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Abbott (ABT) Provides Details on Restructuring Plan for Solvay's Pharma Unit; Sees Q3 Charge of $430M

September 21, 2010 8:57 AM EDT Send to a Friend
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In a Form 8-K, Abbott Labs (NYSE: ABT) announced a restructuring plan related to its acquisition of Solvay’s pharmaceuticals business, following a thorough assessment of Solvay’s R&D portfolio, manufacturing operations, global support functions, and commercial organizations in line with Abbott’s global pharmaceutical strategy.

This plan streamlines operations, improves efficiencies and reduces costs in certain Solvay sites and functions as well as in certain Abbott and Solvay commercial organizations in various countries. Action plans have been identified and most are expected to be implemented within the next two years. The majority of the savings are targeted to be realized by 2012. This plan is expected to result in annual savings that have been contemplated in Abbott’s ongoing earnings-per-share accretion forecast for the Solvay acquisition as communicated when the acquisition was announced in September 2009.

These actions will result in total pre-tax charges of approximately $810 to $970 million over the next 2 years. These charges include employee-related costs of approximately $650 million, accelerated depreciation and asset write-downs of approximately $105 million, and other related exit costs of up to $215 million related to the discontinuation of certain R&D programs and the transfer of certain product manufacturing/R&D to other Abbott facilities. Non-cash charges included in the total will be approximately $105 million, reflecting the accelerated depreciation and asset write-downs noted above. The employee-related costs and other related exit costs will require the outlay of cash.

Approximately $475 to $640 million of the charges are forecast to occur in the second half of 2010, with roughly $430 million projected in the third quarter. Abbott expects to treat these costs as specified items and as a result, these costs will not impact Abbott’s ongoing earnings-per-share guidance in 2010.

In addition to the restructuring costs associated with streamlining operations and reducing costs, Abbott has completed its integration planning for the Solvay Pharmaceuticals acquisition and expects to incur one-time costs of approximately $135 million in the second half of 2010 and $175 million in 2011 related to integrating Abbott and Solvay Pharmaceutical operations, including information technology, support services, R&D, and commercial operations. Abbott expects to treat these costs as specified items and as a result, these costs will not impact Abbott’s ongoing earnings-per-share guidance in 2010.




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