid |
$ |
153 |
132.8 |
$ |
12 |
46.7 |
||||
Kaletra |
$ |
105 |
17.1 |
$ |
113 |
67.3b |
||||
Omnicef* |
$ |
109 |
74.7 |
|
|
|||||
HUMIRA |
$ |
95 |
n/m |
$ |
24 |
n/m |
||||
Mobic |
$ |
93 |
45.9 |
|
|
|||||
Leuprolide |
|
|
$ |
50 |
11.4c |
|||||
Lansoprazole |
|
|
$ |
37 |
27.2d |
|||||
Medical Products Group |
||||||||||
Pediatric Nutritionals |
$ |
284 |
12.6 |
$ |
142 |
18.5 |
||||
Adult Nutritionals |
$ |
220 |
12.1 |
$ |
162 |
13.3e |
||||
Vascular Devices |
$ |
53 |
54.2 |
|
|
|||||
Ultane/Sevorane |
$ |
78 |
26.5 |
$ |
119 |
25.6f |
||||
MediSense Products |
$ |
50 |
(4.3 |
) |
$ |
91 |
20.6g |
|||
TAP Pharmaceutical Products (not consolidated in Abbott's sales) |
||||||||||
Prevacid |
$ |
828 |
(5.8 |
) |
|
|
||||
Lupron |
$ |
200 |
(13.7 |
) |
|
|
n/m = Percent change is not meaningful.
4
The following is a summary of Abbott's 2003 sales for selected products.
Year Ended 12/31/03 |
U.S. ($ millions) |
Percent Change vs. 2002 |
Rest of World ($ millions) |
Percent Change vs. 2002 |
||||||
---|---|---|---|---|---|---|---|---|---|---|
Pharmaceutical Products Group | ||||||||||
Depakote |
$ |
886 |
2.9 |
$ |
41 |
12.3 |
||||
Flomax |
$ |
689 |
24.7 |
$ |
35 |
54.9 |
||||
Synthroid |
$ |
565 |
15.5 |
$ |
44 |
42.9 |
||||
TriCor |
$ |
566 |
40.6 |
|
|
|||||
Biaxin (clarithromycin)* |
$ |
538 |
10.5 |
$ |
683 |
11.0a |
||||
Kaletra |
$ |
383 |
20.6 |
$ |
369 |
58.5b |
||||
Mobic |
$ |
320 |
40.0 |
|
|
|||||
HUMIRA |
$ |
246 |
n/m |
$ |
34 |
n/m |
||||
Omnicef* |
$ |
247 |
58.0 |
|
|
|||||
Leuprolide |
|
|
$ |
183 |
6.3c |
|||||
Lansoprazole |
|
|
$ |
132 |
25.4 |
|||||
Medical Products Group |
||||||||||
Pediatric Nutritionals |
$ |
1,093 |
9.0 |
$ |
527 |
8.4 |
||||
Adult Nutritionals |
$ |
809 |
(3.5 |
) |
$ |
591 |
11.9d |
|||
Vascular Devices |
$ |
185 |
44.7 |
|
|
|||||
Ultane/Sevorane |
$ |
257 |
16.3 |
$ |
417 |
20.6e |
||||
MediSense Products |
$ |
204 |
(0.4 |
) |
$ |
337 |
16.8f |
|||
TAP Pharmaceutical Products (not consolidated in Abbott's sales) |
||||||||||
Prevacid |
$ |
3,190 |
1.0 |
|
|
|||||
Lupron |
$ |
788 |
(10.1 |
) |
|
|
n/m = Percent change is not meaningful.
5
Business highlights
Abbott issues earnings-per-share guidance for full-year and first-quarter 2004
For the first time, Abbott is providing ongoing earnings-per-share guidance of $2.40 to $2.48 for the full-year 2004 and earnings-per-share guidance of $0.55 to $0.57 for the first-quarter 2004, both excluding one-time charges. (For specific assumptions related to the company's 2004 earnings guidance, please see the attached questions and answers section.)
Abbott expects one-time charges in 2004 related to the spin-off of its core hospital products business, as well as in-process research and development and integration costs associated with the recently announced acquisitions of i-STAT and TheraSense. The impact of these charges is estimated to be approximately $0.20 per share for the full-year 2004 and approximately $0.05 per share in the first-quarter 2004. In accordance with Securities and Exchange Commission (SEC) Regulation G, Abbott notes that, including these charges, projected earnings per share under GAAP for 2004 would be $2.20 to $2.28 and $0.50 to $0.52 for the first-quarter 2004.
This guidance assumes a full year of net income from the business components that will be separated into the new hospital products company, Hospira. The company expects to complete the spin-off of Hospira in the first half of 2004. After the spin-off, the historical results of Hospira through the date of the separation will be reflected in Abbott's financial statements as "Discontinued Operations," and Abbott will adjust its 2004 consolidated earnings guidance at that time to reflect the shift of a portion of future earnings to the new company.
6
Hospira Form 10 filed; Abbott receives positive Internal Revenue Service (IRS) ruling regarding tax-free distribution of stock
On Dec. 22, 2003, the Form 10 was filed with the SEC regarding the spin-off of Hospira. Abbott also received a ruling from the IRS, stating that for U.S. federal income tax purposes, the distribution of Hospira common stock qualifies as a tax-free distribution. The ruling provides that holders of Abbott common stock will not recognize a gain or loss upon the spin-off of Hospira, except in connection with cash received in lieu of fractional shares. The actual number of Hospira shares outstanding will not be known until after the distribution date when the actual number of shares distributed is determined.
Abbott declares quarterly dividend
On Dec. 12, 2003, the board of directors of Abbott declared the company's quarterly common dividend of 24.5 cents per share. The cash dividend is payable Feb. 15, 2004, to shareholders of record at the close of business on Jan. 15, 2004. This marks the 320th consecutive dividend paid by Abbott since 1924.
Abbott Laboratories is a global, broad-based health care company devoted to the discovery, development, manufacture and marketing of pharmaceuticals, nutritionals and medical products, including devices and diagnostics. The company employs more than 70,000 people and markets its products in more than 130 countries.
Abbott's news releases and other information are available on the company's Web site at www.abbott.com. Abbott will webcast its live fourth-quarter earnings conference call through its Investor Relations Web site at www.abbottinvestor.com at 9 a.m. Central time today. An archived edition of the call will be available after noon Central time.
Private Securities Litigation Reform Act of 1995
A Caution Concerning Forward-Looking Statements
Some statements in this news release may be forward-looking statements for purposes of the Private Securities Litigation Reform Act of 1995. Abbott cautions that these forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those indicated in the forward-looking statements. Economic, competitive, governmental, technological and other factors that may affect Abbott's operations are discussed in the attached questions and answers section and in Exhibit 99.1 of our Securities and Exchange Commission Form 10-Q for the period ended Sept. 30, 2003, and are incorporated by reference. Forward-looking statements in this press release should also be evaluated together with the disclosure regarding Hospira contained in the Risk Factors section of Hospira's Form 10 Registration Statement filed on Dec. 22, 2003. Abbott and Hospira undertake no obligation to release publicly any revisions to forward-looking statements as the result of subsequent events or developments.
Media Contacts: |
Financial Analyst Contacts: |
|
Melissa Brotz (847) 935-3456 |
John Thomas (847) 938-2655 |
|
Jonathon Hamilton (847) 935-8646 |
Larry Peepo (847) 935-6722 |
|
Christy Wistar (847) 938-4475 |
7
Abbott Laboratories and Subsidiaries
Consolidated Statement of Earnings
Fourth Quarter Ended December 31, 2003 and 2002
(unaudited)
|
2003 |
2002 |
Percent Change |
||||||
---|---|---|---|---|---|---|---|---|---|
Net Sales | $ | 5,530,582,000 | $ | 4,839,249,000 | 14.3 | ||||
Cost of products sold |
2,658,013,000 |
2,376,093,000 |
11.9 |
||||||
Research & development | 485,693,000 | 432,494,000 | 12.3 | ||||||
Selling, general & administrative | 1,281,014,000 | 1,141,864,000 | 12.2 | ||||||
Total Operating Cost and Expenses | 4,424,720,000 | 3,950,451,000 | 12.0 | ||||||
Operating earnings | 1,105,862,000 | 888,798,000 | 24.4 | ||||||
Net interest expense |
34,225,000 |
47,356,000 |
(27.7 |
) |
|||||
Net foreign exchange loss | 5,465,000 | 2,634,000 | n/m | ||||||
(Income) from TAP Pharmaceutical Products Inc. joint venture | (173,499,000 | ) | (159,474,000 | ) | 8.8 | ||||
Other (income)/expense, net | (2,949,000 | ) | 194,533,000 | n/m | |||||
Earnings Before Taxes | 1,242,620,000 | 803,749,000 | 54.6 | ||||||
Taxes on earnings | 298,228,000 | 176,642,000 | 68.8 | ||||||
Net Earnings |
$ |
944,392,000 |
$ |
627,107,000 |
50.6 |
||||
Net Earnings Excluding One-Time Charges, as described below(1) |
$ |
1,023,006,000 |
$ |
865,620,000 |
18.2 |
||||
Diluted Earnings Per Common Share |
$ |
0.60 |
$ |
0.40 |
50.0 |
||||
Diluted Earnings Per Common Share Excluding One-Time Charges, as described below(1) |
$ |
0.65 |
$ |
0.55 |
18.2 |
||||
Average Number of Common Shares Outstanding Plus Dilutive Common Stock Options |
1,574,575,000 |
1,571,469,000 |
(1) | 2003 Net Earnings Excluding One-Time Charges excludes after-tax charges of $67 million or $0.04 per share related to asset impairments and related costs and $12 million or $0.01 per share related to the announced spin-off of Hospira and integration charges for 2003 acquisitions. (See Q&A Answer 5.) | |
2002 Net Earnings Excluding One-Time Charges excludes after-tax charges of $131 million or $0.08 per share related to restructuring charges and $108 million, or a $0.07 per share non-cash charge related to a decline in the value of certain equity investments. (See Q&A Answer 5.) | ||
NOTE: | See attached questions and answers section for further explanation of Consolidated Statement of Earnings line items. | |
n/m = | Percent change is not meaningful. |
8
Abbott Laboratories and Subsidiaries
Consolidated Statement of Earnings
Year Ended December 31, 2003 and 2002
(unaudited)
|
2003 |
2002 |
Percent Change |
||||||
---|---|---|---|---|---|---|---|---|---|
Net Sales | $ | 19,680,561,000 | $ | 17,684,663,000 | 11.3 | ||||
Cost of products sold |
9,473,416,000 |
8,506,254,000 |
11.4 |
||||||
Research & development | 1,733,472,000 | 1,561,792,000 | 11.0 | ||||||
Acquired in-process R&D | 100,240,000 | 107,700,000 | (6.9 | ) | |||||
Selling, general & administrative | 5,050,901,000 | 3,978,776,000 | 26.9 | ||||||
Total Operating Cost and Expenses | 16,358,029,000 | 14,154,522,000 | 15.6 | ||||||
Operating earnings |
3,322,532,000 |
3,530,141,000 |
(5.9 |
) |
|||||
Net interest expense |
146,123,000 |
205,220,000 |
(28.8 |
) |
|||||
Net foreign exchange loss | 55,298,000 | 74,626,000 | (25.9 | ) | |||||
(Income) from TAP Pharmaceutical Products Inc. joint venture | (580,950,000 | ) | (666,773,000 | ) | (12.9 | ) | |||
Other (income)/expense, net | (32,356,000 | ) | 243,655,000 | n/m | |||||
Earnings Before Taxes | 3,734,417,000 | 3,673,413,000 | 1.7 | ||||||
Taxes on earnings | 981,184,000 | 879,710,000 | 11.5 | ||||||
Net Earnings |
$ |
2,753,233,000 |
$ |
2,793,703,000 |
(1.4 |
) |
|||
Net Earnings Excluding One-Time Charges, as described below(1) |
$ |
3,479,050,000 |
$ |
3,242,511,000 |
7.3 |
||||
Diluted Earnings Per Common Share |
$ |
1.75 |
$ |
1.78 |
(1.7 |
) |
|||
Diluted Earnings Per Common Share Excluding One-Time Charges, as described below(1) |
$ |
2.21 |
$ |
2.06 |
7.3 |
||||
Average Number of Common Shares Outstanding Plus Dilutive Common Stock Options |
1,571,869,000 |
1,573,293,000 |
(1) | 2003 Net Earnings Excluding One-Time Charges excludes after-tax charges of $98 million or $0.06 per share for in-process R&D related to acquisitions; $536 million or $0.34 per share for the Ross settlement; $8 million or $0.01 per share for integration charges related to 2003 acquisitions; $17 million or $0.01 per share for charges related to the announced spin-off of Hospira; and $67 million or $0.04 per share related to an impairment of assets and related costs. | |
2002 Net Earnings Excluding One-Time Charges excludes after-tax charges of $82 million or $0.05 per share for acquired in-process R&D related to 2002 acquisitions; $97 million or $0.06 per share for one-time charges related to the Good Manufacturing Practices compliance enhancements in the diagnostics division; $139 million or $0.09 per share for impairments of certain equity investments and $131 million or $0.08 per share related to restructuring charges. | ||
NOTE: | See attached questions and answers section for further explanation of Consolidated Statement of Earnings line items. | |
n/m = | Percent change is not meaningful. |
9
Abbott's fourth-quarter 2003 results
Sales from Abbott's international division grew 15.9 percent during the quarter, including an 11.0 percent favorable impact from exchange. Pharmaceuticals led this growth (up 15.3 percent), favorably impacted by sales of clarithromycin and the international HUMIRA launch. In Abbott International's hospital and nutritionals segments, Sevorane (sevoflurane), pediatric/adult nutritionals and Synagis all experienced solid growth.
Based on the positive performance of HUMIRA in 2003, the company is raising its 2004 worldwide sales expectations for HUMIRA to more than $700 million.
In the U.S. hospital products business, sales were up 1.5 percent, with strong growth in anesthesia sales offset by a difficult comparison to the fourth quarter of 2002, when Abbokinase sales were exceptionally strong due to wholesaler stocking in preparation for the product's launch.
In the U.S. nutritionals business, double-digit sales growth in adult nutritionals was primarily driven by increased sales of Ensure, which began shipping in a new, break-resistant and reclosable bottle earlier this year. ZonePerfect, acquired in August 2003, also contributed to sales growth. The growth in pediatric nutritionals continues to be driven by increased penetration of Similac Advance, as well as incremental retail sales in California related to Ross' award of the Special Supplemental Nutrition Program for Women, Infants and Childrenbetter known as the WIC Program.
In Abbott's global diagnostics business, international sales increased more than 18 percent, including a 13.1 percent benefit from exchange. U.S. diagnostic sales declined, as previously forecasted. The global MediSense business grew double-digits, supported by an 8.0 percent benefit from exchange.
10
|
4Q03 |
4Q02 |
||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Earnings |
|
Earnings |
|
||||||||||||||
|
||||||||||||||||||
|
|
After Tax |
|
After Tax |
||||||||||||||
|
Pretax |
EPS |
Pretax |
EPS |
||||||||||||||
As reported under GAAP | $ | 1,243 | $ | 944 | $ | 0.60 | $ | 804 | $ | 627 | $ | 0.40 | ||||||
Add back one-time charges: | ||||||||||||||||||
Impairment of assets & related costs | $ | 88 | $ | 67 | $ | 0.04 | | | | |||||||||
Spin-off & integration related costs | $ | 15 | $ | 12 | $ | 0.01 | | | | |||||||||
Restructuring costs | | | | $ | 174 | $ | 131 | $ | 0.08 | |||||||||
Equity impairments | | | | $ | 169 | $ | 108 | $ | 0.07 | |||||||||
Excluding one-time charges | $ | 1,346 | $ | 1,023 | $ | 0.65 | $ | 1,147 | $ | 866 | $ | 0.55 |
Pretax
impact of the one-time charges by Consolidated Statement of Earnings line item is as follows
(dollars in millions):
|
4Q03 |
4Q02 |
||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Cost of Products Sold |
SG&A |
Total |
Cost of Products Sold |
R&D |
SG&A |
Other (Income)/ Expense, Net |
Total |
||||||||||||||||
Impairment of assets & related costs | $ | 88 | | $ | 88 | | | | | | ||||||||||||||
Spin-off & integration related costs | | $ | 15 | $ | 15 | | | | | | ||||||||||||||
Restructuring costs | | | | $ | 83 | $ | 5 | $ | 86 | | $ | 174 | ||||||||||||
Equity impairments | | | | | | | $ | 169 | $ | 169 |
Fourth-quarter 2003 results were impacted by one-time charges related to the planned spin-off of Hospira as previously forecasted. In addition, the company recorded a one-time charge for an impairment of assets (non-cash charge) and related other expenses as a result of a lower sales forecast for Abbokinase.
Results from the fourth quarter of 2002 were impacted by a one-time charge related to restructurings and a non-cash charge related to a decline in the value of certain equity investments.
|
4Q03 |
4Q02 |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
|
Cost of Products Sold |
Gross Margin % |
Cost of Products Sold |
Gross Margin % |
|||||||
As reported under GAAP | $ | 2,658 | 51.9 | % | $ | 2,376 | 50.9 | % | |||
Impairment of assets & related costs | $ | (88 | ) | 1.6 | % | | | ||||
Restructuring costs | | | ($ | 83 | ) | 1.7 | % | ||||
Excluding one-time charges | $ | 2,570 | 53.5 | % | $ | 2,293 | 52.6 | % |
The improvement in the gross margin ratio was due to improved sales mix, reflecting a relatively higher sales contribution from the pharmaceutical business.
Fourth-quarter SG&A increased more than 12 percent (19.9 percent excluding one-time charges from both periods) from the fourth quarter of 2002, driven by continued investment in the launch of HUMIRA, promotional spending on other marketed products and the additional contribution to Abbott's philanthropic organization (as discussed in Q&A Answer 4 above.)
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The income recorded on the Income from TAP Joint Venture line of the Consolidated Statement of Earnings increased over the prior year due to lower spending levels.
Abbott's 2004 guidance
Post-retirement expense. Under the accounting rules, Abbott, as well as other companies, is required to compute 2004 accounting expense using the current "benchmark" interest rate for determining post-retirement benefit obligations. This benchmark is down significantly from 2003, which will increase accounting expense for the pension and retiree medical plans in 2004. This negatively impacts year-over-year earnings-per-share comparisons by approximately $0.03 per share.
Tax rate. We are forecasting an increase in the estimated tax rate for ongoing operations from 24.0 percent in 2003 to 24.5 percent in 2004. This increase is due to a lower percentage of income contribution from TAP relative to Abbott's total earnings (income from the TAP joint venture is tax effected at a lower rate), and a change in income mix by taxing jurisdiction. This tax rate does not contemplate any changes to the U.S. tax laws, which are currently under discussion in Congress.
TheraSense. We have previously announced our intentions to acquire TheraSense. Excluding one-time charges, the acquisition of TheraSense will result in an approximate $0.01 reduction in ongoing earnings per share in 2004. This impact is reflected in our ongoing earnings-per-share-guidance for 2004.
Synthroid has no patent protection and is potentially subject to generic competition. Abbott filed a Citizen's Petition in August 2003, at the request of the FDA. The petition highlights Abbott's concerns regarding the current criteria for assessing bioequivalency of oral levothyroxine sodium products, which includes Synthroid. The FDA is reviewing our petition, the outcome of which we cannot predict. As a result, we have projected
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Synthroid sales at roughly 2003 levels. Approval of an AB-rated generic entrant would have a negative impact on sales, gross margin and earnings per share.
Impact from planned spin-off of Hospira
After the spin-off, the historical results of Hospira through the date of the separation will be reflected in Abbott's financial statements as "Discontinued Operations," and Abbott will adjust its 2004 consolidated earnings guidance at that time to reflect the shift of a portion of future earnings to the new company. The future Hospira management team will be providing further details on its outlook prior to the spin-off date.
2004 business segment reporting
At a later date, Abbott will provide investors with revised quarterly historical segment data to reflect these changes.
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