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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
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FORM 10-K
(MARK ONE)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997 COMMISSION FILE NUMBER 1-2189
ABBOTT LABORATORIES
AN ILLINOIS CORPORATION 36-0698440
(I.R.S. employer identification
number)
100 ABBOTT PARK ROAD (847) 937-6100
ABBOTT PARK, ILLINOIS 60064-3500 (telephone number)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
Common Shares, Without Par Value New York Stock Exchange
Chicago Stock Exchange
Pacific Exchange
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE PRECEDING 12 MONTHS (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 ____
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM 405
OF REGULATION S-K IS NOT CONTAINED HEREIN AND WILL NOT BE CONTAINED, TO THE BEST
OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS
INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS
FORM 10-K. [ ]
THE AGGREGATE MARKET VALUE OF THE 704,362,489 SHARES OF VOTING STOCK HELD BY
NONAFFILIATES OF THE REGISTRANT, COMPUTED BY USING THE CLOSING PRICE AS REPORTED
ON THE CONSOLIDATED TRANSACTION REPORTING SYSTEM FOR ABBOTT LABORATORIES COMMON
SHARES WITHOUT PAR VALUE ON JANUARY 30, 1998, WAS APPROXIMATELY $49,877,668,752.
THE COMPANY HAS NO NON-VOTING COMMON EQUITY.
NUMBER OF COMMON SHARES OUTSTANDING AS OF JANUARY 31, 1998: 764,456,112.
DOCUMENTS INCORPORATED BY REFERENCE
PORTIONS OF THE ABBOTT LABORATORIES ANNUAL REPORT FOR THE YEAR ENDED DECEMBER
31, 1997 ARE INCORPORATED BY REFERENCE INTO PARTS I, II, AND IV.
PORTIONS OF THE 1998 ABBOTT LABORATORIES PROXY STATEMENT ARE INCORPORATED BY
REFERENCE INTO PART III.
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PART I
ITEM 1. BUSINESS
GENERAL DEVELOPMENT OF BUSINESS
Abbott Laboratories is an Illinois corporation, incorporated in 1900. The
Company's* principal business is the discovery, development, manufacture, and
sale of a broad and diversified line of health care products and services.
FINANCIAL INFORMATION RELATING TO INDUSTRY SEGMENTS,
GEOGRAPHIC AREAS, AND CLASSES OF SIMILAR PRODUCTS
Incorporated herein by reference is the footnote entitled "Industry Segment
and Geographic Area Information" of the Consolidated Financial Statements in the
Abbott Laboratories Annual Report for the year ended December 31, 1997 (1997
Annual Report), filed as an exhibit to this report. Also incorporated herein by
reference are the text and table of sales by class of similar products included
in the section of the 1997 Annual Report captioned "Financial Review."
NARRATIVE DESCRIPTION OF BUSINESS
PHARMACEUTICAL AND NUTRITIONAL PRODUCTS
Included in this segment is a broad line of adult and pediatric
pharmaceuticals and nutritionals. These products are sold primarily on the
prescription or recommendation of physicians or other health care professionals.
The segment also includes agricultural and chemical products, bulk
pharmaceuticals, and consumer products.
Principal pharmaceutical and nutritional products include the
anti-infectives clarithromycin, sold in the United States under the trademark
Biaxin-Registered Trademark- and outside the United States primarily under the
trademark Klacid-Registered Trademark-, and tosufloxacin, sold in Japan under
the trademark Tosuxacin-Registered Trademark-, various forms of the antibiotic
erythromycin, sold primarily as PCE-Registered Trademark- or polymer coated
erythromycin, Erythrocin-Registered Trademark-, and
E.E.S.-Registered Trademark-, and Norvir-Registered Trademark- , a protease
inhibitor for the treatment of HIV infection; agents for the treatment of
epilepsy and bipolar disorder, including Depakote-Registered Trademark- and
Gabitril-TM-; a broad line of cardiovascular products, including
Loftyl-Registered Trademark-, a vasoactive agent sold outside the United States;
Hytrin-Registered Trademark-, used as an anti-hypertensive and for the treatment
of benign prostatic hyperplasia; Abbokinase-Registered Trademark-, a
thrombolytic drug; Survanta-Registered Trademark-, a bovine-derived lung
surfactant; various forms of prepared infant formula, including
Similac-Registered Trademark-, Isomil-Registered Trademark-,
Alimentum-Registered Trademark-, and Similac NeoCare-Registered Trademark-; and
other medical and pediatric nutritionals, including
Ensure-Registered Trademark-, Ensure Plus-Registered Trademark-,
Ensure-Registered Trademark- High Protein, Ensure-Registered Trademark-Light,
Jevity-Registered Trademark-, Glucerna-Registered Trademark-,
PediaSure-Registered Trademark-, Pedialyte-Registered Trademark-,
Pulmocare-Registered Trademark-, and Gain-Registered Trademark-. Consumer
products include the dandruff shampoo Selsun Blue-Registered Trademark-;
Murine-Registered Trademark- eye care and ear care products; and
Tronolane-Registered Trademark- hemorrhoid medication. Agricultural and animal
health products include plant growth regulators, including
ProGibb-Registered Trademark- and ReTain-TM-; herbicides; larvicides, including
VectoBac-Registered Trademark-; biologically derived insecticides, including
DiPel-Registered Trademark- and XenTari-Registered Trademark-; anti-infectives,
including Saraflox-Registered Trademark- and Sarafin-Registered Trademark- and
medical surgical products, including Isoflo-Registered Trademark- and
Lifecare-Registered Trademark-.
Pharmaceutical and nutritional products are generally sold directly to
retailers, wholesalers, health care facilities, and government agencies. In most
cases, they are distributed from Company-owned distribution centers or public
warehouses. Certain products are co-marketed with other companies. In
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* As used throughout the text of this report on Form 10-K, the term "Company"
refers to Abbott Laboratories, an Illinois corporation, or Abbott
Laboratories and its consolidated subsidiaries, as the context requires.
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certain countries overseas, some of these products are marketed and distributed
through distributors. Primary marketing efforts for pharmaceutical and
nutritional products are directed toward securing the prescription or
recommendation of the Company's brand of products by physicians or other health
care professionals. In the United States, managed care purchasers, for example,
health maintenance organizations (HMOs) and pharmacy benefit managers, are
becoming increasingly important customers. Competition is generally from other
broad line and specialized health care manufacturers. A significant aspect of
competition is the search for technological innovations. The introduction of new
products by competitors and changes in medical practices and procedures can
result in product obsolescence. In addition, the substitution of generic drugs
for the brand prescribed has increased competitive pressures on pharmaceutical
products.
Consumer products are promoted directly to the public by consumer
advertising. These products are generally sold directly to retailers and
wholesalers. Competitive products are sold by other diversified consumer and
health care companies. Competitive factors include consumer advertising,
scientific innovation, price, and availability of generic product forms.
Agricultural, animal health and bulk pharmaceutical products are generally
sold to agricultural distributors, growers, companion animal health product
distributors, veterinarians and pharmaceutical companies. Competition is
primarily from chemical, animal health and agricultural companies. Competition
is based on numerous factors depending on the market served. Competitive factors
include product performance, quality, price, and technological advantages.
The Company is the leading worldwide producer of the antibiotic
erythromycin. Ensure-Registered Trademark- is the leading medical nutritional
worldwide. Similac-Registered Trademark- is a leading infant formula in the
United States.
Under an agreement between the Company and Takeda Chemical Industries, Ltd.
of Japan (Takeda), TAP Holdings Inc., (owned 50 percent by the Company and 50
percent by Takeda) together with its subsidiary, TAP Pharmaceuticals Inc. (TAP),
develops and markets products in the United States. TAP markets
Lupron-Registered Trademark-, an LH-RH analog, and Lupron
Depot-Registered Trademark-, a sustained release form of
Lupron-Registered Trademark- in the United States. Lupron-Registered Trademark-
and Lupron Depot-Registered Trademark- are used for the palliative treatment of
advanced prostate cancer, treatment of endometriosis and central precocious
puberty, and for preoperative treatment of patients with anemia caused by
uterine fibroids. TAP also markets Prevacid-Registered Trademark-
(lansoprazole), a proton pump inhibitor, and has a co-promotion arrangement with
the Company for Prevacid-Registered Trademark-. Prevacid-Registered Trademark-
is indicated for short-term treatment of duodenal ulcers, gastric ulcers, and
erosive esophagitis. It is also indicated for the eradication of H. pylori to
reduce the risk of duodenal ulcer recurrence, for long-term treatment of
Zollinger-Ellison syndrome, and the maintenance of healed erosive esophagitis
and duodenal ulcers. The Company also has marketing rights to certain Takeda
products in select Latin American markets. The Company also markets
Lupron-Registered Trademark-, Lupron Depot-Registered Trademark-, Lupron
Depot-Ped-Registered Trademark-, and Prevacid-Registered Trademark- in select
markets outside the United States.
HOSPITAL AND LABORATORY PRODUCTS
Hospital and laboratory products include diagnostic systems for blood banks,
hospitals, commercial laboratories, alternate-care testing sites, and consumers;
intravenous and irrigation fluids and related administration equipment,
including electronic drug delivery systems; drugs and drug delivery systems;
anesthetics; pain management products; critical care products; diagnostic
imaging products; and other medical specialty products for hospitals and
alternate-care sites. In the second quarter of 1997, the Company acquired
certain parenteral products businesses from Sanofi Pharmaceuticals, Inc.,
including the worldwide rights to Sanofi's proprietary
Carpuject-Registered Trademark- drug delivery system, a pre-filled, single-dose
syringe technology.
The principal products included in this segment are parenteral (intravenous
or I.V.) solutions and related administration equipment sold as the
LifeCare-Registered Trademark- line of products,
LifeShield-Registered Trademark- needleless products, and
Venoset-Registered Trademark- products; irrigating fluids; parenteral
nutritionals such as Aminosyn-Registered Trademark- and
Liposyn-Registered Trademark-; Plum-Registered Trademark-,
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Omni-Flow-Registered Trademark- and Abbott AIM-Registered Trademark- electronic
drug delivery systems; Abbott Pain Manager-Registered Trademark-;
patient-controlled analgesia (PCA) systems; venipuncture products; hospital
injectables including Carpuject-Registered Trademark- and
FirstChoice-Registered Trademark- generics; premixed I.V. drugs in various
containers; ADD-Vantage-Registered Trademark- and Nutrimix-Registered Trademark-
drug and nutritional delivery systems; anesthetics, including
Pentothal-Registered Trademark-, Amidate-Registered Trademark-, sevoflurane
(sold in the United States and a few other markets as
Ultane-Registered Trademark- and outside of the United States primarily under
the trademark Sevorane-Registered Trademark-), isoflurane and enflurane;
Calcijex-Registered Trademark-, an injectable agent for treatment of bone
disease in hemodialysis patients; critical care products including
Opticath-Registered Trademark- and OptiQue-TM- advanced sensor catheters,
Transpac-Registered Trademark- for hemodynamic monitoring, and specialty cardiac
products; Faultless-Registered Trademark- rubber sundry products; diagnostic
imaging products used in MRI (magnetic resonance imaging) and CT (computed
tomography) imaging; screening tests for hepatitis B, HTLV-I/II, hepatitis B
core, and hepatitis C; tests for detection of AIDS antibodies and antigens, and
other infectious disease detection systems; tests for determining levels of
abused drugs with the ADx-Registered Trademark- instrument; physiological
diagnostic tests; cancer monitoring tests including tests for prostate specific
antigen; laboratory tests and therapeutic drug monitoring systems such as
TDx-Registered Trademark-; clinical chemistry systems such as Abbott
Spectrum-Registered Trademark-, Abbott Spectrum-Registered Trademark-
EPx-Registered Trademark-, Abbott Spectrum-Registered Trademark- CCx-TM-, Abbott
Alycon-TM-, and Quantum-TM-; AxSYM-Registered Trademark-,
Commander-Registered Trademark-, IMx-Registered Trademark-, and Abbott
Prism-Registered Trademark- lines of diagnostic instruments and chemical
reagents used with immunoassay diagnostics; the LCx-Registered Trademark-
amplified DNA probe system and reagents; Abbott Vision-Registered Trademark-, a
desk-top blood analyzer; the Abbott TestPack-Registered Trademark- system for
diagnostic testing; a full line of hematology systems and reagents known as the
Cell-Dyn-Registered Trademark- series; the MediSense line of blood glucose
monitoring meters and test strips for diabetics including Precision
Q.I.D.-Registered Trademark-, the Precision G-Registered Trademark- hospital
system, the ExacTech-Registered Trademark-, the MediSense II-TM-, and the
ExacTech RSG-TM-; and the Fact Plus-Registered Trademark- and Fact
Plus-Registered Trademark- One Step pregnancy tests.
The Company markets hospital and laboratory products in the United States
and many other countries. These products are generally distributed to
wholesalers and directly to hospitals, laboratories, and physicians' offices
from distribution centers maintained by the Company. Sales in the home infusion
services market are also made directly to patients receiving treatment outside
the hospital through marketing arrangements with hospitals and other health care
providers. Overseas sales are made either directly to customers or through
distributors, depending on the market served. Blood glucose monitoring meters
and test strips for diabetics and the Fact Plus-Registered Trademark- and Fact
Plus-Registered Trademark- One Step pregnancy tests are sold over the counter to
consumers.
The hospital and laboratory products industry segment is highly competitive,
both in the United States and overseas. This segment is subject to competition
in technological innovation, price, convenience of use, service, instrument
warranty provisions, product performance, long-term supply contracts, and
product potential for overall cost effectiveness and productivity gains.
Products in this segment can be subject to rapid product obsolescence. The
Company has benefitted from technological advantages of certain of its current
products; however, these advantages may be reduced or eliminated as competitors
introduce new products.
The Company is one of the leading domestic manufacturers of I.V. and
irrigating solutions and related administration equipment, parenteral
nutritional products, anesthesia products, and drug delivery systems. It is also
the worldwide leader in in vitro diagnostic products, including thyroid tests,
therapeutic drug monitoring, cancer monitoring tests, diagnostic tests for the
detection of hepatitis and AIDS antibodies, and immunodiagnostic instruments.
INFORMATION WITH RESPECT TO THE COMPANY'S BUSINESS IN GENERAL
SOURCES AND AVAILABILITY OF RAW MATERIALS
The Company purchases, in the ordinary course of business, necessary raw
materials and supplies essential to the Company's operations from numerous
suppliers in the United States and overseas. There have been no recent
availability problems or significant supply shortages.
3
PATENTS, TRADEMARKS, AND LICENSES
The Company is aware of the desirability for patent and trademark protection
for its products. Accordingly, where possible, patents and trademarks are sought
and obtained for the Company's products in the United States and all countries
of major marketing interest to the Company. The Company owns, has applications
pending for, and is licensed under a substantial number of patents. Principal
trademarks and the products they cover are discussed in the Narrative
Description of Business on pages 1, 2 and 3. These, and various patents which
expire during the period 1998 to 2018, in the aggregate, are believed to be of
material importance in the operation of the Company's business. The Company
believes that no single patent, license, trademark (or related group of patents,
licenses, or trademarks), except for those related to clarithromycin, are
material in relation to the Company's business as a whole. The original United
States compound patent covering clarithromycin is licensed from Taisho
Pharmaceutical Co., Ltd. of Tokyo, Japan, and will expire in 2005. In addition,
the patents, licenses, and trademarks related to Depakote-Registered Trademark-
and Hytrin-Registered Trademark- are significant products for the Company's
Pharmaceutical and Nutritional Products segment. The United States patents
covering Depakote-Registered Trademark- will expire in 2008. In the United
States, the original compound patent covering Hytrin-Registered Trademark- has
expired. The Company has other patents in the United States covering certain
forms of Hytrin-Registered Trademark- which expire during the period 2000 to
2013. Litigation involving the Company's patents covering
Depakote-Registered Trademark- and Hytrin-Registered Trademark- is discussed in
Legal Proceedings on pages 9 and 10.
SEASONAL ASPECTS, CUSTOMERS, BACKLOG, AND RENEGOTIATION
There are no significant seasonal aspects to the Company's business. The
incidence of certain infectious diseases which occur at various times in
different areas of the world does, however, affect the demand for the Company's
anti-infective products. Orders for the Company's products are generally filled
on a current basis, and order backlog is not material to the Company's business.
No single customer accounted for sales equaling 10 percent or more of the
Company's consolidated net sales. No material portion of the Company's business
is subject to renegotiation of profits or termination of contracts at the
election of the government.
RESEARCH AND DEVELOPMENT
The Company spent $1,302,403,000 in 1997, $1,204,841,000 in 1996, and
$1,072,745,000 in 1995 on research to discover and develop new products and
processes and to improve existing products and processes. The Company continues
to concentrate research expenditures in pharmaceutical and diagnostic products.
ENVIRONMENTAL MATTERS
The Company believes that its operations comply in all material respects
with applicable laws and regulations concerning environmental protection.
Regulations under federal and state environmental laws impose stringent
limitations on emissions and discharges to the environment from various
manufacturing operations. The Company's capital and operating expenditures for
pollution control in 1997 were approximately $25 million and $44 million,
respectively. Capital and operating expenditures for pollution control are
estimated to approximate $23 million and $49 million, respectively, in 1998.
The Company has been identified as one of many potentially responsible
parties in investigations and/ or remediations at 18 locations in the United
States and Puerto Rico under the Comprehensive Environmental Response,
Compensation, and Liability Act, commonly known as Superfund. The aggregate
costs of remediation at these sites by all identified parties are uncertain but
have been subject to widely ranging estimates totaling as much as several
hundred million dollars. In many cases, the Company believes that the actual
costs will be lower than these estimates, and the fraction for which the Company
may be responsible is anticipated to be considerably less and will be paid out
over a number of years. The
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Company may participate in the investigation or cleanup at these sites. The
Company is also voluntarily investigating potential contamination at two
Company-owned sites, and has initiated remediation at four sites, in cooperation
with the Environmental Protection Agency (EPA) or similar state agencies.
While it is not feasible to predict with certainty the costs related to the
previously described investigation and cleanup activities, the Company believes
that such costs, together with other expenditures to maintain compliance with
applicable laws and regulations concerning environmental protection, should not
have a material adverse effect on the Company's financial position, cash flows,
or results of operations.
EMPLOYEES
The Company employed 54,487 persons as of December 31, 1997.
REGULATION
The development, manufacture, sale, and distribution of the Company's
products are subject to comprehensive government regulation. Government
regulation by various federal, state, and local agencies, which includes
detailed inspection of and controls over research and laboratory procedures,
clinical investigations, and manufacturing, marketing, sampling, distribution,
recordkeeping, storage, and disposal practices, substantially increases the
time, difficulty, and costs incurred in obtaining and maintaining the approval
to market newly developed and existing products. Government regulatory actions
can result in the seizure or recall of products, suspension or revocation of the
authority necessary for their production and sale, and other civil or criminal
sanctions.
Continuing studies of the utilization, safety, and efficacy of health care
products and their components are being conducted by industry, government
agencies, and others. Such studies, which employ increasingly sophisticated
methods and techniques, can call into question the utilization, safety, and
efficacy of previously marketed products and in some cases have resulted, and
may in the future result, in the discontinuance of marketing of such products
and give rise to claims for damages from persons who believe they have been
injured as a result of their use.
The cost of human health care products continues to be a subject of
investigation and action by governmental agencies, legislative bodies, and
private organizations in the United States and other countries. In the United
States, most states have enacted generic substitution legislation requiring or
permitting a dispensing pharmacist to substitute a different manufacturer's
version of a pharmaceutical product for the one prescribed. Federal and state
governments continue to press efforts to reduce costs of Medicare and Medicaid
programs, including restrictions on amounts agencies will reimburse for the use
of products. In addition, the federal government follows a diagnosis-related
group (DRG) payment system for certain institutional services provided under
Medicare or Medicaid. The DRG system entitles a health care facility to a fixed
reimbursement based on discharge diagnoses rather than actual costs incurred in
patient treatment, thereby increasing the incentive for the facility to limit or
control expenditures for many health care products. Manufacturers must pay
certain statutorily-prescribed rebates on Medicaid purchases for reimbursement
on prescription drugs under state Medicaid plans. The Veterans Health Care Act
of 1992 requires manufacturers to extend additional discounts on pharmaceutical
products to various federal agencies, including the Department of Veterans
Affairs, Department of Defense, and Public Health Service entities and
institutions.
In the United States, governmental cost-containment efforts have extended to
the federally funded Special Supplemental Nutrition Program for Women, Infants,
and Children (WIC). All states participate in WIC and have sought and obtained
rebates from manufacturers of infant formula whose products are used in the
program. All of the states have conducted competitive bidding for infant formula
contracts which require the use of specific infant formula products by the state
WIC program. The Child Nutrition and WIC Reauthorization Act of 1989 requires
all states participating in WIC to engage in competitive bidding
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or to use any other cost containment measure that yields savings equal to or
greater than the savings generated by a competitive bidding system.
Governmental regulatory agencies require prescription drug manufacturers to
pay fees. The Federal Food and Drug Administration (FDA) imposes substantial
fees on various aspects of the approval, manufacture, and sale of proprietary
prescription drugs. The FDA's authority to impose these fees was reauthorized by
the Food and Drug Administration Modernization Act of 1997.
The Company expects debate to continue during 1998 at both the federal and
the state level over the availability, method of delivery, and payment for
health care products and services. The Company believes that if legislation is
enacted, it could have the effect of reducing prices, or reducing the rate of
price increases, for medical products and services.
International operations are also subject to a significant degree of
government regulation. Many countries, directly or indirectly through
reimbursement limitations, control the selling price of most health care
products. Furthermore, many developing countries limit the importation of raw
materials and finished products. International regulations are having an impact
on United States regulations, as well. The International Organization for
Standardization (ISO) provides the criteria for meeting the regulations for
medical devices within the European Union. The Company has made significant
strides in gaining ISO 9000 and European Norm 46000 certification for facilities
that manufacture devices for European markets. The FDA recently adopted
regulations governing the manufacture of medical devices that appear to
encompass and exceed the ISO's approach to regulating medical devices. The FDA's
adoption of the ISO's approach to regulation and other changes to the manner in
which the FDA regulates medical devices will increase the cost of compliance
with those regulations.
Efforts to reduce health care costs are also being made in the private
sector. Health care providers have responded by instituting various cost
reduction and containment measures.
It is not possible to predict the extent to which the Company or the health
care industry in general might be affected by the matters discussed above.
INTERNATIONAL OPERATIONS
The Company markets products in approximately 130 countries through
affiliates and distributors. Most of the products discussed in the preceding
sections of this report are also sold outside the United States. In addition,
certain products of a local nature and variations of product lines to meet local
regulatory requirements and marketing preferences are manufactured and marketed
to customers outside the United States. International operations are subject to
certain additional risks inherent in conducting business outside the United
States, including price and currency exchange controls, changes in currency
exchange rates, limitations on foreign participation in local enterprises,
expropriation, nationalization, and other governmental action.
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ITEM 2. PROPERTIES
The Company's corporate offices are located at 100 Abbott Park Road, Abbott
Park, Illinois 60064-3500. The locations of the Company's principal plants are
listed below.
LOCATION INDUSTRY SEGMENTS OF PRODUCTS PRODUCED
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Abbott Park, Illinois Pharmaceutical and Nutritional Products, and Hospital
and Laboratory Products
Abingdon, England Hospital and Laboratory Products
Altavista, Virginia Pharmaceutical and Nutritional Products
Ashland, Ohio Hospital and Laboratory Products
Austin, Texas Hospital and Laboratory Products
Barceloneta, Puerto Rico Pharmaceutical and Nutritional Products, and Hospital
and Laboratory Products
Bedford, Massachusetts Hospital and Laboratory Products
Campoverde, Italy Pharmaceutical and Nutritional Products, and Hospital
and Laboratory Products
Casa Grande, Arizona Pharmaceutical and Nutritional Products
Columbus, Ohio Pharmaceutical and Nutritional Products
Delkenheim, Germany Hospital and Laboratory Products
Irving, Texas Hospital and Laboratory Products
Laurinburg, North Carolina Pharmaceutical and Nutritional Products, and Hospital
and Laboratory Products
McPherson, Kansas Hospital and Laboratory Products
Mexico City, Mexico Pharmaceutical and Nutritional Products, and Hospital
and Laboratory Products
Montreal, Canada Pharmaceutical and Nutritional Products, and Hospital
and Laboratory Products
Morgan Hill, California Hospital and Laboratory Products
North Chicago, Illinois Pharmaceutical and Nutritional Products, and Hospital
and Laboratory Products
Queenborough, England Pharmaceutical and Nutritional Products, and Hospital
and Laboratory Products
Rocky Mount, North Carolina Hospital and Laboratory Products
Salt Lake City, Utah Hospital and Laboratory Products
Santa Clara, California Hospital and Laboratory Products
Santo Domingo, Dominican Republic Hospital and Laboratory Products
Sligo/Donegal/Cootehill/Finisklin, Ireland Pharmaceutical and Nutritional Products, and Hospital
and Laboratory Products
Sturgis, Michigan Pharmaceutical and Nutritional Products
St. Remy, France Pharmaceutical and Nutritional Products, and Hospital
and Laboratory Products
Tokyo, Japan Hospital and Laboratory Products
Zwolle, The Netherlands Pharmaceutical and Nutritional Products
7
In addition to the above, the Company has manufacturing facilities in five
other locations in the United States, including Puerto Rico. Overseas
manufacturing facilities are located in 13 other countries. The Company's
facilities are deemed suitable, provide adequate productive capacity, and are
utilized at normal and acceptable levels.
In the United States, including Puerto Rico, the Company owns 11
distribution centers. The Company also has 13 United States research and
development facilities located at Abbott Park, Illinois; Ashland, Ohio; Bedford,
Massachusetts; Columbus, Ohio (two locations); Irving, Texas; Long Grove,
Illinois; Madera, California; McPherson, Kansas; Morgan Hill, California; North
Chicago, Illinois; Santa Clara, California; and San Diego, California. Overseas,
the Company has research and development facilities in Argentina, Australia,
Canada, France, Germany, Ireland, Italy, Japan, The Netherlands, Spain and the
United Kingdom.
The corporate offices, and those principal plants in the United States that
are listed above, are owned by the Company or subsidiaries of the Company. The
remaining manufacturing plants and all other facilities are owned or leased by
the Company or subsidiaries of the Company.
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in various claims and legal proceedings, including
(as of January 31, 1998) two antitrust suits and five investigations in
connection with the Company's sale and marketing of infant formula products, 148
antitrust suits and two investigations in connection with the Company's pricing
of prescription pharmaceuticals, two cases involving the Company's patents for
divalproex sodium, a drug that the Company sells under the trademark
Depakote-Registered Trademark-, and five cases involving the Company's patents
for terazosin hydrochloride, a drug that the Company sells under the trademark
Hytrin-Registered Trademark-.
The infant formula antitrust suits allege that the Company conspired with
one or more of its competitors to fix prices, restrain trade and monopolize the
market for infant formula in violation of state antitrust laws. The suits have
been brought on behalf of individuals and name the Company and certain other
infant formula manufacturers as defendants. The cases seek treble damages, civil
penalties, and other relief. On November 7, 1997, the Louisiana District Court
dismissed the plaintiff's complaint in the case that was pending in Louisiana.
The plaintiffs have appealed that decision. In 1997, a case was filed in state
court in St. Louis, Missouri. It purports to be a statewide consumer class
action. The Company has filed a motion to dismiss. A decision is pending. On
December 1, 1997, the court granted final approval to the settlement of the
infant formula case pending in United States District Court in Massachusetts.
The Company paid one and one-half million dollars under that settlement.
Investigations are being conducted by the Attorneys General of the states of
California, Connecticut, New York, Pennsylvania, and Wisconsin.
As of January 31, 1998, 124 prescription pharmaceutical pricing antitrust
cases were pending in federal court, 23 were pending in state courts, and one
was pending in a District of Columbia court. The prescription pharmaceutical
pricing antitrust suits allege that various pharmaceutical manufacturers and
pharmaceutical wholesalers 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 individual consumers and retail pharmacies and name both the Company
and certain other pharmaceutical manufacturers and pharmaceutical wholesalers
and at least one mail-order pharmacy company as defendants. The cases seek
treble damages, civil penalties and injunctive and other relief. The Company has
filed or intends to file a response to each of the complaints denying all
substantive allegations. The state cases are pending in the following state
courts: Tuscaloosa County, Alabama; Yavapai County, Arizona; Alameda County,
California; Monterey County, California; San Francisco County, California (eight
cases); San Joaquin County, California; Cumberland County, Maine; Oakland
County, Michigan; Prentiss County, Mississippi; Hennepin County, Minnesota
(three cases); Mecklenburg County, North Carolina; and Dane County and
Washington County, Wisconsin. A case is also pending in
8
the Superior Court for the District of Columbia. The case which was pending in
New York County, New York, has been dismissed and is now on appeal. The case
that was pending in King County, Washington, was dismissed. In January 1998,
that dismissal became final. Motions for certification as a consumer class
action were denied in Maine, Michigan, and Minnesota. Appeals of the consumer
class certification decisions are pending in Maine and Michigan. Trial in the
individual consumer case pending in Michigan is scheduled for July 1998. Abbott
has entered into a settlement agreement to settle the retail pharmacy lawsuits
in Wisconsin and Minnesota. The settlement agreement in Minnesota was approved
on December 30, 1997. The cases pending in Greene County, Alabama; Dade County,
Florida; Johnson County, Kansas; and Davidson County, Tennessee, were removed to
the United States District Court for the Northern District of Illinois. The
plaintiffs challenged the removal orders. In August 1997, the Court of Appeals
reversed the Alabama removal and remanded the case to state court. The federal
jurisdictional issues in the Alabama, Florida, Kansas, and Tennessee cases are
now being considered by the United States District Court for the Northern
District of Illinois. The manufacturer defendants have filed a petition for
certiorari with the United States Supreme Court seeking a reversal of the Court
of Appeals jurisdictional decision in the Alabama case. The federal cases are
pending in the United States District Court for the Northern District of
Illinois under the Multidistrict Litigation Rules as In re: Brand Name
Prescription Drug Antitrust Litigation, MDL 997. One of the cases which is
pending in the MDL 997 litigation has been certified as a class action on behalf
of certain retail pharmacies. A number of appeals to the Seventh Circuit Court
of Appeals were filed arising out of the MDL 997 litigation. The Company has
previously reported that these appeals were decided in August 1997. The
wholesaler defendants and the manufacturer defendants filed petitions for
certiorari to the United States Supreme Court on January 6, 1998. The
wholesalers' petition seeks a reversal of the Court of Appeals decision denying
summary judgment in the wholesalers' favor. The manufacturers' petition seeks to
reverse the Court of Appeals ruling that indirect purchasers of prescription
drugs may recover alleged overcharges in those cases in which the intermediary
purchaser (in this case, the wholesaler) is also alleged to be part of the
conspiracy. The federal retail pharmacy class action trial is scheduled to begin
in September 1998. The investigations are being conducted by the Attorney
General of Illinois and the Federal Trade Commission.
On October 24, 1997, after having been notified that TorPharm, a division of
Apotex, Inc. ("TorPharm") had applied to the Federal Food and Drug
Administration (the "FDA") for approval for a generic version of divalproex
sodium, a drug that the Company sells under the trademark
Depakote-Registered Trademark-, the Company sued TorPharm in the United States
District Court for the Northern District of Illinois alleging patent
infringement. TorPharm contends that its product does not infringe the Company's
patents and that, in any event, the patents are invalid and unenforceable. The
Company is involved in one other proceeding involving the Company's patents for
divalproex sodium. On August 28, 1992, after having been notified that Alra
Laboratories, Inc. ("Alra") had applied to the FDA for approval for a generic
version of divalproex sodium, the Company sued Alra in the United States
District Court for the Northern District of Illinois alleging patent
infringement. Alra filed counterclaims alleging that the Company fraudulently
delayed Alra's entry into the market for divalproex sodium and seeking money
damages. Alra contended that its product did not infringe the Company's patents
and that, in any event, those patents were invalid and unenforceable. Alra filed
motions for summary judgment on the issues of infringement and validity. The
Company filed a motion for summary judgment on the issue of infringement. On
October 20, 1997, the court granted the Company's motion for summary judgment
and found that Alra's product infringes the Company's patents. The court denied
Alra's motions for summary judgment on the issues of infringement and patent
invalidity and dismissed the lawsuit. Alra filed a motion for reconsideration of
the court's ruling. That motion was granted in part and denied in part. The
court has stayed its earlier rulings on validity and infringement pending
further proceedings.
As of January 31, 1998, five cases involving the Company's patents for
terazosin hydrochloride, a drug that the Company sells under the trademark
Hytrin-Registered Trademark-, were pending in federal court in the United
States. The Company has been separately notified first by Geneva
Pharmaceuticals, Inc. ("Geneva") in April 1996, and then by Novopharm Limited
("Novopharm"), Invamed, Inc. ("Invamed") and Mylan
9
Pharmaceuticals, Inc. ("Mylan") that these corporations had applied to the
Federal Food and Drug Administration for approval for a generic version of
terazosin hydrochloride. The Company sued each of these corporations in the
United States District Court for the Northern District of Illinois alleging
patent infringement. These lawsuits were filed on June 4, 1996, against Geneva,
on September 13, 1996, against Novopharm, on August 1, 1997, against Mylan, and
on October 28, 1997, against Invamed. These corporations contend that the
Company's patent which covers their version of terazosin hydrochloride is
invalid and unenforceable. Geneva and Novopharm have filed motions for summary
judgment on the issue of validity. Additionally, in April 1996, Zenith
Laboratories, Inc. ("Zenith") sued the Company in the United States District
Court for the District of New Jersey alleging that the Company has engaged in
unfair competition, abuse of process, tortious interference with prospective
economic advantage, and fraud in attempting to protect Hytrin from generic
competition. Zenith seeks money damages and a declaration that certain of the
Company's patents covering terazosin hydrochloride are invalid. The Company
filed counterclaims alleging patent infringement. Trial in the Zenith case is
scheduled to begin in May 1998.
While it is not feasible to predict the outcome of such pending claims,
proceedings, and investigations with certainty, management is of the opinion
that their ultimate disposition should not have a material adverse effect on the
Company's financial position, cash flows, or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
10
EXECUTIVE OFFICERS OF THE REGISTRANT
Officers of the Company are elected annually by the board of directors at
the first meeting held after the annual shareholders meeting. Each officer holds
office until a successor has been duly elected and qualified or until the
officer's death, resignation, or removal. Vacancies may be filled at any meeting
of the board. Any officer may be removed by the board of directors when, in its
judgment, removal would serve the best interests of the Company.
Current corporate officers, and their ages as of March 1, 1998, are listed
below. The officers' principal occupations and employment from January 1993 to
March 1, 1998 and the dates of their first election as officers of the Company
are also shown. Unless otherwise stated, employment was by the Company for the
period indicated. There are no family relationships between any corporate
officers or directors.
DUANE L. BURNHAM**, 56
1993 to present -- Chairman of the Board and Chief Executive Officer, and
Director.
Elected Corporate Officer -- 1982.
THOMAS R. HODGSON**, 56
1993 to present -- President and Chief Operating Officer, and Director.
Elected Corporate Officer -- 1980.
PAUL N. CLARK**, 51
1993 to 1998 -- Senior Vice President, Pharmaceutical Operations.
1998 to present -- Executive Vice President.
Elected Corporate Officer -- 1985.
ROBERT L. PARKINSON, JR.**, 47
1993 -- Vice President, European Operations.
1993 to 1995 -- Senior Vice President, Chemical and Agricultural Products.
1995 to 1998 -- Senior Vice President, International Operations.
1998 to present -- Executive Vice President.
Elected Corporate Officer -- 1989.
MILES D. WHITE**, 42
1993 -- Divisional Vice President and General Manager, Diagnostic Systems
and Operations.
1993 to 1994 -- Vice President, Diagnostic Systems and Operations.
1994 to 1998 -- Senior Vice President, Diagnostic Operations.
1998 to present -- Executive Vice President.
Elected Corporate Officer -- 1993.
11
JOY A. AMUNDSON**, 43
1993 to 1994 -- Vice President, Corporate Hospital Marketing.
1994 to 1995 -- Vice President, Abbott HealthSystems.
1995 to 1998 -- Senior Vice President, Chemical and Agricultural Products.
1998 to present -- Senior Vice President, Ross Products.
Elected Corporate Officer -- 1990.
THOMAS D. BROWN**, 49
1993 -- Divisional Vice President, Diagnostic Commercial Operations.
1993 to 1998 -- Vice President, Diagnostic Commercial Operations.
1998 to present -- Senior Vice President, Diagnostic Operations.
Elected Corporate Officer -- 1993.
GARY P. COUGHLAN**, 53
1993 to present -- Senior Vice President, Finance and Chief Financial
Officer.
Elected Corporate Officer -- 1990.
JOSE M. DE LASA**, 56
1993 to 1994 -- Vice President and Associate General Counsel, Bristol-Myers
Squibb Company (Health and personal care products company).
1994 -- Vice President, Secretary and Associate General Counsel,
Bristol-Myers Squibb Company.
1994 to present -- Senior Vice President, Secretary and General Counsel.
Elected Corporate Officer -- 1994.
WILLIAM G. DEMPSEY **, 46
1993 to 1995 -- Divisional Vice President and General Manager, Abbott
Critical Care Systems.
1995 to 1996 -- Divisional Vice President, Hospital Products Business Sector
Sales.
1996 to 1998 -- Vice President, Hospital Products Business Sector.
1998 to present -- Senior Vice President, Chemical and Agricultural
Products.
Elected Corporate Officer -- 1996.
RICHARD A. GONZALEZ**, 44
1993 to 1995 -- Divisional Vice President and General Manager, U.S. and
Canada, Diagnostic Products.
1995 to 1998 -- Vice President, Abbott HealthSystems.
1998 to present -- Senior Vice President, Hospital Products.
Elected Corporate Officer -- 1995.
12
ARTHUR J. HIGGINS**, 41
1993 to 1994 -- Regional Director, Europe, Africa, and Middle East.
1994 to 1995 -- Divisional Vice President, Commercial Operations, Abbott
International Division.
1995 to 1996 -- Divisional Vice President, Pacific, Asia, and Africa
Operations.
1996 to 1998 -- Vice President, Pacific, Asia, and Africa Operations.
1998 to present -- Senior Vice President, Pharmaceutical Operations.
Elected Corporate Officer -- 1996.
JOHN G. KRINGEL**, 58
1993 to 1998 -- Senior Vice President, Hospital Products.
1998 to present -- Senior Vice President.
Elected Corporate Officer -- 1981.
THOMAS M. MCNALLY**, 50
1993 -- Senior Vice President, Chemical and Agricultural Products.
1993 to 1998 -- Senior Vice President, Ross Products.
1998 to present -- Senior Vice President.
Elected Corporate Officer -- 1989.
ELLEN M. WALVOORD**, 58
1993 to 1995 -- Vice President, Investor Relations and Public Affairs.
1995 to present -- Senior Vice President, Human Resources.
Elected Corporate Officer -- 1991.
JOSEF WENDLER**, 48
1993 -- Divisional Vice President, Pacific, Asia, and Africa.
1993 to 1995 -- Vice President, Pacific, Asia, and Africa Operations.
1995 to 1998 -- Vice President, European Operations.
1998 to present -- Senior Vice President, International Operations.
Elected Corporate Officer -- 1993.
CATHERINE V. BABINGTON**, 45
1993 to 1995 -- Director, Corporate Communications.
1995 to present -- Vice President, Investor Relations and Public Affairs.
Elected Corporate Officer -- 1995.
13
PATRICK J. BALTHROP, 41
1993 to 1995 -- Divisional Vice President and Sector General Manager,
Diagnostic Products.
1995 to 1996 -- Divisional Vice President and General Manager, U.S. and
Canada, Diagnostic Products.
1996 to 1998 -- Vice President, Diagnostic Operations, U.S. and Canada.
1998 to present -- Vice President, Diagnostic Commercial Operations.
Elected Corporate Officer -- 1996.
MARK E. BARMAK, 56
1993 to 1995 -- Divisional Vice President and Associate General Counsel,
Litigation.
1995 to present -- Vice President, Litigation and Government Affairs.
Elected Corporate Officer -- 1995.
CHRISTOPHER B. BEGLEY, 45
1993 to 1996 -- Vice President, Hospital Products Business Sector.
1996 to present -- Vice President, MediSense Operations.
Elected Corporate Officer -- 1993.
DOUGLAS C. BRYANT, 40
1993 to 1995 -- Regional Sales Manager, Diagnostics Division.
1995 to 1997 -- General Manager, United Kingdom and Ireland, Diagnostics
Division.
1997 to 1998 -- Commercial Director, Asia and Pacific, Diagnostics Division.
1998 to present -- Vice President, Diagnostic Operations, Asia and Pacific.
Elected Corporate Officer -- 1998.
GARY R. BYERS**, 56
1993 -- Divisional Vice President, Corporate Auditing.
1993 to present -- Vice President, Internal Audit.
Elected Corporate Officer -- 1993.
THOMAS F. CHEN, 48
1993 to 1994 -- General Manager, Korea and Taiwan.
1994 to 1996 -- General Manager Taiwan and Peoples Republic of China Task
Force.
1996 to 1998 -- Regional Director, Taiwan and Peoples Republic of China.
1998 to present -- Vice President, Pacific, Asia, and Africa Operations.
Elected Corporate Officer -- 1998.
KENNETH W. FARMER**, 52
1993 to present -- Vice President, Management Information Services and
Administration.
Elected Corporate Officer -- 1985.
14
EDWARD J. FIORENTINO, 39
1993 to 1994 -- Business Unit Director, Antimicrobials, Pharmaceuticals
Division.
1994 to 1998 -- Divisional Vice President, Marketing, Pharmaceuticals
Division.
1998 to present -- Vice President, Pharmaceutical Products, Marketing and
Sales.
Elected Corporate Officer -- 1998.
THOMAS C. FREYMAN**, 43
1993 to present -- Vice President and Treasurer.
Elected Corporate Officer -- 1991.
DAVID B. GOFFREDO, 43
1993 -- Divisional Vice President, Pharmaceutical Products Marketing.
1993 to 1995 -- Divisional Vice President, Pharmaceutical Products Sales and
Marketing.
1995 to 1998 -- Vice President, Pharmaceutical Products, Marketing and
Sales.
1998 to present -- Vice President, European Operations.
Elected Corporate Officer -- 1995.
GUILLERMO A. HERRERA, 44
1993 to 1994 -- Regional Director, Europe, Abbott International.
1994 -- General Manager, Abbott Spain and Portugal.
1994 to 1996 -- Area Vice President, Latin America.
1996 to 1998 -- Vice President, Latin America Operations.
1998 to present -- Vice President, Latin America and Canada Operations.
Elected Corporate Officer -- 1996.
JAY B. JOHNSTON, 54
1993 -- Divisional Vice President and General Manager, Diagnostic Assays and
Operations.
1993 to present -- Vice President, Diagnostic Assays and Systems.
Elected Corporate Officer -- 1993.
JAMES J. KOZIARZ, 49
1993 -- Divisional Vice President, Diagnostic Products Research and
Development.
1993 to present -- Vice President, Diagnostic Products Research and
Development.
Elected Corporate Officer -- 1993.
JOHN F. LUSSEN**, 56
1993 to present -- Vice President, Taxes.
Elected Corporate Officer -- 1985.
15
EDWARD L. MICHAEL, 41
1993 to 1994 -- Business Unit Manager, Diagnostics Division.
1995 to 1996 -- Director, Area Operations and Scientific Development.
1997 to present -- Vice President, Diagnostic Operations, Europe, Africa,
and Middle East.
Elected Corporate Officer -- 1997.
THEODORE A. OLSON**, 59
1993 to present -- Vice President and Controller.
Elected Corporate Officer -- 1988.
ANDRE G. PERNET, 53
1993 to 1994 -- Divisional Vice President, Pharmaceutical Development,
Pharmaceutical Products Division.
1994 to present -- Vice President, Pharmaceutical Products Research and
Development.
Elected Corporate Officer -- 1994.
CARL A. SPALDING, 52
1993 -- Divisional Vice President and General Manager, Ross Pediatric
Products.
1993 to present -- Vice President, Ross Pediatric Products.
Elected Corporate Officer -- 1993.
WILLIAM H. STADTLANDER, 52
1993 -- Divisional Vice President and General Manager, Medical Nutritionals.
1993 to present -- Vice President, Ross Medical Nutritional Products.
Elected Corporate Officer -- 1993.
MARCIA A. THOMAS **, 50
1993 to 1995 -- Divisional Vice President and General Manager, Infectious
Diseases Diagnostics.
1995 to 1996 - Divisional Vice President, Quality Assurance and Regulatory
Affairs, Diagnostics Division.
1996 to present -- Vice President, Quality Assurance and Regulatory Affairs.
Elected Corporate Officer -- 1996.
H. THOMAS WATKINS**, 45
1993 -- Divisional Vice President and Sector General Manager, Diagnostics
Division.
1994 to 1996 -- Divisional Vice President and General Manager, Asia and
Pacific Diagnostics.
1996 to 1998 -- Vice President, Diagnostic Operations, Asia and Pacific.
1998 to present -- Vice President, Abbott HealthSystems.
Elected Corporate Officer -- 1996.
16
STEVEN J. WEGER, JR.**, 53
1993 -- Director, Strategic Planning, Diagnostics Division.
1994 to 1996 -- Divisional Vice President, Strategic Planning and Technology
Assessment, Diagnostics Division.
1996 to present -- Vice President, Corporate Planning and Development.
Elected Corporate Officer -- 1996.
SUSAN M. WIDNER, 41
1993 to 1995 -- Business Unit Manager, Diagnostics Division.
1995 to 1996 -- Director, Venture Marketing, Diagnostics Division.
1996 to 1998 -- Divisional Vice President, Worldwide Marketing, Diagnostics
Division.
1998 to present -- Vice President, Diagnostic Operations, U.S. and Canada.
Elected Corporate Officer -- 1998.
LANCE B. WYATT**, 53
1993 to 1995 -- Divisional Vice President, Quality Assurance and Regulatory
Affairs, Pharmaceutical Division.
1995 to present -- Vice President, Corporate Engineering.
Elected Corporate Officer -- 1995.
- ------------------------
** Pursuant to Item 401(b) of Regulation S-K, the Company has identified these
persons as "executive officers" within the meaning of Item 401(b).
17
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
PRINCIPAL MARKET
The principal market for the Company's common shares is the New York Stock
Exchange. Shares are also listed on the Chicago Stock Exchange and the Pacific
Exchange and are traded on the Boston, Cincinnati, and Philadelphia Exchanges.
Overseas, the Company's shares are listed on the London Stock Exchange and the
Swiss Stock Exchange.
MARKET PRICE PER SHARE
-------------------------------------
1997 1996
----------------- -----------------
HIGH LOW HIGH LOW
------- ------- ------- -------
First Quarter................... 60 1/2 49 3/4 44 3/4 38 1/8
Second Quarter.................. 68 15/16 52 7/8 43 7/8 38 5/8
Third Quarter................... 68 1/2 58 13/16 49 3/4 41 3/8
Fourth Quarter.................. 69 1/4 57 1/16 57 3/8 48 3/4
Market prices are as reported by the New York Stock Exchange composite
transaction reporting system.
SHAREHOLDERS
There were 102,981 shareholders of record of Abbott common shares as of
December 31, 1997.
DIVIDENDS
Quarterly dividends of $.27 per share and $.24 per share were declared on
common shares in 1997 and 1996, respectively.
ITEM 6. SELECTED FINANCIAL DATA
Incorporated herein by reference for the years 1993 through 1997 are the
applicable portions of the section captioned "Summary of Selected Financial
Data" of the 1997 Annual Report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Incorporated herein by reference is management's discussion and analysis of
financial condition and results of operations for the years 1997, 1996, and 1995
found under the section captioned "Financial Review" of the 1997 Annual Report.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Incorporated herein by reference is the section captioned "Financial
Instruments and Risk Management" of the 1997 Annual Report.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Incorporated herein by reference are the portions of the 1997 Annual Report
captioned Consolidated Statement of Earnings, Consolidated Statement of Cash
Flows, Consolidated Balance Sheet, Consolidated Statement of Shareholders'
Investment, Notes to Consolidated Financial Statements, and Report of
18
Independent Public Accountants (which contains the related report of Arthur
Andersen LLP dated January 15, 1998 (except with respect to the matter discussed
in Note 12, as to which the date is February 13, 1998)). Data relating to
quarterly results is found in Note 9.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Incorporated herein by reference are "Committees of the Board of Directors"
and "Information Concerning Nominees for Directors" found in the 1998 Abbott
Laboratories Proxy Statement (1998 Proxy Statement).
ITEM 11. EXECUTIVE COMPENSATION
The material in the 1998 Proxy Statement under the heading "Executive
Compensation," other than the Report of the Compensation Committee, the
Performance Graph, and Security Ownership of Officers and Directors is hereby
incorporated by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated herein by reference is the text found under the caption
"Information Concerning Security Ownership" and the material under the heading
"Security Ownership of Executive Officers and Directors" in the 1998 Proxy
Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) DOCUMENTS FILED AS PART OF THIS FORM 10-K.
1. FINANCIAL STATEMENTS: The Consolidated Financial Statements for the
years ended December 31, 1997, 1996, and 1995 and the related report of Arthur
Andersen LLP dated January 15, 1998 (except with respect to the matter discussed
in Note 12, as to which the date is February 13, 1998), appearing under the
portions of the 1997 Annual Report captioned Consolidated Statement of Earnings,
Consolidated Statement of Cash Flows, Consolidated Balance Sheet, Consolidated
Statement of Shareholders' Investment, Notes to Consolidated Financial
Statements, and Report of Independent Public Accountants, respectively, are
incorporated by reference in response to Item 14(a)1. With the exception of the
portions of the 1997 Annual Report specifically incorporated herein by
reference, such Report shall not be deemed filed as part of this Annual Report
on Form 10-K or otherwise deemed subject to the liabilities of Section 18 of the
Securities Exchange Act of 1934.
19
2. FINANCIAL STATEMENT SCHEDULES: The required financial statement
schedules are found on the pages indicated below. These schedules should be read
in conjunction with the Consolidated Financial Statements in the 1997 Annual
Report:
SCHEDULES PAGE NO.
- ---------------------------------------------------------------------------------------------- -------------
Valuation and Qualifying Accounts (Schedule II) 23
Schedules I, III, IV, and V are not submitted because they are not applicable or not required.
Supplemental Report of Independent Public Accountants 24
Individual Financial Statements of the registrant have been omitted pursuant to Rule 3.05,
paragraph (1) of Regulation S-X.
3. EXHIBITS REQUIRED BY ITEM 601 OF REGULATION S-K: The information called
for by this paragraph is incorporated herein by reference to the Exhibit Index
on pages 26 and 27 of this Form 10-K.
(b) REPORTS ON FORM 8-K DURING THE QUARTER ENDED DECEMBER 31, 1997:
No reports on Form 8-K were filed during the quarter ended December 31,
1997.
(c) EXHIBITS FILED (SEE EXHIBIT INDEX ON PAGES 26 AND 27).
(d) FINANCIAL STATEMENT SCHEDULES FILED (PAGE 23).
20
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Abbott Laboratories has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
ABBOTT LABORATORIES
By /s/ DUANE L. BURNHAM
------------------------------------
Duane L. Burnham
Chairman of the Board and
Chief Executive Officer
Date: February 13, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of Abbott
Laboratories on February 13, 1998 in the capacities indicated below.
/s/ DUANE L. BURNHAM
- -------------------------------------------
Duane L. Burnham
Chairman of the Board,
Chief Executive Officer and
Director of Abbott Laboratories
(principal executive officer)
/s/ GARY P. COUGHLAN
- -------------------------------------------
Gary P. Coughlan
Senior Vice President, Finance and
Chief Financial Officer
(principal financial officer)
/s/ THOMAS R. HODGSON
- -------------------------------------------
Thomas R. Hodgson
President, Chief Operating Officer
and Director of Abbott Laboratories
/s/ THEODORE A. OLSON
- -------------------------------------------
Theodore A. Olson
Vice President and Controller
(principal accounting officer)
/s/ K. FRANK AUSTEN, M.D.
- -------------------------------------------
K. Frank Austen, M.D.
Director of Abbott Laboratories
/s/ H. LAURANCE FULLER
- -------------------------------------------
H. Laurance Fuller
Director of Abbott Laboratories
/s/ DAVID A. JONES
- -------------------------------------------
David A. Jones
Director of Abbott Laboratories
/s/ DAVID A. L. OWEN
- -------------------------------------------
David A. L. Owen
Director of Abbott Laboratories
/s/ BOONE POWELL, JR.
- -------------------------------------------
Boone Powell, Jr.
Director of Abbott Laboratories
/s/ A. BARRY RAND
- -------------------------------------------
A. Barry Rand
Director of Abbott Laboratories
/s/ W. ANN REYNOLDS
- -------------------------------------------
W. Ann Reynolds
Director of Abbott Laboratories
21
/s/ WILLIAM D. SMITHBURG
- -------------------------------------------
William D. Smithburg
Director of Abbott Laboratories
/s/ WILLIAM L. WEISS
- -------------------------------------------
William L. Weiss
Director of Abbott Laboratories
22
ABBOTT LABORATORIES AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
(UNAUDITED)
AMOUNTS
ALLOWANCES FOR DOUBTFUL BALANCE AT PROVISIONS CHARGED OFF
ACCOUNTS AND SALES BEGINNING CHARGED TO NET OF BALANCE AT
DEDUCTIONS OF YEAR INCOME(A) RECOVERIES END OF YEAR
- ------------------------------------------------------------ ----------- ------------- ----------- -----------
1997................................................ 153,424 28,193 (14,211) 167,406
1996................................................ 157,990 7,389 (11,955) 153,424
1995................................................ 128,929 32,462 (3,401) 157,990
(a) represents provisions related to allowances for doubtful accounts and net
change in the allowances for sales deductions.
23
SUPPLEMENTAL REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Abbott Laboratories:
We have audited in accordance with generally accepted auditing standards,
the financial statements included in the Company's Annual Report incorporated by
reference in this Form 10-K, and have issued our report thereon dated January
15, 1998 (except with respect to the matter discussed in Note 12, as to which
the date is February 13, 1998). Our audits were made for the purpose of forming
an opinion on those statements taken as a whole. Schedule II is the
responsibility of the Company's management, is presented for purposes of
complying with the Securities and Exchange Commission's rules, and is not part
of the basic financial statements. This schedule has been subjected to the
auditing procedures applied in the audits of the basic financial statements and,
in our opinion, fairly states in all material respects the financial data
required to be set forth therein in relation to the basic financial statements
taken as a whole.
ARTHUR ANDERSEN LLP
Chicago, Illinois
January 15, 1998
(except with respect to the matter
discussed in Note 12, as to
which the date is February 13, 1998)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference of the following into the Company's previously filed S-8 Registration
Statements 33-4368 for the Abbott Laboratories 1986 Incentive Stock Program,
33-39798 for the Abbott Laboratories 1991 Incentive Stock Program, 333-09071 and
333-43381 for the Abbott Laboratories 1996 Incentive Stock Program, 333-13091
for the Abbott Laboratories Ashland Union 401(k) Plan and Trust, and 33-26685,
33-51585, 33-56897, 33-65127, 333-19511 and 333-43383 for the Abbott
Laboratories Stock Retirement Plan and Trust and into the Company's previously
filed S-3 Registration Statements 33-50253 and 333-06155:
1. Our supplemental report dated January 15, 1998 (except with respect to
the matter discussed in Note 12, as to which the date is February 13, 1998)
included in this Annual Report on Form 10-K for the year ended December 31,
1997; and
2. Our report dated January 15, 1998 (except with respect to the matter
discussed in Note 12, as to which the date is February 13, 1998) incorporated by
reference in this Annual Report on Form 10-K for the year ended December 31,
1997.
ARTHUR ANDERSEN LLP
Chicago, Illinois
March 9, 1998
EXHIBIT INDEX
ABBOTT LABORATORIES
ANNUAL REPORT
FORM 10-K
1997
10-K
EXHIBIT
TABLE
ITEM NO.
- ---------
3.1 * Articles of Incorporation-Abbott Laboratories, filed as Exhibit 3.1 to the 1996 Abbott Laboratories
Annual Report on Form 10-K.
3.2 * Corporate By-Laws-Abbott Laboratories, filed as Exhibit 3 to the Abbott Laboratories Quarterly Report
on Form 10-Q for the Quarter ended March 31, 1997.
4.1 * Indenture dated as of October 1, 1993, between Abbott Laboratories and Harris Trust and Savings Bank,
filed as Exhibit 4.1 to the Abbott Laboratories Quarterly Report for the Quarter ended September 30,
1993, on Form 10-Q.
4.2 * Form of 5.6% Note issued pursuant to the Indenture filed as Exhibit 4.2 to the Abbott Laboratories
Quarterly Report for the Quarter ended September 30, 1993, on Form 10-Q.
4.3 * Form of Medium-Term Note, Series A (Fixed Rate) to be issued pursuant to the Indenture filed as
Exhibit 4.3 to the Abbott Laboratories Quarterly Report for the Quarter ended September 30, 1993, on
Form 10-Q.
4.4 * Form of Medium-Term Note, Series A (Floating Rate) to be issued pursuant to the Indenture filed as
Exhibit 4.4 to the Abbott Laboratories Quarterly Report for the Quarter ended September 30, 1993, on
Form 10-Q.
4.5 * Resolution of the Company's Board of Directors filed as Exhibit 4.5 to the Abbott Laboratories
Quarterly Report for the Quarter ended September 30, 1993, on Form 10-Q.
4.6 * Actions of the Authorized Officers with respect to the Company's $200,000,000 5.6% Notes filed as
Exhibit 4.6 to the Abbott Laboratories Quarterly Report for the Quarter ended September 30, 1993, on
Form 10-Q.
4.7 * Actions of the Authorized Officers with respect to the Company's Medium-Term Notes, Series A filed as
Exhibit 4.7 to the Abbott Laboratories Quarterly Report for the Quarter ended September 30, 1993, on
Form 10-Q.
4.8 * Officers' Certificate and Company Order with respect to the Company's $200,000,000 5.6% Notes filed as
Exhibit 4.8 to the Abbott Laboratories Quarterly Report for the Quarter ended September 30, 1993, on
Form 10-Q.
4.9 * Form of 6.8% Note issued pursuant to Indenture filed as Exhibit 4.9 to the 1995 Abbott Laboratories
Annual Report on Form 10-K.
4.10 * Actions of Authorized Officers with respect to the Company's $150,000,000 6.8% Notes filed as Exhibit
4.10 to the 1995 Abbott Laboratories Annual Report on Form 10-K.
4.11 * Officers' Certificate and Company Order with respect to the Company's $150,000,000 6.8% Notes filed as
Exhibit 4.11 to the 1995 Abbott Laboratories Annual Report on Form 10-K.
4.12 * Resolution of the Company's Board of Directors relating to the 6.4% Notes filed as Exhibit 4.12 to the
1996 Abbott Laboratories Annual Report on Form 10-K.
4.13 * Form of $50,000,000 6.4% Note issued pursuant to Indenture filed as Exhibit 4.13 to the 1996 Abbott
Laboratories Annual Report on Form 10-K.
4.14 * Form of $200,000,000 6.4% Note issued pursuant to Indenture filed as Exhibit 4.14 to the 1996 Abbott
Laboratories Annual Report on Form 10-K.
26
10-K
EXHIBIT
TABLE
ITEM NO.
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4.15 * Actions of Authorized Officers with respect to the Company's 6.4% Notes filed as Exhibit 4.15 to the
1996 Abbott Laboratories Annual Report on Form 10-K.
4.16 * Officers' Certificate and Company Order with respect to the Company's 6.4% Notes filed as Exhibit 4.16
to the 1996 Abbott Laboratories Annual Report on Form 10-K.
Other debt instruments are omitted in accordance with Item 601(b)(4)(iii)(A) of Regulation S-K. Copies
of such agreements will be furnished to the Securities and Exchange Commission upon request.
10.1 * Supplemental Plan Abbott Laboratories Extended Disability Plan, filed as an exhibit (pages 50-51) to
the 1992 Abbott Laboratories Annual Report on Form 10-K.**
10.2 The Abbott Laboratories 1986 Incentive Stock Program.**
10.3 The Abbott Laboratories 1991 Incentive Stock Program.**
10.4 Consulting agreement between Abbott Laboratories and K. Frank Austen, M.D. dated, December 15, 1997.**
10.5 * Abbott Laboratories 401(k) Supplemental Plan, filed as Exhibit 10.7 to the Abbott Laboratories 1993
Annual Report on Form 10-K.**
10.6 * Abbott Laboratories Supplemental Pension Plan filed as Exhibit 10.6 to the 1996 Abbott Laboratories
Annual Report on Form 10-K.**
10.7 * The 1986 Abbott Laboratories Management Incentive Plan filed as Exhibit 10.1 to the 1996 Abbott
Laboratories Quarterly Report on Form 10-Q for the quarter ended June 30, 1997.**
10.8 Abbott Laboratories Non-Employee Directors' Fee Plan.**
10.9 The Abbott Laboratories 1996 Incentive Stock Program.**
11 Calculation of Diluted Earnings Per Common Share.
12 Computation of Ratio of Earnings to Fixed Charges.
13 The portions of the Abbott Laboratories Annual Report for the year ended December 31, 1997 captioned
Financial Review, Financial Instruments and Risk Management, Consolidated Statement of Earnings,
Consolidated Statement of Cash Flows, Consolidated Balance Sheet, Consolidated Statement of
Shareholders' Investment, Notes to Consolidated Financial Statements, Report of Independent Public
Accountants, and the applicable portions of the section captioned Summary of Financial Data for the
years 1993 through 1997.
21 Subsidiaries of Abbott Laboratories.
23 Consent of Independent Public Accountants.
27 Financial Data Schedule.
99.1 Cautionary Statement Regarding Forward-Looking Statements.
The 1998 Abbott Laboratories Proxy Statement will be filed with the Securities and Exchange Commission
under separate cover on or about March 10, 1998.
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* Incorporated herein by reference.
** Denotes management contract or compensatory plan or arrangement required to
be filed as an exhibit hereto.
The Company will furnish copies of any of the above exhibits to a
shareholder upon written request to the Corporate Secretary, Abbott
Laboratories, 100 Abbott Park Road, Abbott Park, Illinois 60064-3500.
27