QuickLinks -- Click here to rapidly navigate through this document
Exhibit 99.1
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, 2004-Abbott Laboratories today announced
financial results for the fourth quarter ended Dec. 31, 2003.
º •
º Worldwide sales for the quarter were $5.531 billion, up 14.3 percent
from $4.839 billion in the fourth quarter of 2002. Total sales were
favorably impacted 4.4 percent due to the effect of exchange rates.
º •
º Excluding one-time charges in 2003 and 2002, Abbott's fourth-quarter
net income increased 18.2 percent to $1.023 billion and diluted
earnings per share increased 18.2 percent to $0.65-within the
company's previous guidance of $0.64 to $0.66. For an explanation of
one-time charges see the attached questions and answers section.
º •
º Fourth-quarter net income and diluted earnings per share under
Generally Accepted Accounting Principles (GAAP) increased 50.6 percent
to $944 million and 50.0 percent to $0.60, respectively.
º •
º U.S. pharmaceutical sales grew 27.8 percent in the quarter, driven by
strong growth across a number of branded pharmaceutical products,
including Biaxin, TriCor and Omnicef. Worldwide HUMIRA sales were
$119 million in the fourth quarter, totaling $280 million for the
year.
"2003 was a year of many accomplishments for Abbott as we continued to
reshape our businesses for longer-term growth," said Miles D. White, chairman
and chief executive officer. "Our Pharmaceutical Products Group had another
outstanding year, with the successful U.S. launch of HUMIRA, as well as strong
double-digit growth from many of our major pharmaceutical products. In our
Medical Products Group, we created a new operating model aligned with our
strategy to focus on higher-growth, higher-margin products and businesses. We
are especially pleased with the significant progress we have made implementing
our quality initiatives and the positive results of the FDA's recent inspection
of our Lake County diagnostics facility. The FDA assessment reflects the
considerable effort of a large number of dedicated Abbott employees.
"Moving into 2004, our top priorities will be the continued worldwide
launch of HUMIRA, the launch of several new products in our U.S. immunoassay
business and the successful spin-off of Hospira, which will be one of the
largest manufacturers of hospital products in the United States."
1
The following is a summary of fourth-quarter 2003 sales for each of Abbott's
major operating divisions.
Impact of
Percent Exchange
Sales Summary- 4Q03 Change on Percent
Quarter Ended 12/31/03 ($ millions) vs. 4Q02 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.
Impact of
Year Ended Percent Exchange on
Sales Summary- 12/31/03 Change Percent
Year Ended 12/31/03 ($ millions) vs. 2002 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.
Percent Rest of Percent
U.S. Change World Change
Quarter Ended 12/31/03 ($ millions) vs. 4Q02 ($ millions) 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 ) - -
º *
º Abbott's U.S. anti-infectives franchise, which includes Biaxin
(clarithromycin) and Omnicef, grew 34.8 percent.
º a
º Without the positive impact of exchange of 12.9 percent, clarithromycin
sales increased 2.2 percent internationally.
º b
º Without the positive impact of exchange of 17.2 percent, Kaletra sales
increased 50.1 percent internationally.
º c
º Without the positive impact of exchange of 12.1 percent, leuprolide sales
decreased 0.7 percent internationally.
º d
º Without the positive impact of exchange of 13.3 percent, lansoprazole sales
increased 13.9 percent internationally.
º e
º Without the positive impact of exchange of 8.9 percent, adult nutritional
sales increased 4.4 percent internationally.
º f
º Without the positive impact of exchange of 13.2 percent, Sevorane sales
increased 12.4 percent internationally.
º g
º Without the positive impact of exchange of 13.6 percent, MediSense sales
increased 7.0 percent internationally.
n/m = Percent change is not meaningful.
4
The following is a summary of Abbott's 2003 sales for selected products.
Percent Rest of Percent
U.S. Change World Change
Year Ended 12/31/03 ($ millions) vs. 2002 ($ millions) 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 ) - -
º *
º Abbott's U.S. anti-infectives franchise, which includes Biaxin
(clarithromycin) and Omnicef, grew 22.0 percent.
º a
º Without the positive impact of exchange of 11.4 percent, clarithromycin
sales decreased 0.4 percent internationally.
º b
º Without the positive impact of exchange of 16.4 percent, Kaletra sales
increased 42.1 percent internationally.
º c
º Without the positive impact of exchange of 6.9 percent, leuprolide sales
decreased 0.6 percent internationally.
º d
º Without the positive impact of exchange of 7.0 percent, adult nutritional
sales increased 4.9 percent internationally.
º e
º Without the positive impact of exchange of 10.1 percent, Sevorane sales
increased 10.5 percent internationally.
º f
º Without the positive impact of exchange of 12.4 percent, MediSense sales
increased 4.4 percent internationally.
n/m = Percent change is not meaningful.
5
Business highlights
º •
º On Jan. 13, 2004, Abbott announced that it will acquire
TheraSense, Inc., a leader in the development, manufacturing and
marketing of blood glucose self-monitoring systems. The acquisition of
TheraSense will broaden Abbott's current blood glucose product line
and add critical mass in research and development and sales and
marketing, as well as provide TheraSense products with greater
international presence. TheraSense currently markets the FreeStyle
Flash™ system, which is the world's smallest glucose meter.
º •
º Abbott announced in December that it would acquire all of the issued
and outstanding stock of i-STAT, a leading manufacturer of
point-of-care diagnostic systems for blood analysis. Abbott entered
into a strategic alliance with i-STAT for point-of-care testing in
1998. This acquisition provides an excellent fit with Abbott's
long-term strategy of expanding its capabilities in high-growth
segments of the diagnostics market while targeting medical needs at
the point-of-patient care.
º •
º On Dec. 18, 2003, Abbott's Lake County, Ill., diagnostic manufacturing
operations were found to be in "substantial conformity" with the
Quality System Regulation, as indicated in a determination letter from
the U.S. Food and Drug Administration (FDA). Abbott is now able to
begin the process of returning products and introducing new products
to the market. This process is expected to begin shortly and continue
on a rolling basis over 2004.
º •
º On Dec. 8, 2003, Abbott announced that its manufacturing partner,
Axis-Shield, submitted a Premarket Notification 510(k) Application to
the FDA seeking clearance of a B-type Natriuretic Peptide (BNP) test
for Abbott's widely used AxSYM automated immunoassay instrument
system. BNP is a cardiac marker used in the diagnosis of heart
failure.
º •
º Abbott recently completed enrollment in studies investigating an oral
formulation of Zemplar (paricalcitol injection) for the treatment of
secondary hyperparathyroidism in predialysis chronic kidney disease
patients. Scheduled for completion by early 2004, these global,
multicenter trials are the largest studies ever conducted for the
treatment of secondary hyperparathyroidism in predialysis chronic
kidney disease patients. This timeline puts the company on track to
file a New Drug Application with the FDA in mid-2004.
º •
º Abbott submitted a Veterinary Biological Product License Application
to the U.S. Department of Agriculture regarding its test for bovine
spongiform encephalopathy (BSE), commonly known as "mad cow disease."
The test, currently approved for use in Europe and Japan, detects the
presence of the abnormal proteins believed to cause BSE and can
provide results within a few hours-much faster than the current
testing methods. Through a marketing and distribution agreement with
Ireland-based Enfer Scientific Ltd., Abbott has been selling the tests
outside the United States since 2001.
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 John Thomas
(847) 935-3456 (847) 938-2655
Jonathon Hamilton Larry Peepo
(847) 935-8646 (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)
Percent
2003 2002 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)
Percent
2003 2002 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
Questions & Answers
Abbott's fourth-quarter 2003 results
º Q1)
º What impacted Pharmaceutical Products Group sales for the fourth quarter?
º A1)
º Strong sales in the Pharmaceutical Products Group were driven by robust
U.S. pharmaceutical sales, which grew nearly 28 percent during the quarter.
U.S. sales were led by double-digit growth in Flomax, TriCor, Biaxin, Mobic
and Omnicef. Synthroid sales in the quarter were also strong, with the
large percentage growth resulting from a favorable comparison to the prior
year when wholesalers were adjusting inventory levels following approval of
the New Drug Application for Synthroid in 2002. In addition, the U.S.
anti-infectives franchise grew more than 34 percent this quarter, driven by
strength in Biaxin and Omnicef.
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.
º Q2)
º How did HUMIRA perform in the fourth quarter, and what is the outlook for
2004?
º A2)
º The worldwide launch of HUMIRA continues to proceed well, with the product
now approved for sale in 37 countries. Worldwide HUMIRA sales this quarter
were $119 million, with full-year sales in 2003 of $280 million.
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.
º Q3)
º What impacted Medical Products Group sales for the fourth quarter?
º A3)
º Sales growth in the Medical Products Group was driven by double-digit
growth in U.S. sales of adult and pediatric nutritionals and Ultane
(sevoflurane). Global sales of MediSense blood glucose monitoring products
grew double digits supported by favorable foreign exchange rates. Growth in
these businesses was partially offset by a sales decline in the U.S.
immunochemistry business, as previously forecasted.
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 Children-better 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.
º Q4)
º What impacted the increase in Non-Segment Sales in the quarter?
º A4)
º As previously announced, Abbott sold the U.S. product rights to Rythmol and
Rythmol SR, two cardiovascular products that did not fit strategically with
the U.S. pharmaceutical portfolio. The sale resulted in a pretax gain of
approximately $70 million in the fourth quarter, reported in "Non-Segment"
Sales. A portion of the gain was used to fund a $35 million additional
contribution to Abbott's philanthropic organization and to support
increased investment in R&D and SG&A, both of which grew double digits.
(See Q&A Answer 7 for additional detail.) As a reminder, sales of product
rights for approved products are recognized as sales in accordance with our
revenue recognition policy.
º Q5)
º How did one-time charges impact quarterly comparisons?
10
º A5)
º One-time charges impacted the fourth quarter as follows (dollars in
millions, except earnings-per-share data):
4Q03 4Q02
Earnings Earnings
After After
Pretax Tax EPS Pretax Tax 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
Other
Cost of Cost of (Income)/
Products Products Expense,
Sold SG&A Total Sold R&D SG&A Net Total
Impairment of assets & $ 88 - $ 88 - - - - -
related costs
Spin-off & integration - $ 15 $ 15 - - - - -
related costs
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.
º Q6)
º How did the gross margin ratio compare with the fourth quarter of 2002?
º A6)
º Gross margin improved in the fourth quarter:
4Q03 4Q02
Cost of
Cost of Gross Products Gross
Products Sold Margin % Sold 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.
º Q7)
º What drove the significant increases in R&D and SG&A in the quarter?
º A7)
º R&D investment this quarter increased more than 12 percent to support key
pipeline programs, including the follow-on indications for HUMIRA and other
clinical programs in pharmaceuticals and vascular devices.
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.)
11
º Q8)
º Why did Net Interest Expense decline from the prior year?
º A8)
º Lower interest rates and a lower level of debt compared to the prior year
reduced Net Interest Expense.
º Q9)
º How did the TAP joint venture perform during the quarter?
º A9)
º TAP sales this quarter were $1.027 billion, down 7.7 percent from 2002 due
to a decline in sales for both Prevacid and Lupron. Prevacid prescriptions
in the quarter were impacted by a slowdown in market growth for promoted
proton pump inhibitors (PPIs). Prevacid remained the PPI market leader with
market share of more than 29 percent. Lupron sales declined this quarter as
increased competition in the urology segment has led to pricing pressures.
TAP has had to make adjustments in Lupron's price due to the entry of a new
competitive product earlier last year, which was initially priced lower
than Lupron. TAP continues to promote the significant patient advantages
and safety profile of Lupron to physicians.
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
º Q10)
º What is your guidance for ongoing earnings per share for the full-year and
first-quarter 2004, and what key assumptions are impacting year-over-year
comparisons?
º A10)
º For the first time, Abbott is providing ongoing earnings-per-share guidance
of $2.40 to $2.48 for the full-year 2004 and $0.55 to $0.57 for the
first-quarter 2004, which excludes one-time charges. The following key
assumptions are reflected in this 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.
º Q11)
º Is the future Hospira business reflected in your 2004 guidance?
º A11)
º Our 2004 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.
º Q12)
º What are your assumptions regarding generic competition in your 2004
guidance?
º A12)
º Abbott is currently in litigation with generic pharmaceutical companies
that have filed for approval of a generic TriCor tablet. Our position is
that these products infringe on the TriCor patents, and we intend to defend
our intellectual property. We believe that it is unlikely that a generic
TriCor tablet will come to market in 2004. Accordingly, our 2004 guidance
assumes no generic competition for TriCor.
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
12
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.
º Q13)
º What one-time charges are you expecting in 2004?
º A13)
º 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 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.
Impact from planned spin-off of Hospira
º Q14)
º What is the estimated 2004 earnings-per-share contribution from the
businesses that will be spun off as Hospira?
º A14)
º The full-year 2004 ongoing earnings-per-share contribution to Abbott from
the business components that will comprise Hospira is estimated to be
approximately $0.16 to $0.18. As a reminder, Hospira will consist of the
Hospital Products Division's core hospital products businesses and related
international businesses. Abbott expects to complete the spin-off of
Hospira in the first half of 2004. The actual earnings-per-share
contribution to Abbott from these businesses will be determined based upon
their performance from Jan. 1, 2004, through the date of the spin-off.
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
º Q15)
º How will the planned spin-off of Hospira, and other organizational changes
at Abbott, impact business segment financial reporting during 2004?
º A15)
º Starting in the first quarter of 2004, Abbott will revise its business
segment reporting to reflect organizational changes effective Jan. 1, 2004.
These are:
º 1.
º Hospital Products Division. Most of this division, as defined in 2003,
will ultimately be spun off as the major operating component of
Hospira, with the remainder moving to other business segments as
discussed below. Prior to the spin-off, only the domestic core
hospital businesses that will be spun off to Hospira will be reported
in the Hospital Products Division segment in 2004.
º 2.
º Pharmaceutical Products Division. In 2004, this division will include
the domestic sales of proprietary pharmaceuticals that were part of
the Hospital Products Division in 2003. These include proprietary
hospital pharmaceuticals, such as the anesthesia agent, Ultane,
neuromuscular blockers and pain management products, as well as the
vitamin D therapy, Zemplar.
º 3.
º Abbott International Division. The product lines of the core
international hospital business will continue to be reported as part
of Abbott International prior to the spin-off. We plan to continue to
report sales for Abbott International by the pharmaceutical and
nutritionals components post-spin-off. Note that in 2004 the
pharmaceutical component will include the hospital pharmaceuticals
that were included in the hospital component in 2003. The nutritionals
component of the international division remains unchanged.
º 4.
º Segments within the Medical Products Group. The U.S. nutritionals
business will continue to be reported as a separate segment. Abbott
will retain, as part of the Medical Products Group, Abbott Vascular
Devices and the recently acquired Spinal Concepts. Both of these
businesses were previously part of the Hospital Products Division. For
segment reporting purposes, these businesses will be included in the
"Other" (non-segment) category. We plan to continue to include
Immunoassay, MediSense and Molecular Diagnostics, as well as the
anticipated acquisitions of i-STAT and TheraSense, in the diagnostics
segment.
At a later date, Abbott will provide investors with revised quarterly
historical segment data to reflect these changes.
###
13
QuickLinks
Exhibit 99.1
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-
Private Securities Litigation Reform Act of 1995- A Caution Concerning
Forward-Looking Statements
Abbott Laboratories and Subsidiaries Consolidated Statement of Earnings Fourth
Quarter Ended December 31, 2003 and 2002 (unaudited)
Abbott Laboratories and Subsidiaries Consolidated Statement of Earnings Year
Ended December 31, 2003 and 2002 (unaudited)
Questions & Answers
|