Fitch Rates Abbott Laboratories 'AA-'; Rating Outlook Stable.

Business Editors

CHICAGO--(BUSINESS WIRE)--March 24, 2003

Fitch Ratings has assigned credit ratings of 'AA-' to Abbott Laboratories, Inc.'s (Abbott) senior unsecured debt and 'F1+' to the company's commercial paper. The ratings apply to approximately $6.4 billion of debentures and commercial paper. The Rating Outlook is Stable. The ratings were initiated by Fitch as a service to users of its ratings and are based on public information.

The ratings reflect Abbott's well-diversified product portfolio in human pharmaceuticals, medical technology, nutritionals and clinical diagnostics. Abbott's revenue and earnings growth is bolstered by corporate acquisition and strategic alliance activities, that focus on key businesses, notably the Pharmaceutical Products, Hospital Products and Abbott Diagnostic divisions. The ratings account for an active research and development program (with spending in 2002 representing approximately 9% of total sales) across the company, strengthened through internal development, acquisitions and licensing agreements. Potential loss in revenues and earnings from intermediate-term generic pharmaceutical competition is anticipated to be offset by R&D successes, including the recent commercialization of Humira, an innovative treatment for rheumatoid arthritis.

Fitch's concerns center on compliance issues regarding FDA current good manufacturing practices (cGMP), and increased leverage as a result of the acquisition of the pharmaceuticals business of BASF. The consent decree at the Lake County, Illinois diagnostic operations has impaired growth in the immunodiagnostics business prohibiting approximately 60 diagnostic products from U.S. shipment, and most importantly, restricting the U.S. commercialization of new immounoassay products from the Lake County facility. Leverage has risen over traditional levels in conjunction with the BASF pharmaceutical business purchase in 2001 for approximately $7.2 billion, financed by short- and long-term debt. Abbott had approximately $1.6 billion of commercial paper outstanding at the end of 2002, down from approximately $2.9 billion at the end of 2001. Fitch expects that the company will continue to bolster revenue and earnings growth through corporate acquisitions and strategic alliance across key divisions.

Fitch recognizes Abbott's ample liquidity and strong cash flow generation, however, the company pays a large dividend and consumes a large amount of cash flow on capital expenditures. In 2002, Abbott generated greater than $1.4 billion in free cash flow after dividends and capital expenditures. Additionally, Abbott had $3 billion in unused lines of credit at the end of 2002, which supports commercial paper borrowings. The company reduced total debt by greater than $800 million and spent approximately $586 million on acquisitions in 2002. In early 2003, Abbott had re-instituted a share buyback program from June 2000, with 14.4 million shares remaining.

At the end of 2002, leverage as measured by total debt-to-EBITDA was 1.3 times (x) and interest coverage as measured by EBITDA-to-interest incurred was 19.5x. Abbott had cash and cash equivalents of approximately $704 million and a net debt position of $5.7 billion at December 31, 2002.