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Abbott Laboratories · 10-Q · For 6/30/99

Filed On 8/13/99 · SEC File 1-02189 · Accession Number 1047469-99-32006

  As Of               Filer                 Filing     On/For/As Docs:Pgs              Issuer               Agent

 8/13/99  Abbott Laboratories               10-Q        6/30/99    3:19                                     Merrill Corp/New/- FA

Quarterly Report · Form 10-Q
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-Q        Quarterly Report                                      16     83K 
 2: EX-12       Statement re: Computation of Ratios                    1      7K 
 3: EX-27       Financial Data Schedule                                2      8K

10-Q · Quarterly Report
Document Table of Contents

Page	(sequential)	\|	(alphabetic)	Top
			Alternative Formats (RTF, XML, et al.) Exhibits and Reports on Form 8-K Legal Proceedings
1	1st Page
13	Item 1. Legal Proceedings
14	Item 6. Exhibits and Reports on Form 8-K

10-Q 1st Page of 16 TOC Top Previous Next Bottom Just 1st
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 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 June 30, 1999                                    

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 60064-6400

 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 July 31, 1999, the Corporation had 1,521,330,354 common shares without par
value outstanding.                                                              

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 PART I. FINANCIAL INFORMATION

Abbott Laboratories and Subsidiaries

 Condensed Consolidated Financial Statements

 (Unaudited)

10-Q 3rd Page of 16 TOC 1st Previous Next Bottom Just 3rd

Abbott Laboratories and Subsidiaries

Condensed Consolidated Statement of Earnings

 (Unaudited)

 (dollars and shares in thousands except per share data)

                                                        · Enlarge/Download Table

                                                     Three Months Ended June 30    Six Months Ended June 30  
                                                         1999           1998          1999           1998    
                                                     -----------    -----------   -----------    ----------- 
                                                                                                             
Net Sales .........................................  $ 3,243,166    $ 3,066,753   $ 6,542,197    $ 6,111,666 
                                                     -----------    -----------   -----------    ----------- 

Cost of products sold .............................    1,410,942      1,297,770     2,859,773      2,577,743 
Research and development ..........................      314,944        307,132       582,121        587,008 
Selling, general and administrative ...............      687,727        682,162     1,368,000      1,364,337 
                                                     -----------    -----------   -----------    ----------- 
     Total Operating Cost and Expenses ............    2,413,613      2,287,064     4,809,894      4,529,088 
                                                     -----------    -----------   -----------    ----------- 

Operating Earnings ................................      829,553        779,689     1,732,303      1,582,578 
                                                     -----------    -----------   -----------    ----------- 

Net interest expense ..............................       22,028         26,927        48,267         51,973 
Income from TAP Holdings Inc. joint venture .......      (96,336)       (70,288)     (167,905)      (120,636)
Net foreign exchange (gain) loss ..................       (2,078)         7,623        18,481         15,024 
Other (income) expense, net .......................       13,355          2,142        15,086          4,053 
                                                     -----------    -----------   -----------    ----------- 

   Earnings Before Taxes ..........................      892,584        813,285     1,818,374      1,632,164 
Taxes on earnings .................................      249,924        227,720       509,145        457,006 
                                                     -----------    -----------   -----------    ----------- 
Net Earnings ......................................  $   642,660    $   585,565   $ 1,309,229    $ 1,175,158 
                                                     -----------    -----------   -----------    ----------- 
                                                     -----------    -----------   -----------    ----------- 

Basic Earnings Per Common Share ...................  $      0.42    $      0.38   $      0.86    $      0.77 
                                                     -----------    -----------   -----------    ----------- 
                                                     -----------    -----------   -----------    ----------- 

Diluted Earnings Per Common Share .................  $      0.42    $      0.38   $      0.85    $      0.76 
                                                     -----------    -----------   -----------    ----------- 
                                                     -----------    -----------   -----------    ----------- 

Cash Dividends Declared Per Common Share ..........  $      0.17    $      0.15   $      0.34    $      0.30 
                                                     -----------    -----------   -----------    ----------- 
                                                     -----------    -----------   -----------    ----------- 
Average Number of Common Shares Outstanding                                                                  
   Used for Basic Earnings Per Common Share .......    1,520,416      1,524,789     1,518,960      1,526,354 

Dilutive Common Stock Options .....................       21,990         21,310        22,809         21,197 
                                                     -----------    -----------   -----------    ----------- 
Average Number of Common Shares Outstanding                                                                  
   Plus Dilutive Common Stock Options .............    1,542,406      1,546,099     1,541,769      1,547,551 
                                                     -----------    -----------   -----------    ----------- 
                                                     -----------    -----------   -----------    ----------- 
Outstanding Common Stock Options Having No Dilutive                                                          
   Effect .........................................        2,808             36         1,709             36 
                                                     -----------    -----------   -----------    ----------- 
                                                     -----------    -----------   -----------    ----------- 

The accompanying notes to consolidated financial statements are an integral part
of this statement.                                                              

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Abbott Laboratories and Subsidiaries

Condensed Consolidated Statement of Cash Flows

 (Unaudited)

(dollars in thousands)

                                                        · Enlarge/Download Table

                                                                                Six Months Ended June 30    
                                                                            --------------------------------
                                                                                   1999           1998      
                                                                               -----------    -----------   
                                                                                                            
Cash Flow From (Used in) Operating Activities:                                                              
  Net earnings ............................................................    $ 1,309,229    $ 1,175,158   
  Adjustments to reconcile net earnings to                                                                  
  net cash from operating activities -                                                                      
  Depreciation and amortization ...........................................        416,140        393,301   
  Trade receivables .......................................................        (30,245)        21,679   
  Inventories .............................................................        (65,986)      (150,153)  
  Other, net ..............................................................        (16,961)       257,658   
                                                                               -----------    -----------   
    Net Cash From Operating Activities ....................................      1,612,177      1,697,643   
                                                                               -----------    -----------   

Cash Flow From (Used in) Investing Activities:                                                              
  Acquisitions of businesses, net of cash acquired ........................             --       (239,777)  
  Acquisitions of property and equipment ..................................       (462,246)      (500,616)  
  Investment securities transactions ......................................         85,715       (139,928)  
  Other ...................................................................          6,558          8,206   
                                                                               -----------    -----------   
    Net Cash Used in Investing Activities .................................       (369,973)      (872,115)  
                                                                               -----------    -----------   

Cash Flow From (Used in) Financing Activities:                                                              
  Repayments of commercial paper, net .....................................       (760,000)      (156,000)  
  Proceeds from issuance of long-term debt ................................             --        200,000   
  Other borrowing transactions, net .......................................        (12,898)       (42,901)  
  Common share transactions ...............................................         66,858       (365,743)  
  Dividends paid ..........................................................       (485,939)      (435,379)  
                                                                               -----------    -----------   
    Net Cash Used in Financing Activities .................................     (1,191,979)      (800,023)  
                                                                               -----------    -----------   

Effect of exchange rate changes on cash and cash equivalents ..............        (12,674)        (3,761)  
                                                                               -----------    -----------   

Net Increase in Cash and Cash Equivalents .................................         37,551         21,744   
Cash and Cash Equivalents, Beginning of Year ..............................        308,230        230,024   
                                                                               -----------    -----------   
Cash and Cash Equivalents, End of Period ..................................    $   345,781    $   251,768   
                                                                               -----------    -----------   
                                                                               -----------    -----------   

The accompanying notes to consolidated financial statements are an integral part
of this statement.                                                              

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Abbott Laboratories and Subsidiaries

Condensed Consolidated Balance Sheet

(dollars in thousands)

                                                        · Enlarge/Download Table

                                                                                       June 30     December 31  
                                                                                        1999           1998     
                                                                                     -----------   ------------ 
                                                                                     (Unaudited)                
                                                                                                                
                                     Assets                                                                     
Current Assets:                                                                                                 
  Cash and cash equivalents .......................................................  $   345,781   $    308,230 
  Investment securities ...........................................................       55,969         75,087 
  Trade receivables, less allowances of $190,148 in 1999 and $190,952 in 1998 .....    1,909,378      1,950,058 
Inventories:                                                                                                    
  Finished products ...............................................................      746,292        697,494 
  Work in process .................................................................      314,411        345,776 
  Materials .......................................................................      362,055        367,339 
                                                                                     -----------   ------------ 
     Total inventories ............................................................    1,422,758      1,410,609 
Prepaid expenses, income taxes, and other receivables .............................    1,813,300      1,809,152 
                                                                                     -----------   ------------ 
     Total Current Assets .........................................................    5,547,186      5,553,136 
                                                                                     -----------   ------------ 
Investment Securities Maturing after One Year .....................................      717,243        783,842 
                                                                                     -----------   ------------ 
Property and Equipment, at Cost ...................................................    9,499,590      9,396,236 
  Less: accumulated depreciation and amortization .................................    4,799,702      4,657,393 
                                                                                     -----------   ------------ 
  Net Property and Equipment ......................................................    4,699,888      4,738,843 
Deferred Charges, Intangible and Other Assets .....................................    2,180,781      2,140,392 
                                                                                     -----------   ------------ 
                                                                                    $ 13,145,098   $ 13,216,213 
                                                                                     -----------   ------------ 
                                                                                     -----------   ------------ 

                    Liabilities and Shareholders' Investment                                                    

Current Liabilities:                                                                                            
  Short-term borrowings and current portion of long-term debt ..................... $    982,861   $  1,759,076 
  Trade accounts payable ..........................................................      830,748      1,056,641 
  Salaries, income taxes, dividends payable, and other accruals ...................    2,356,809      2,146,409 
                                                                                     -----------   ------------ 
      Total Current Liabilities ...................................................    4,170,418      4,962,126 
                                                                                     -----------   ------------ 
Long-Term Debt ....................................................................    1,337,566      1,339,694 
                                                                                     -----------   ------------ 
Other Liabilities and Deferrals ...................................................    1,197,843      1,200,732 
                                                                                     -----------   ------------ 
Shareholders' Investment:                                                                                       
  Preferred shares, one dollar 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: 1999: 1,538,743,060; 1998: 1,533,774,332 ..............................    1,468,693      1,231,079 
Earnings employed in the business .................................................    5,408,876      4,782,349 
Accumulated other comprehensive income ............................................     (366,059)      (227,701)
Common shares held in treasury, at cost -                                                                       
   Shares: 1999: 17,591,970; 1998: 17,710,838 .....................................      (46,421)       (46,735)
Unearned compensation - restricted stock awards ...................................      (25,818)       (25,331)
                                                                                     -----------   ------------ 
      Total Shareholders' Investment ..............................................    6,439,271      5,713,661 
                                                                                     -----------   ------------ 
                                                                                     $13,145,098   $ 13,216,213 
                                                                                     -----------   ------------ 
                                                                                     -----------   ------------ 

The accompanying notes to consolidated financial statements are an integral part
of this statement.                                                              

                   4

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Abbott Laboratories and Subsidiaries

Notes to Condensed Consolidated Financial Statements

 June 30, 1999

 (Unaudited)

Note 1 - Basis of Presentation                                                  

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 Abbott's Annual Report on 
Form 10-K for the year ended December 31, 1998.                                 

Note 2 - Supplemental Financial Information                                     
(dollars in thousands)                                                          

                                                        · Enlarge/Download Table

                                         Three Months Ended June 30   Six Months Ended June 30 
                                         --------------------------   ------------------------ 
                                           1999              1998       1999            1998   
                                         --------          --------   --------        -------- 
                                                                                               
Net interest expense:                                                                          
   Interest expense .................... $ 36,492          $ 40,401   $ 76,840        $ 78,361 
   Interest income .....................  (14,464)          (13,474)   (28,573)        (26,388)
                                         --------          --------   --------        -------- 
Total .................................. $ 22,028          $ 26,927   $ 48,267        $ 51,973 
                                         --------          --------   --------        -------- 
                                         --------          --------   --------        -------- 

Note 3 - 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 4 - Litigation and Environmental Matters                                   

Abbott is involved in various claims and legal proceedings including numerous   
antitrust suits and investigations in connection with the pricing of            
prescription pharmaceuticals. These suits and investigations 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 Abbott 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. During 1998, settlements were     
reached in the federal class action lawsuit, whereby Abbott paid $57 million,   
and thirteen other separate actions. Abbott has filed or intends to file a      
response to each of the remaining complaints denying all substantive            
allegations.                                                                    

      In addition, Abbott 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 Abbott-owned locations.    

  The matters above are discussed more fully in Note 14 to the financial
statements included in Abbott's Annual Report on Form 10-K, which is available  
upon request, and in Part II, Item 1, Legal Proceedings, in this Form.          

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Notes to Condensed Consolidated Financial Statements                            
June 30, 1999                                                                   
(Unaudited), continued                                                          

Note 4 - Litigation and Environmental Matters, continued                        

  Abbott expects that within the next year, legal proceedings will occur
which may result in a change in the estimated reserves recorded by Abbott. 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 Abbott's financial position, cash flows, or results of operations.    

Note 5 - Comprehensive Income                                                   
(dollars in thousands)                                                          

                                                        · Enlarge/Download Table

                                                               Three Months Ended June 30    Six Months Ended June 30   
                                                               --------------------------   --------------------------- 
                                                                   1999           1998          1999            1998    
                                                               -----------    -----------   -----------     ----------- 
                                                                                                                        
Net Earnings ................................................. $   642,660    $   585,565   $ 1,309,229     $ 1,175,158 
                                                               -----------    -----------   -----------     ----------- 
Other comprehensive income (loss):                                                                                      
   Foreign currency translation adjustments ..................     (42,637)         9,841      (122,174)        (35,754)
   Tax (expense) benefit related to foreign                                                                             
       currency translation adjustments ......................         (81)            --            45              -- 
   Unrealized gains (losses) on marketable equity securities..         912        (15,052)      (27,048)        (15,395)
   Tax (expense) benefit related to unrealized losses                                                                   
       on marketable equity securities .......................        (365)         6,021        10,819           6,158 
                                                               -----------    -----------   -----------     ----------- 

Other comprehensive income (loss), net of tax ................     (42,171)           810      (138,358)        (44,991)
                                                               -----------    -----------   -----------     ----------- 

Comprehensive Income ......................................... $   600,489    $   586,375   $ 1,170,871     $ 1,130,167 
                                                               -----------    -----------   -----------     ----------- 
                                                               -----------    -----------   -----------     ----------- 

As of June 30, 1999, the cumulative net of tax balances for foreign currency    
translation loss adjustments and the unrealized (gains) on marketable equity    
securities were $382,840, and ($16,781), respectively.                          

Note 6 - Segment Information                                                    
(dollars in millions)                                                           

REVENUE SEGMENTS - Abbott's principal business is the discovery, development,   
manufacture and sale of a broad line of health care products and services.      
Abbott's products are generally sold directly to retailers, wholesalers,        
hospitals, health care facilities, laboratories, physicians' offices and        
government agencies throughout the world. Segments are identified as those      
revenue divisions which report directly to the chief operating officer of       
Abbott. Abbott's products are sold through six revenue segments as follows:     

    PHARMACEUTICAL PRODUCTS - U.S. sales of a broad line of pharmaceuticals.

 DIAGNOSTIC PRODUCTS - Worldwide sales of diagnostic systems for blood
banks, hospitals, consumers, commercial laboratories and alternate-care sites.  

   HOSPITAL PRODUCTS - U.S. sales of 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.                                                           

ROSS PRODUCTS - U.S. sales of a broad line of adult and pediatric   
nutritional products, pediatric pharmaceuticals and consumer products.          

   INTERNATIONAL - Non-U.S. sales of all Abbott's pharmaceutical, hospital
and nutritional products. Products sold by International are manufactured by    
domestic segments and by international manufacturing locations.                 

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Notes to Condensed Consolidated Financial Statements                            
June 30, 1999                                                                   
(Unaudited), continued                                                          

Note 6 - Segment Information                                                    
(dollars in millions), continued                                                

CHEMICAL & AGRICULTURAL PRODUCTS - Worldwide sales of chemicals and agricultural
products for crop protection, forestry and animal health and a supplier of bulk 
drugs for the Pharmaceutical Products, Hospital Products, and International     
segments.                                                                       

    SEGMENT ACCOUNTING POLICIES - Abbott's underlying accounting records are
maintained on a legal entity basis for government and public reporting          
requirements. Segment disclosures are on a performance basis consistent with    
internal management reporting. Intersegment transfers of inventory are recorded 
at standard cost and are not a measure of segment operating earnings. The cost  
of some corporate functions and the cost of certain employee benefits are sold  
to segments at predetermined rates which approximate cost. Remaining costs, if  
any, are not allocated to revenue segments. The following segment information   
has been prepared in accordance with the internal accounting policies of Abbott,
as described above, and may not be presented in accordance with generally       
accepted accounting principles.                                                 

                                                        · Enlarge/Download Table

                                                Net Sales to                                          Operating                   
                                              External Customers                                       Earnings                   
                                  --------------------------------------------        ------------------------------------------- 
                                   Three Months Ended       Six Months Ended          Three Months Ended         Six Months Ended 
                                         June 30                  June 30                    June 30                 June 30      
                                  ------------------       -------------------          ---------------           --------------- 
                                   1999         1998         1999        1998           1999       1998          1999       1998  
                                  ------       -----        ------      ------          ----       ----         ------     ------ 
                                                                                                                                  
Pharmaceutical ................   $  543       $ 592        $1,213      $1,289          $277       $306         $  654     $  715 
Diagnostics ...................      760         702         1,475       1,327           141        107            251        201 
Hospital ......................      544         459         1,061         916           145        104            265        202 
Ross ..........................      470         460           971         912           158        147            343        280 
International .................      781         750         1,613       1,483           169        162            382        342 
Chemical & Agricultural .......      110         104           174         184            34         40             48         63 
                                  ------       -----        ------      ------          ----       ----         ------     ------ 
Total Segments ................    3,208       3,067         6,507       6,111           924        866          1,943      1,803 
Other .........................       35          --            35           1                                                    
                                  ------       -----        ------      ------                                                    
Net Sales .....................   $3,243      $3,067        $6,542      $6,112                                                    
                                  ------       -----        ------      ------                                                    
                                  ------       -----        ------      ------                                                    
Corporate and service functions .....................................................     36         39             64         73 
Benefit plans costs .................................................................     31         24             58         52 
Net interest expense ................................................................     22         27             48         52 
Income from TAP Holdings Inc. .......................................................    (96)       (70)          (168)      (121)
Net foreign exchange (gain) loss ....................................................     (3)         8             18         15 
Other expenses, net .................................................................     42         25            105        100 
                                                                                        ----       ----         ------     ------ 
Consolidated Earnings Before Taxes ..................................................   $892       $813        $ 1,818     $1,632 
                                                                                        ----       ----         ------     ------ 
                                                                                        ----       ----         ------     ------ 

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Notes to Condensed Consolidated Financial Statements                            
June 30, 1999                                                                   
(Unaudited), continued                                                          

Note 7 - Pending Acquisitions                                                   

On June 21, 1999, Abbott and ALZA Corporation announced that the companies      
entered into a definitive agreement for Abbott to acquire ALZA, a research-based
pharmaceutical company with a growing portfolio of urology and oncology products
and leading drug delivery technologies. The transaction is expected to be       
completed by year end.                                                          

         On July 8, 1999, Abbott and Perclose, Inc. announced that the companies
entered into a definitive agreement for Abbott to acquire Perclose, the leading 
arterial closure device manufacturer. The transaction is expected to be         
completed by year end.                                                          

     Abbott expects to account for each transaction as a pooling of interests.

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FINANCIAL REVIEW                                                                

RESULTS OF OPERATIONS - SECOND QUARTER AND FIRST SIX MONTHS 1999 COMPARED WITH  
SAME PERIODS IN 1998                                                            

The following table details sales by segment for the second quarter and first   
six months 1999:                                                                
(dollars in millions)                                                           

                                                        · Enlarge/Download Table

                                         Net Sales to            Percentage       Net Sales to           Percentage
                                      External Customers           Change*     External Customers          Change* 
                                      -------------------        ----------  --------------------        ----------
                                          Three Months Ended June 30                Six Months Ended June 30       
                                      -------------------------------------  --------------------------------------
                                       1999          1998                      1999          1998                  
                                       ----          ----                      ----          ----                  
                                                                                                                   
Pharmaceutical ..................... $  543         $ 592           (8.1)    $1,213        $1,289            (5.9) 
Diagnostics ........................    760           702            8.2      1,475         1,327            11.1  
Hospital ...........................    544           459           18.8      1,061           916            15.9  
Ross ...............................    470           460            2.1        971           912             6.5  
International ......................    781           750            4.2      1,613         1,483             8.8  
Chemical & Agricultural ............    110           104            4.4        174           184            (5.8) 
                                     ------        ------                    ------        ------                  
Total Segments .....................  3,208         3,067            4.6      6,507         6,111             6.5  
Other ..............................     35            --                        35             1                  
                                     ------        ------                    ------        ------                  
Net Sales .......................... $3,243        $3,067            5.8     $6,542        $6,112             7.0  
                                     ------        ------                    ------        ------                  
                                     ------        ------                    ------        ------                  
Total U.S. ......................... $1,990        $1,857            7.2     $4,031        $3,773             6.8  
                                     ------        ------                    ------        ------                  
                                     ------        ------                    ------        ------                  
Total International ................ $1,253        $1,210            3.6     $2,511        $2,338             7.4  
                                     ------        ------                    ------        ------                  
                                     ------        ------                    ------        ------                  

* Percentage changes are based on unrounded numbers.                            

Worldwide sales for the second quarter and first six months reflect primarily   
unit growth. Excluding the negative effect of the relatively stronger U.S.      
dollar, sales increased 6.8 percent and 7.5 percent, respectively, over the     
comparable 1998 periods. Pharmaceutical segment sales decreased primarily due to
volume shortfalls for Abbokinase, as the result of production issues more fully 
described below. Diluted earnings per common share increased 10.5 percent and   
11.8 percent in the second quarter and first six months 1999, respectively, over
the same periods in 1998. Net earnings increased 9.8 percent and 11.4 percent in
the second quarter and first six months 1999, respectively, over the comparable 
1998 periods.                                                                   

    Gross profit margin (sales less cost of products sold, including freight
and distribution expenses) was 56.5 percent for the 1999 second quarter,        
compared to 57.7 percent for the 1998 second quarter. First six months 1999     
gross profit margin was 56.3 percent, compared to 57.8 percent a year earlier.  
Unfavorable product mix, primarily lower sales of pharmaceuticals, had a        
negative effect on both periods in 1999.                                        

Research and development expenses were $314.9 million for the second
quarter 1999 and $582.1 million for the first six months 1999. Research and     
development expenses represented 9.7 percent and 8.9 percent of net sales in the
second quarter and first six months 1999, respectively, compared to 10.0 percent
and 9.6 percent in the comparable 1998 periods. The majority of research and    
development expenditures continues to be concentrated on pharmaceutical and     
diagnostic products.                                                            

   Selling, general and administrative expenses for the second quarter and
first six months 1999 were comparable to the respective prior year periods.     

 Abbott holds patents on Hytrin in the United States and several major
markets throughout the world.  Abbott is facing a number of patent challenges   
from generic manufacturers in the United States, and the ultimate outcome of    
litigation cannot be predicted with certainty.  Abbott has been informed that   
Geneva Pharmaceuticals, Inc. intends to begin shipments of generic Hytrin in    
the United States in August 1999.  Abbott believes that the resulting generic   
competition will adversely impact Abbott's Hytrin sales.  For the first six     
months of 1999, Abbott recorded U.S. sales of Hytrin of $292 million and U.S.   
sales of Hytrin in 1998 amounted to $542 million.                               

9     

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FINANCIAL REVIEW                                                                
(continued)                                                                     

   In late 1998, the U.S. Food and Drug Administration (FDA) suspended its
approval of the release of production lots of Abbott's pharmaceutical product   
Abbokinase due to Current Good Manufacturing Practice concerns raised by the    
FDA following inspections of Abbott and its raw material supplier. In January   
1999, after Abbott revised the product's labeling to add additional warnings    
and the FDA issued a health care provider information sheet, the FDA released   
certain lots that were under its review. Since January, the FDA has             
established new criteria for the release of additional lots. In a letter        
dated July 14, 1999, the FDA raised additional concerns regarding these         
criteria and identified several additional criteria which Abbott must           
address as part of its corrective actions. Abbott continues to work with the    
FDA to resolve the remaining issues. No additional lots have been released.     
Abbott cannot predict whether it will be able to resolve the FDA's concerns     
or the effect of this matter on future sales of Abbokinase. During 1998,        
Abbott sold approximately $277 million of Abbokinase, primarily in the United   
States.                                                                         

LIQUIDITY AND CAPITAL RESOURCES AT JUNE 30, 1999 COMPARED WITH DECEMBER 31, 1998

Net cash from operating activities for the first six months 1999 totaled $1.612 
billion. Abbott expects annual cash flow from operating activities to continue  
to approximate or exceed Abbott's capital expenditures and cash dividends.      

      Abbott 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 June 30, 1999. These lines of credit support domestic         
commercial paper borrowing arrangements.                                        

  Abbott may issue up to $1.350 billion of senior debt securities in the
future under a registration statement filed with the Securities and Exchange    
Commission on July 23, 1999. Of the $1.350 billion total, Abbott may issue up to
$600 million either in the form of debt securities or additional common shares  
without par value. The remaining $750 million may only be issued in the form of 
debt securities.                                                                

 In December 1998, Abbott suspended purchases of its common shares and
in June 1999, the Board of Directors revoked its resolutions authorizing        
future purchases of common shares. Abbott's short-term borrowings have          
decreased by approximately $776 million since December 31, 1998, due, in        
part, to the cessation of the common stock purchases.                           

LEGISLATIVE ISSUES                                                              

Abbott's primary markets are highly competitive and subject to substantial      
government regulation. Abbott 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. Abbott 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 Abbott 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.                    

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.                                                                        

 Abbott 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 Abbott. Progress goals have been established in each area.          

Internal information systems were inventoried and assessed, and     
remediation started in 1992. All remediation and testing has been completed. A  
suite of seven new systems at one European site, as well as three other systems,
all of which are Y2K compliant and tested, are yet to be put into production    
but will be in the third quarter.                                               

Landlord and embedded systems were inventoried and Y2K assessment   
completed by May 1998. Abbott's goal is to resolve all critical systems by July 
1999. Current progress is according to plan.                                    

10

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FINANCIAL REVIEW                                                                
(continued)                                                                     

  Abbott has assessed the ability of its medical electronic and software
products to cope with the Y2K issue. Customers may access Abbott's assessment on
Abbott's Web site. For i-STAT products and the recently acquired Murex product  
line, a referral source for customers to contact the manufacturer is provided on
the Web site. Most of Abbott's products are not affected by the Y2K issue. For  
those products requiring remediation, all products except one have solutions    
available. The remaining solution is expected by the end of August.             

      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.      
Ninety-five percent of suppliers responded; 70 percent of those responding      
certified compliance currently and 30 percent have stated they have action      
plans for compliance in place. Follow-up with all key suppliers is being        
conducted according to plan.                                                    

Each of the above areas began developing business continuity plans  
during 1998. Abbott's goal is to complete all business continuity plans by      
September 30, 1999. Current progress is according to plan.                      

   Abbott is in the process of quantifying the amount of sales which might
occur in 1999 due to Y2K that would otherwise occur in 2000.                    

   The most likely worst-case Y2K scenarios are subject to a wide range of
speculation. However, the business continuity plans assume Y2K failures are     
primarily third party, are intermittent, are of relatively short duration, or   
are localized at one site or region, primarily outside the United States.       

Abbott's policy is to expense Y2K remediation costs as incurred. Y2K
remediation costs from inception through the end of 1999 are expected to        
approximate $100 million, of which approximately one-third is expected to be    
spent in 1999.                                                                  

EURO CONVERSION                                                                 

On January 1, 1999, the European Economic and Monetary Union took effect and    
introduced the euro as the official single currency of the eleven participating 
member countries. On that date the currency exchange rates of the participating 
countries were fixed against the euro. There is a three-year transition to the  
euro, and at the end of 2001, the legacy currencies will be eliminated. In 1997,
Abbott organized an internal cross-functional task force to address the euro    
issues and expects to be ready for the full conversion to the euro. Costs       
required to prepare for the euro are not material to Abbott's financial         
position, results of operations or cash flows. The impact, if any, of the euro  
on Abbott's competitive position is unknown.                                    

PENDING ACQUISITIONS                                                            

On June 21, 1999, Abbott and ALZA Corporation announced that the companies      
entered into a definitive agreement for Abbott to acquire ALZA, a research-based
pharmaceutical company with a growing portfolio of urology and oncology products
and leading drug delivery technologies. The transaction is expected to be       
completed by year end.                                                          

         On July 8, 1999, Abbott and Perclose, Inc. announced that the companies
entered into a definitive agreement for Abbott to acquire Perclose, the leading 
arterial closure device manufacturer. The transaction is expected to be         
completed by year end.                                                          

     Abbott expects to account for each transaction as a pooling of interests.

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PART II.    OTHER INFORMATION                                                   

ITEM 1.     LEGAL PROCEEDINGS                                                   

             As reported in Abbott's 10-K for the fiscal year ended December
31, 1998, Abbott is involved in numerous antitrust suits and two investigations 
regarding Abbott's pricing of pharmaceutical products. As of July 7, 1999, 116  
antitrust suits are pending in federal court and 15 are pending in state courts.
The prescription pharmaceutical pricing antitrust suits allege that various     
pharmaceutical manufacturers and pharmaceutical wholesalers have conspired to   
fix prices for prescription pharmaceuticals and/or to discriminate in pricing to
retail pharmacies by providing discounts to mail-order pharmacies, institutional
pharmacies, and HMOs in violation of state and federal antitrust laws. The suits
have been brought on behalf of individual consumers and retail pharmacies and   
name both Abbott and certain other pharmaceutical manufacturers and             
pharmaceutical wholesalers and at least one mail-order pharmacy company as      
defendants. The cases seek treble damages, civil penalties and injunctive and   
other relief. Abbott has filed or intends to file a response to each of the     
complaints denying all substantive allegations. The federal cases are pending in
the United States District Court for the Northern District of Illinois under the
Multidistrict Litigation Rules as In re: Brand Name Prescription Drug Antitrust 
Litigation, MDL 997. The state cases are pending in the following state courts: 
Tuscaloosa County and Clarke County, Alabama; Monterey County, California; San  
Francisco County, California (five cases); San Joaquin County, California;      
Prentiss County, Mississippi; San Miguel County, New Mexico; Burleigh County,   
North Dakota; Hughes County, South Dakota; Cocke County, Tennessee; and Marshall
County, West Virginia. As previously reported, a settlement agreement for the   
four consumer cases pending in Alameda County, California and San Francisco     
County, California was approved by the court on April 21, 1999. The amount to be
paid in settlement is $6.2 million. An appeal has been filed challenging this   
settlement agreement.                                                           

           As previously reported, five cases involving Abbott's patents
for terazosin hydrochloride, a drug that Abbott sells under the trademark       
Hytrin-Registered Trademark-,are pending in the United States District Court    
for the Northern District of Illinois. The other parties to these cases are     
Geneva Pharmaceuticals, Inc. ("Geneva") Novopharm Limited ("Novopharm"),        
Invamed, Inc. ("Invamed"), Mylan Pharmaceuticals, Inc., and Warner Chilcott,    
Inc. Abbott sued each of these five other corporations alleging patent          
infringement after learning that they had applied to the Federal Food and       
Drug Administration for approval for a generic version of terazosin             
hydrochloride. Each of these corporations contends that Abbott's patent which   
covers their version of terazosin hydrochloride is invalid and unenforceable.   
The Geneva, Invamed, and Novopharm cases were all pending before the same       
judge, who, on September 1, 1998, entered a judgment in each of those cases     
ruling that the Abbott patent at issue in those cases is invalid. Abbott        
appealed this ruling and on July 1, 1999, the appellate court affirmed the      
lower court's decision. Abbott filed a petition for rehearing which was         
denied on August 5, 1999. Abbott has the right to seek certiorari from the      
United States Supreme Court.                                                    

             In April 1996, Zenith Laboratories, Inc. ("Zenith") sued Abbott
in the United States District Court for the District of New Jersey alleging that
Abbott had engaged in unfair competition, abuse of process, tortious            
interference with prospective economic advantage, and                           

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fraud in attempting to protect Hytrin from generic competition. Zenith sought   
money damages and a declaration that certain of Abbott's patents covering       
terazosin hydrochloride are invalid. Abbott filed counterclaims alleging        
patent infringement. On March 31, 1998, Abbott and Zenith reached an            
agreement that resolved the litigation between the parties. In the              
settlement, Zenith acknowledged the validity of Abbott's terazosin              
hydrochloride patents and agreed to refrain from selling a generic version of   
terazosin hydrochloride until the expiration of one of Abbott's patents for     
terazosin hydrochloride (U.S. Patent No. 4,251,532). On April 1, 1998, Abbott   
and Geneva reached an agreement under which Geneva would not market its Food    
and Drug Administration approved generic terazosin hydrochloride products       
until resolution of the pending litigation between the parties. Abbott agreed   
to make quarterly payments to Zenith and monthly payments to Geneva until the   
date on which they may enter the market for terazosin hydrochloride under       
their agreements. Under the agreements, both Zenith and Geneva would be free    
to enter the market for terazosin hydrochloride in the United States if         
certain of Abbott's patents for terazosin hydrochloride were determined to be   
invalid and if another company legally enters the generic market in the         
United States. On August 12, 1999, Abbott and Geneva terminated their April 1   
agreement, and Geneva returned to Abbott a portion of the payments held in      
escrow under the agreement. As previously reported, Abbott has received a       
subpoena and a civil investigative demand from the Federal Trade Commission     
regarding these agreements with Geneva and Zenith. In addition, Louisiana       
Wholesale Drug Co. sued Abbott, Geneva, and Zenith in the United States         
District Court for the Southern District of Florida alleging that Abbott's      
agreements with Geneva and Zenith regarding terazosin hydrochloride violate     
the federal antitrust laws. The case purports to be a class action and seeks    
actual damages, treble damages civil penalties and other relief. On July 12,    
1999, Walgreen Co., Eckerd Corp., The Kroger Co., Albertson's Inc., The Stop    
& Shop Supermarket Co., and Hy-Vee, Inc. also sued Abbott, Geneva, and Zenith   
in the United States District Court for the Southern District of Florida        
alleging that Abbott's agreements with Geneva and Zenith regarding terazosin    
hydrochloride violate the federal antitrust laws. Abbott intends to file a      
response to the complaint denying all substantive allegations.                  

             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 Abbott's financial position, cash flows, or results of operations.    

ITEM 6.     EXHIBITS AND REPORTS ON FORM 8-K                                    

a)   Exhibits                                           

                 12.     Statement re: computation of ratio of earnings to
        fixed charges - attached hereto.

          27.     Financial Data Schedule - attached hereto.

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b)   Reports on Form 8-K                          

                 One report on Form 8-K was filed during the quarter ended
                June 30, 1999. In a Form 8-K dated June 30, 1999, Abbott
                    reported that on June 21, 1999, ALZA Corporation, a Delaware
                   corporation ("ALZA"), entered into an Agreement and Plan of
                 Merger (the "Merger Agreement") with Abbott and AC Merger
           Sub Inc., a Delaware corporation and a wholly-owned
                subsidiary of Abbott (the "Merger Sub"). Pursuant to the
                    terms of the Merger Agreement, and subject to the conditions
                   set forth therein (including approval of the transaction by
                 the stockholders of ALZA), Merger Sub will be merged with
                  and into ALZA (the "Merger"). At the effective time of the
                Merger, the separate existence of Merger Sub will cease,
                 ALZA will become a wholly-owned subsidiary of Abbott, and
           each outstanding share of ALZA common stock will be
                   exchanged for 1.2 shares of Abbott common stock. The Merger
               is intended to be a tax-free reorganization pursuant to
               Section 368(a) of the Internal Revenue Code of 1986, as
              amended, and is intended to be treated as a pooling of
                interests for financial reporting purposes. In addition,
                Abbott and ALZA entered into two Co-Promotion Agreements
 with respect to certain products of ALZA.

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 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/ Gary L. Flynn
                                           -----------------------------------
Date: August 13, 1999                       Gary L. Flynn, Vice President       
                                            and Controller (Principal Accounting
                Officer)

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Dates Referenced Herein and Documents Incorporated By Reference

		Referenced-On Page
This 10-Q Filing	Date	First	Last	Other Filings

	3/31/98	14		10-Q
	4/1/98	14
	9/1/98	13		SC 13D
	12/31/98	6	13	10-K
	1/1/99	12
	4/21/99	13
	6/21/99	9	15	8-K
For The Period Ended	6/30/99	1	15	8-K
	7/1/99	13
	7/7/99	13
	7/8/99	9	12
	7/12/99	14
	7/14/99	11
	7/23/99	11		S-3
	7/31/99	1
	8/5/99	13
	8/12/99	14
Filed On / Filed As Of	8/13/99	16
	9/30/99	12		8-K, 10-Q

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Abbott Laboratories · 10-Q · For 6/30/99

Filed On 8/13/99 · SEC File 1-02189 · Accession Number 1047469-99-32006

Quarterly Report · Form 10-QFiling Table of Contents

10-Q · Quarterly ReportDocument Table of Contents

Dates Referenced Herein and Documents Incorporated By Reference

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