Abbott Laboratories (ABT), (founding name: Abbott Alkaloid Company) is a global pharmaceutical company with around 73,000 employees in 150 countries. Abbott was founded in 1888 by Wallace C. Abbott (1857-1921) and is headquartered in Abbott Park, a northern suburb of Chicago, Illinois.
FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 (Mark One) /X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1998 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________________________ to _________________ Commission File No. 1-2189 ABBOTT LABORATORIES An Illinois Corporation I.R.S. Employer Identification No. 36-0698440 100 Abbott Park Road Abbott Park, Illinois 60064-3500 Telephone: (847) 937-6l00 Indicate by check mark whether the registrant (l) has filed all reports required to be filed by Section l3 or l5(d) of the Securities Exchange Act of l934 during the preceding l2 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X . No . ---- ---- As of October 31, 1998, the Corporation had 1,517,621,345 common shares without par value outstanding.
PART I. FINANCIAL INFORMATION ABBOTT LABORATORIES AND SUBSIDIARIES CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
ABBOTT LABORATORIES AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF EARNINGS (UNAUDITED) (Dollars and shares in thousands except per share data) <TABLE> <CAPTION> THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30 SEPTEMBER 30 ---------------------------- ---------------------------- 1998 1997 1998 1997 ----------- ----------- ----------- ----------- <S> <C> <C> <C> <C> Net Sales .............................. $ 3,035,767 $ 2,865,184 $ 9,147,433 $ 8,765,406 ----------- ----------- ----------- ----------- Cost of products sold .................. 1,375,010 1,241,842 3,952,753 3,786,216 Research and development ............... 292,078 326,797 879,086 927,019 Selling, general and administrative .... 665,202 675,062 2,029,539 1,982,663 ----------- ----------- ----------- ----------- Total Operating Cost and Expenses .... 2,332,290 2,243,701 6,861,378 6,695,898 ----------- ----------- ----------- ----------- Operating Earnings ..................... 703,477 621,483 2,286,055 2,069,508 ----------- ----------- ----------- ----------- Interest expense ....................... 41,027 33,470 119,388 97,612 Interest income ........................ (14,654) (12,146) (41,042) (35,537) Other (income) expense, net ............ (61,398) (53,301) (162,957) (144,403) ----------- ----------- ----------- ----------- Earnings Before Taxes .................. 738,502 653,460 2,370,666 2,151,836 Taxes on earnings ...................... 206,780 182,011 663,786 624,032 ----------- ----------- ----------- ----------- Net Earnings ........................... $ 531,722 $ 471,449 $ 1,706,880 $ 1,527,804 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Basic Earnings Per Common Share ........ $ .35 $ .31 $ 1.12 $ .99 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Diluted Earnings Per Common Share ...... $ .34 $ .30 $ 1.10 $ .97 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Cash Dividends Declared Per Common Share ..................... $ .15 $ .135 $ .45 $ .405 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Average Number of Common Shares Outstanding Used for Basic Earnings Per Common Share ................... 1,520,914 1,536,674 1,524,556 1,542,934 Dilutive Common Stock Options .......... 23,766 22,106 22,052 22,197 ----------- ----------- ----------- ----------- Average Number of Common Shares Outstanding Plus Dilutive Common Stock Options ...................... 1,544,680 1,558,780 1,546,608 1,565,131 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Outstanding Common Stock Options Having No Dilutive Effect .... 564 319 564 319 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- </TABLE> The accompanying notes to condensed consolidated financial statements are an integral part of this statement. 2
ABBOTT LABORATORIES AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEET (Dollars in Thousands) <TABLE> <CAPTION> SEPTEMBER 30 DECEMBER 31 1998 1997 ------------- ------------ (unaudited) <S> <C> <C> ASSETS Current Assets: Cash and cash equivalents............................................$ 223,470 $ 230,024 Investment securities................................................ 50,563 28,986 Trade receivables, less allowances of $183,555 in 1998 and $167,406 in 1997............................................... 1,732,647 1,782,326 Inventories: Finished products.................................................. 680,950 667,355 Work in process.................................................... 329,138 287,653 Materials ........................................................ 384,026 324,892 ----------- ----------- Total inventories............................................... 1,394,114 1,279,900 Prepaid expenses, income taxes, and other receivables................ 1,665,416 1,716,972 ----------- ----------- Total Current Assets............................................ 5,066,210 5,038,208 ----------- ----------- Investment Securities Maturing after One Year............................. 745,149 630,967 ----------- ----------- Property and Equipment, at Cost........................................... 9,201,129 8,790,157 Less: accumulated depreciation and amortization...................... 4,555,362 4,220,466 ----------- ----------- Net Property and Equipment...................................... 4,645,767 4,569,691 Deferred Charges, Intangible and Other Assets............................. 2,145,908 1,822,202 ----------- ----------- $12,603,034 $12,061,068 ----------- ----------- ----------- ----------- LIABILITIES AND SHAREHOLDERS' INVESTMENT Current Liabilities: Short-term borrowings and current portion of long-term debt..........$ 1,419,970 $ 1,781,352 Trade accounts payable............................................... 922,341 1,001,058 Salaries, income taxes, dividends payable, and other accruals........ 2,322,201 2,252,058 ----------- ----------- Total Current Liabilities....................................... 4,664,512 5,034,468 ----------- ----------- Long-Term Debt ........................................................ 1,340,845 937,983 ----------- ----------- Other Liabilities and Deferrals........................................... 1,223,785 1,089,940 ----------- ----------- Shareholders' Investment: Preferred shares, $1 par value Authorized - 1,000,000 shares, none issued......................... ... ... Common shares, without par value Authorized - 2,400,000,000 shares Issued at stated capital amount - Shares: 1998: 1,536,366,561; 1997: 1,546,468,504................ 1,114,445 907,106 Earnings employed in the business......................................... 4,643,640 4,395,582 Accumulated other comprehensive income.................................... (307,152) (230,241) ----------- ----------- 5,450,933 5,072,447 Less: Common shares held in treasury, at cost - Shares: 1998: 17,710,838; 1997: 18,280,398 .......................... 46,735 48,238 Unearned compensation - restricted stock awards........................... 30,306 25,532 ----------- ----------- Total Shareholders' Investment.................................. 5,373,892 4,998,677 ----------- ----------- $12,603,034 $12,061,068 ----------- ----------- ----------- ----------- </TABLE> The accompanying notes to condensed consolidated financial statements are an integral part of this statement. 3
ABBOTT LABORATORIES AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) (Dollars in Thousands) <TABLE> <CAPTION> NINE MONTHS ENDED SEPTEMBER 30 ------------------------------- 1998 1997 ----------- ----------- <S> <C> <C> Cash Flow From (Used in) Operating Activities: Net earnings ........................................... $ 1,706,880 $ 1,527,804 Adjustments to reconcile net earnings to net cash from operating activities - Depreciation and amortization .......................... 591,032 547,044 Trade receivables ...................................... 14,671 (120,783) Inventories ............................................ (135,017) (64,723) Other, net ............................................. 90,547 120,869 ----------- ----------- Net Cash From Operating Activities ................ 2,268,113 2,010,211 ----------- ----------- Cash Flow From (Used in) Investing Activities: Acquisitions of businesses, net of cash acquired ....... (242,713) (201,030) Acquisitions of property and equipment ................. (703,677) (732,388) Investment securities transactions ..................... (135,897) 25,515 Other .................................................. 11,040 (14,088) ----------- ----------- Net Cash (Used in) Investing Activities ........... (1,071,247) (921,991) ----------- ----------- Cash Flow From (Used in) Financing Activities: Proceeds from (repayment of) commercial paper, net ... (301,000) 252,000 Proceeds from issuance of long-term debt ............. 400,000 . Other borrowing transactions, net .................... (51,748) 22,128 Common share transactions ............................ (581,419) (732,687) Dividends paid ....................................... (663,824) (602,723) ----------- ----------- Net Cash (Used in) Financing Activities ........... (1,197,991) (1,061,282) ----------- ----------- Effect of exchange rate changes on cash and cash equivalents ....................................... (5,429) (7,743) ----------- ----------- Net Increase (Decrease) in Cash and Cash Equivalents ....... (6,554) 19,195 Cash and Cash Equivalents, Beginning of Year ............... 230,024 110,209 ----------- ----------- Cash and Cash Equivalents, End of Period ................... $ 223,470 $ 129,404 ----------- ----------- ----------- ----------- </TABLE> The accompanying notes to condensed consolidated financial statements are an integral part of this statement. 4
ABBOTT LABORATORIES AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 1998 (UNAUDITED) NOTE 1 - BASIS OF PREPARATION: The accompanying unaudited, condensed consolidated financial statements have been prepared pursuant to rules and regulations of the Securities and Exchange Commission and, therefore, do not include all information and footnote disclosures normally included in audited financial statements. However, in the opinion of management, all adjustments (which include only normal adjustments) necessary to present fairly the results of operations, financial position and cash flows have been made. It is suggested that these statements be read in conjunction with the financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 1997. NOTE 2 - TAXES ON EARNINGS: Taxes on earnings reflect the estimated annual effective tax rates. The effective tax rates are less than the statutory U. S. Federal income tax rate principally due to tax incentive grants related to subsidiaries operating in Puerto Rico, the Dominican Republic, Ireland, the Netherlands, and Italy. NOTE 3 - LITIGATION AND ENVIRONMENTAL MATTERS: The Company is involved in various claims and legal proceedings including numerous antitrust suits and investigations in connection with the pricing of prescription pharmaceuticals. On September 9, 1998 the federal court approved the settlement of the independent retail pharmacy federal class action lawsuit for $57 million. 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 and state remediation laws and is investigating potential contamination at a number of Company-owned locations. The matters above are discussed more fully in Note 10 to the financial statements included in the Company's Annual Report on Form 10-K, which is available upon request, and in Part II, Item 1, Legal Proceedings, in this Form. The Company expects that within the next year, progress in the legal proceedings described above may cause a change in the estimated reserves recorded by the Company. While it is not feasible to predict the outcome of such pending claims, proceedings and investigations with certainty, management is of the opinion that their ultimate disposition should not have a material adverse effect on the Company's financial position, cash flows, or results of operations. 5
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 1998 (Unaudited), Continued NOTE 4 - ACQUISITIONS: On April 17, 1998, the Company acquired the common stock of International Murex Technologies Corporation for approximately $234 million in cash. A substantial portion of the purchase price was allocated to intangible assets, including goodwill, which is being amortized over 40 years. Had this acquisition taken place on January 1, 1997, consolidated sales and net income would not have been significantly different from reported amounts. NOTE 5 - COMPREHENSIVE INCOME: (Dollars in Thousands) <TABLE> <CAPTION> THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30 SEPTEMBER 30 ------------------------------- ------------------------------- 1998 1997 1998 1997 ----------- ----------- ----------- ----------- <S> <C> <C> <C> <C> Net Earnings $ 531,722 $ 471,449 $ 1,706,880 $ 1,527,804 ----------- ----------- ----------- ----------- Other comprehensive income: Foreign currency translation adjustments (30,947) (63,346) (66,701) (171,442) Unrealized (losses) gains on marketable equity securities (850) 21,908 (16,245) 26,605 Tax benefit (expense) related to items of other comprehensive income (123) (8,763) 6,035 (10,641) ----------- ----------- ----------- ----------- Other comprehensive income (loss), net of tax (31,920) (50,201) (76,911) (155,478) ----------- ----------- ----------- ----------- Comprehensive Income $ 499,802 $ 421,248 $ 1,629,969 $ 1,372,326 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- </TABLE> As of September 30, 1998, the cumulative net of tax balances for foreign currency translation loss adjustments and the unrealized (gains) on marketable equity securities were $329,820, and ($22,668), respectively. NOTE 6 - STOCK SPLIT: On February 13, 1998, the Board of Directors approved a two-for-one stock split. Shareholders of record on May 1, 1998 were issued an additional share of the Company's common stock on May 29, 1998 for each share owned on the record date. All shares and per share data in the condensed consolidated financial statements and notes have been adjusted to reflect the stock split. NOTE 7 - RECENTLY ISSUED ACCOUNTING STANDARD: In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities." This statement requires the recognition of derivatives as either assets or liabilities in the statement of financial position at fair value. The statement is effective for fiscal years beginning after June 15, 1999. The Company is assessing the impact this statement will have on its financial statements. 6
FINANCIAL REVIEW RESULTS OF OPERATIONS - THIRD QUARTER AND FIRST NINE MONTHS 1998 COMPARED WITH SAME PERIODS IN 1997 Worldwide sales for the third quarter and first nine months increased 6.0 percent and 4.4 percent, respectively, over the comparable 1997 periods. Excluding the negative effect of the relatively stronger U.S. dollar, sales increased 9.3 percent and 7.7 percent, respectively, over the comparable 1997 periods. Net earnings increased 12.8 percent and 11.7 percent, respectively, in the third quarter and first nine months 1998. Basic earnings per common share increased 12.9 percent and 13.1 percent, respectively, over the prior year periods. Diluted earnings per common share increased 13.3 percent and 13.4 percent, respectively, over the prior year periods. Gross profit margin (sales less cost of products sold, including freight and distribution expenses) was 54.7 percent for the 1998 third quarter, compared to 56.7 percent for the 1997 third quarter, and was negatively affected by the unfavorable effects of the stronger U.S. dollar. First nine months 1998 gross profit margin was 56.8 percent, the same as a year earlier. Research and development expenses were $292.1 million for the third quarter 1998 and $879.1 million for the first nine months 1998. Research and development represented 9.6 percent of net sales for both the third quarter and first nine months 1998, compared to 11.4 percent and 10.6 percent, respectively, for the third quarter and the first nine months 1997. The majority of research and development expenditures continues to be concentrated on pharmaceutical and diagnostic products. Selling, general and administrative expenses for the third quarter and first nine months 1998 decreased 1.5 percent and increased 2.4 percent, respectively, over the comparable prior year periods, net of the favorable effect of the relatively stronger U.S. dollar of 3.3 percent and 3.4 percent, respectively. The net increases, exclusive of exchange impact, reflect inflation, additional selling and marketing support for new and existing products, primarily for pharmaceutical products, and litigation charges. Other (income) expense, net, includes net foreign exchange losses of $5.6 million for the third quarter and $20.6 million for the first nine months 1998, compared to net foreign exchange gains of $4.3 million and $11.2 million, respectively, for the corresponding prior year periods. Other (income) expense, net, also includes the Company's share of the net income from its joint venture, TAP Holdings, Inc., of $69.3 million for the third quarter and $189.9 million for the first nine months 1998, compared to $51.7 million and $142.3 million for the respective prior year periods. On July 27, 1998, the Company announced that it was experiencing manufacturing difficulties with the capsule formulation of its protease inhibitor Norvir. The manufacturing difficulties with Norvir will result in shortages and interruption of the supply of capsules. The Company plans to supply Norvir liquid formulation to provide continued Norvir therapy for patients. During the first nine months 7
FINANCIAL REVIEW (Continued) of 1998, the Company recorded sales of Norvir of $197.0 million. The Company is unable to quantify the effect that the production problems will have on sales in future periods. INDUSTRY SEGMENTS Industry segment sales for the third quarter and first nine months 1998 and the related change from the comparable 1997 periods are shown in the table below. The Pharmaceutical and Nutritional Products segment includes a broad line of adult and pediatric pharmaceuticals and nutritionals, which are sold primarily on the prescription or recommendation of physicians or other health care professionals; consumer products; agricultural and chemical products; and bulk pharmaceuticals. The Hospital and Laboratory Products segment includes diagnostic systems for 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; and other medical specialty products for hospitals and alternate-care sites. Domestic and international sales for the third quarter and first nine months 1998 primarily reflect unit growth. Total sales were unfavorably affected 3.3 percent and international sales were unfavorably affected 8.7 percent by the relatively stronger U.S. dollar in the third quarter. On a year-to-date basis, total sales were unfavorably affected 3.3 percent and international sales were unfavorably affected 8.6 percent by the relatively stronger U.S. dollar. <TABLE> <CAPTION> Third Quarter Nine Months - ------------------------------------------------------------------------------- SEGMENT SALES 1998 Percent 1998 Percent (in millions of dollars) Sales Change Sales Change - ------------------------------------------------------------------------------- <S> <C> <C> <C> <C> Pharmaceutical and Nutritional Products: Domestic $1,131.0 5.1 $3,455.0 2.7 - ------------------------------------------------------------------------------- International 585.2 6.4 1,801.7 2.1 - ------------------------------------------------------------------------------- 1,716.2 5.5 5,256.7 2.5 Hospital and Laboratory Products: Domestic 781.8 10.7 2,274.0 11.5 - ------------------------------------------------------------------------------- International 537.8 0.9 1,616.7 1.1 - ------------------------------------------------------------------------------- 1,319.6 6.5 3,890.7 7.0 Total All Segments: Domestic 1,912.8 7.3 5,729.0 6.0 - ------------------------------------------------------------------------------- International 1,123.0 3.7 3,418.4 1.7 - ------------------------------------------------------------------------------- $3,035.8 6.0 $9,147.4 4.4 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- </TABLE> 8
FINANCIAL REVIEW (Continued) LIQUIDITY AND CAPITAL RESOURCES AT SEPTEMBER 30, 1998 COMPARED WITH DECEMBER 31, 1997 Net cash from operating activities for the first nine months 1998 totaled $2.268 billion. The Company expects annual cash flow from operating activities to continue to approximate or exceed the Company's capital expenditures and cash dividends. The Company funded the acquisition of Murex through commercial paper borrowings. 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 $2.505 billion at September 30, 1998. These lines of credit support domestic commercial paper borrowing arrangements. During the first nine months 1998, the Company issued $400 million of debt securities under a registration statement filed with the Securities and Exchange Commission in 1996. The Company may issue up to $750 million of senior debt securities in the future under a registration statement filed with the Securities and Exchange Commission in September 1998. During the first nine months 1998, the Company continued its program to purchase its common shares. The Company purchased and retired 17,248,000 shares during this period at a cost of $673.7 million. As of September 30, 1998, an additional 10,152,000 shares may be purchased in future periods under authorization granted by the Board of Directors in December 1997. 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 the state levels 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. RECENTLY ISSUED ACCOUNTING STANDARD In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities." This statement requires the recognition of derivatives as either assets or liabilities in the statement of financial position at fair value. The statement is effective for fiscal years beginning after June 15, 1999. The Company is assessing the impact this statement will have on its financial statements. 9
FINANCIAL REVIEW (Continued) YEAR 2000 The Year 2000 ("Y2K") issue results from the inability of some computer programs to identify the Year 2000 properly, potentially leading to errors or system failure. The Company has organized its efforts to resolve the Y2K issue as follows: internal information systems; landlord and embedded systems; electronic products currently marketed or in the field; and suppliers providing products and services to the Company. Progress goals have been established in each area. Internal information systems were inventoried and assessed, and remediation started in 1992. Virtually all remediation is scheduled to be completed by the end of 1998, and testing completed by mid-1999. Current progress is slightly better than plan. Landlord and embedded systems were inventoried and Y2K assessment completed by May 1998. The Company's goal is to resolve 75 percent of critical systems by year-end 1998, and 100 percent of critical systems by July 1999. Current progress is according to plan. The Company has assessed the ability of its medical electronic and software products to cope with the Y2K issue. Customers may access the Company's assessment on the Company's internet web page. Most of the Company's products are not affected by the Y2K issue. For those products requiring remediation, the Company's goal is to provide solutions by June 1999. Current progress is according to plan. Beginning in March 1998 key suppliers were requested to certify that they were Y2K compliant or, if not, to provide their plans to become compliant. Fifty-four percent of suppliers responded; 39 percent of those responding certified compliance currently and 61 percent forwarded action plans. Follow-up with all key suppliers is being conducted according to plan. Each of the above areas will begin developing contingency plans by the end of 1998, and will continue to develop and update those plans throughout 1999. The Company's policy is to expense Y2K remediation costs as incurred. Future expenditures to remediate the Company's systems for the Y2K issue are not material to the Company's results of operations, financial position or cash flows. 10
FINANCIAL REVIEW (Continued) EURO CONVERSION On January 1, 1999, the European Economic and Monetary Union will take effect and introduce the euro as the official single currency of the eleven participating member countries. On that date the currency exchange rates of the participating countries will be fixed against the euro. There will be a three year transition to the euro, and at the end of 2001 the legacy currencies will be eliminated. In 1997 the Company organized an internal cross-functional task force to address the euro issues and expects to be ready for the conversion to the euro. Costs required to prepare for the euro are not material to the Company's financial position, results of operations or cash flows. The impact, if any, of the euro on the Company's competitive position is unknown. 11
PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS As reported in the Company's 10-K for the fiscal year ended December 31, 1997, the Company is involved in numerous antitrust suits and two investigations regarding the Company's pricing of pharmaceutical products. As of September 30, 1998, 117 antitrust suits are pending in the United States District Court for the Northern District of Illinois as "In re: Brand Name Prescription Drug Antitrust Litigation, MDL 997." A portion of the MDL 997 litigation has been certified as a class action on behalf of certain retail pharmacies. In July 1998, the Company entered into an agreement to settle the class action portion of the MDL 997 litigation for $57 million. On September 9, 1998, the United States District Court for the Northern District of Illinois approved that settlement agreement. In addition, during the third quarter of 1998, three other lawsuits pending in the MDL 997 litigation, ALBERTSON'S V. ABBOTT, AMERICAN DRUG V. ABBOTT, and ECKERD V. ABBOTT, were settled and have now been dismissed. As of October 15, 1998, 24 pharmaceutical pricing cases were pending in various state courts and one case was pending in a District of Columbia court. As reported in the Company's 10-K for the fiscal year ended December 31, 1997, the Company has entered into settlement agreements in twelve consumer lawsuits pending in the following jurisdictions: Arizona, Florida, Kansas, Maine, Michigan, Minnesota (2), New York, North Carolina, Tennessee, Washington, D.C., and Wisconsin. The court in each jurisdiction must approve the agreement before it becomes final. Courts in Michigan and Wisconsin have approved the settlement agreement. The Company has previously disclosed that cases are pending in the United States District Court for the Northern District of Illinois between the Company and Geneva Pharmaceuticals, Inc. ("Geneva"), Invamed, Inc. ("Invamed"), Novopharm Limited ("Novopharm"), Mylan Pharmaceuticals, Inc. ("Mylan"), and Warner Chilcott, Inc. ("Warner") in which the validity of the Company's patent claim covering the form of terazosin hydrochloride used by those companies has been contested. The Geneva, Invamed, and Novopharm cases are all pending before the same judge, who, on September 1, 1998, entered a judgment in each of those cases ruling that the Company's patent claim is invalid. The Company has appealed those judgments. Both Mylan and Warner have filed motions seeking to have the September 1 ruling applied in their cases. While it is not feasible to predict the outcome of such pending claims, proceedings, and investigations with certainty, management is of the opinion that their ultimate dispositions should not have a material adverse effect on the Company's results of operations, financial position or cash flows.
Item 5. NOTICE OF DEADLINES FOR SUBMITTING SHAREHOLDER PROPOSALS. DATE FOR RECEIPT OF 1999 SHAREHOLDER PROPOSALS Shareholder proposals for presentation at the 1999 Annual Meeting must be received by the corporation no later than November 10, 1998 and must otherwise comply with the applicable requirements of the Securities and Exchange Commission to be considered for inclusion in the proxy statement and proxy for the 1999 meeting. PROCEDURE FOR RECOMMENDATION AND NOMINATION OF DIRECTORS AND TRANSACTION OF BUSINESS AT ANNUAL MEETINGS A shareholder may recommend persons as potential nominees for director by submitting the names of such persons in writing to the chairman of the nominations and board affairs committee or the secretary of the corporation. Recommendations should be accompanied by a statement of qualifications and confirmation of the person's willingness to serve. A shareholder may directly nominate persons for director only by complying with the following procedure: the shareholder must submit the names of such persons in writing to the secretary of the corporation not earlier than the October 1 nor later than the first business day of January prior to the date of the Annual Meeting. The nominations must be accompanied by a statement setting forth the name, age, business address, residence address, principal occupation, qualifications, and number of shares of the corporation owned by the nominee and the name, record address, and number of shares of the corporation owned by the shareholder making the nomination. A shareholder may properly bring business before the Annual Meeting of Shareholders only by complying with the following procedure: the shareholder must submit to the secretary of the corporation, not earlier than the October 1 nor later than the first business day of January prior to the date of the Annual Meeting, a written statement describing the business to be discussed, the reasons for conducting such business at the Annual Meeting, the name, record address, and number of shares of the corporation owned by the shareholder making the submission, and a description of any material interest of the shareholder in such business.
Item 6. Exhibits and Reports on Form 8-K a) Exhibits 3. By-Laws of Abbott Laboratories, as amended effective as of October 9, 1998, filed as Exhibit 3.1 to Registration Statement on Form S-3, file number 333-65601*. 4.1 Resolution of the Company's Board of Directors relating to the 5.40% Note filed as Exhibit 4.12 to the 1996 Abbott Laboratories Annual Report on Form 10-K*. 4.2 Form of $200,000,000 5.40% Note issued pursuant to Indenture - attached hereto. 4.3 Actions of Authorized Officers with respect to the Company's 5.40% Note - attached hereto. 4.4 Officers' Certificate and Company Order with respect to the Company's 5.40% Note - attached hereto. 12. Statement re: computation of ratio of earnings to fixed charges - attached hereto. 27. Financial Data Schedule - attached hereto. * Incorporated herein by reference b) Reports on Form 8-K None SIGNATURE Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ABBOTT LABORATORIES /s/ Theodore A. Olson -------------------------------------------- Date: November 11, 1998 Theodore A. Olson, Vice President and Controller (Principal Accounting Officer)