Abbott Laboratories 2012 Annual Report Download

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Abbott 2012 Annual Report
2012 Annual Report

Table of contents

  • Page 1
    2012 Annual Report

  • Page 2
    ...Notes Management Report on Internal Control Over Financial Reporting Reports of Independent Registered Public Accounting Firm Financial Instruments and Risk Management Financial Review Summary of Selected Financial Data Directors and Corporate Of ficers Shareholder and Corporate Information Abbott...

  • Page 3
    Abbott 2012 Annual Report Miles D. White Chairman of the Board and Chief Executive Officer Dear Fellow Shareholder: On January 1 we marked two extraordinary milestones: the beginning of our 125th anniversary year and our creation of two leading healthcare companies. Our research-based ...

  • Page 4
    ... record sales and ongoing earnings, along with stock-price growth of more than 16 percent. This Annual Report covers both halves of Abbott in 2012. Its discussion of what was then Abbott's research-based pharmaceuticals business is presented as AbbVie - with its new corporate identity - to give...

  • Page 5
    ... 2012 Annual Report Letter to our shareholders Consistent Dividends (dollars per share paid) in large and attractive markets. Many of our ï¬,agship products in each are number one or number two in their respective categories. • I n Diagnostics, we're the world leader in immunoassay and blood...

  • Page 6
    Abbott 2012 Annual Report Letter to our shareholders cases occurring in emerging markets. Abbott can help the world address these growing needs, as the number-one coronary intervention company worldwide and one of the leaders in both blood-glucose monitoring and balanced nutrition to build better ...

  • Page 7
    Two Leaders Abbott and AbbVie offer two distinct investment identities - diversified medical products and research-based pharmaceuticals - but both have broad-based portfolios of marketleading products, productive pipelines of innovative new technologies, global reach, and financial strength.

  • Page 8
    ... care and diabetes care - continue to grow through leading-edge, patient-focused innovation. 30% 30% 40% of sales of sales of sales Emerging-market sales to approach a Nutrition Abbott's portfolio of nutritional products includes some of the world's most trusted brands. We continually develop new...

  • Page 9

  • Page 10
    ...2012 Annual Report Today's Abbott A Leader in Global Nutrition Abbott's portfolio of products includes some of the world's most trusted brands in pediatric, adult and performance nutrition. Our pediatric nutrition brand, Similac, is designed to meet babies' specific nutritional needs by supporting...

  • Page 11
    ...'s syndrome, the dizziness and vertigo turned her life upside down. She had to rely on her family to perform many previously simple tasks. But since 2000, when her disease was diagnosed, she has been taking Betaserc daily to help manage her condition, letting her resume a happy and productive life.

  • Page 12
    Tan Tai Peng a Singapore A leaking mitral valve resulted in fatigue for Tan Tai Peng, impairing his ability to enjoy his retirement. Abbott's MitraClip was used to repair the valve, and today he has the energy he needs to keep up with his three grandchildren and run a small, part-time business.

  • Page 13
    ... to patients and their healthcare professionals. In the hospital environment, products like Precision Xceed Pro are developed to meet the challenges of point-of-care glucose testing. In vision care, Abbott is the world's leading provider of laser vision correction (LASIK) technologies and number two...

  • Page 14
    ... clinical chemistry, hematology, molecular, point of care, and informatics. In its largest segment of the market, core laboratory and blood screening, Abbott offers a broad range of innovative instrument systems and tests, as well as informatics and automation solutions for hospitals, reference labs...

  • Page 15
    Julie Jonte a Paris, France Julie Jonte is the Chief Executive of Biopath, one of the largest private diagnostic labs in France. Every day, Biopath receives more than 4,000 samples to be tested. Biopath relies on Abbott Diagnostic systems and tests to deliver accurate results, quickly and effi...

  • Page 16
    ..., Abbott's new-product pipeline is focused on innovations designed to speed the process of identifying disease and to identify which patients are more likely to benefit from a particular therapy. Abbott is developing next-generation systems and tests, as well as automation and information solutions...

  • Page 17
    ...2012 Annual Report Abbott's robust new-product pipeline contains dozens of potentially transformational medical technologies, next-generation systems, new formulations, and packaging and brand enhancements. >30 medical devices in development >150 product launches, registrations in 2013 Vision Care...

  • Page 18
    ... growth brands and sustainable performers. it has a strong global footprint and a new-product pipeline that includes a unique mix of biologics and small molecules. and it has an experienced management team with a track record of outstanding commercial execution. THIS IS ABBVIE Richard...

  • Page 19

  • Page 20
    Abbott 2012 Annual Report AbbVie's portfolio of biologics and other compounds addresses some of the world's most complex medical needs, building AbbVie disease-state leadership through products like Humira, Lupron, Synagis and Kaletra. Through the years, AbbVie's leading pharmaceutical brands have...

  • Page 21
    DUODOPA PARKINSON'S DISEASE DOUG CURTIS CALGARY, ALBERTA, CANADA doug curtis is an award-winning writer/ director/ producer and the founding artistic director of ghost river theatre. he held the position for 17 years, until his battle with parkinson's disease made it necessary for him to step down....

  • Page 22
    ..., USA sherrese sims loves to pursue her hobbies, spend time with her friends and travel. for years, living with moderate to severe crohn's disease meant that her symptoms could get in the way. today, she continues to do the things she loves, while many of her symptoms are controlled with humira .

  • Page 23
    ...years on the market 15 years of clinical data 9 approved indications 4 new indications in late-stage development 670,000 patients worldwide A Productive Pipeline AbbVie's future success will grow from the output of the company's new-product pipeline. AbbVie research programs include a strategic...

  • Page 24
    Abbott 2012 Annual Report 30 compounds currently in human trials across a broad spectrum of treatment areas. 14 biologic compounds across several therapeutic areas including a number of proprietary combination biologic agents. THE A B BV I E PI PEL INE BROAD AND COMPELLING. aBBVie has an ...

  • Page 25
    ... three within 18 months. CANCER HEPATITIS C VIRUS NEUROLOGY abbVie has tripled its number of new molecular entities (nmes) in development over the last several years. 3x as many nmes as 3 years ago 30% of abbVie's pipeline: biologics abbVie's pipeline is strong and specialty focused, with...

  • Page 26
    ... Balance Sheet 30 Consolidated Statement of Shareholders' Investment 31 Notes to Consolidated Financial Statements 46 Management Report on Internal Control Over Financial Reporting 47 Reports of Independent Registered Public Accounting Firm 48 Financial Instruments and Risk Management 49 Financial...

  • Page 27
    Abbott 2012 Annual Report Consolidated Statement of Earnings (dollars and shares in thousands except per share data) Year Ended December 31 Net Sales Cost of products sold Research and development Acquired in-process and collaborations research and development Selling, general and administrative ...

  • Page 28
    ...net actuarial losses and prior service cost and credits, net of taxes of $(276,076) in 2012, $(391,528) in 2011 and $(70,389) in 2010 Unrealized (losses) gains on marketable equity securities, net of taxes of $(4,079) in 2012, $8,338 in 2011 and $61 in 2010 Net adjustments for derivative instruments...

  • Page 29
    ... of long-term debt and debt with maturities over 3 months Purchases of common shares Proceeds from stock options exercised, including income tax benefit Dividends paid Net Cash From (Used in) Financing Activities Effect of exchange rate changes on cash and cash equivalents Net Increase (Decrease) in...

  • Page 30
    ... funds, primarily U.S. treasury bills Trade receivables, less allowances of - 2012: $405,921; 2011: $420,579; 2010: $388,564 Inventories: Finished products Work in process Materials Total inventories Deferred income taxes Other prepaid expenses and receivables Total Current Assets Investments 2012...

  • Page 31
    Abbott 2012 Annual Report Consolidated Balance Sheet (dollars in thousands) December 31 Liabilities and Shareholders' Investment Current Liabilities: Short-term borrowings Trade accounts payable Salaries, wages and commissions Other accrued liabilities Dividends payable Income taxes payable ...

  • Page 32
    Abbott 2012 Annual Report Consolidated Statement of Shareholders' Investment (dollars in thousands except per share data) Year Ended December 31 Common Shares: Beginning of Year Shares: 2012: 1,638,870,201; 2011: 1,619,689,876; 2010: 1,612,683,987 Issued under incentive stock programs Shares: 2012...

  • Page 33
    ... 2012 Annual Report Notes to Consolidated Financial Statements Note 1 - Summary of Significant Accounting Policies Nature of Business - Abbott's principal business is the discovery, development, manufacture and sale of a broad line of health care products. In October 2011, Abbott announced a plan...

  • Page 34
    ... traded on public stock exchanges are recorded at cost. Investments in other debt securities are classified as held-to-maturity, as management has both the intent and ability to hold these securities to maturity, and are reported at cost, net of any unamortized premium or discount. Income relating...

  • Page 35
    ...research and development. 2012, 2011 and 2010 includes acquisition consideration payable of $400 related to the acquisition of Piramal Healthcare Limited's Healthcare Solutions business. (dollars in millions) Post-employment Obligations and Other Long-term Liabilities: Defined benefit pension plans...

  • Page 36
    Abbott 2012 Annual Report Notes to Consolidated Financial Statements The following table summarizes the amounts and location of certain derivative financial instruments as of December 31: (dollars in millions) Interest rate swaps designated as fair value hedges Foreign currency forward exchange ...

  • Page 37
    Abbott 2012 Annual Report Notes to Consolidated Financial Statements The following table summarizes the bases used to measure certain assets and liabilities at fair value on a recurring basis in the balance sheet: (dollars in millions) Outstanding December 31, 2012: Equity securities Interest rate...

  • Page 38
    ... the year Interest cost on projected benefit obligations Losses (gains), primarily changes in discount rates, plan design changes, law changes and differences between actual and estimated health care costs Benefits paid Acquisition of Solvay's pharmaceuticals business Settlement Other, primarily...

  • Page 39
    Abbott 2012 Annual Report Notes to Consolidated Financial Statements Other comprehensive income (loss) for 2012 includes amortization of actuarial losses and prior service cost of $235 million and $4 million, respectively, and net actuarial losses of $1.2 billion for defined benefit plans and ...

  • Page 40
    ...in 2010. Abbott provides certain other post-employment benefits, primarily salary continuation plans, to qualifying domestic employees, and accrues for the related cost over the service lives of the employees. Note 5 - Taxes on Earnings Taxes on earnings reflect the annual effective rates, including...

  • Page 41
    ... products. Diagnostic Products-Worldwide sales of diagnostic systems and tests for blood banks, hospitals, commercial laboratories and alternate-care testing sites. For segment reporting purposes, the Core Laboratories Diagnostics, Molecular Diagnostics, Point of Care and Ibis diagnostic divisions...

  • Page 42
    ...$ 7,948 $ 7,202 $6,592 Net Sales to External Customers (a) 2012 2011 2010 Operating Earnings (a) 2012 2011 2010 Established Pharmaceutical Products segment. The following segment information has been prepared in accordance with the internal accounting policies of Abbott, as described above, and are...

  • Page 43
    Abbott 2012 Annual Report Notes to Consolidated Financial Statements Note 7 - Litigation and Environmental Matters 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 ...

  • Page 44
    ... of options exercised in 2012, 2011 and 2010 was $528 million, $94 million and $77 million, respectively. The total unrecognized compensation cost related to all share-based compensation plans at December 31, 2012 amounted to approximately $174 million, giving effect to the separation of AbbVie from...

  • Page 45
    ..., Technology Acquisitions and Related Transactions On September 8, 2010, Abbott acquired Piramal Healthcare Limited's Healthcare Solutions business, a leader in the Indian branded generics market, for $2.2 billion, in cash, plus additional payments of $400 million annually in 2011, 2012, 2013 and...

  • Page 46
    ... (average 11 years). Note 12 - Restructuring Plans In 2012, Abbott management approved plans to streamline various commercial operations in order to reduce costs and improve efficiencies in Abbott's core diagnostics, established pharmaceutical and nutritionals businesses. Abbott recorded employee...

  • Page 47
    ... employee severance and accelerated depreciation. In 2011 and 2008, Abbott management approved plans to streamline global manufacturing operations, reduce overall costs, and improve efficiencies in Abbott's core diagnostic business. In 2011, a charge of $28 million was recorded in Cost of products...

  • Page 48
    ... public accounting firm has issued an audit report on their assessment of the effectiveness of the company's internal control over financial reporting. This report appears on page 47. Miles D. White Chairman of the Board and Chief Executive Officer Thomas C. Freyman Executive Vice President...

  • Page 49
    ...2012 Annual Report Reports of Independent Registered Public Accounting Firm To the Board of Directors and Shareholders of Abbott Laboratories: We have audited the accompanying consolidated balance sheets of Abbott Laboratories and subsidiaries (the "Company") as of December 31, 2012, 2011, and 2010...

  • Page 50
    ... technology acquisitions that are not traded on public stock exchanges. The carrying value of these investments was approximately $137 million and $224 million as of December 31, 2012 and 2011, respectively. No individual investment is recorded at a value in excess of $30 million. Abbott monitors...

  • Page 51
    ... leadership in the Indian pharmaceutical market and further accelerating the company's growth in emerging markets. Abbott recorded expense of approximately $262 million in 2012, $345 million in 2011 and $710 million in 2010 related to the integration of the Solvay business and restructuring plans...

  • Page 52
    ... Poor's Corporation and A1 by Moody's Investors Service. Operating cash flows in excess of capital expenditures and cash dividends have partially funded acquisitions over the last three years. In 2013, Abbott will focus on several key initiatives. In the nutritional business, Abbott will continue to...

  • Page 53
    ... in relation to the obligations and the annual cost recorded for these programs. Low asset returns due to poor market conditions and low interest rates have significantly increased actuarial losses for these plans. At December 31, 2012, pretax net actuarial losses and prior service costs and...

  • Page 54
    ... effect of exchange, Vascular Products sales increased 3.4 percent in 2012. In 2011 and 2010, Total Net, Total U.S., Total International, Proprietary Pharmaceutical Products segment and Established Pharmaceutical Products segment sales reflect the acquisition of Solvay's pharmaceuticals business...

  • Page 55
    ... the voluntary recall of certain Similac-brand powder infant formulas in September 2010 and the subsequent recovery in market share in 2011. International Proprietary Pharmaceuticals, International Adult Nutritionals and Immunochemistry sales were positively impacted by the effect of the relatively...

  • Page 56
    .... These rebate programs continue to have a negative effect on the gross profit margins of the Nutritional, Proprietary Pharmaceutical and Established Pharmaceutical Products segments. Research and development expense was $4.322 billion in 2012, $4.129 billion in 2011 and $3.724 billion in 2010 and...

  • Page 57
    ... employee severance and accelerated depreciation. In 2011 and 2008, Abbott management approved plans to streamline global manufacturing operations, reduce overall costs, and improve efficiencies in Abbott's core diagnostic business. In 2011, a charge of $28 million was recorded in Cost of products...

  • Page 58
    Abbott 2012 Annual Report Financial Review Research and Development Programs Abbott currently has numerous pharmaceutical, medical and nutritional products in development. Research and Development Process In the Proprietary Pharmaceuticals segment, the research and development process generally ...

  • Page 59
    ... infant formula and medical nutritional products. Areas of Focus In 2013 and beyond, Abbott's significant areas of therapeutic focus will include the following: Established Pharmaceuticals - Abbott is actively working on plans for about 20 - 30 key brands. Depending on the product, the development...

  • Page 60
    ..., Technology Acquisitions and Related Transactions On September 8, 2010, Abbott acquired Piramal Healthcare Limited's Healthcare Solutions business, a leader in the Indian branded generics market, for $2.2 billion, in cash, plus additional payments of $400 million annually in 2011, 2012, 2013 and...

  • Page 61
    ...cardiac surgery in patients at increased risk, and as a result of this transaction, Abbott recorded a charge to acquired in-process and collaborations research and development of $110 million. In addition, in 2012, Abbott entered into a global collaboration to develop and commercialize an oral, next...

  • Page 62
    ...& Poor's Corporation and A1 by Moody's Investors Service. In 2012, Abbott replaced unused lines of credit of $3.0 billion and $3.7 billion that were to expire in October 2012 and in 2013, respectively, with two five-year credit facilities totaling $7.0 billion that support commercial paper borrowing...

  • Page 63
    ...balance. Capital Expenditures Capital expenditures of $1.8 billion in 2012, $1.5 billion in 2011 and $1.0 billion in 2010 were principally for upgrading and expanding manufacturing, research and development, and administrative support facilities in all segments, investments in information technology...

  • Page 64
    ...Annual Report on Form 10-K. $150 Performance Graph This graph compares the change in Abbott's cumulative total shareholder return on its common shares with the Standard & Poor's 500 Index and the Standard & Poor's 500 Health Care Index. $100 $50 2007 2008 2009 2010 2011 2012 Abbott Laboratories...

  • Page 65
    ... Long-term debt Shareholders' investment Return on shareholders' investment from continuing operations Book value per share Other Statistics: Gross profit margin Research and development to net sales Net cash from operating activities of continuing operations Capital expenditures Cash dividends...

  • Page 66
    ... Engineering Services Murthy V. Simhambhatla* Senior Vice President, Abbott Medical Optics J. Scott White* Senior Vice President, International Nutrition Corporate Vice Presidents Greg E. Arnsdorff Vice President, Point of Care Diagnostics Michael J. Buck Vice President, Licensing and Acquisitions...

  • Page 67
    ... certificate for Abbott Laboratories stock. Please contact the transfer agent with any questions. Annual Meeting www.abbott.com Abbott Online Annual Report Tax Information for Shareholders Abbott is an Illinois High Impact Business and is located in a U.S. federal Foreign Trade Sub-Zone (Sub...

  • Page 68
    Abbott 100 Abbott Park Road, Abbott Park, IL 60064-6400 U.S.A. (847) 937-6100 www.abbott.com