Healthcare products maker Abbott Laboratories (ABT) revealed in a Form-8K filling with the Securities and Exchange Commission that it has approved a four-year plan to streamline global manufacturing operations, reduce overall costs, and improve efficiencies in its core diagnostic business. Following the four-year period, the streamlining actions are expected to save the company more than $150 million per year, primarily by transferring manufacturing operations to Europe. It also plans to cut about 1,000 jobs worldwide during the streamlining process over the next four years.
The Abbott Park, Illinois-based Abbott noted that the implementation of these plans would result in pre-tax cash charges of about $370 million over the next several years. Out of this, about $150 million of charges are anticipated to impact the results for the second-half of fiscal 2008, with about $140 million projected to impact third quarter results. The company anticipates that the balance charges of about $220 million would impact results through 2011.
These charges include cash costs of about $110 million of employee-related costs, $75 million related to accelerated depreciation and other related exit costs of about $185 million, mainly related to product transfers. Apart from these, the company anticipates non-cash charges of about $115 million primarily reflecting the accelerated deprecation.
According to a company spokesperson, Abbott plans to eliminate about 1,000 jobs worldwide, reflecting 1.5% of the company's worldwide workforce or 10% of diagnostic segment workforce, during the four-year streamlining period at its core diagnostics unit. About 100 jobs are expected to be cut by the end of fiscal 2008, and the rest through the four-year period.
Abbott is a broad-based health care company that discovers, develops, manufactures and markets products and services that span the continuum of care, from prevention and diagnosis to treatment and cure. Abbott's principal businesses are global pharmaceuticals, nutritional and medical products, including diagnostics and cardiovascular devices.
In July Abbott reported better than expected second quarter profit , boosted by higher sales, improved gross margin, and higher ongoing income related to the recently concluded TAP joint venture. Net income for the quarter was $1.32 billion or $0.85 per share, higher than $988.74 million or $0.63 per share in the year-ago quarter. Quarterly total sales were $7.31 billion, up 14.8% over the prior-year quarter.
Abbott's worldwide Diagnostics segment sales for the second quarter of fiscal 2008 totaled $936 million, a 17.2% increase in sales from the prior-year quarter. More than half these sales came in from international sales. The company now plans to shift some of its diagnostics operations from the U.S. closer to its large international customers, particularly to Europe.
ABT closed Thursday's regular trading session at $58.04, down $0.30 or 0.51% on a volume of 3.82 million shares, lower than the three-month average volume of 6.73 million shares.
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