Abbott Reports Third-Quarter 2014 Results

- Third-Quarter Adjusted EPS Above Previous Guidance Range, Including Results From Discontinued Operations Related to Mylan Transaction -

- Raises Mid-Point of Full-Year 2014 EPS Guidance; Excluding Specified Items, Represents Double-Digit Growth -

Oct 22, 2014, 07:31 ET from Abbott

ABBOTT PARK, Ill., Oct. 22, 2014 /PRNewswire/ -- Abbott today announced financial results for the third quarter ended Sept. 30, 2014.

  • Diluted EPS, excluding specified items, was $0.62 in the third quarter, representing growth of 12.7 percent, and above the previous guidance range of $0.59 to $0.61. This includes results from the developed markets branded generics pharmaceuticals business, now presented as discontinued operations due to the pending sale of this business to Mylan. Reported diluted EPS under GAAP was $0.36. See page 2 for additional information on how results from the developed markets branded generics pharmaceuticals business are being reported.
  • Abbott is raising the mid-point of its full-year 2014 adjusted EPS guidance, including results from both continuing and discontinued operations, to $2.25 to $2.27 from $2.19 to $2.29, reflecting double-digit growth. Projected full-year 2014 EPS under GAAP is $1.22 to $1.24, including results from both continuing and discontinued operations.
  • Third-quarter worldwide sales of $5.1 billion from continuing operations, which exclude the sales from the developed markets branded generics pharmaceuticals business, increased 6.7 percent on an operational basis and 5.8 percent on a reported basis.
  • Worldwide sales of $5.6 billion from both continuing and discontinued operations increased 5.6 percent on an operational basis and 4.7 percent on a reported basis in the third quarter.
  • In September, Abbott completed its acquisition of CFR Pharmaceuticals, more than doubling Abbott's branded generics pharmaceuticals presence in Latin America.  
  • In its Medical Devices business, Abbott received European approval for its revolutionary FreeStyle® Libre Flash Glucose Monitoring System that eliminates routine finger pricks and finger-prick calibration. Abbott also announced positive one-year results from the ABSORB II randomized clinical trial, demonstrating that the Absorb Bioresorbable Vascular Scaffold is comparable to XIENCE, Abbott's leading drug-eluting stent. 

"We reported another quarter of sequential sales growth, including improved performance in our branded generics pharmaceuticals and nutrition businesses, and we are particularly pleased with the growth in our vision care business," said Miles D. White, chairman and chief executive officer, Abbott.

Third-Quarter Business Overview

Note regarding presentation of financial results beginning this quarter: On July 14, 2014, Abbott announced the sale of its developed markets branded generics pharmaceuticals business to Mylan. In accordance with GAAP, financial results from the developed markets branded generics pharmaceuticals business have been excluded from continuing operations and are reported as discontinued operations in the Earnings and EPS lines of the Consolidated Statement of Earnings. Prior year and year-to-date results also have been adjusted to report the developed markets branded generics pharmaceuticals business as discontinued operations. As a result, Sales and Consolidated Statement of Earnings reflect the remaining business at Abbott, reported as continuing operations.

Following are sales by business segment from continuing operations and commentary for the third quarter and the first nine months of the year:

Total Company
($ in millions)









% Change vs. 3Q13



Sales 3Q14




Int'l


Total



U.S.


Int'l


Total


U.S.


Operational


Reported


Operational


Reported

Total *


1,577


3,527


5,104


(0.6)


10.2


8.9


6.7


5.8

Nutrition


734


1,053


1,787


1.3


17.1


15.7


10.1


9.3

Diagnostics


325


855


1,180


1.8


8.0


6.1


6.2


4.9

Established Pharmaceuticals


--


771


771


 n/a 


12.9


11.5


12.9


11.5

Medical Devices


493


836


1,329


(5.1)


2.3


1.6


(0.6)


(1.0)


* Total Sales included in this schedule are from continuing operations; third-quarter sales from continuing and discontinued operations total $5.623 billion, including $519 million of sales from discontinued operations. Total Abbott Sales from continuing operations also include Other Sales of $37 million.

 









% Change vs. 9M13



Sales 9M14




Int'l


Total



U.S.


Int'l


Total


U.S.


Operational


Reported


Operational


Reported

Total *


4,627


10,330


14,957


(1.2)


6.3


3.7


3.9


2.1

Nutrition


2,148


3,001


5,149


(0.5)


6.9


4.2


3.7


2.2

Diagnostics


961


2,525


3,486


4.9


5.9


3.8


5.6


4.1

Established Pharmaceuticals


--


2,196


2,196


 n/a 


7.9


2.9


7.9


2.9

Medical Devices


1,451


2,562


4,013


(5.7)


3.9


3.0


0.2


(0.3)


* Total Sales included in this schedule are from continuing operations; year-to-date sales from continuing and discontinued operations total $16.418 billion, including $1.461 billion of sales from discontinued operations. Total Abbott Sales from continuing operations also include Other Sales of $113 million.

n/a = Not Applicable.

Note: Operational growth reflects percentage change over the prior year excluding the impact of exchange rates.

 

Third-quarter 2014 worldwide sales from continuing operations of $5.1 billion increased 6.7 percent on an operational basis and 5.8 percent on a reported basis, including an unfavorable 0.9 percent effect of foreign exchange.

International sales from continuing operations, which comprise approximately 70 percent of total Abbott sales, increased 10.2 percent on an operational basis and 8.9 percent on a reported basis in the third quarter.

Emerging market sales from continuing operations, which will now comprise nearly 50 percent of total Abbott sales, increased 15.0 percent on an operational basis and 13.8 percent on a reported basis in the third quarter, driven by double-digit growth in Nutrition, Diagnostics and Established Pharmaceuticals.

Nutrition
($ in millions)           









% Change vs. 3Q13



Sales 3Q14




Int'l


Total



U.S.


Int'l


Total


U.S.


Operational


Reported


Operational


Reported

Total


734


1,053


1,787


1.3


17.1


15.7


10.1


9.3

Pediatric


382


581


963


1.3


14.0


12.9


8.6


8.0

Adult


352


472


824


1.3


21.1


19.3


11.8


10.8

 









% Change vs. 9M13



Sales 9M14




Int'l


Total



U.S.


Int'l


Total


U.S.


Operational


Reported


Operational


Reported

Total


2,148


3,001


5,149


(0.5)


6.9


4.2


3.7


2.2

Pediatric


1,138


1,697


2,835


(0.6)


1.7


(0.6)


0.8


(0.6)

Adult


1,010


1,304


2,314


(0.3)


14.5


11.2


7.7


5.9

 

Worldwide Nutrition sales increased 10.1 percent in the third quarter on an operational basis and 9.3 percent on a reported basis, including an unfavorable 0.8 percent effect of foreign exchange.

Worldwide Pediatric Nutrition sales increased 8.6 percent on an operational basis and 8.0 percent on a reported basis in the quarter, including an unfavorable 0.6 percent effect of foreign exchange. Sales growth in the quarter was led by market uptake of recently launched products, including new infant formula products, Eleva and Similac® QINTI, which were launched earlier this year in China.

Worldwide Adult Nutrition sales increased 11.8 percent on an operational basis and 10.8 percent on a reported basis in the quarter, including an unfavorable 1.0 percent effect of foreign exchange. Sales growth in the quarter was led by strong growth of Ensure® and continued expansion of the adult nutrition category internationally.

Abbott recently announced the opening of its new nutrition manufacturing plant in India to meet increasing demand for its pediatric and adult nutrition products. This new manufacturing plant and Abbott's nutrition R&D center in India will work together to deliver innovations that address unmet health needs while also meeting specific local tastes and preferences.  

Diagnostics
($ in millions)









% Change vs. 3Q13



Sales 3Q14




Int'l


Total



U.S.


Int'l


Total


U.S.


Operational


Reported


Operational


Reported

Total 


325


855


1,180


1.8


8.0


6.1


6.2


4.9

Core Laboratory


189


766


955


1.0


8.3


6.3


6.8


5.2

Molecular


50


68


118


--


1.9


1.5


1.1


0.9

Point of Care


86


21


107


4.5


17.1


17.2


6.7


6.7

 









% Change vs. 9M13



Sales 9M14




Int'l


Total



U.S.


Int'l


Total


U.S.


Operational


Reported


Operational


Reported

Total 


961


2,525


3,486


4.9


5.9


3.8


5.6


4.1

Core Laboratory


561


2,267


2,828


7.5


6.0


3.8


6.3


4.5

Molecular


149


197


346


(0.8)


2.6


2.4


1.1


1.0

Point of Care


251


61


312


2.9


11.2


10.2


4.4


4.2

Worldwide Diagnostics sales increased 6.2 percent in the third quarter on an operational basis and 4.9 percent on a reported basis, including an unfavorable 1.3 percent effect of foreign exchange. This business continues to invest in the development of several next-generation diagnostic platforms across all of its business units that are designed to positively impact patient care, improve service to customers, enhance laboratory productivity and reduce costs.

Core Laboratory Diagnostics sales increased 6.8 percent in the quarter on an operational basis and 5.2 percent on a reported basis, including an unfavorable 1.6 percent effect of foreign exchange. International sales growth of 8.3 percent on an operational basis was driven by continued strong growth in emerging markets. U.S. sales growth in the quarter was impacted by comparison to the third quarter 2013 when sales were higher due to the timing of equipment sales.

Molecular Diagnostics sales increased 1.1 percent in the quarter on an operational basis, impacted by market dynamics in its smaller businesses, as well as the timing of tenders in its infectious disease business in several emerging markets. Sales increased 0.9 percent on a reported basis, including an unfavorable 0.2 percent effect of foreign exchange.

Point of Care Diagnostics sales increased 6.7 percent in the quarter on an operational and a reported basis as this business continues to build and expand its presence in targeted developed and emerging markets.

Established Pharmaceuticals
($ in millions)

Note regarding presentation of financial results beginning this quarter: In accordance with GAAP, financial results from the developed markets branded generics pharmaceuticals business have been excluded from continuing operations due to the pending sale of this business to Mylan and are reported as discontinued operations. Prior year and year-to-date results have also been adjusted to report the developed markets branded generics pharmaceuticals business as discontinued operations. Therefore, sales shown in the following charts represent continuing operations.









% Change vs. 3Q13



Sales 3Q14




Int'l


Total



U.S.


Int'l


Total


U.S.


Operational


Reported


Operational


Reported

Total *


--


771


771


n/a


12.9


11.5


12.9


11.5

Key Emerging Markets


--


602


602


n/a


10.2


9.0


10.2


9.0

Other Emerging Markets **

--


169


169


n/a


23.5


21.2


23.5


21.2


* Sales included in this schedule are from continuing operations; third-quarter sales from continuing and discontinued operations total $1.290 billion, including $519 million of sales from discontinued operations.

** Includes sales from CFR Pharmaceuticals; transaction closed Sept. 26, 2014.

 









% Change vs. 9M13



Sales 9M14




Int'l


Total



U.S.


Int'l


Total


U.S.


Operational


Reported


Operational


Reported

Total *


--


2,196


2,196


n/a


7.9


2.9


7.9


2.9

Key Emerging Markets


--


1,708


1,708


n/a


6.7


1.2


6.7


1.2

Other Emerging Markets **

--


488


488


n/a


12.4


9.3


12.4


9.3


* Sales included in this schedule are from continuing operations; year-to-date sales from continuing and discontinued operations total $3.657 billion, including $1.461 billion of sales from discontinued operations.

** Includes sales from CFR Pharmaceuticals; transaction closed Sept. 26, 2014.

n/a = Not Applicable.

 

On July 14, 2014, Abbott announced that it will sell its developed markets branded generics pharmaceuticals business to Mylan. This transaction is expected to positively impact Abbott's 2015 sales and earnings-per-share growth rates as the company focuses its branded generics pharmaceuticals business entirely on emerging markets. Abbott expects to close the transaction in the first quarter of 2015. 

Established Pharmaceuticals sales from continuing operations increased 12.9 percent in the third quarter on an operational basis and 11.5 percent on a reported basis, including an unfavorable 1.4 percent effect of foreign exchange.

Key Emerging Markets include India, Russia, Brazil and China, along with several additional emerging markets that represent the most attractive long-term growth opportunities for Abbott's branded generics product portfolio. Sales in these geographies increased 10.2 percent on an operational basis led by strong growth in India, Russia, Mexico and Vietnam. Sales increased 9.0 percent on a reported basis, including an unfavorable 1.2 percent effect of foreign exchange.

On Sept. 26, 2014, Abbott completed its acquisition of Latin American pharmaceutical company CFR Pharmaceuticals. This acquisition more than doubles Abbott's branded generics presence in Latin America and immediately establishes Abbott among the top 10 pharmaceutical companies in the region.

Medical Devices
($ in millions)









% Change vs. 3Q13



Sales 3Q14




Int'l


Total



U.S.


Int'l


Total


U.S.


Operational


Reported


Operational


Reported

Total


493


836


1,329


(5.1)


2.3


1.6


(0.6)


(1.0)

Vascular


281


449


730


(6.7)


1.0


0.5


(2.1)


(2.4)

Diabetes Care


102


198


300


(16.4)


1.5


0.9


(5.3)


(5.8)

Medical Optics


110


189


299


14.0


6.4


5.2


9.0


8.3


















Vascular Product Lines:

















DES/BVSa)


111


244


355


(14.1)


(3.6)


(4.2)


(7.1)


(7.6)

Other Coronary Productsb)

48


92


140


1.6


3.1


2.8


2.6


2.4

Endovascularc)


69


65


134


10.7


16.6


16.6


13.5


13.5


















 









% Change vs. 9M13



Sales 9M14




Int'l


Total



U.S.


Int'l


Total


U.S.


Operational


Reported


Operational


Reported

Total


1,451


2,562


4,013


(5.7)


3.9


3.0


0.2


(0.3)

Vascular


827


1,405


2,232


(4.1)


2.7


2.1


0.1


(0.3)

Diabetes Care


297


580


877


(24.0)


2.4


1.8


(8.3)


(8.7)

Medical Optics


327


577


904


14.2


8.4


6.8


10.4


9.4


















Vascular Product Lines:

















DES/BVSa)


332


761


1,093


(13.4)


(0.6)


(2.1)


(4.8)


(5.8)

Other Coronary Productsb)

147


289


436


1.7


1.4


1.4


1.5


1.5

Endovascularc)


196


195


391


6.8


15.7


16.3


11.0


11.3


















a)Includes drug-eluting stents and bioresorbable vascular scaffold (BVS) product portfolio.





b)Includes guide wires, balloon catheters and other coronary products.

c)Includes vessel closure, carotid stents and other peripheral products.

 

Worldwide Medical Devices sales decreased 0.6 percent in the third quarter on an operational basis and 1.0 percent on a reported basis, including an unfavorable 0.4 percent effect of foreign exchange.

Worldwide sales of Vascular products decreased 2.1 percent in the quarter on an operational basis and 2.4 percent on a reported basis, including an unfavorable 0.3 percent effect of foreign exchange. Sales growth in the quarter was impacted by a comparison to the third quarter 2013 when Abbott realized the final sales true-up related to a third-party agreement. Abbott's Endovascular business and its structural heart product, MitraClip®, for the treatment of mitral regurgitation, delivered double-digit global growth in the quarter. In the U.S., MitraClip recently received improved reimbursement and National Medicare coverage. Worldwide sales of Vascular products were also impacted by a decline in drug-eluting stent sales.

In September, Abbott presented the one-year results from the ABSORB II randomized clinical trial demonstrating that its Absorb Bioresorbable Vascular Scaffold is comparable to Abbott's leading XIENCE drug-eluting stent in treating people with coronary artery disease. In addition, the study showed that people treated with Absorb experienced significantly lower rates of angina, or chest pain.

Worldwide Diabetes Care sales decreased 5.3 percent in the quarter on an operational basis and 5.8 percent on a reported basis, including an unfavorable 0.5 percent effect of foreign exchange. In the U.S., the impact of CMS reimbursement reductions and market dynamics moderated in the quarter, in line with expectations. Outside of the U.S., Abbott is driving growth in both emerging and developed markets.

In September, Abbott announced CE Mark for its FreeStyle Libre Flash Glucose Monitoring System. FreeStyle Libre is a revolutionary new glucose sensing technology that eliminates routine finger pricks, requires no finger-prick calibration and presents data in a user-friendly, visual chart, enabling productive treatment discussions between patients and healthcare professionals.

Worldwide Medical Optics sales increased 9.0 percent in the quarter on an operational basis and 8.3 percent on a reported basis, including an unfavorable 0.7 percent effect of foreign exchange. Sales of cataract products, which represent nearly 70 percent of Medical Optics sales, increased double digits, outpacing the growth of the global cataract market. This performance was driven by continued share gains of recently launched intraocular lenses (IOLs), as well as further penetration of Abbott's Catalys® Precision Laser System for cataract surgery. In addition, Abbott recently announced that it will broaden its global presence by building a new manufacturing facility in Malaysia to support growing global demand for its IOLs.

Abbott raises the mid-point and narrows its full-year 2014 earnings-per-share guidance range

Abbott is raising the mid-point and narrowing its full-year 2014 earnings-per-share guidance, excluding specified items, to $2.25 to $2.27 from $2.19 to $2.29, representing double-digit growth. This guidance includes results from the developed markets branded generics pharmaceuticals business, reported as discontinued operations due to the pending sale of this business to Mylan.

Abbott continues to forecast net specified items for the full year 2014 of $1.03 per share. Specified items include intangible amortization expense, charges associated with cost reduction initiatives, deal and other expenses related to the acquisitions and pending sale of the developed markets branded generics pharmaceuticals business, as well as tax expense associated with a one-time repatriation of 2014 ex-U.S. earnings, partially offset by a net favorable adjustment to tax expense related to the resolution of various tax positions from previous years.

Including net specified items, projected earnings per share under Generally Accepted Accounting Principles (GAAP) would be $1.22 to $1.24 for the full year 2014, including results from both continuing and discontinued operations.

Abbott is issuing fourth-quarter 2014 earnings-per-share guidance, excluding specified items, of $0.68 to $0.70, representing double-digit growth. Abbott forecasts specified items for the fourth quarter 2014 of $0.36. Including specified items, projected earnings-per-share under GAAP would be $0.32 to $0.34 for the fourth quarter. This guidance includes results from both continuing and discontinued operations.

Abbott announces $3 billion share repurchase program and declares 363rd quarterly dividend  

On Sept. 11, 2014, the board of directors of Abbott authorized the repurchase of up to $3 billion of Abbott's common shares, as market conditions warrant and subject to regulatory considerations. The board of directors also declared the company's quarterly dividend of $0.22 per share. Abbott's cash dividend is payable Nov. 15, 2014, to shareholders of record at the close of business on Oct. 15, 2014.

Abbott is a member of the S&P 500 Dividend Aristocrats Index, which tracks companies that have annually increased their dividend for 25 consecutive years.

About Abbott

Abbott (NYSE: ABT) is a global healthcare company devoted to improving life through the development of products and technologies that span the breadth of healthcare. With a portfolio of leading, science-based offerings in diagnostics, medical devices, nutritionals and branded generic pharmaceuticals, Abbott serves people in more than 150 countries and employs approximately 69,000 people.

Visit Abbott at www.abbott.com and connect with us on Twitter at @AbbottNews.

Abbott will webcast its live third-quarter earnings conference call through its Investor Relations website at www.abbottinvestor.com at 8 a.m. Central time today. An archived edition of the call will be available after 11 a.m. Central time.

Private Securities Litigation Reform Act of 1995 —

A Caution Concerning Forward-Looking Statements

Some statements in this news release may be forward-looking statements for purposes of the Private Securities Litigation Reform Act of 1995. Abbott cautions that these forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those indicated in the forward-looking statements. Economic, competitive, governmental, technological and other factors that may affect Abbott's operations are discussed in Item 1A, "Risk Factors,'' to our Annual Report on Securities and Exchange Commission Form 10-K for the year ended Dec. 31, 2013, and are incorporated by reference. Abbott undertakes no obligation to release publicly any revisions to forward-looking statements as a result of subsequent events or developments, except as required by law.

 

Abbott Laboratories and Subsidiaries

Consolidated Statement of Earnings

Third Quarter Ended September 30, 2014 and 2013

(in millions, except per share data)

(unaudited)




3Q14


3Q13


% Change


Net Sales


$5,104


$4,825


5.8










Cost of products sold, excluding amortization expense


2,331


2,255


3.4


Amortization of intangible assets


132


146


(9.2)


Research and development


307


339


(9.5)


Selling, general, and administrative


1,603


1,612


(0.6)


Total Operating Cost and Expenses


4,373


4,352


0.5










Operating earnings


731


473


54.5










Interest expense, net


17


21


(17.9)


Net foreign exchange (gain) loss


(1)


(2)


(63.6)


Other (income) expense, net


(3)


(27)


(87.4)


Earnings from Continuing Operations before taxes


718


481


49.3










Taxes on Earnings from Continuing Operations


278


(163)


n/m

1)

Earnings from Continuing Operations


440


644


(31.6)










Earnings from Discontinued Operations, net of taxes


98


322


(69.5)

2) 3)









Net Earnings


$538


$966


(44.2)










Net Earnings from Continuing Operations, excluding 








Specified Items, as described below


$820


$688


19.2

4)









Net Earnings from Discontinued Operations, excluding 








Specified Items, as described below


125


185


(32.4)

2) 5)









Net Earnings, excluding Specified Items, as described below


$945


$873


8.3










Diluted Earnings per Common Share from:
















Continuing Operations


$0.29


$0.41


(29.3)










Discontinued Operations


0.07


0.20


(65.0)

2) 3)









Total


$0.36


$0.61


(41.0)










Diluted Earnings per Common Share, excluding Specified 








Items, as described below, from:
















Continuing Operations


$0.54


$0.44


22.7

4)









Discontinued Operations


0.08


0.11


(27.3)

2) 5)









Total


$0.62


$0.55


12.7










Average Number of Common Shares Outstanding








Plus Dilutive Common Stock Options and Awards


1,520


1,567






NOTES:


a)    

See tables below for an explanation of certain non-GAAP financial information.



n/m = Percent change is not meaningful.



1)

Increase over prior year is a result of specified items, including 2013 favorable adjustment to tax expense as a result of the resolution of various tax positions from previous years, and 2014 current quarter tax expense associated with a one-time repatriation of 2014 ex-U.S. earnings.



2)

Earnings and Diluted Earnings per Common Share from Discontinued Operations reflect the reporting of the developed markets branded generics pharmaceuticals business as discontinued operations due to the pending sale of this business to Mylan.



3)

2013 Earnings from Discontinued Operations, net of taxes, also includes a favorable adjustment to tax expense of $193 million, or $0.12 per share, as a result of the resolution of various tax positions from a previous year related to AbbVie operations.



4)

2014 Net Earnings from Continuing Operations, excluding Specified Items, excludes net after-tax charges of $380 million, or $0.25 per share, for intangible amortization expense, expenses associated with cost reduction initiatives and deal and other expenses related to the acquisitions, as well as current quarter tax expense associated with a one-time repatriation of 2014 ex-U.S. earnings.




2013 Net Earnings from Continuing Operations, excluding Specified Items, excludes after-tax charges of $44 million, or $0.03 per share, for intangible amortization expense; expenses associated with cost reduction initiatives; a philanthropic contribution to the Abbott Fund; and other costs, including integration and separation-related costs; partially offset by a favorable tax adjustment, as discussed in note 1.



5)

2014 Net Earnings from Discontinued Operations, excluding Specified Items, excludes net after-tax charges of $27 million, or $0.01 per share, primarily related to current quarter tax expense associated with a one-time repatriation of 2014 ex-U.S. earnings.




2013 Net Earnings from Discontinued Operations, excluding Specified Items, excludes a favorable tax adjustment of $193 million, or $0.12 per share, related to AbbVie operations, as discussed in note 3, partially offset by net after-tax charges of $56 million, or $0.03 per share, primarily related to cost reduction initiatives.

 

Abbott Laboratories and Subsidiaries

Consolidated Statement of Earnings

Nine Months Ended September 30, 2014 and 2013

(in millions, except per share data)

(unaudited)




9M14


9M13


% Change


Net Sales


$14,957


$14,643


2.1










Cost of products sold, excluding amortization expense


6,918


6,854


0.9


Amortization of intangible assets


392


441


(11.2)


Research and development


989


1,012


(2.3)


Selling, general, and administrative


4,886


4,831


1.1


Total Operating Cost and Expenses


13,185


13,138


0.4










Operating earnings


1,772


1,505


17.8










Interest expense, net


53


64


(16.6)


Net foreign exchange (gain) loss


1


36


(98.5)


Other (income) expense, net


2


(28)


n/m


Earnings from Continuing Operations before taxes


1,716


1,433


19.7










Taxes on Earnings from Continuing Operations


627


(71)


n/m

1)

Earnings from Continuing Operations


1,089


1,504


(27.6)










Earnings from Discontinued Operations, net of taxes


291


483


(39.6)

2) 3)









Net Earnings


$1,380


$1,987


(30.5)










Net Earnings from Continuing Operations, excluding 








Specified Items, as described below


$2,096


$1,842


13.8

4)









Net Earnings from Discontinued Operations, excluding 








Specified Items, as described below


319


429


(25.6)

2) 5)









Net Earnings, excluding Specified Items, as described below


$2,415


$2,271


6.3










Diluted Earnings per Common Share from:
















Continuing Operations


$0.71


$0.95


(25.3)










Discontinued Operations


0.19


0.30


(36.7)

2) 3)









Total


$0.90


$1.25


(28.0)










Diluted Earnings per Common Share, excluding Specified 








Items, as described below, from:
















Continuing Operations


$1.36


$1.16


17.2

4)









Discontinued Operations


0.21


0.27


(22.2)

2) 5)









Total


$1.57


$1.43


9.8










Average Number of Common Shares Outstanding








Plus Dilutive Common Stock Options and Awards


1,529


1,576






NOTES:



a)    

See tables below for an explanation of certain non-GAAP financial information.


n/m = Percent change is not meaningful.



1)

Increase over prior year is a result of specified items, including 2013 favorable adjustments to tax expense as a result of the resolution of various tax positions from previous years and for the impact of U.S. tax law changes enacted in 2013 related to 2012 results, as well as 2014 year-to-date tax expense associated with a one-time repatriation of 2014 ex-U.S. earnings.



2)

Earnings and Diluted Earnings per Common Share from Discontinued Operations reflect the reporting of the developed markets branded generics pharmaceuticals business as discontinued operations due to the pending sale of this business to Mylan.



3)

2014 Earnings from Discontinued Operations, net of taxes, also includes a net favorable adjustment to tax expense of $37 million, or $0.03 per share, as a result of the resolution of various tax positions from previous years related to AbbVie operations.




2013 Earnings from Discontinued Operations, net of taxes, also includes a favorable adjustment to tax expense of $193 million, or $0.12 per share, as a result of the resolution of various tax positions from a previous year related to AbbVie operations.



4)

2014 Net Earnings from Continuing Operations, excluding Specified Items, excludes net after-tax charges of $1.007 billion, or $0.65 per share, for intangible amortization expense, expenses associated with cost reduction initiatives and deal and other expenses related to the acquisitions, as well as year-to-date tax expense associated with a one-time repatriation of 2014 ex-U.S. earnings.




2013 Net Earnings from Continuing Operations, excluding Specified Items, excludes after-tax charges of $338 million, or $0.21 per share, for intangible amortization expense, expenses associated with cost reduction initiatives, a philanthropic contribution to the Abbott Fund, and other costs, including integration and separation-related costs, partially offset by favorable tax adjustments, as discussed in note 1.



5)

2014 Net Earnings from Discontinued Operations, excluding Specified Items, excludes net after-tax charges of $65 million, or $0.05 per share, primarily related to intangible amortization expense and cost reduction initiatives, as well as year-to-date tax expense associated with a one-time repatriation of 2014 ex-U.S. earnings, net of a favorable adjustment to tax expense related to the resolution of various tax positions from previous years; partially offset by a net favorable adjustment to tax expense of $37 million, or $0.03 per share, related to AbbVie operations, as discussed in note 3.




2013 Net Earnings from Discontinued Operations, excluding Specified Items, excludes a favorable tax adjustment of $193 million, or $0.12 per share, related to AbbVie operations, as discussed in note 3, partially offset by net after-tax charges of $139 million, or $0.09 per share, primarily related to cost reduction initiatives.

 

Non-GAAP Reconciliation of Financial Information



Abbott Laboratories and Subsidiaries



Non-GAAP Reconciliation of Financial Information



Third Quarter Ended September 30, 2014 and 2013



(in millions, except per share data)



(unaudited)




Reconciliation of Diluted Earnings per Common Share






3Q14




GAAP 


Disc Ops-
AbbVie


Specified
Items


As
Adjusted 










Continuing Operations


$0.29


--


$0.25


$0.54

Discontinued Operations


$0.07


--


$0.01


$0.08

Total


$0.36


--


$0.26


$0.62

 

Reconciliation of Financial Information




3Q14



As
Reported
(GAAP) 


Specified
Items


As
Adjusted


% to
Sales










Continuing Operations









Intangible Amortization


$132


($132)


--



Gross Margin


2,641


188


$2,829


55.4%

R&D


307


(2)


305


6.0%

SG&A


1,603


(100)


1,503


29.4%

Other (Income) Expense, Net


(3)


(4)


(7)



Earnings before taxes 


718


294


1,012



Taxes on Earnings 


278


(86)


192



Net Earnings 


440


380


820



Diluted Earnings per Share


$0.29


$0.25


$0.54












Discontinued Operations









Net Earnings


$98


$27


$125



Diluted Earnings per Share


$0.07


$0.01


$0.08



 

Specified items for continuing operations reflect intangible amortization expense of $132 million and other expenses of $162 million, primarily associated with cost reduction initiatives and deal and other expenses related to the acquisitions, as well as current quarter tax expense of $110 million associated with a one-time repatriation of 2014 ex-U.S. earnings.

Specified items for discontinued operations are primarily related to current quarter tax expense associated with a one-time repatriation of 2014 ex-U.S. earnings.

Reconciliation of Diluted Earnings per Common Share




3Q13



Historical
GAAP 


Disc Ops-
EPD DM


Historical
GAAP
Adj for EPD DM


Disc Ops-AbbVie


Specified Items


As
Adjusted 














Continuing Operations


$0.49


($0.08)


$0.41


--


$0.03


$0.44

Discontinued Operations


$0.12


$0.08


$0.20


($0.12)


$0.03


$0.11

Total


$0.61


--


$0.61


($0.12)


$0.06


$0.55

Reconciliation of Financial Information




3Q13



Historical GAAP


Disc Ops-
EPD DM


Historical GAAP
Adj for EPD DM


Disc Ops-
AbbVie


Specified Items


As
Adjusted 


% to Sales
















Continuing Operations















Intangible Amortization


$197


($51)


$146


--


($146)


--



Gross Margin


2,722


(298)


2,424


--


216


$2,640


54.7%

R&D


357


(18)


339


--


(11)


328


6.8%

SG&A


1,735


(123)


1,612


--


(110)


1,502


31.1%

Other Non-Operating Items

2


(10)


(8)


--


--


(8)



Earnings before taxes


628


(147)


481


--


337


818



Taxes on Earnings 


(145)


(18)


(163)


--


293


130



Net Earnings 


773


(129)


644


--


44


688



Diluted Earnings per Share 

$0.49


($0.08)


$0.41


--


$0.03


$0.44


















Discontinued Operations















Net Earnings 


$193


$129


$322


($193)


$56


$185



Diluted Earnings per Share 

$0.12


$0.08


$0.20


($0.12)


$0.03


$0.11



 

Specified items for continuing operations reflect intangible amortization expense of $146 million; expenses associated with cost reduction initiatives of $81 million; a philanthropic contribution to the Abbott Fund of $40 million; and other expenses of $70 million, including integration and separation-related costs; partially offset by a favorable adjustment to tax expense of $237 million related to the resolution of various tax provisions from previous years.

Specified items for discontinued operations are primarily related to cost reductions initiatives.

Abbott Laboratories and Subsidiaries

Non-GAAP Reconciliation of Financial Information

Nine Months Ended September 30, 2014 and 2013

(in millions, except per share data)

(unaudited)


Reconciliation of Diluted Earnings per Common Share




9M14




GAAP 


Disc Ops-
AbbVie


Specified
Items


As
Adjusted 










Continuing Operations


$0.71


--


$0.65


$1.36

Discontinued Operations


$0.19


($0.03)


$0.05


$0.21

Total


$0.90


($0.03)


$0.70


$1.57

 

Reconciliation of Financial Information




9M14



As
Reported
(GAAP) 


Disc Ops-
AbbVie


Specified
 Items


As
Adjusted 


% to
Sales












Continuing Operations











Intangible Amortization


$392


--


($392)


--



Gross Margin


7,647


--


530


$8,177


54.7%

R&D


989


--


(53)


936


6.3%

SG&A


4,886


--


(280)


4,606


30.8%

Other (Income) Expense, Net


2


--


(8)


(6)



Earnings before taxes 


1,716


--


871


2,587



Taxes on Earnings


627


--


(136)


491



Net Earnings 


1,089


--


1,007


2,096



Diluted Earnings per Share 


$0.71


--


$0.65


$1.36














Discontinued Operations











Net Earnings 


$291


($37)


$65


$319



Diluted Earnings per Share 


$0.19


($0.03)


$0.05


$0.21



 

Specified items for continuing operations reflect intangible amortization expense of $392 million and other expenses of $479 million, primarily associated with cost reduction initiatives and deal and other expenses related to the acquisitions, as well as year-to-date tax expense of $264 million associated with a one-time repatriation of 2014 ex-U.S. earnings.  

Specified items for discontinued operations are primarily related to intangible amortization expense, cost reduction initiatives, as well as year-to-date tax expense associated with a one-time repatriation of 2014 ex-U.S. earnings, net of a favorable adjustment to tax expense related to the resolution of various tax positions from previous years.

Reconciliation of Diluted Earnings per Common Share




9M13



Historical
GAAP 


Disc Ops-EPD DM


Historical
GAAP Adj for EPD DM


Disc Ops-AbbVie


Specified Items


As
Adjusted 














Continuing Operations


$1.13


($0.18)


$0.95


--


$0.21


$1.16

Discontinued Operations


$0.12


$0.18


$0.30


($0.12)


$0.09


$0.27

Total


$1.25


--


$1.25


($0.12)


$0.30


$1.43

Reconciliation of Financial Information




9M13



Historical GAAP


Disc Ops-EPD DM


Historical GAAP Adj
for EPD DM


Disc Ops-
AbbVie


Specified Items


As
Adjusted 


% to Sales
















Continuing Operations














Intangible Amortization

$593


($152)


$441


--


($441)


--



Gross Margin

8,173


(825)


7,348


--


656


$8,004


54.7%

R&D

1,066


(54)


1,012


--


(16)


996


6.8%

SG&A

5,234


(403)


4,831


--


(155)


4,676


31.9%

Other Non-Operating Items

89


(17)


72


--


(18)


54



Earnings before taxes

1,784


(351)


1,433


--


845


2,278



Taxes on Earnings 

(10)


(61)


(71)


--


507


436



Net Earnings 

1,794


(290)


1,504


--


338


1,842



Diluted Earnings per Share 

$1.13


($0.18)


$0.95


--


$0.21


$1.16

















Discontinued Operations














Net Earnings 


$193


$290


$483


($193)


$139


$429



Diluted Earnings per Share 

$0.12


$0.18


$0.30


($0.12)


$0.09


$0.27



 

Specified items for continuing operations reflect intangible amortization expense of $441 million; expenses associated with cost reduction initiatives of $185 million; a philanthropic contribution to the Abbott Fund of $40 million; and other costs of $179 million, including integration and separation-related costs; partially offset by favorable adjustments to tax expense of $237 million related to the resolution of various tax positions from previous years and $103 million for the impact of U.S. tax law changes enacted in 2013 related to 2012 results.

Specified items for discontinued operations are primarily related to cost reductions initiatives.

Reconciliation of Tax Rate for Continuing Operations

A reconciliation of the third-quarter tax rates for continuing operations for 2014 and 2013 is shown below:




3Q14


(dollars in millions)


Pre-Tax
Income 


Taxes on
Earnings


Tax
Rate


As reported (GAAP)


$718


$278


38.7%


Specified items


294


(86)



1)

Excluding specified items


$1,012


$192


19.0%























3Q13


(dollars in millions)


Pre-Tax
Income


Taxes on
Earnings


Tax
Rate


As reported (GAAP)


$481


($163)


(33.9%)


Specified items


337


293



2)

Excluding specified items


$818


$130


15.8%




1)

Specified items include current quarter tax expense of $110 million associated with a one-time repatriation of 2014 ex-U.S. earnings.



2)

Specified items include a favorable adjustment to tax expense of $237 million from the resolution of various tax positions from previous years.

 

A reconciliation of the year-to-date tax rates for continuing operations for 2014 and 2013 is shown below:




9M14


(dollars in millions)


Pre-Tax
Income 


Taxes on
Earnings


Tax
Rate


As reported (GAAP)


$1,716


$627


36.6%


Specified items


871


(136)



3)

Excluding specified items


$2,587


$491


19.0%























9M13


(dollars in millions)


Pre-Tax
Income 


Taxes on
Earnings


Tax
Rate


As reported (GAAP)


$1,433


($71)


(5.0%)


Specified items


845


507



4)

Excluding specified items


$2,278


$436


19.1%




3)

Specified items include year-to-date tax expense of $264 million associated with a one-time repatriation of 2014 ex-U.S. earnings.



4)

Specified items include favorable adjustments to tax expense of $237 million related to the resolution of various tax positions from previous years and $103 million for the impact of U.S. tax law changes enacted in 2013 related to 2012 results.

 

Additional Financial Information

Reconciliation of the Reported 2014 Sales between Continuing and Discontinued Operations

($ in millions)





2014 Sales



Total Sales, Incl.
Discontinued Operations


Discontinued Operations


Continuing
Operations



$

Operational % Change vs. PY


$


$

Operational % Change vs. PY










1H14


















Total Sales


10,795

1.8


(942)


9,853

2.5

U.S. 


3,050

(1.4)


--


3,050

(1.4)

International


7,745

3.0


(942)


6,803

4.4










Established Pharmaceuticals

2,367

0.8


(942)


1,425

5.4










3Q14


















Total Sales


5,623

5.6


(519)


5,104

6.7

U.S. 


1,577

(0.6)


--


1,577

(0.6)

International


4,046

8.3


(519)


3,527

10.2










Established Pharmaceuticals

1,290

5.7


(519)


771

12.9










9M14


















Total Sales


16,418

3.0


(1,461)


14,957

3.9

U.S. 


4,627

(1.2)


--


4,627

(1.2)

International


11,791

4.7


(1,461)


10,330

6.3










Established Pharmaceuticals

3,657

2.4


(1,461)


2,196

7.9

 

Reconciliation of the Reported 2013 Sales between Continuing and Discontinued Operations
($ in millions)



2013 Sales



Total Sales, Incl. Discontinued Operations


Discontinued Operations


Continuing
Operations








1H13













Total Sales

10,824


(1,006)


9,818

U.S. 

3,094


--


3,094

International

7,730


(1,006)


6,724








Established Pharmaceuticals

2,451


(1,006)


1,445








3Q13













Total Sales

5,369


(544)


4,825

U.S. 

1,587


--


1,587

International

3,782


(544)


3,238








Established Pharmaceuticals

1,235


(544)


691








9M13













Total Sales

16,193


(1,550)


14,643

U.S. 

4,681


--


4,681

International

11,512


(1,550)


9,962








Established Pharmaceuticals

3,686


(1,550)


2,136








4Q13













Total Sales

5,655


(562)


5,093

U.S. 

1,588


--


1,588

International

4,067


(562)


3,505








Established Pharmaceuticals

1,288


(562)


726















Full Year 2013













Total Sales

21,848


(2,112)


19,736

U.S. 

6,269


--


6,269

International

15,579


(2,112)


13,467








Established Pharmaceuticals

4,974


(2,112)


2,862

SOURCE Abbott



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