Abbott Laboratories Declares Special Dividend Distribution of Hospira Stock
12 Abril 2004 - 10:06AM
PR Newswire (US)
Abbott Laboratories Declares Special Dividend Distribution of
Hospira Stock - Abbott Confirms Previously Announced
Earnings-Per-Share Guidance for Second-Quarter and Full-Year 2004,
Adjusted for the Shift of Earnings to Hospira - ABBOTT PARK, Ill.,
April 12 /PRNewswire-FirstCall/ -- Abbott Laboratories today
announced that its board of directors has declared a special
dividend distribution of all of the outstanding shares of common
stock of Hospira, Inc., the global hospital products company being
spun off by Abbott. For every 10 shares of Abbott common shares
held, Abbott shareholders will receive one share of Hospira stock.
No fractional shares of Hospira will be issued; shareholders will
receive cash in lieu of fractionalshares. The special dividend
distribution is expected to be paid on April 30, 2004, to Abbott
shareholders of record as of the close of business on April 22,
2004. The distribution of Hospira common stock will mark the
completion of the new company's separation from Abbott. After the
distribution, Hospira common stock is expected to begin trading on
May 3, 2004, on the New York Stock Exchange under the symbol "HSP."
Distribution of the dividend is subject to Hospira's Form 10 being
declared effective by the Securities and Exchange Commission. "The
declaration of this special dividend distribution reinforces our
commitment to build shareholder value -- giving shareholders equity
investments in two separate companies that are able to focus
exclusively on maximizing opportunities in their distinct markets,"
said Miles D. White, chairman and chief executive officer, Abbott
Laboratories. "The upcoming launch of Hospira also marks another
milestone in Abbott's strategy to accelerate growth by developing
and marketing leading innovations in advanced- technology medical
products and pharmaceuticals." Abbott has received a ruling from
the Internal Revenue Service that, for U.S. federal income tax
purposes, the distribution of Hospira common stock is tax-free to
Abbott and to Abbott's U.S. shareholders except to the extent that
cash is received in lieu of fractional shares. The special dividend
distribution is subject to the conditions set forth in the
Separation and Distribution Agreement between Abbott and Hospira,
filed as an exhibit to Hospira's registration statement on Form 10.
Abbott shareholders will not be required to take any action to
receive their Hospira shares. Additional information on the special
dividend distribution for Abbott shareholders is included in the
attached questions and answers section of this news release and
posted on http://www.abbottinvestor.com/ . Hospira's initial
financial outlook and the financial impact of the spin- off on
Abbott, including the shift of future income from Abbott to Hospira
as discussed in Abbott's first-quarter earnings news release issued
on April 8, 2004, are discussed in detail in the questions and
answers section of this news release. Abbott Laboratories is a
global, broad-based health care company devoted to the discovery,
development, manufacture and marketing of pharmaceuticals and
medical products, including nutritionals, devices and diagnostics.
The company employs more than 70,000 people and markets its
products in more than130 countries. Abbott's news releases and
other information are available at http://www.abbott.com/ . Private
Securities Litigation Reform Act of 1995 - A Caution Concerning
Forward-Looking Statements Some statements in this news release may
be forward-looking statements for purposes of the Private
Securities Litigation Reform Act of 1995. Abbott cautions that
these forward-looking statements are subject to risks and
uncertainties that may cause actual results to differ materially
from those indicated in the forward-looking statements. Economic,
competitive, governmental, technological and other factors that may
affect Abbott's operations are discussed in the attached questions
and answers section and in Exhibit 99.1 of our Securities and
Exchange Commission 2003 Form 10-K, and are incorporated by
reference. Forward-looking statements in this press release should
also be evaluated together with the disclosure regarding Hospira
contained in the Risk Factors section ofHospira's Form 10
Registration Statement filed on April 8, 2004. Abbott and Hospira
undertake no obligation to release publicly any revisions to
forward-looking statements as the result of subsequent events or
developments. Questions & Answers INFORMATION FOR ABBOTT
SHAREHOLDERS Q1) What will shareholders receive in the
distribution? A1) Each holder of record of Abbott common shares
will receive one share of Hospira common stock, and the associated
preferred stock purchase rights, for every 10 Abbott common shares
held on the record date. No fractional shares of Hospira common
stock will be distributed. The fractional shares shareholders would
otherwise have been entitled to receive will be aggregated and sold
in the public market by the distribution agent. The aggregate net
cash proceeds of these sales will be distributed ratably to those
shareholders who would otherwise have received fractional shares of
Hospira common stock. The distribution will not affect the number
of outstanding Abbott shares or any rights of Abbott shareholders,
although it may affect the market value of each outstanding Abbott
common share due to a shift of a portion of Abbott's business to
Hospira. Q2) Will shareholders have to pay U.S. federal income
taxes on their receipt of Hospira shares? A2) Abbott has received a
ruling from the Internal Revenue Service that, for U.S. federal
income tax purposes, the distribution of Hospira common stock is
tax-free to Abbott and to Abbott's U.S. shareholders to the extent
that they receive Hospira common stock. However, fractional shares
will not be issued and any cash received in lieu of fractional
shares generally will be taxable. A tax advisor should be consulted
about the particular tax consequences of the distribution,
including the application of state, local and foreign tax laws. Q3)
How will shareholders determine their tax basis in their Hospira
shares? A3) Shortly after the distribution is completed, Abbott
will provide its U.S. shareholders information to enable them to
compute their tax basis in both Abbott and Hospira shares and other
information they will need to report their receipt of Hospira
common stock on their 2004 U.S. federal income tax return as a
tax-free transaction. A tax advisor should be consulted about the
particular tax consequences of the distribution, including the
application of state, local and foreign tax laws. Q4) How will
Hospira shares be issued? A4) Abbott shareholders will receive
shares of Hospira common stock through the same channels that they
currently use to hold or trade Abbott common shares, whether
through a brokerage account, 401(k) plan or other channels. Receipt
of shares of Hospira common stock will be documented in the same
manner that Abbott common shareholders typically receive
shareholder updates, including monthly broker statements and 401(k)
statements. Registered Abbott shareholders who hold their Abbott
common shares in certificate form (or who hold shares in the Abbott
Laboratories dividend reinvestment plan) will receive a statement
of account showing their shares from EquiServe Trust Company, N.A.,
the distribution agent, transfer agent and registrar for Hospira's
common stock. This is commonly referred to as book-entry, a method
of recording stock ownership in Hospira's records in which no
physical certificates are issued. Following the distribution that
is expected on April 30, 2004, Hospira stockholders whose shares
are held in book-entry form may request the transfer of their
shares to a brokerage or other account, or the delivery of physical
stock certificates for their shares. Q5) What do shareholders need
to do to receive their Hospira shares? A5) No action is required to
receive the Hospira shares except that the shareholder must be an
Abbott shareholder as of the close of business on April 22, 2004.
Shareholders will not be required to pay anything for the new
shares or to surrender any Abbott shares. Q6) Whom do shareholders
contact for additional information? A6) Georgeson Shareholder
Communications Inc. is the information agent for the distribution.
Please contact Georgeson with any questions about the distribution
or if you need any additional information. Georgeson can be reached
at 17 State Street, 10th Floor, New York, NY 10004, or by telephone
at 1-800-905-7286. Additional questions and answers for Abbott
shareholders are posted on http://www.abbottinvestor.com/ . Q7)
What are the financial implications of the transaction for Abbott
and Hospira? A7) The spin-off of Hospira will result in a
separation of Hospira's assets, liabilities, and operating results
from Abbott to this new independent company. Hospira will also
assume approximately $700 million of Abbott debt just prior to the
spin-off. This will reduce Abbott's short-term debt by
approximately $700 million. Hospira will also be obligated to
purchase from Abbott the net operating assets of the hospital
products international business for approximately $300 million over
the 2004 to 2006 time frame. Hospira's net income historically
reflected in Abbott's results, including net income of its
international business, will shift to Hospira on the spin-off date.
As a result, and as previously indicated, Abbott's
earnings-per-share guidance must be adjusted to reflect this shift
to Hospira. Adjusting for the post spin-off split of earnings
between Abbott and Hospira, Abbott is confirming its previously
announced second-quarter and full-year 2004 earnings-per- share
guidance, announced in its first-quarter 2004 earnings news release
issued on April 8, 2004. This is shown in the chart in Answer 8.
Hospira's historical results through the spin-off date will
continue to be reported in Abbott's historical results, but they
will be reclassified from "Continuing Operations" to separate
"Discontinued Operations" lines in Abbott's Consolidated Statement
of Earnings. Abbott's earnings-per-share guidance going forward
will focus on earnings per share from continuing operations,
excluding certain one-time charges. As previously forecasted,
Abbott expects to incur certain one-time charges in 2004 related to
acquisitions and costs associated with the spin-off, which will be
included in earnings- per-share forecasts provided on a GAAP basis,
as shown in thechart in Answer 8. Hospira's historical audited
financial results through 2003 are reflected in the Form 10
regulatory filing submitted to the SEC, available electronically on
http://www.sec.gov/ . This document will be mailed to shareholders
of record on approximately April 16, 2004, with a subsequent
mailing to new shareholders as of the record date. For 2004,
Hospira's reported financial results will reflect a full year's
results, including activity from January 2004 through April 2004
when Hospira was part of Abbott. As disclosed in the Form 10
filing, during 2004, Hospira will begin to incur ongoing costs to
operate as an independent company, including corporate and
information technology expenses, as reflected in the pretax income
forecast for 2004 shown in the chart in Answer 8. Hospira's
forecasts beyond 2004 indicate that incremental growth and
efficiencies in the business are expected to offset these costs in
the future. As discussed in the Form 10, Hospira will also incur
interest expense on the debt it assumes with the spin-off. Interest
expense has been forecasted based on Hospira's current financing
strategy as reflected in the pretax income forecast for 2004 shown
in the chart in Answer 8. Also as discussed in the Form 10, Hospira
will incur certain nonrecurring transitional costs over the 2004 to
2006 time frame, as shown in the chart in Answer 8. Hospira will
provide transition services to and receive them from Abbott at a
fair markup on cost. Hospira and Abbott will also supply product to
each other during the transition period at a fair markup. The net
margin impact of these arrangements on Hospira 2004 forecasts is
reflected in the pretax income forecast for 2004 shown in the chart
in Answer 8. Q8) How does the transaction impact full-year earnings
for Abbott and Hospira? A8) The split of income between Abbott and
Hospira is explained in the following chart. Adjusting for the post
spin-off shift of earnings to Hospira, Abbott is confirming its
previously announced second- quarter and full-year 2004
earnings-per-share guidance, announced in its first-quarter 2004
earnings news release issued on April 8, 2004. The schedule also
provides 2004 guidance for Hospira. Reconciliation of Income Split
Between Abbott and Hospira -- Full Year Estimated Full-year 2004
Abbott: Diluted Earnings Per Share (EPS) excluding one-time charges
(1) $2.40 - $2.48 Diluted EPS income shift to Hospira (2) ($0.160 -
$0.175) Diluted EPS - Continuing Operations excluding one-time
charges (1) $2.24 - $2.31 Less: One-time charges (1) ($0.20)
Diluted EPS from Continuing Operations per GAAP $2.04 - $2.11
Hospira: Equivalent Diluted Abbott EPS $0.160 - $0.175 Millions of
dollars: Equivalent Pretax Income less costs to operate as an
independent company, excluding one-time charges (3) (4) $292 - $325
Net Earnings excluding one-time charges $219 - $243 Less: One-time
charges, net of tax (4) ($27) Net Earnings per GAAP $192 - $216
Diluted Hospira EPS guidance excluding one-time charges (4) $1.39 -
$1.54 Less: One-time charges (4) ($0.17) Diluted Hospira EPS per
GAAP $1.22 - $1.37 1. As previously forecasted, Abbott's 2004
results will include one-time charges for in-process R&D and
integration costs related to acquisitions and costs associated with
the spin-off of Hospira. These costs are expected to approximate
$0.20 per share for the full-year 2004, of which $0.05 per share
were incurred in the first quarter of 2004. 2. Reflects
earnings-per-share equivalent of net income for Hospira as
structured within Abbott. 3. As detailed in Hospira's Form 10
filing with the SEC, Hospira will incur costs to operate as an
independent company, including corporate and information technology
expenses. The 2004 impact of these costs, as well as interest and
net margin on transition service/manufacturing agreements with
Abbott, have been reflected in this estimate of pretax income.
Hospira's forecasts beyond 2004 indicate that incremental growth
and efficiencies in the business are expected to offset these costs
in the future. 4. As previously disclosed in Hospira's Form 10
filing with the SEC, Hospira will incur one-time transitional costs
of approximately $100 million of pretax expense and $82 million of
capital expenditures during the 2004 to 2006 timeframe. Expense,
net of tax, for 2004is projected to be approximately $27 million or
$0.17 per Hospira share (mid-point of $0.15 - $0.19 range),
measured on the basis of Hospira EPS. Hospira diluted EPS is based
on an estimate of Hospira shares outstanding using a 10 to 1
distribution ratio. The precise number of Hospira shares will not
be known until the spin-off is executed and the dilutive effect of
stock options is calculated. Additional Hospira Guidance Note:
Hospira projects full-year 2004 sales of approximately $2.5
billion, with a tax rate for ongoing operations excluding one-time
transition expenses in 2004 estimated at 25.5 percent. The one-time
transition-related expenses will be tax effected at a higher rate
resulting in an estimated tax rate on a GAAP basis of 23 - 24
percent. Abbott Earnings-Per-Share Guidance Q9) How does this
transaction impact Abbott's recently issued earnings- per-share
guidance for the second quarter of 2004? A9) On April 8, 2004,
Abbott provided ongoing earnings-per-share guidance of $0.57 -
$0.59 for second-quarter 2004, before previously announced one-time
chargesand assuming that the business components that comprise
Hospira remained within Abbott. Abbott is confirming its
second-quarter 2004 earnings-per-share guidance, as adjusted to
reflect the shift of a portion of Abbott's future earnings to
Hospira, as shown in the following chart. Ongoing Earnings Per
Share (EPS) assuming Hospira business components remained with
Abbott $0.57 - $0.59 Estimated portion of net income shift to
Hospira as measured in Abbott EPS ($0.04) Ongoing EPS from
Continuing Operations after spin-off $0.53 - $0.55 Less: Previously
announced one-time charges ($0.11) Diluted EPS per GAAP $0.42 -
$0.44 DATASOURCE: Abbott Laboratories CONTACT: Media, Melissa
Brotz, +1-847-935-3456, or Jonathon Hamilton, +1-847-935-8646, or
Financial Community, John Thomas, +1-847-938-2655, all of Abbott
Laboratories Web site: http://www.abbott.com/
http://www.abbottinvestor.com/
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