10-QPeriod: Q2 FY2004

ABBOTT LABORATORIES Quarterly Report for Q2 Ended Jun 30, 2004

Filed August 6, 2004For Securities:ABT

Summary

Abbott Laboratories reported strong financial performance for the second quarter and first half of 2004, driven by solid sales growth across its key segments, including Pharmaceuticals, Diagnostics, Ross Products, and International. Net sales increased by 14.0% to $4.7 billion for the quarter and 14.9% to $9.3 billion for the six-month period, with notable contributions from new acquisitions like TheraSense and i-STAT. The company successfully completed the spin-off of its hospital products business, Hospira, Inc., on April 30, 2004, which is now reflected as discontinued operations. This strategic move is expected to allow Abbott to focus on its core healthcare product portfolio. Despite significant charges related to acquired in-process research and development from acquisitions, the company demonstrated robust operating earnings and net earnings growth.

Key Highlights

  • 1Total net sales for the second quarter of 2004 reached $4.703 billion, a 14.0% increase compared to $4.126 billion in the same period of 2003. For the first six months, net sales grew 14.9% to $9.344 billion.
  • 2The company successfully executed the spin-off of Hospira, Inc. on April 30, 2004, with the financial results of Hospira presented as discontinued operations.
  • 3Acquisitions played a significant role, including TheraSense for approximately $1.2 billion and i-STAT Corporation for approximately $394 million, contributing to growth in the Diagnostic Products segment.
  • 4Operating earnings for the second quarter increased substantially to $796.5 million from $228.4 million in the prior year, reflecting improved sales and operational efficiency.
  • 5Research and development expenses, excluding acquired in-process R&D, increased by 15.2% in the second quarter, underscoring Abbott's commitment to pipeline development.
  • 6Selling, general, and administrative expenses decreased by 24.2% in the second quarter primarily due to a significant one-time charge in the prior year related to the Ross enteral nutrition investigation settlement.
  • 7Diluted Earnings Per Common Share from continuing operations increased to $0.40 in the second quarter of 2004, up from $0.11 in the comparable period of 2003.

Frequently Asked Questions

The spin-off of Hospira, Inc. on April 30, 2004, resulted in the operations and cash flows of Hospira being presented as discontinued operations. This strategic move is intended to allow Abbott to focus on its core healthcare businesses. While the spin-off itself generated transaction costs, the ongoing financial results of Hospira are no longer consolidated into Abbott's continuing operations.

Abbott made significant acquisitions in early 2004, including TheraSense for approximately $1.2 billion and i-STAT for approximately $394 million. These acquisitions, especially TheraSense in the Diabetes Care area, contributed to the strong sales growth in the Diagnostic Products segment. However, these acquisitions also resulted in substantial charges for acquired in-process research and development, which impacted reported earnings.

The substantial increase in operating earnings for the second quarter of 2004 is primarily driven by strong top-line sales growth across all reporting segments, up 14.0% year-over-year. Additionally, a significant decrease in selling, general, and administrative expenses, largely due to the absence of a $614 million charge recorded in the prior year for the settlement of the Ross enteral nutrition investigation, significantly boosted reported operating profit.

Humira continues to be a strong performer, with worldwide sales of $351 million in the first six months of 2004 and projected full-year sales exceeding $800 million. However, Synthroid sales have been impacted by the FDA's approval of generic competition in the second quarter of 2004, leading to increased market presence of generic alternatives.