Exhibit 13
The portions of the Abbott Laboratories Annual Report for the year ended
December 31, 1996 captioned Financial Review, Consolidated Balance Sheet,
Consolidated Statement of Earnings, Consolidated Statement of Cash Flows,
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 1992 through 1996.
Abbott Laboratories and Subsidiaries
CONSOLIDATED BALANCE SHEET
(Dollars in Thousands)
ASSETS
December 31
---------------------------------
1996 1995 1994
---------- ---------- ----------
Current Assets:
Cash and cash equivalents. . . . . . . . . . . . . . . . $ 110,209 $ 281,197 $ 290,272
Investment securities. . . . . . . . . . . . . . . . . . 12,875 34,500 25,056
Trade receivables, less allowances of -
1996: $153,424; 1995: $157,990; 1994: $128,929 . . . . . 1,708,807 1,563,038 1,468,519
Inventories -
Finished products . . . . . . . . . . . . . . . . . . 627,449 560,637 514,715
Work in process . . . . . . . . . . . . . . . . . . . 269,443 238,943 218,643
Materials. . . . . . . . . . . . . . . . . . . . . . . 341,313 311,361 284,833
---------- ---------- ----------
Total inventories. . . . . . . . . . . . . . . . . . 1,238,205 1,110,941 1,018,191
Prepaid income taxes . . . . . . . . . . . . . . . . . . 708,402 651,436 549,091
Other prepaid expenses and receivables . . . . . . . . . 702,404 585,599 525,199
---------- ---------- ----------
Total Current Assets. . . . . . . . . . . . . . . . . 4,480,902 4,226,711 3,876,328
---------- ---------- ----------
Investment Securities Maturing after One Year. . . . . . . 665,553 422,547 316,195
---------- ---------- ----------
Property and Equipment, at Cost:
Land . . . . . . . . . . . . . . . . . . . . . . . . . . 156,038 152,401 145,634
Buildings. . . . . . . . . . . . . . . . . . . . . . . . 1,621,036 1,531,202 1,349,668
Equipment. . . . . . . . . . . . . . . . . . . . . . . . 6,142,139 5,518,210 4,764,296
Construction in progress . . . . . . . . . . . . . . . . 451,070 560,629 794,006
---------- ---------- ----------
8,370,283 7,762,442 7,053,604
Less: accumulated depreciation
and amortization . . . . . . . . . . . . . . . . . . . 3,908,740 3,512,904 3,132,754
---------- ---------- ----------
Net Property and Equipment . . . . . . . . . . . . . . . 4,461,543 4,249,538 3,920,850
Net Intangible Assets. . . . . . . . . . . . . . . . . . . 979,793 155,580 151,241
---------- ---------- ----------
Deferred Charges and Other Assets. . . . . . . . . . . . . 537,809 358,204 259,110
----------- ---------- ----------
$11,125,600 $9,412,580 $8,523,724
---------- ---------- ----------
---------- ---------- ----------
The accompanying notes to consolidated financial statements are an
integral part of this statement.
Abbott Laboratories and Subsidiaries
CONSOLIDATED BALANCE SHEET
(Dollars in Thousands)
LIABILITIES AND SHAREHOLDERS' INVESTMENT
December 31
---------------------------------
1996 1995 1994
----------- ------------ ----------
Current Liabilities:
Short-term borrowings and current portion of
long-term debt. . . . . . . . . . . . . . . . . . . $ 1,383,727 $ 1,049,863 $ 772,503
Trade accounts payable . . . . . . . . . . . . . . . . . 923,018 755,921 671,100
Salaries, wages and commissions. . . . . . . . . . . . . 322,292 286,186 270,539
Other accrued liabilities. . . . . . . . . . . . . . . . 1,206,552 1,217,016 1,140,154
Dividends payable. . . . . . . . . . . . . . . . . . . . 185,866 165,354 152,515
Income taxes payable . . . . . . . . . . . . . . . . . . 322,262 315,974 469,055
----------- ------------ ----------
Total Current Liabilities . . . . . . . . . . . . . . 4,343,717 3,790,314 3,475,866
----------- ------------ ----------
Long-Term Debt . . . . . . . . . . . . . . . . . . . . . . 932,898 435,198 287,091
----------- ------------ ----------
Other Liabilities and Deferrals:
Deferred income taxes. . . . . . . . . . . . . . . . . . 153,279 67,993 55,597
Other. . . . . . . . . . . . . . . . . . . . . . . . . . 875,524 722,228 655,770
----------- ------------ ----------
Total Other Liabilities and Deferrals. . . . . . . . . . 1,028,803 790,221 711,367
----------- ------------ ----------
Shareholders' Investment:
Preferred shares, one dollar par value
Authorized - 1,000,000 shares, none issued . . . . . . - - -
Common shares, without par value
Authorized - 1,200,000,000 shares
Issued at stated capital amount -
Shares: 1996: 784,037,858; 1995: 797,021,211;
1994: 813,046,602 . . . . . . . . . . . . . . . . . . 694,380 581,562 505,170
Earnings employed in the business. . . . . . . . . . . . . 4,262,804 3,926,917 3,652,434
Cumulative translation adjustments . . . . . . . . . . . . (78,770) (55,646) (51,124)
----------- ------------ ----------
4,878,414 4,452,833 4,106,480
Less:
Common shares held in treasury, at cost -
Shares: 1996: 9,588,632; 1995: 9,714,379;
1994: 9,766,880. . . . . . . . . . . . . . . . . . . . . 50,605 51,268 51,545
Unearned compensation - restricted stock awards. . . . . . 7,627 4,718 5,535
----------- ------------ ----------
Total Shareholders' Investment . . . . . . . . . . . . . 4,820,182 4,396,847 4,049,400
----------- ------------ ----------
$11,125,600 $9,412,580 $8,523,724
----------- ------------ ----------
----------- ------------ ----------
Abbott Laboratories and Subsidiaries
CONSOLIDATED STATEMENT OF EARNINGS
(Dollars in Thousands Except Per Share Data)
Year Ended December 31
--------------------------------------
1996 1995 1994
----------- ----------- ----------
Net Sales. . . . . . . . . . . . . . . . . . . . . . . . . $11,013,460 $10,012,194 $9,156,009
Cost of products sold. . . . . . . . . . . . . . . . . . . 4,731,998 4,325,805 3,993,831
Research and development . . . . . . . . . . . . . . . . . 1,204,841 1,072,745 963,516
Selling, general and administrative. . . . . . . . . . . . 2,459,560 2,230,740 2,054,455
----------- ----------- ----------
Total Operating Cost and Expenses. . . . . . . . . . . . 8,396,399 7,629,290 7,011,802
----------- ----------- ----------
Operating Earnings . . . . . . . . . . . . . . . . . . . . 2,617,061 2,382,904 2,144,207
Interest expense . . . . . . . . . . . . . . . . . . . . . 95,445 69,532 49,722
Interest income. . . . . . . . . . . . . . . . . . . . . . (44,521) (51,783) (36,907)
Other (income) expense, net. . . . . . . . . . . . . . . . (103,413) (30,164) (35,298)
----------- ----------- ----------
Earnings Before Taxes. . . . . . . . . . . . . . . . . 2,669,550 2,395,319 2,166,690
Taxes On Earnings . . . . . . . . . . . . . . . . . . . . 787,517 706,619 650,007
----------- ----------- ----------
Net Earnings . . . . . . . . . . . . . . . . . . . . . . . $1,882,033 $ 1,688,700 $1,516,683
----------- ----------- ----------
----------- ----------- ----------
Earnings Per Common Share. . . . . . . . . . . . . . . . . $2.41 $2.12 $1.87
----------- ----------- ----------
----------- ----------- ----------
Average Number of Common Shares Outstanding. . . . . . . . 781,247,000 795,362,000 812,236,000
----------- ----------- ----------
----------- ----------- ----------
The accompanying notes to consolidated financial statements are an integral
part of this statement.
Abbott Laboratories and Subsidiaries
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in Thousands)
Year Ended December 31
-------------------------------
1996 1995 1994
---------- ---------- ----------
Cash Flow From (Used in) Operating Activities:
Net earnings . . . . . . . . . . . . . . . . . . . . . . $1,882,033 $1,688,700 $1,516,683
Adjustments to reconcile net earnings to
net cash from operating activities -
Depreciation and amortization. . . . . . . . . . . . . . 686,085 566,423 510,504
Exchange (gains) losses, net . . . . . . . . . . . . . . (3,419) 5,035 8,600
Investing and financing (gains) losses, net. . . . . . . 57,224 43,020 21,834
Trade receivables. . . . . . . . . . . . . . . . . . . . (163,621) (91,349) (109,623)
Inventories. . . . . . . . . . . . . . . . . . . . . . . (125,726) (93,184) (52,293)
Prepaid expenses and other assets. . . . . . . . . . . . (303,766) (255,764) (183,705)
Trade accounts payable and other liabilities . . . . . . 342,407 256,549 360,216
Income taxes payable . . . . . . . . . . . . . . . . . . 10,845 (153,849) 139,921
---------- ---------- ----------
Net Cash From Operating Activities. . . . . . . . . 2,382,062 1,965,581 2,212,137
---------- ---------- ----------
Cash Flow From (Used in) Investing Activities:
Acquisition of MediSense, Inc., net of cash acquired . . (830,559) - -
Acquisitions of property, equipment and other
businesses. . . . . . . . . . . . . . . . . . . . . . (949,028) (947,021) (929,488)
Purchases of investment securities . . . . . . . . . . . (312,535) (183,443) (226,728)
Proceeds from sales of investment securities . . . . . . 117,783 67,130 185,268
Other. . . . . . . . . . . . . . . . . . . . . . . . . . 19,098 25,611 26,863
---------- ---------- ----------
Net Cash Used in Investing Activities. . . . . . . . . (1,955,241) (1,037,723) (944,085)
---------- ---------- ----------
Cash Flow From (Used in) Financing Activities:
Proceeds from borrowings with original
maturities of more than three months . . . . . . . . . 504,652 353,317 107,868
Repayments of borrowings with original
maturities of more than three months . . . . . . . . . (72,016) (221,506) (89,977)
Proceeds from (repayments of) other borrowings . . . . . 402,401 282,754 (115,725)
Purchases of common shares . . . . . . . . . . . . . . . (808,816) (771,411) (615,946)
Proceeds from stock options exercised. . . . . . . . . . 109,638 76,540 36,214
Dividends paid . . . . . . . . . . . . . . . . . . . . . (728,147) (653,567) (602,356)
--------- --------- ----------
Net Cash Used in Financing Activities. . . . . . . . . (592,288) (933,873) (1,279,922)
--------- --------- ----------
Abbott Laboratories and Subsidiaries
CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)
(Dollars in Thousands)
Year Ended December 31
-------------------------------
1996 1995 1994
---- ---- ----
Effect of exchange rate changes on cash and
cash equivalents . . . . . . . . . . . . . . . . . . . . (5,521) (3,060) 1,466
---------- --------- ----------
Net (Decrease) in Cash and Cash Equivalents. . . . . . . . (170,988) (9,075) (10,404)
Cash and Cash Equivalents, Beginning of Year . . . . . . . 281,197 290,272 300,676
---------- --------- ----------
Cash and Cash Equivalents, End of Year . . . . . . . . . . $ 110,209 $ 281,197 $ 290,272
---------- --------- ----------
---------- --------- ----------
Supplemental Cash Flow Information:
Income taxes paid. . . . . . . . . . . . . . . . . . . . $ 801,107 $ 954,861 $ 571,215
Interest paid. . . . . . . . . . . . . . . . . . . . . . 89,509 67,917 50,157
The accompanying notes to consolidated financial statements are an integral
part of this statement.
Abbott Laboratories and Subsidiaries
CONSOLIDATED STATEMENT OF SHAREHOLDERS' INVESTMENT
(Dollars in Thousands Except Per Share Data)
Year Ended December 31
---------------------------------
1996 1995 1994
---------- ----------- ----------
Common Shares:
Beginning of Year
Shares: 1996: 797,021,211; 1995: 813,046,602;
1994: 830,941,614. . . . . . . . . . . . . . . . . . . $ 581,562 $ 505,170 $ 469,828
Issued under incentive stock programs
Shares: 1996: 5,103,701; 1995: 4,332,070;
1994: 3,247,207. . . . . . . . . . . . . . . . . . . . 105,648 70,842 38,638
Tax benefit from sale of option shares and
vesting of restricted stock awards
(no share effect). . . . . . . . . . . . . . . . . . . 21,589 19,303 9,800
Retired - Shares: 1996: 18,087,054;
1995: 20,357,461; 1994: 21,142,219 . . . . . . . . . . (14,419) (13,753) (13,096)
---------- ----------- ----------
End of Year
Shares: 1996: 784,037,858; 1995: 797,021,211;
1994: 813,046,602. . . . . . . . . . . . . . . . . . . $ 694,380 $ 581,562 $ 505,170
---------- ---------- ----------
---------- ---------- ----------
Earnings Employed in the Business:
Beginning of Year. . . . . . . . . . . . . . . . . . . . $3,926,917 $3,652,434 $3,364,952
Net earnings . . . . . . . . . . . . . . . . . . . . . . 1,882,033 1,688,700 1,516,683
Unrealized gain on marketable equity securities,
net of tax . . . . . . . . . . . . . . . . . . . . . . 9,000 21,600 -
Cash dividends declared on common shares
(per share -1996: $.96; 1995: $.84; 1994: $.76). . . . (748,659) (666,406) (615,271)
Cost of common shares retired in excess
of stated capital amount . . . . . . . . . . . . . . . (811,996) (771,263) (615,074)
Cost of treasury shares issued below market
value of restricted stock awards . . . . . . . . . . . 5,509 1,852 1,144
---------- ---------- ----------
End of Year. . . . . . . . . . . . . . . . . . . . . . . $4,262,804 $3,926,917 $3,652,434
---------- ---------- ----------
---------- ---------- ----------
Cumulative Translation Adjustments:
Beginning of Year . . . . . . . . . . . . . . . . . . . $ (55,646) $ (51,124) $ (100,716)
Translation adjustments. . . . . . . . . . . . . . . . . (23,124) (4,522) 49,592
---------- ---------- ---------
End of Year. . . . . . . . . . . . . . . . . . . . . . . $ (78,770) $ (55,646) $ (51,124)
---------- ---------- ---------
---------- ---------- ---------
Abbott Laboratories and Subsidiaries
CONSOLIDATED STATEMENT OF SHAREHOLDERS' INVESTMENT (CONTINUED)
(Dollars in Thousands Except Per Share Data)
Year Ended December 31
----------------------------------
1996 1995 1994
---------- ---------- ----------
Common Shares Held in Treasury:
Beginning of Year
Shares: 1996: 9,714,379; 1995: 9,766,880;
1994: 9,811,930. . . . . . . . . . . . . . . . . . . $ 51,268 $ 51,545 $ 51,783
Issued under incentive stock programs
Shares: 1996: 125,747; 1995: 52,501;
1994: 45,050 . . . . . . . . . . . . . . . . . . . . . (663) (277) (238)
---------- ---------- ----------
End of Year
Shares: 1996: 9,588,632; 1995: 9,714,379;
1994: 9,766,880. . . . . . . . . . . . . . . . . . . . $ 50,605 $ 51,268 $ 51,545
---------- ---------- ----------
---------- ---------- ----------
Unearned Compensation - Restricted Stock Awards:
Beginning of Year. . . . . . . . . . . . . . . . . . . . $ 4,718 $ 5,535 $ 7,352
Issued at market value - Shares: 1996: 118,800;
1995: 45,000; 1994: 35,000 . . . . . . . . . . . . . . 5,881 1,829 1,094
Lapses - Shares: 1996: 6,000; 1995: 4,800;
1994: 21,600 . . . . . . . . . . . . . . . . . . . . . (308) (137) (575)
Amortization . . . . . . . . . . . . . . . . . . . . . . (2,664) (2,509) (2,336)
---------- ---------- ----------
End of Year. . . . . . . . . . . . . . . . . . . . . . . $ 7,627 $ 4,718 $ 5,535
---------- ---------- ----------
---------- ---------- ----------
The accompanying notes to consolidated financial statements are an integral
part of this statement.
Abbott Laboratories and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Summary of Significant Accounting Policies
BASIS OF CONSOLIDATION
The consolidated financial statements include the accounts of the parent
company and subsidiaries, after elimination of intercompany transactions.
The accounts of foreign subsidiaries are consolidated as of November 30.
USE OF ESTIMATES
The financial statements have been prepared in accordance with generally
accepted accounting principles and necessarily include amounts based on
estimates and assumptions by management. Actual results could differ from
those amounts.
CASH AND CASH EQUIVALENTS
Cash equivalents consist of time deposits and certificates of deposit with
original maturities of three months or less.
INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out basis)
or market. Cost includes material and conversion costs.
PROPERTY AND EQUIPMENT
Depreciation and amortization are provided on the straight-line method
over the estimated useful lives of the assets.
INTANGIBLE ASSETS
Intangible assets, primarily purchased intangible assets and goodwill
resulting from business acquisitions, are amortized on a straight-line basis
over up to 40 years. Accumulated amortization as of December 31, 1996, 1995,
and 1994, was $54.7 million, $26.0 million, and $20.6 million, respectively.
PRODUCT LIABILITY
Provisions are made for the portions of probable losses that are not
covered by product liability insurance.
TRANSLATION ADJUSTMENTS
For foreign operations in highly inflationary economies, translation
gains and losses are included in other (income) expense, net. For remaining
foreign operations, translation adjustments are included as a component of
shareholders' investment.
Abbott Laboratories and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
EARNINGS PER COMMON SHARE
Earnings per common share amounts are computed using the weighted
average number of common shares outstanding.
REVENUE RECOGNITION
The Company recognizes revenue from product sales upon shipment to
customers. Provisions for discounts and rebates to customers, and returns
and other adjustments are provided for in the same period the related sales
are recorded.
Abbott Laboratories and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Note 2 - Taxes on Earnings
(dollars in thousands)
Deferred income taxes reflect the tax consequences on future years of
temporary differences between the tax bases of assets and liabilities and
their financial reporting amounts. U.S. income taxes are provided on those
earnings of foreign subsidiaries and subsidiaries operating in Puerto Rico
under tax incentive grants, which are intended to be remitted to the parent
company. Undistributed earnings reinvested indefinitely in foreign
subsidiaries as working capital and plant and equipment aggregated $1,312,000
at December 31, 1996. Deferred income taxes not provided on these earnings
would be approximately $210,000.
Earnings before taxes, and the related provisions for taxes on earnings,
were as follows:
Earnings Before Taxes 1996 1995 1994
---------- ---------- ----------
Domestic . . . . . . . . . . . . . . . . $1,934,872 $1,711,188 $1,595,279
Foreign . . . . . . . . . . . . . . . . 734,678 684,131 571,411
---------- ---------- ----------
Total. . . . . . . . . . . . . . . . . . . $2,669,550 $2,395,319 $2,166,690
---------- ---------- ----------
---------- ---------- ----------
Taxes on Earnings 1996 1995 1994
---------- ---------- ----------
Current:
U.S. Federal and Possessions . . . . . $573,208 $495,692 $487,977
State. . . . . . . . . . . . . . . . . 62,835 47,656 56,548
Foreign. . . . . . . . . . . . . . . . 207,512 251,339 192,509
---------- ---------- ----------
Total current. . . . . . . . . . . . . . 843,555 794,687 737,034
---------- ---------- ----------
Deferred:
Domestic . . . . . . . . . . . . . . . (68,762) (81,264) (96,679)
Foreign. . . . . . . . . . . . . . . . 13,338 (6,332) 9,801
Enacted tax rate changes . . . . . . . (614) (472) (149)
---------- ---------- ----------
Total deferred . . . . . . . . . . . . . (56,038) (88,068) (87,027)
---------- ---------- ----------
Total. . . . . . . . . . . . . . . . . . . $787,517 $706,619 $650,007
---------- ---------- ----------
---------- ---------- ----------
Abbott Laboratories and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Differences between the effective income tax rate and the U.S. statutory
tax rate were as follows:
1996 1995 1994
---- ---- ----
Statutory tax rate . . . . . . . . . . . . . . . . 35.0% 35.0% 35.0%
Benefit of tax exemptions in Puerto Rico,
the Dominican Republic,
Italy, Ireland, and The Netherlands . . . . . . . (6.5) (5.7) (5.1)
State taxes, net of federal benefit. . . . . . . . 1.5 1.3 1.7
All other, net . . . . . . . . . . . . . . . . . . (0.5) (1.1) (1.6)
---- ---- ----
Effective tax rate . . . . . . . . . . . . . . . . 29.5% 29.5% 30.0%
---- ---- ----
---- ---- ----
As of December 31, 1996, 1995, and 1994, total deferred tax assets were
$997,036, $858,045, and $767,857, respectively, and total deferred tax
liabilities were $427,412, $265,388, and $263,734, respectively. Valuation
allowances for deferred tax assets were not significant. The temporary
differences that give rise to deferred tax assets and liabilities were as
follows:
1996 1995 1994
-------- --------- ---------
Compensation and employee benefits . . . . . . . $185,537 $ 161,547 $ 157,374
Trade receivable reserves. . . . . . . . . . . . 130,692 126,209 107,320
Inventory reserves . . . . . . . . . . . . . . . 122,522 101,835 77,787
Deferred intercompany profit . . . . . . . . . . 112,467 97,555 78,317
State income taxes . . . . . . . . . . . . . . . 30,343 25,602 37,394
Depreciation . . . . . . . . . . . . . . . . . . (184,270) (178,025) (167,773)
Other, primarily other accruals, reserves and
intangible assets not currently deductible . . 157,832 248,720 203,075
--------- --------- ---------
Total. . . . . . . . . . . . . . . . . . . . . . $ 555,123 $ 583,443 $ 493,494
--------- --------- ---------
--------- --------- ---------
Abbott Laboratories and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Note 3 - Financial Instruments
The Company enters into foreign currency forward exchange contracts to
hedge intercompany loans and trade accounts payable where the functional
currency of the lending and borrowing entities are not the same. Such
contracts are also used to hedge foreign currency denominated third party
trade payables and receivables. For intercompany loans, the contracts
require the Company to sell foreign currencies, primarily Japanese yen and
European currencies, in exchange for primarily U.S. dollars. For
intercompany and trade payables and receivables, the currencies hedged are
primarily the U.S. dollar, Japanese yen and European currencies. At December
31, 1996, 1995, and 1994, the Company held $1.0 billion, $723 million, and
$717 million, respectively, of foreign currency forward exchange contracts.
The contracts outstanding at December 31, 1996 mature in 1997. These
contracts are marked to market each month. The resulting gains or losses are
reflected in income and are generally offset by losses or gains on the
exposures being hedged.
The Company purchases U.S. dollar call options as a hedge of anticipated
intercompany purchases by foreign subsidiaries whose functional currency is
not the U.S. dollar. These contracts give the Company the right, but not the
requirement, to purchase U.S. dollars in exchange for foreign currencies,
primarily Japanese yen and European currencies, at predetermined exchange
rates. At December 31, 1996, 1995, and 1994, the Company held $431 million,
$330 million, and $370 million, respectively, of U.S. dollar call option
contracts. The contracts outstanding at December 31, 1996 mature in 1997.
Realized and unrealized gains and losses on contracts that qualify as hedges
of anticipated purchases by foreign subsidiaries are recognized in the same
period that the foreign currency exposure is recognized. Contracts that do
not qualify for hedge accounting are marked to market each month, and the
resulting gains or losses are reflected in income.
The Company purchases foreign currency put options as a hedge against the
effect of exchange rate fluctuations on income. These contracts give the
Company the right, but not the requirement, to sell foreign currencies,
primarily Japanese yen and European currencies, in exchange for U.S. dollars
at predetermined exchange rates. These contracts are marked to market each
month. The resulting gains or losses are reflected in income and are
generally offset by losses or gains on the exposures being hedged. There
were no such contracts outstanding at December 31, 1996, 1995, and 1994.
The gross unrealized holding gains/(losses) on current investment
securities and those maturing after one year totaled $4.2 million and $(11.0)
million at December 31, 1996, respectively; $5.6 million and $(4.3) million
at December 31, 1995, respectively; and $2.5 million and $(9.2) million at
December 31, 1994, respectively.
Abbott Laboratories and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The carrying values and fair values of certain of the Company's financial
instruments as of December 31 are shown in the table below. The carrying
values of all other financial instruments approximate their estimated fair
values. Fair value is the quoted market price of the instrument held or the
quoted market price of a similar instrument. The counterparties to financial
instruments consist of select major international financial institutions.
The Company does not expect any losses from nonperformance by these
counterparties.
(millions of dollars)
1996 1995 1994
------------------- ------------------- --------------------
Carrying Fair Carrying Fair Carrying Fair
Value Value Value Value Value Value
------------------- ------------------- --------------------
Investment Securities:
Current . . . . . . . . . . . $ 12.9 $ 12.7 $ 34.5 $ 34.6 $ 25.1 $ 25.2
Maturing after One Year . . . 665.6 659.0 422.5 423.7 316.2 309.4
Total Long-Term Debt. . . . . . (935.2) (917.0) (436.6) (441.8) (308.8) (276.1)
Foreign Currency Forward
Exchange Contracts:
(Payable) position . . . . . (10.9) (10.9) (2.6) (2.6) (1.6) (1.6)
Receivable position. . . . . 18.6 18.6 5.2 5.2 6.5 6.5
Foreign Currency Option
Contracts. . . . . . . . . . 2.8 1.6 10.6 7.8 14.7 0.7
Abbott Laboratories and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Note 4 - Debt and Lines of Credit
(dollars in thousands)
The following is a summary of long-term debt at December 31:
1996 1995 1994
-------- -------- --------
6.5% debentures, due 2001. . . . . . . . . . . . . . . . . $250,000 $ -- $ --
5.6% debentures, due 2003 . . . . . . . . . . . . . . . . 200,000 200,000 200,000
6.8% debentures, due 2005 . . . . . . . . . . . . . . . . 150,000 150,000 --
6.4% debentures, due 2006. . . . . . . . . . . . . . . . . 250,000 -- --
Other, primarily industrial revenue bonds at
various rates of interest, averaging 4.3 %
at December 31, 1996, and due at
various dates through 2023 . . . . . . . . . . . . . . . 82,898 85,198 87,091
-------- -------- --------
Total, net of current maturities . . . . . . . . . . . . . $932,898 $435,198 $287,091
-------- -------- --------
-------- -------- --------
Payments required on long-term debt outstanding at December 31, 1996 are
$2,329 in 1997, $2,582 in 1998, $800 in 1999, none in 2000, and $250,000 in
2001.
At December 31, 1996, the Company had $1,505,000 of unused domestic lines
of credit which support domestic commercial paper borrowing arrangements.
Related compensating balances, which are subject to withdrawal by the Company
at its option, and commitment fees are not material. The Company's weighted
average interest rate on short-term borrowings was 5.8% at December 31, 1996
and 1995, and 6.1% at December 31, 1994.
The Company may issue up to $400,000 of senior debt securities in the
future under a registration statement filed with the Securities and Exchange
Commission in 1996.
Abbott Laboratories and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Note 5 - Retirement Plans
(dollars in thousands)
Retirement plans consist of defined benefit, defined contribution, and
medical and dental plans.
Pension benefits for the Company's defined benefit plans generally are
based on an employee's years of service and compensation near retirement.
Certain plan benefits would vest and certain restrictions on the use of plan
assets would take effect upon a change in control of the Company.
Net pension cost for the Company's significant defined benefit plans
includes the following components:
1996 1995 1994
--------- --------- ---------
Service cost - benefits earned during the year . . . . . . $ 81,243 $ 59,636 $ 67,768
Interest cost on projected benefit obligations . . . . . . 111,449 94,101 85,414
Return on assets . . . . . . . . . . . . . . . . . . . . . (224,412) (274,844) 915
Net amortization and deferral. . . . . . . . . . . . . . . 80,886 139,491 (125,186)
--------- --------- ---------
Net pension cost . . . . . . . . . . . . . . . . . . . . . $ 49,166 $ 18,384 $ 28,911
--------- --------- ---------
--------- --------- ---------
The plans' funded status at December 31 was as follows:
1996 1995 1994
---------- ---------- ----------
Actuarial present value of benefit obligations -
Vested benefits. . . . . . . . . . . . . . . . . . . . . $1,338,376 $1,036,937 $ 799,425
Nonvested benefits . . . . . . . . . . . . . . . . . . . 163,033 140,232 104,120
---------- ---------- ----------
Accumulated benefit obligations. . . . . . . . . . . . . . $1,501,409 $1,177,169 $ 903,545
---------- ---------- ----------
Plans' assets at fair value, principally
listed securities. . . . . . . . . . . . . . . . . . . . $1,828,989 $1,600,368 $1,321,051
Actuarial present value of projected
benefit obligations. . . . . . . . . . . . . . . . . . . 1,771,191 1,494,348 1,147,024
---------- ---------- ----------
Projected benefit obligations less
than plans' assets . . . . . . . . . . . . . . . . . . . 57,798 106,020 174,027
Unrecognized net transitional asset. . . . . . . . . . . . (42,728) (52,915) (63,866)
Unrecognized prior service cost. . . . . . . . . . . . . . 11,968 12,532 15,274
Unrecognized net (gain) loss . . . . . . . . . . . . . . . 51,531 (11,315) (101,139)
---------- ---------- ----------
Net prepaid pension cost . . . . . . . . . . . . . . . . . $ 78,569 $ 54,322 $ 24,296
---------- ---------- ----------
---------- ---------- ----------
Abbott Laboratories and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Assumptions used for the Company's major defined benefit plan as of December
31 include:
1996 1995 1994
------ ------ ------
Discount rate for determining obligations
and interest cost. . . . . . . . . . . . . . . . . . . . 7 1/2% 7 1/4% 8 1/2%
Expected aggregate average long-term change
in compensation. . . . . . . . . . . . . . . . . . . . . 5% 4% 4%
Expected long-term rate of return on assets. . . . . . . . 9% 9% 9%
The Stock Retirement Plan is the principal defined contribution plan.
Company contributions to this plan were $54,883 in 1996, $48,845 in 1995, and
$45,124 in 1994, equal to 7.33 percent of dividends declared, as provided
under the plan.
The Company provides certain medical and dental benefits to qualifying
domestic retirees. Net post- retirement health care cost includes the
following components:
1996 1995 1994
------- ------- -------
Service cost - benefits earned during the year . . . . . . $28,302 $21,328 $27,605
Interest cost on accumulated post-retirement
benefit obligations. . . . . . . . . . . . . . . . . . . 40,822 36,412 35,578
Return on assets . . . . . . . . . . . . . . . . . . . . . (9,372) (16,798) 810
Net amortization and deferral. . . . . . . . . . . . . . . 7,128 11,980 (1,561)
------- ------- -------
Net post-retirement health care cost . . . . . . . . . . . $66,880 $52,922 $62,432
------- ------- -------
------- ------- -------
The plans' funded status at December 31 was as follows:
1996 1995 1994
--------- --------- ---------
Actuarial present value of benefit obligations -
Retirees . . . . . . . . . . . . . . . . . . . . . . . . $ 196,800 $ 174,782 $ 164,153
Fully eligible active participants . . . . . . . . . . . 138,564 131,669 113,128
Other active participants. . . . . . . . . . . . . . . . 264,267 250,518 186,778
--------- --------- ---------
Accumulated post-retirement benefit obligations. . . . . . 599,631 556,969 464,059
Plans' assets at fair value, principally listed securities 87,719 95,530 94,297
--------- --------- ---------
Accumulated post-retirement benefit obligations
in excess of plans' assets . . . . . . . . . . . . . . . (511,912) (461,439) (369,762)
Unrecognized net loss. . . . . . . . . . . . . . . . . . . 152,030 168,307 129,477
--------- --------- ---------
Accrued post-retirement health care cost . . . . . . . . . $(359,882) $(293,132) $(240,285)
--------- --------- ---------
--------- --------- ---------
Abbott Laboratories and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The discount rate and expected long-term rate of return on assets assumptions
are identical to those used for the Company's major defined benefit plan. A
6 percent annual rate of increase in the per capita cost of covered health
care benefits was assumed for 1997. This rate is assumed to decrease to 5
percent in 1998 and remain at that level thereafter. A one-percentage-point
increase in the assumed health care cost trend rates would increase the
accumulated post-retirement benefit obligations as of December 31, 1996 by
approximately $96,900 and the total of the service and interest cost
components of net post-retirement health care cost for the year then ended by
approximately $16,800.
The Company provides certain other post-employment benefits, primarily
salary continuation plans, to qualifying domestic employees, and accrues for
the related cost over the service lives of the employees.
Abbott Laboratories and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Note 6 - Investment Securities
(dollars in thousands)
The following is a summary of investment securities at December 31:
1996 1995 1994
-------- --------- --------
Current Investment Securities
Time deposits and certificates of deposit . . . . . . . . $ 800 $ 10,000 $ 8,050
Other, primarily debt obligations issued or guaranteed
by various governments or government agencies. . . . . 12,075 24,500 17,006
-------- --------- --------
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 12,875 $ 34,500 $ 25,056
-------- --------- --------
-------- --------- --------
1996 1995 1994
-------- --------- --------
Investment Securities Maturing after One Year
Time deposits and certificates of deposit,
maturing through 2001. . . . . . . . . . . . . . . . . $432,200 $161,500 $ 66,500
Corporate debt obligations, maturing through 2008. . . . 84,310 86,728 104,696
Debt obligations issued or guaranteed
by various governments or government agencies,
maturing through 2023. . . . . . . . . . . . . . . . . 149,043 174,319 144,999
-------- --------- --------
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . $665,553 $422,547 $316,195
-------- --------- --------
-------- --------- --------
The Company generally holds investment securities until maturity. All
investment securities classified as current as of December 31, 1996 mature
before January 1, 1998.
Of the investment securities listed above, $676,251, $452,445, and
$334,128, were held at December 31, 1996, 1995, and 1994, respectively, by
subsidiaries operating in Puerto Rico under tax incentive grants expiring
from 2002 through 2007. In addition, these subsidiaries held cash
equivalents of $197,600 and $164,700 at December 31, 1995 and 1994,
respectively.
Abbott Laboratories and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Note 7 - Incentive Stock Program
The 1996 Incentive Stock Program authorizes the granting of stock
options, stock appreciation rights, limited stock appreciation rights,
restricted stock awards, performance units, and foreign qualified benefits.
Stock options, limited stock appreciation rights, restricted stock awards,
and foreign qualified benefits have been granted and are currently
outstanding under this program and prior programs. The purchase price of
shares under option must equal the fair market value of the common stock on
the date of grant and the maximum term of the option is ten years. Options
granted in 1996, 1995, and 1994 vest equally over three years.
Limited stock appreciation rights have been granted to certain holders
of stock options and can be exercised, by surrendering related stock options,
only upon a change in control of the Company. At December 31, 1996,
5,737,882 options, with a weighted average exercise price of $32.98 per
share, were subject to limited stock appreciation rights. Upon a change in
control of the Company, all outstanding stock options become fully
exercisable, and all terms and conditions of all restricted stock awards are
deemed satisfied.
At December 31, 1996, 11,075,823 shares were reserved for future grants
under the 1996 Program. Data with respect to stock options under the 1996
Program and prior programs are as follows:
OPTIONS OUTSTANDING EXERCISABLE OPTIONS
------------------- -------------------
Weighted Weighted
Average Average
Exercise Exercise
Shares Price Shares Price
---------- ------ ---------- -------
January 1, 1994 30,077,038 $22.26
Granted 1,894,815 28.89
Exercised (3,247,207) 11.70
Lapsed (436,488) 31.77
---------- ------
December 31, 1994 28,288,158 23.77 21,819,935 $21.75
---------- -------
---------- -------
Granted 5,827,269 39.17
Exercised (4,332,070) 16.28
Lapsed (282,570) 33.81
---------- ------
December 31, 1995 29,500,787 27.82 18,654,652 23.40
---------- -------
---------- -------
Granted 6,121,564 43.96
Exercised (5,103,701) 20.38
Lapsed (281,555) 40.39
---------- ------
December 31, 1996 30,237,095 $32.22 19,957,414 $27.51
---------- ------ ---------- -------
---------- ------ ---------- -------
Abbott Laboratories and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Options Outstanding at Exercisable Options
December 31, 1996 at Dececember 31, 1996
- ------------------------------------------------------ ----------------------
Weighted Weighted Weighted
Average Average Average
Range of Remaining Exercise Exercise
Exercise Prices Shares Life (Years) Price Shares Price
- ----------------- ---------- ----------- -------- --------- -------
$11 to $32 9,775,006 3.8 $20.69 9,190,486 $20.17
$33 to $38 9,024,093 5.3 32.71 8,988,322 32.70
$39 to $55 11,437,996 8.8 41.70 1,778,606 39.22
---------- ----------- -------- --------- -------
30,237,095 6.1 $32.22 19,957,414 $27.51
---------- ----------- -------- --------- -------
---------- ----------- -------- --------- -------
The Company measures compensation cost using the intrinsic value-based method
of accounting. Had compensation cost been determined using the fair market
value-based accounting method for options granted in 1996 and 1995, pro forma
net income for 1996 and 1995 would have been $1.845 billion and $1.674
billion, respectively, and pro forma earnings per common share for 1996 and
1995 would have been $2.36 and $2.11, respectively. The weighted average
fair value of an option granted in 1996 and 1995, was $11.63 and $11.37,
respectively. For purposes of fair market value disclosures, the fair market
value of an option grant was estimated using the Black-Scholes option pricing
model with the following assumptions:
1996 1995
----- -----
Risk-Free Interest Rate 5.25% 6.75%
Average Life of Options (years) 5.2 5.2
Volatility 25.0% 25.0%
Dividend Yield 1.9% 2.1%
Abbott Laboratories and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Note 8 - Quarterly Results (Unaudited)
(dollars in millions except per share data)
1996 1995 1994
-------- -------- --------
FIRST QUARTER
Net Sales. . . . . . . . . . . . . . . . $2,672.2 $2,524.4 $2,215.2
Gross Profit . . . . . . . . . . . . . . 1,516.0 1,435.5 1,251.0
Net Earnings . . . . . . . . . . . . . . 480.1 417.3 366.2
Earnings Per Common Share. . . . . . . . .61 .52 .45
SECOND QUARTER
Net Sales. . . . . . . . . . . . . . . . $2,699.2 $2,500.3 $2,204.1
Gross Profit . . . . . . . . . . . . . . 1,555.3 1,414.3 1,257.2
Net Earnings . . . . . . . . . . . . . . 470.4 424.0 376.6
Earnings Per Common Share. . . . . . . . .60 .53 .46
THIRD QUARTER
Net Sales. . . . . . . . . . . . . . . . $2,646.2 $2,390.8 $2,254.8
Gross Profit . . . . . . . . . . . . . . 1,468.9 1,320.5 1,239.0
Net Earnings . . . . . . . . . . . . . . 420.9 382.0 351.3
Earnings Per Common Share. . . . . . . . .54 .48 .43
FOURTH QUARTER
Net Sales. . . . . . . . . . . . . . . . $2,995.9 $2,596.7 $2,481.9
Gross Profit . . . . . . . . . . . . . . 1,741.3 1,516.1 1,415.0
Net Earnings . . . . . . . . . . . . . . 510.6 465.4 422.6
Earnings Per Common Share. . . . . . . . .66 .59 .53
Abbott Laboratories and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Note 9 - Litigation and Environmental Matters
The Company is involved in various claims and legal proceedings
including numerous antitrust suits and investigations in connection with the
sale and marketing of infant formula products and the pricing of prescription
pharmaceuticals. In addition, the Company has been identified as a
potentially responsible party for investigation and cleanup costs at a number
of locations in the United States and Puerto Rico under Federal remediation
laws and is voluntarily investigating potential contamination at a number of
Company-owned locations.
The 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 products in violation of state and
federal antitrust laws. The suits have been brought on behalf of
individuals, the Nestle Food Company, and state government agencies and name
the Company, certain other infant formula manufacturers and, in some
instances, the American Academy of Pediatrics as defendants. The cases seek
treble damages, civil penalties and other relief. On June 19, 1995, a jury
in federal court in Los Angeles, California found in favor of the Company and
the American Academy of Pediatrics in the infant formula antitrust case
brought by Nestle Food Company. On January 9, 1997, the Ninth Circuit Court
of Appeals affirmed the jury's verdict. Nestle has the right to
petition for certiorari to the United States Supreme Court. In addition, in
1996, the Company entered into agreements to settle, pending court approval,
a majority of the other antitrust suits. Under these settlement agreements,
the Company has agreed to pay $25 million in cash and provide $7.5 million of
infant formula products.
The prescription pharmaceutical pricing antitrust suits allege that
various pharmaceutical manufacturers have conspired to fix prices for
prescription pharmaceuticals and/or to discriminate in pricing to retail
pharmacies by providing discounts to mail-order pharmacies, institutional
pharmacies and HMOs in violation of state and federal antitrust laws. The
suits have been brought on behalf of individuals and retail pharmacies and
name both 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, injunctive and
other relief. The Company has filed or intends to file a response to each of
the complaints denying all substantive allegations.
The Company expects that within the next year, legal proceedings will
occur which may result in a change in the estimated reserves recorded by the
Company. While it is not feasible to predict the outcome of such pending
claims, proceedings, investigations and remediation activities with
certainty, management is of the opinion that their ultimate disposition
should not have a material adverse effect on the Company's financial
position, cash flows, or results of operations.
Abbott Laboratories and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Note 10 - Business Acquisitions
In 1996, the Company acquired all of the outstanding shares of
MediSense, Inc., a manufacturer of blood glucose self-testing products. Of
the cash purchase price of approximately $867 million, $219 million was
allocated to goodwill; $635 million was allocated to other intangible assets;
and $37 million was charged against earnings for in-process research and
development. Goodwill and other intangible assets will be amortized on a
straight-line basis over 25 to 40 years. In December 1994, the Company
purchased the operating assets of the nutritional business of Puleva Union
Industrial y Agroganadera, S.A. for $106 million. Had these acquisitions
taken place on January 1 of the previous years, consolidated sales and income
would not have been significantly different from reported amounts.
The Company currently owns 70% of the capital stock of a Japanese
subsidiary. In 1996, the Company entered into an agreement with the
minority interest shareholder to purchase their 30% ownership over a ten-year
period.
Note 11 - Industry Segment and Geographic Area Information
(dollars in millions)
The Company's principal business is the discovery, development, manufacture,
and sale of a broad and diversified line of health care products and
services. The Company's products are generally sold directly to retailers,
wholesalers, hospitals, health care facilities, laboratories, physicians'
offices and government agencies throughout the world. These products have
been classified into the following industry segments:
PHARMACEUTICAL AND NUTRITIONAL PRODUCTS - Included are a broad line of adult
and pediatric pharmaceuticals and nutritionals, which are sold primarily on
the prescription or recommendation of physicians or other health care
professionals; consumer products; agricultural and chemical products; and
bulk pharmaceuticals.
HOSPITAL AND LABORATORY PRODUCTS - Included are diagnostic systems for
consumers, blood banks, hospitals, commercial laboratories and alternate-care
testing sites; intravenous and irrigation fluids and related administration
equipment; drugs and drug delivery systems; anesthetics; critical care
products; diagnostic imaging; and other medical specialty products for
hospitals and alternate care sites.
In the following tables, net sales by industry segment and geographic
area include both sales to customers, as reported in the Consolidated
Statement of Earnings, and inter-area sales (for geographic areas) at sales
prices which approximate market. Operating profit excludes corporate
expenses.
Abbott Laboratories and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Industry Segments (a) 1996 1995 1994
------- ------- ------
Net Sales
Pharmaceutical and nutritional . . . . . . . $ 6,307 $ 5,629 $4,951
Hospital and laboratory . . . . . . . . . . 4,706 4,383 4,205
------- ------- ------
Total . . . . . . . . . . . . . . . . . . . . $11,013 $10,012 $9,156
------- ------- ------
------- ------- ------
Operating Profit
Pharmaceutical and nutritional (b) . . . . . $ 1,898 $ 1,586 $1,385
Hospital and laboratory . . . . . . . . . . 810 853 818
------- ------- ------
Operating Profit . . . . . . . . . . . . . . 2,708 2,439 2,203
Corporate (income) expense, net (c). . . . . (13) 26 23
Interest (income) expense, net . . . . . . . 51 18 13
------- ------- ------
Earnings Before Taxes. . . . . . . . . . . . . $ 2,670 $ 2,395 $2,167
------- ------- ------
------- ------- ------
Identifiable Assets
Pharmaceutical and nutritional . . . . . . . $ 4,117 $ 3,866 $3,415
Hospital and laboratory (d). . . . . . . . . 4,977 3,782 3,596
General corporate (e). . . . . . . . . . . . 2,032 1,765 1,513
------- ------- ------
Total. . . . . . . . . . . . . . . . . . . . . $11,126 $ 9,413 $8,524
------- ------- ------
------- ------- ------
Capital Expenditures
Pharmaceutical and nutritional . . . . . . . $ 374 $ 459 $ 478
Hospital and laboratory. . . . . . . . . . . 571 483 447
General corporate. . . . . . . . . . . . . . 4 5 4
------- ------- ------
Total. . . . . . . . . . . . . . . . . . . . . $ 949 $ 947 $ 929
------- ------- ------
------- ------- ------
Depreciation and Amortization
Pharmaceutical and nutritional . . . . . . . $ 285 $ 252 $ 213
Hospital and laboratory (d). . . . . . . . . 397 311 295
General corporate. . . . . . . . . . . . . . 4 3 3
------- ------- ------
Total. . . . . . . . . . . . . . . . . . . . . $ 686 $ 566 $ 511
------- ------- ------
------- ------- ------
Abbott Laboratories and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(a) Net sales and operating profit in 1996 were unfavorably affected by the
relatively stronger U.S. dollar, and, in 1995, were favorably impacted by the
relatively weaker U.S. dollar. Net sales and operating profit in 1994 were
not significantly impacted by the fluctuations in the U.S. dollar.
(b) The operating profit for 1994 was unfavorably impacted by charges
against earnings for certain litigation.
(c) Corporate expenses not allocated to segments include results from joint
ventures, net foreign exchange losses, minority interest expense and other
general corporate income and expense. Net foreign exchange losses were $21.8
in 1996, $25.2 in 1995, and $30.8 in 1994.
(d) In 1996, the Company acquired all of the outstanding shares of
MediSense, Inc.
(e) General corporate assets are principally prepaid income taxes, cash and
cash equivalents, investment securities, and investments in joint ventures.
Abbott Laboratories and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Geographic Areas (a) 1996 1995 1994
------- ------- ------
Net Sales
United States:
Domestic and export customers. . . . . . . $ 6,786 $ 6,121 $5,758
Inter-area . . . . . . . . . . . . . . . . 1,762 1,371 1,143
------- ------- ------
Total United States. . . . . . . . . . . . . 8,548 7,492 6,901
Latin America. . . . . . . . . . . . . . . . 619 540 490
Europe, Mideast and Africa . . . . . . . . . 2,135 1,918 1,662
Pacific, Far East and Canada . . . . . . . . 1,473 1,433 1,246
Eliminations . . . . . . . . . . . . . . . . (1,762) (1,371) (1,143)
------- ------- ------
Total. . . . . . . . . . . . . . . . . . . . . $11,013 $10,012 $9,156
------- ------- ------
------- ------- ------
Operating Profit (b)
United States. . . . . . . . . . . . . . . . $2,012 $1,653 $1,558
Latin America. . . . . . . . . . . . . . . . 167 177 131
Europe, Mideast and Africa . . . . . . . . . 381 385 352
Pacific, Far East and Canada . . . . . . . . 229 234 182
Eliminations . . . . . . . . . . . . . . . . (93) (10) (20)
------- ------- ------
Total. . . . . . . . . . . . . . . . . . . . . $2,696 $2,439 $2,203
------- ------- ------
------- ------- ------
Identifiable Assets,
Excluding General Corporate Assets (d) (e)
United States . . . . . . . . . . . . . . . $6,120 $5,081 $4,809
Latin America . . . . . . . . . . . . . . . 436 330 274
Europe, Mideast and Africa . . . . . . . . . 1,817 1,517 1,298
Pacific, Far East and Canada . . . . . . . . 1,015 927 827
Eliminations . . . . . . . . . . . . . . . . (294) (207) (197)
------- ------- ------
Total. . . . . . . . . . . . . . . . . . . . . $9,094 $7,648 $7,011
------- ------- ------
------- ------- ------
Abbott Laboratories and Subsidiaries
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of Abbott Laboratories:
We have audited the accompanying consolidated balance sheet of Abbott
Laboratories (an Illinois corporation) and Subsidiaries as of December 31,
1996, 1995, and 1994, and the related consolidated statements of earnings,
shareholders' investment, and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Abbott
Laboratories and Subsidiaries as of December 31, 1996, 1995, and 1994, and
the results of their operations and their cash flows for the years then ended
in conformity with generally accepted accounting principles.
Chicago, Illinois Arthur Andersen LLP
January 15, 1997
AUDIT COMMITTEE CHAIRMAN'S REPORT
The Audit Committee of the Board of Directors is composed of six
non-employee directors. The Audit Committee oversees the Company's financial
reporting process on behalf of the Board of Directors. The Committee held
two meetings during 1996. In fulfilling its responsibility, the Committee
recommended to the Board of Directors, subject to shareholder approval, the
selection of the Company's independent public accountants. The Audit
Committee discussed with the internal auditors and the independent public
accountants the overall scope and specific plans for their respective audits.
The Committee also discussed the Company's consolidated financial statements
and the adequacy of the Company's internal controls. During the Audit
Committee meetings the Committee met with the internal auditors and
independent public accountants, without management present, to discuss the
results of their audits, their evaluations of the Company's internal
controls, and the overall quality of the Company's financial reporting. The
meetings also were designed to facilitate any private communication with the
Committee desired by the internal auditors or independent public accountants.
John R. Walter
Chairman, Audit Committee
Abbott Laboratories and Subsidiaries
MANAGEMENT REPORT ON FINANCIAL STATEMENTS
Management has prepared, and is responsible for, the Company's
consolidated financial statements and related notes. They have been prepared
in accordance with generally accepted accounting principles and necessarily
include amounts based on judgments and estimates by management. All
financial information in this annual report is consistent with the
consolidated financial statements.
The Company maintains internal accounting control systems and related
policies and procedures designed to provide reasonable assurance that assets
are safeguarded, that transactions are executed in accordance with
management's authorization and properly recorded, and that accounting records
may be relied upon for the preparation of consolidated financial statements
and other financial information. The design, monitoring, and revision of
internal accounting control systems involve, among other things, management's
judgment with respect to the relative cost and expected benefits of specific
control measures. The Company also maintains an internal auditing function
which evaluates and formally reports on the adequacy and effectiveness of
internal accounting controls, policies, and procedures.
The Company's consolidated financial statements have been audited by
independent public accountants who have expressed their opinion with respect
to the fairness of these statements.
Duane L. Burnham
Chairman and Chief Executive Officer
Gary P. Coughlan
Senior Vice President, Finance and Chief Financial Officer
Theodore A. Olson
Vice President and Controller
Abbott Laboratories and Subsidiaries
FINANCIAL REVIEW
RESULTS OF OPERATIONS
SALES
The following table details the components of sales growth by industry segment
and geographic area for the last three years:
Total % Components of Change %
----------------------
Worldwide Sales Change Price Volume Exchange
- --------------- ------ ----- ------ --------
Total Worldwide
1996 vs. 1995 10.0 0.1 11.5 (1.6)
1995 vs. 1994 9.4 (0.1) 8.0 1.5
1994 vs. 1993 8.9 0.8 8.0 0.1
Domestic
1996 vs. 1995 10.9 0.1 10.8 -
1995 vs. 1994 6.2 (0.8) 7.0 -
1994 vs. 1993 7.6 1.0 6.6 -
International
1996 vs. 1995 8.7 0.1 12.5 (3.9)
1995 vs. 1994 14.5 1.1 9.5 3.9
1994 vs. 1993 11.1 0.5 10.4 0.2
Pharmaceutical and
Nutritional Products
- ----------------------
Total Worldwide
1996 vs. 1995 12.0 1.5 11.9 (1.4)
1995 vs. 1994 13.7 1.0 12.1 0.6
1994 vs. 1993 12.8 1.8 11.1 (0.1)
Domestic
1996 vs. 1995 12.8 1.5 11.3 -
1995 vs. 1994 9.0 0.1 8.9 -
1994 vs. 1993 10.8 1.8 9.0 -
International
1996 vs. 1995 10.6 1.5 13.2 (4.1)
1995 vs. 1994 23.6 2.9 18.8 1.9
1994 vs. 1993 17.2 1.9 15.6 (0.3)
Abbott Laboratories and Subsidiaries
FINANCIAL REVIEW (CONTINUED)
Hospital and
Laboratory Products
- ---------------------
Total Worldwide
1996 vs. 1995 7.4 (1.7) 10.8 (1.7)
1995 vs. 1994 4.2 (1.3) 3.0 2.5
1994 vs. 1993 4.6 (0.4) 4.7 0.3
Domestic
1996 vs. 1995 7.9 (2.2) 10.1 -
1995 vs. 1994 2.1 (2.1) 4.2 -
1994 vs. 1993 3.1 (0.2) 3.3 -
International
1996 vs. 1995 6.8 (1.2) 11.7 (3.7)
1995 vs. 1994 6.9 (0.5) 1.9 5.5
1994 vs. 1993 6.5 (0.6) 6.5 0.6
Sales of new products in the pharmaceutical and nutritional segment in
1996 are estimated to be $263 million. New product sales in the hospital and
laboratories segment are estimated to be $760, including $146 for MediSense,
Inc. products. Sales in international markets represented approximately 40
percent of worldwide sales in 1996 and 1995, and 38 percent of worldwide sales
in 1994.
The Company holds patents on Hytrin in the United States and several
major markets throughout the world. The Company is facing a number of patent
challenges from generic manufacturers in the United States, and the ultimate
outcome of this litigation cannot be predicted.
Abbott Laboratories and Subsidiaries
FINANCIAL REVIEW (CONTINUED)
The classes of products which contributed at least 10 percent to
consolidated net sales in at least one of the last three years were:
(dollars in millions) 1996 1995 1994
- -------------------- ------ ------ -------
Anti-Infectives $1,407 $1,291 $ 994
Adult Nutritionals 1,226 1,172 1,011
Infant Formula 1,153 1,109 1,180
Increases in anti-infectives and adult nutritionals were primarily due to
unit increases. Worldwide sales of infant formula increased in 1996 pimarily
due to unit increases and decreased in 1995 primarily due to unit decreases.
OPERATING EARNINGS
Gross profit margins (sales less cost of products sold, including freight and
distribution expenses) were 57.0 percent of sales in 1996, 56.8 percent in
1995, and 56.4 percent in 1994. The increases in gross profit margins were
due primarily to favorable product mix, especially higher sales of
pharmaceuticals, and productivity improvements, partially offset by higher
project expenses for new products, higher manufacturing capacity costs for
anticipated unit growth, and the effects of inflation and competitive pricing
pressures in some product lines. Gross profit margins were unfavorably
affected by the relatively stronger U.S. dollar in 1996, and were favorably
impacted in 1995 by the relatively weaker U.S. dollar. Fluctuations in the
U.S. dollar had an insignificant impact on gross profit margins in 1994. In
the U.S., states receive price rebates from manufacturers of infant formula
under the federally subsidized Special Supplemental Food Program for Women,
Infants, and Children (WIC). The WIC rebate programs continue to have a
negative effect on the gross profit margins of this portion of the infant
formula business.
Research and development expense increased to $1.205 billion in 1996,
including $37 million of acquired in-process research and development
relating to the purchase of MediSense, Inc. Research and development for 1995
included a similar charge for the acquisition of certain technologies.
Research and development represented 10.9 percent of net sales in 1996,
compared to 10.7 percent of net sales in 1995, and 10.5 percent of net sales
in 1994. Research and development expenditures continue to be concentrated
on pharmaceutical and diagnostic products.
Abbott Laboratories and Subsidiaries
FINANCIAL REVIEW (CONTINUED)
Selling, general and administrative expenses increased 10.3 percent in
1996, net of the favorable effect of the relatively stronger U.S. dollar of
1.6 percent, compared to increases of 8.6 percent in 1995, and 3.3 percent
in 1994. The increases reflect additional selling and marketing to support
new product launches in the pharmaceutical and nutritional products segment.
The 1995 increase also reflects contributions to the Company's charitable
foundation.
INTEREST (INCOME) EXPENSE, NET
Net interest expense increased in 1996 due primarily to a higher level of
borrowings as a result of the purchase of MediSense, Inc.
OTHER (INCOME) EXPENSE, NET
Other (income) expense, net, includes net foreign exchange losses of $21.8
million in 1996, $25.2 million in 1995, and $30.8 million in 1994, including
net exchange (gains) losses on foreign currency contracts. These contracts
were purchased to manage the Company's exposure to foreign currency rate
changes. Other (income) expense, net, also includes the Company's share of
the income from joint ventures, primarily TAP Holdings Inc. and minority
interest expense.
Abbott Laboratories and Subsidiaries
FINANCIAL REVIEW (CONTINUED)
TAXES ON EARNINGS
The Company's effective income tax rate for 1996 and 1995 was 29.5 percent,
compared to 30.0 percent for 1994. All three years' tax rates were
unfavorably impacted by the reduction in tax incentive grants for Puerto Rico
operations.
FINANCIAL CONDITION
CASH FLOW
The Company expects positive cash flow from operating activities to continue
to approximate or exceed the Company's capital expenditures and cash
dividends.
DEBT AND CAPITAL
The Company has maintained its favorable bond ratings (AAA by Standard &
Poor's Corporation and Aa1 by Moody's Investors Service) and continues to
have readily available financial resources, including unused domestic lines
of credit of $1.5 billion at December 31, 1996. These lines of credit
support domestic commercial paper borrowing arrangements.
In 1996, the Company filed a registration statement with the Securities
and Exchange Commission for the issuance of $650 million of senior debt
securities and issued $250 million of 6.4% notes due in 2006. Under a separate
arrangement the Company also issued, in 1996, $250 million of 6.5%
Eurodollar notes, payable in U.S. dollars, which are due in 2001. Proceeds
from the notes were used to retire short-term borrowings.
During the last three years, the Company purchased 58,436,000 of its
common shares at a cost of $2.197 billion, including 4,335,000 shares of the
20,000,000 shares authorized for purchase by the Board of Directors in
October, 1996.
CAPITAL EXPENDITURES
Capital expenditures of $949 million in 1996, $947 million in 1995, and $929
million in 1994, were principally for upgrading and expanding manufacturing
and research and development facilities in both segments, for laboratory
instruments and hospital equipment placed with customers, and for
administrative support facilities. This level of capital expenditures is
expected to continue, with an increased proportion dedicated to the hospital
and laboratory products segment.
Abbott Laboratories and Subsidiaries
FINANCIAL REVIEW (CONTINUED)
BUSINESS ACQUISITIONS
In 1996, the Company acquired all of the outstanding shares of MediSense,
Inc., a manufacturer of blood glucose self-testing products. Of the cash
purchase price of approximately $867 million, $219 million was allocated to
goodwill; $635 million was allocated to other intangible assets; and $37
million was charged against earnings for in-process research and development.
Goodwill and other intangible assets will be amortized on a straight-line
basis over 25 to 40 years. In December 1994, the Company purchased the
operating assets of the nutritional business of Puleva Union Industrial y
Agroganadera, S.A. for $106 million. Had these acquisition taken place on
January 1 of the previous years, consolidated sales and income would not have
been significantly different from reported amounts.
LEGISLATIVE ISSUES
The Company's primary markets are highly competitive and subject to
substantial government regulation. The Company expects debate to continue at
both the federal and 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. It is not possible to predict the extent to which the
Company or the health care industry in general might be adversely affected by
these factors in the future. A more complete discussion of these factors is
contained in Item 1, Business, in the Annual Report on Form 10-K, which is
available upon request.
Abbott Laboratories and Subsidiaries
SUMMARY OF SELECTED FINANCIAL DATA
Year Ended December 31
(Dollars in Millions Except Per Share Data)
. 1996 1995 1994 1993 1992
--------- ------- -------- -------- --------
Summary of Operations:
Net sales . . . . . . . . . . . . . . . . . . . . $ 11,013.5 10,012.2 9,156.0 8,407.8 7,851.9
Cost of products sold . . . . . . . . . . . . . . $ 4,732.0 4,325.8 3,993.8 3,684.7 3,505.3
Research and development. . . . . . . . . . . . . $ 1,204.8 1,072.7 963.5 881.0 772.4
Selling, general and administrative . . . . . . . $ 2,459.6 2,230.7 2,054.5 1,988.2 1,833.2
Operating earnings (1). . . . . . . . . . . . . . $ 2,617.1 2,382.9 2,144.2 1,924.0 1,526.0
Interest expense. . . . . . . . . . . . . . . . . $ 95.4 69.5 49.7 54.3 53.0
Interest income . . . . . . . . . . . . . . . . . $ (44.5) (51.8) (36.9) (37.8) (42.3)
Other (income) expense, net . . . . . . . . . . . $ (103.4) (30.2) (35.3) (35.7) 48.5
Earnings before taxes (2) . . . . . . . . . . . . $ 2,669.6 2,395.3 2,166.7 1,943.2 1,738.8
Taxes on earnings . . . . . . . . . . . . . . . . $ 787.5 706.6 650.0 544.1 499.7
Earnings before extraordinary gain and
accounting change . . . . . . . . . . . . . . . $ 1,882.0 1,688.7 1,516.7 1,399.1 1,239.1
Earnings per common share before extra-
ordinary gain and accounting change . . . . . . $ 2.41 2.12 1.87 1.69 1.47
Financial Position:
Working capital . . . . . . . . . . . . . . . . . $ 137.2 436.4 400.5 490.6 449.2
Investment securities maturing after one year . . $ 665.6 422.5 316.2 221.8 270.6
Net property and equipment. . . . . . . . . . . . $ 4,461.5 4,249.5 3,920.9 3,511.0 3,099.2
Total assets. . . . . . . . . . . . . . . . . . . $ 11,125.6 9,412.6 8,523.7 7,688.6 6,941.2
Long-term debt. . . . . . . . . . . . . . . . . . $ 932.9 435.2 287.1 306.8 110.0
Shareholders' investment. . . . . . . . . . . . . $ 4,820.4 4,396.8 4,049.4 3,674.9 3,347.6
Return on shareholders' investment. . . . . . . . % 40.8 40.0 39.3 39.8 37.8
Book value per share. . . . . . . . . . . . . . . $ 6.22 5.58 5.04 4.48 4.00
Other Statistics:
Gross profit margin . . . . . . . . . . . . . . . % 57.0 56.8 56.4 56.2 55.4
Research and development to net sales . . . . . . % 10.9 10.7 10.5 10.5 9.8
Capital expenditures. . . . . . . . . . . . . . . $ 949.0 947.0 929.5 952.7 1,007.2
Cash dividends declared per common share. . . . . $ .96 .84 .76 .68 .60
Common shares outstanding (in thousands). . . . 774,449 787,307 803,280 821,130 836,052
Number of common shareholders . . . . . . . . . 99,513 89,831 86,324 82,947 75,703
Number of employees . . . . . . . . . . . . . . . 52,817 50,241 49,464 49,659 48,118
Sales per employee (in dollars) . . . . . . . . . $ 208,521 199,283 185,105 169,312 163,180
Market price per share-high . . . . . . . . . . . $ 57 3/8 44 3/4 34 30 7/8 34 1/8
Market price per share-low. . . . . . . . . . . . $ 38 1/8 30 5/8 25 3/8 22 5/8 26 1/8
Market price per share-close. . . . . . . . . . . $ 50 3/4 41 5/8 32 5/8 29 5/8 30 3/8
Abbott Laboratories and Subsidiaries
SUMMARY OF SELECTED FINANCIAL DATA (CONTINUED)
Year Ended December 31
(Dollars in Millions Except Per Share Data)
. 1991 1990 1989 1988 1987
--------- ------- -------- -------- --------
Summary of Operations:
Net sales . . . . . . . . . . . . . . . . . . . . $ 6,876.6 6,158.7 5,379.8 4,937.0 4,387.9
Cost of products sold . . . . . . . . . . . . . . $ 3,140.0 2,910.1 2,556.7 2,353.2 2,101.9
Research and development. . . . . . . . . . . . . $ 666.3 567.0 501.8 454.6 361.3
Selling, general and administrative . . . . . . . $ 1,513.3 1,275.6 1,100.2 1,027.2 919.0
Operating earnings. . . . . . . . . . . . . . . . $ 1,557.0 1,406.0 1,221.1 1,102.0 1,005.7
Interest expense. . . . . . . . . . . . . . . . . $ 63.8 91.4 74.4 85.0 77.6
Interest income . . . . . . . . . . . . . . . . . $ (45.1) (51.6) (73.8) (69.4) (56.7)
Other (income) expense, net . . . . . . . . . . . $ (5.9) 15.5 26.3 30.9 47.7
Earnings before taxes . . . . . . . . . . . . . . $ 1,544.2 1,350.7 1,194.2 1,055.5 937.1
Taxes on earnings . . . . . . . . . . . . . . . . $ 455.5 384.9 334.4 303.5 304.5
Earnings before extraordinary gain and
accounting change . . . . . . . . . . . . . . . $ 1,088.7 965.8 859.8 752.0 632.6
Earnings per common share before extra-
ordinary gain and accounting change . . . . . . $ 1.27 1.11 .96 .83 .69
Financial Position:
Working capital . . . . . . . . . . . . . . . . . $ 661.7 460.0 719.2 913.3 668.7
Investment securities maturing after one year . . $ 340.2 314.0 300.0 285.7 292.9
Net property and equipment. . . . . . . . . . . . $ 2,662.1 2,375.8 2,090.2 1,952.6 1,741.6
Total assets. . . . . . . . . . . . . . . . . . . $ 6,255.3 5,563.2 4,851.6 4,825.1 4,385.7
Long-term debt. . . . . . . . . . . . . . . . . . $ 125.1 134.8 146.7 349.3 271.0
Shareholders' investment. . . . . . . . . . . . . $ 3,203.0 2,833.6 2,726.4 2,464.6 2,093.5
Return on shareholders' investment. . . . . . . . % 36.1 34.7 33.1 33.0 32.7
Book value per share. . . . . . . . . . . . . . . $ 3.77 3.30 3.08 2.74 2.31
Other Statistics:
Gross profit margin . . . . . . . . . . . . . . . % 54.3 52.7 52.5 52.3 52.1
Research and development to net sales . . . . . . % 9.7 9.2 9.3 9.2 8.2
Capital expenditures. . . . . . . . . . . . . . . $ 732.8 629.5 501.5 521.2 432.7
Cash dividends declared per common share. . . . . $ .50 .42 .35 .30 .25
Common shares outstanding (in thousands). . . . . 850,530 858,282 884,958 899,384 906,924
Number of common shareholders . . . . . . . . . . 56,541 49,827 45,361 46,324 45,822
Number of employees . . . . . . . . . . . . . . . 45,694 43,770 40,929 38,751 37,828
Sales per employee (in dollars) . . . . . . . . . $ 150,492 140,706 131,441 127,403 115,995
Market price per share-high . . . . . . . . . . . $ 34 3/4 23 1/8 17 5/8 13 1/8 16 3/4
Market price per share-low. . . . . . . . . . . . $ 19 5/8 15 5/8 11 1/2 10 3/4 10
Market price per share-close. . . . . . . . . . . $ 34 3/8 22 1/2 17 12 12
Abbott Laboratories and Subsidiaries
SUMMARY OF SELECTED FINANCIAL DATA (CONTINUED)
Year Ended December 31
(Dollars in Millions Except Per Share Data)
1986
--------
Summary of Operations:
Net sales . . . . . . . . . . . . . . . . . . . . $3,807.6
Cost of products sold . . . . . . . . . . . . . . $1,868.4
Research and development. . . . . . . . . . . . . $ 284.9
Selling, general and administrative . . . . . . . $ 775.7
Operating earnings. . . . . . . . . . . . . . . . $ 878.6
Interest expense. . . . . . . . . . . . . . . . . $ 86.3
Interest income . . . . . . . . . . . . . . . . . $ (63.1)
Other (income) expense, net . . . . . . . . . . . $ 36.7
Earnings before taxes . . . . . . . . . . . . . . $ 818.7
Taxes on earnings . . . . . . . . . . . . . . . . $ 278.2
Earnings before extraordinary gain and
accounting change . . . . . . . . . . . . . . . $ 540.5
Earnings per common share before extra-
ordinary gain and accounting change . . . . . . $ .58
Financial Position:
Working capital . . . . . . . . . . . . . . . . . $ 585.4
Investment securities maturing after one year . . $ 254.2
Net property and equipment. . . . . . . . . . . . $1,543.3
Total assets. . . . . . . . . . . . . . . . . . . $3,865.6
Long-term debt. . . . . . . . . . . . . . . . . . $ 297.4
Shareholders' investment. . . . . . . . . . . . . $1,778.9
Return on shareholders' investment. . . . . . . . % 29.6
Book value per share. . . . . . . . . . . . . . . $ 1.94
OTHER STATISTICS:
Gross profit margin . . . . . . . . . . . . . . . % 50.9
Research and development to net sales . . . . . . % 7.5
Capital expenditures. . . . . . . . . . . . . . . $ 383.4
Cash dividends declared per common share. . . . . $ .21
Common shares outstanding (in thousands). . . . . 915,356
Number of common shareholders . . . . . . . . . . 40,387
Number of employees . . . . . . . . . . . . . . . 35,754
Sales per employee (in dollars) . . . . . . . . . $106,495
Market price per share-high . . . . . . . . . . . $ 13 3/4
Market price per share-low. . . . . . . . . . . . $ 7 7/8
Market price per share-close. . . . . . . . . . . $ 11 3/8
Abbott Laboratories and Subsidiaries
SUMMARY OF SELECTED FINANCIAL DATA (CONTINUED)
Year Ended December 31
(Dollars in Millions Except Per Share Data)
(1) In 1992, the Company recorded a pretax charge of $215 for costs
associated with the voluntary withdrawal of temafloxacin from the worldwide
market. In 1993, the Company resolved various contingencies related to the
withdrawal and recorded a pretax credit of $70.
(2) In 1992, the Company recorded a pretax gain of $272 on the sale of its
investment in Boston Scientific Corporation.