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ABBOTT LABORATORIES.
Term Paper ID:30250
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Essay Subject:
Examines history and financial situation of the firm known for its pharmaceuticals, hospital products and nutritional products.... More...
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5 Pages / 1125 Words
4 sources, 0 Citations,
APA Format
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Paper Abstract:
Examines history and financial situation of the firm known for its pharmaceuticals, hospital products and nutrational products. Founding of firm. Aggressive marketing techniques. Growth of company by acquisition. Services, products, competitors. Financial analysis: income statement. Balance sheet. Ratio Analysis. Financial situation and profits. Future outlook, including restructuring. Foreign revenues.
Paper Introduction:
History of Firm
Abbott Laboratories, based in Abbott Park, Illinois-based company is best-known for its range of nutritional products including Similac (infant formula) and Ensure. However, the lion’s share of corporate sales come from the sales of pharmaceuticals and hospital products. The company ranks 144th in the Fortune 500 and is in the S&P 500. The firm was founded in 1888 by Dr. Wallace Abbott, who began marketing and making his patented “dosimetric granule” (a formulation that allowed for uniform measurements of drugs).
In the early days, the American Medical Association thought of him as a charlatan because of his aggressive marketing techniques, although many physicians and pharmacists used his granules, since they allowed for standardization. With World War I, the Abbott team of rese
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Abbott estimates 38 percent. |Antibiotic |NA ||Erythrocin |Antibiotic |2 ||Kaletra |Protease inhibitor for |5 || |HIV and AIDS treatment | ||Norvir |Protease inhibitor for |3 || |HIV and AIDS treatment | ||Hospital | | ||ADD-Vantage |IV mixing system |4 ||Amidate |Anesthetic |2 ||Carpuject |Injectible drug-delivery |4 || |system | ||Ross | | ||Alimentum |Infant formula |6 ||Ensure |Adult nutrition |4 ||Fact Plus |Pregnancy test |5 ||Murine |Eye drops |4 ||Selsun Blue |Dandruff shampoo |3 | The major competitors are: American Home Products; Genentech; AmgenGlaxoSmithKline; AstraZeneca; Johnson & Johnson; Aventis Mallinckrodt;Bausch & Lomb; Merck; Baxter Novartis; Bayer AG; Pfizer; Becton Dickinson;Roche Holding; Bristol-Myers Squibb; Schering-Plough; Eli Lilly; Solvay Financial AnalysisIncome Statement: The company is on a December 32 fiscal. Following World War II, the company continued to grow by acquisition,and the company introduced many new products, some of which were withdrawnby the FDA. Its reputation wasassured, thanks to its efforts at increasing production of penicillin inWorld War II. When we see both companies' quick ratios, we cansee that they are both operating at the same level of efficiencies. 7 |35.13 |28.18 ||Price/Book |8.38 |8.5 |2.81 ||Price/Cash Flow |19.83 |25.49 |13.2 ||Days of sales Outstanding |57. Estimates of Foreign Revenues Bausch & Lomb estimates 42 percent of its revenues come from outsidethe U.S. The only ratio that isbothersome is the very high days cost of goods in inventory, much of whichcan be attributed to some delays with FDA approvals. With World War I, the Abbott team of researchers begansynthesizing anesthetics that had only been available from Germany. However, in pre tax profitmargins, Abbott out performed Bausch which barely surpassed the market.This does not mean, however, that Abbott is better managed or moresuccessful. In terms of GPM, bothcompanies outdid the industry and the market. The company ranks144th in the Fortune 5 and is in the S&P 5 . Future OutlookAbbott with its restructuring and returning to core competencies is in theprocess of reinventing itself. References Abbott Laboratories, Hoovers Online Capsule Reports, athttp://www.hoovers.com Abbott Laboratories Annual Report, 2 , online at http://www.edgar-online.com Bausch & Lomb, Hoovers Online Capsule Reports, athttp://www.hoovers.com Bausch & Lomb Annual Report, 2 , online at http://www.edgar-online.com History of Firm Abbott Laboratories, based in Abbott Park, Illinois-based company isbest-known for its range of nutritional products including Similac (infantformula) and Ensure. 6 |1.44 ||Price/Earnings |29.29 |26. One way to do this is to consider the quick ratio,which shows at a glance how both companies are performing within theindustry and the market. Ratios are helpful here. It is well positioned internationally tocompete on a regional basis with many of the global power companies, andits purchase of Knoll should help its pharmaceutical growth. However, the lion's share of corporate sales comefrom the sales of pharmaceuticals and hospital products. The table below shows a sampling.|Brand |Purpose |Percent Revenues ||Diagnostic | | ||Abbott PRISM |High-volume |1 || |blood-screening system | ||Abbott Spectrum |Clinical chemistry system|3 ||Abbott TestPack |Tests for pregnancy, |8 || |strep throat, and | || |chlamydia | ||Abbott Vision |Clinical chemistry system|4 ||Alcyon |Automated clinical |3 || |chemistry instruments | ||Murex |Microtiter-based |2 || |immunoassay test | ||Precision Sure-Dose |Insulin syringes |4 ||Pharmaceutical | | ||Biaxin |Anti-infective |1 ||Depakote |Treats epileptic |2 || |seizures, migraines | ||E.E.S. 6 |67.97 |59.16 ||Outstanding | | | | ||Inventory Turnover |2.4 |3.3 |2.4 |7.2 ||Days cost of goods sold |15 |1 8 |153 |5 ||in inventory | | | | ||Asset Turnover |.5 | .9 | .8 | .4 ||Net Receivables Turnover|4.2 |6.5 |5.6 |6.4 ||Flow | | | | ||Current |1.92 |1.72 |1.54 |1.35 ||Quick |1.4 |.8 |1 |.9 ||Leverage |2.99 |1.78 |2.23 |5.1 ||Total Debt/Equity |.99 |.18 |.37 |1.25 | Findings When analyzing a company, the primary decision is on what basis willthe company be compared. 6 |67.97 |59.16 ||Inventory Turnover |3.3 |2.4 |7.2 ||Days cost of goods sold in inventory|1 8 |153 |5 ||Asset Turnover | .9 | .8 | .4 ||Net Receivables Turnover Flow |6.5 |5.6 |6.4 ||Current |1.72 |1.54 |1.35 ||Quick |.8 |1 |.9 ||Leverage |1.78 |2.23 |5.1 ||Total Debt/Equity |.18 |.37 |1.25 |4. The profit marginsare in line for a company that has restructured as much. 2 |8.77 ||Net Profit Margin |2 .27 |15 |5.43 ||Return on Equity |32.5 |25.1 |1 .6 ||Return on Assets |18.2 |11.3 |2.1 ||Return on Invested Capital |28.9 |2 .9 |5.5 ||Price/Sales |5.22 |5. Continuedgrowth in its hospital and diagnostics sector will also be more valuable tothe company. When we compare the current ratios of the two companies, a differentpicture emerges, and based on these, Bausch appears to be better thanAbbott since this can be found to suggest similar ROIs (Bausch is makingits money work harder than Abbott, although Abbott is flush with cash fromthe sales of its chemical division to Sumitomo. 2 |8.77 ||Net Profit Margin |5.28 |2 .27 |15 |5.43 ||Return on Equity |8.9 |32.5 |25.1 |1 .6 ||Return on Assets |3 |18.2 |11.3 |2.1 ||Return on Invested |5.1 |28.9 |2 .9 |5.5 ||Capital | | | | ||Price/Sales |1.51 |5.22 |5. 83.4 ||Gross Profit |54.6 |54.6 |56.8 ||Margin | | | ||SGA |4,245/2 |4, 51.1 |3,965.5 ||Operating Income |3,262.1 |3,149.3 |3,117.9 ||Operating Margin |23.7 |23.9 |25 ||Total Net Income |2,786 |2,445.8 |2,333.2 ||Net Profit Margin |2 .3 |18.6 |18.7 | The increase in revenues, and the increase in total net income andthe net profit margin confirm that the management shifts are paying off.Balance Sheet|Item |2 |1999 |1998 ||Cash |914.2 |6 8.1 |3 8.2 ||Net Receivables |2,179.5 |2, 55.8 |1,95 .1 ||Inventories |1,741.3 |1,495.4 |1,41 .6 ||Total Current |7,376.2 |6,419.8 |5,553.1 ||Assets | | | ||Short Term Debt |479.5 |896.3 |1,759.1 ||Total Current |4,297.5 |4,516.7 |4.962.1 ||Liabilities | | | ||Long Term Debt |1, 76.4 |1,336.8 |1,339.7 ||Total Liabilities |6,712.4 |7, 43.6 |7,5 2.6 |Ratio Analysis|Ratio |Abbott |Industry |Market ||Gross Profit Margin |6 .63 |72.42 |46.46 ||Pre Tax Profit Margin |27.76 |21. The firm was founded in1888 by Dr. Wallace Abbott, who began marketing and making his patented"dosimetric granule" (a formulation that allowed for uniform measurementsof drugs). 7 |35.13 |28.18 ||Price/Book |2.55 |8.38 |8.5 |2.81 ||Price/Cash Flow |1 .46 |19.83 |25.49 |13.2 ||Days of sales |89.79 |57. In the early days, the American Medical Association thought of him asa charlatan because of his aggressive marketing techniques, although manyphysicians and pharmacists used his granules, since they allowed forstandardization. Comparison with Bausch & Lomb Global Reach--Subsidiaries Bausch & Lomb has wholly owned subsidiaries in Switzerland, Argentina,Australia, Bermuda, the Netherlands, Belgium, Canada, Spain, Singapore,France, Austria, Hong Kong, India, Italy, Ireland, Korea, British VirginIslands, Malaysia, Mexico, New Zealand, South Africa, Thailand, Turkey,Venezuela, China, Brazil, Japan, Germany, and the UK. If we apply fundamental analysis to both companies (studying suchthings as earnings, dividends, balance sheet variables and footnotes, andthe quality of management) we can make educated guesses about the futuresof both companies. Financial Situation Abbott's quick ratio suggests that the company's good control ofinventory and receivables is bringing more profits. Ratio Comparisons|Ratio |Bausch & Lomb |Abbott |Industry |Market ||Gross Profit Margin |66.69 |6 .63 |72.42 |46.46 ||Pre Tax Profit Margin |9.73 |27.76 |21. Werethis a stock analysis question, the consensus would be to "buy" bothstocks. Abbott has wholly owned subsidiaries in Switzerland, The Netherlands,Spain, Germany, France, Austria, Bahamas, Puerto Rico, UK, Ireland, Japan,Korea, Colombia, Denmark, Argentina, Bangladesh, Panama, Venezuela, Chile,Colombia, Mexico, Australia, Greece, Hungary, India, Canada, Shanghai,China, Thailand, Malaysia, Mozambique, New Zealand, Pakistan and Zimbabwe. 6 |1.44 ||Price/Earnings |26. Income Statement ($ Millions, US)|Item |2 |1999 |1998 ||Revenue |13,745.9 |13,177.6 |12,477.8 ||COG |6,238.6 |5,977.2 |5,394.4 ||Gross Profit |7,5 7.3 |7,2 .4 |7. The comparative incomestatement follows. Growthwas achieved in the 192 s by buying several labs, and the company begantrading publicly in 1929, also the year of the Great Wall Street Crash.Abbott began a program of world expansion in the 193 s, opening up branchesin Argentina, Brazil, Cuba, Mexico, and the UK. With the appointment of a new CEO in 1999, the company is on anew growth spurt, due to skillful purchases of such companies as KnollPharmaceuticals, a manufacturing unit of German chemicals juggernaut, BASF. Services, Products, Competitors The company breaks its products accounting (there are more than 3, )into these categories: Diagnostics; Pharmaceuticals; Hospital; Ross; Other.
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