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Abbott lays off 550 in run-up to spinoff

10:34 am by | 0 Comments

"job cuts"

Abbott Laboratories on Wednesday laid off 550 workers across several business units and said it plans to cut "several hundred" additional workers in 2013.

About 100 of the layoffs were in Chicago area mostly related to sales and marketing and operations personnel at the company's Lake County headquarters campus and business units that will remain under the Abbott banner after the company spins off its proprietary pharmaceutical arm as a separate company called AbbVie Inc. on Jan. 1.

Abbott revealed the cuts in its third-quarter earnings under a $478 million pretax charge that will pay for the restructuring. That amount includes costs related to earlier job cuts and those expected in 2013.

Scott Stoffel, a company spokesman, cited a need to "align ... resources to better meet evolving business needs."

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The cuts represent the second round of layoffs Abbott has announced in 2012. Abbott also cut 700 jobs in January, including about 200 in Lake County.

Abbott announced the layoffs to workers Wednesday morning after the company said its third-quarter income beat Wall Street expectations by 2 cents per share despite a slight drop in revenue, as it cut expenses ahead of its planned split.

Abbott Chief Executive Miles White said in a conference call with investors that Abbott remains on track to complete the spinoff Jan. 1, separating its portfolio of proprietary drugs, including the blockbuster Humira, into AbbVie. The legacy Abbott will retain a range of products, from heart stents to baby formula and generic drugs.

The two companies will begin trading separately Jan. 2 on the New York Stock Exchange.

Abbott said net income rose to $1.94 billion, or $1.21 per share, up from $303 million, or 19 cents a share, in the year-earlier period, when it took a $1.4 billion charge for litigation over improper marketing of the anti-seizure drug Depakote.

Excluding some items, Abbott said it earned $1.30 a share. Analysts polled by Thomson Reuters expected adjusted earnings of $1.28 a share.

Sales declined slightly to $9.77 billion from $9.82 billion in the same quarter of 2011, falling short of analysts' estimates of $9.94 billion. Abbott attributed the drop largely to unfavorable foreign exchange rates.

Despite performing mostly in line with Wall Street expectations, shares fell 4.3 percent, or $3.09, to close Wednesday at $69.04. Analysts blamed the sell-off on weaker-than-expected projections for AbbVie.

Abbott executives offered new financial details for both firms in the call Wednesday, projecting weaker sales and a higher-than-expected tax rate for AbbVie. Executives said they expect AbbVie 2013 sales of slightly more than $18 billion, with figures flat to slightly down over the following two years.

Abbott also said it expects an effective tax rate of about 22 percent for the spinoff firm, which is 10 percentage points higher than it projected earlier this year in a securities filing related to the spinoff and above the historical average, said Damien Conover, an analyst with Morningstar.

Abbott executives said the higher rate reflects AbbVie's emphasis on shareholder returns, including an annual dividend of $1.60 per share starting with a quarterly distribution in February. To pay those dividends, the company must repatriate cash earned overseas, which will be taxed at the higher U.S. rate.

Abbott Labs, meanwhile, will pay an annual dividend of 56 cents per share.

Wednesday also marked the first time Abbott rolled out AbbVie's prospective top executives, CEO Richard Gonzalez and CFO William Chase, to investors.

The morning earnings call served as an opportunity for Gonzalez to put behind him a flap over his corporate biography, which contained inflated educational credentials on Abbott's website and in regulatory filings for at least 6 years, Conover said.

"It was critical just to hear Rick talk a little bit," he said. "He's been with the company for so long that (the resume issue) is less important in the investment community's eyes, but it's important for him to be able to put that behind him."

Tony Butler, a Barclays analyst, said he was impressed by Gonzalez and Chase.

"To some degree, you want to make sure you're getting appropriate responses from the people who run the business," Butler said.

Gonzalez, he said, "has the confidence of (Abbott's) board and senior managers. Does he have the confidence of investors? Let's just see how AbbVie performs in the post-spin world. He has lots of wood to chop."

[email protected]

Twitter @peterfrost

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(c)2012 Chicago Tribune

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