Abbott Reports Second-Quarter 2017 Results
ABBOTT PARK, Ill., July 20, 2017 /PRNewswire/ -- Abbott (NYSE: ABT) today announced financial results for the second quarter ended June 30, 2017.
-- Second-quarter worldwide sales of $6.6 billion increased 24.4 percent on
a reported basis and 2.9 percent on a comparable operational(*) basis.
-- Reported diluted EPS from continuing operations under GAAP was $0.15 in
the second quarter. Excluding specified items, adjusted diluted EPS from
continuing operations was $0.62 in the second quarter, above the
previous guidance range of $0.59 to $0.61.
-- Abbott is raising its full-year 2017 EPS guidance range, which continues
to reflect double-digit growth. Abbott projects full-year diluted EPS
from continuing operations on a GAAP basis of $1.03 to $1.13. Projected
full-year adjusted diluted EPS from continuing operations is now $2.43
to $2.53.
-- In the second quarter, Abbott submitted for FDA approval of
MRI-conditional labeling for its Quadra Assura(TM) Cardiac
Resynchronization Therapy Defibrillator (CRT-D) products and Quartet(TM
)family of left ventricular leads.
-- In May, Abbott announced CE Mark of the new Confirm Rx(TM) Insertable
Cardiac Monitor (ICM), the world's first smartphone compatible ICM that
helps physicians detect cardiac arrhythmias in order to guide therapy.
-- In June, Abbott announced CE Mark of its new Alinity(TM) hq hematology
system, which identifies and quantifies different types of blood cells
to help diagnose blood-related diseases. Alinity hq represents the fifth
new diagnostic system the company has launched in Europe since November
2016.
-- In June, Abbott announced its FreeStyle(®) Libre glucose monitoring
system received regulatory approval in Canada and national reimbursement
in France. This revolutionary system transforms how people test their
glucose levels by providing a convenient alternative to painful finger
sticks.
"Halfway through the year, we're on track with all of our key priorities, including the integration of St. Jude and growth contributions from our pipeline," said Miles D. White, chairman and chief executive officer, Abbott. "We're also raising our full-year guidance range as we continue to target double-digit ongoing EPS growth."
* See note on comparable operational growth below.
SECOND-QUARTER BUSINESS OVERVIEW
Note: Management believes that measuring sales growth rates on a comparable operational basis is an appropriate way for investors to best understand the underlying performance of the business.
Comparable operational sales growth excludes the impact of exchange and for Total Abbott and Medical Devices, also includes prior year results for St. Jude Medical, which was acquired on Jan. 4, 2017, and excludes prior year and current year results for the Abbott Medical Optics (AMO) and St. Jude Medical vascular closure businesses, which were divested during the first quarter 2017. Comparable operational sales growth also reflects a reduction to St. Jude Medical's historic sales related to administrative fees paid to conform to Abbott's presentation, as further described in Form 8-K issued on April 18, 2017.
Following are sales by business segment and commentary for the second quarter and first half 2017:
Total Company
($ in millions)
% Change vs. 2Q16
-----------------
Sales 2Q17 Reported Comparable Operational
---------- -------- ----------------------
U.S. Int'l Total U.S. Int'l Total U.S. Int'l Total
---- ----- ----- ----- ----- ----- -----
Total * 2,360 4,277 6,637 42.5 16.3 24.4 3.0 2.9 2.9
----- ----- ----- ---- ---- ---- --- --- ---
Nutrition 773 958 1,731 3.1 (3.3) (0.6) 3.1 (1.5) 0.5
Diagnostics 385 888 1,273 6.8 2.6 3.8 6.8 4.8 5.4
Established
Pharmaceuticals -- 1,021 1,021 n/a 4.1 4.1 n/a 3.5 3.5
Medical Devices 1,191 1,405 2,596 122.4 68.0 89.2 1.7 4.4 3.2
* Total Abbott sales from
continuing operations include
Other Sales of $16 million.
In 2016, the AMO business,
which was divested during the
first quarter 2017, was
reported as part of the
Medical Devices group.
Comparable operational growth
rates above exclude results
from the AMO business.
% Change vs. 1H16
-----------------
Sales 1H17 Reported Comparable Operational
---------- -------- ----------------------
U.S. Int'l Total U.S. Int'l Total U.S. Int'l Total
---- ----- ----- ----- ----- ----- -----
Total * 4,684 8,288 12,972 47.0 17.9 27.0 3.4 2.9 3.1
----- ----- ------ ---- ---- ---- --- --- ---
Nutrition 1,503 1,870 3,373 2.4 (3.8) (1.1) 2.4 (2.2) (0.3)
Diagnostics 756 1,675 2,431 8.1 1.9 3.7 8.1 3.8 5.1
Established
Pharmaceuticals -- 1,971 1,971 n/a 5.5 5.5 n/a 4.5 4.5
Medical Devices 2,327 2,664 4,991 132.5 70.0 94.3 2.6 4.8 3.8
* In 2017, Total Abbott sales
from continuing operations
include Other Sales of $206
million, including sales of
$175 million from the AMO
business, which was divested
during the first quarter
2017. In 2016, the AMO
business was reported as part
of the Medical Devices group.
Comparable operational growth
rates above exclude results
from the AMO business.
n/a = Not Applicable.
Note: In order to compute
results excluding the impact
of exchange rates, current
year U.S. dollar sales are
multiplied or divided, as
appropriate, by the current
year average foreign exchange
rates and then those amounts
are multiplied or divided, as
appropriate, by the prior
year average foreign exchange
rates.
Second-quarter 2017 worldwide sales of $6.6 billion increased 24.4 percent on a reported basis. On a comparable operational basis, worldwide sales increased 2.9 percent. Sales growth in the quarter was impacted by purchasing patterns associated with the implementation of a new Goods and Services Tax (GST) system in India. Excluding this transitory impact, which primarily impacted Established Pharmaceuticals, total Abbott sales would have grown 25.3 percent on a reported basis and 3.7 percent on a comparable operational basis in the second quarter. Refer to the tables titled Non-GAAP Reconciliation of Comparable Historical Revenue for additional detail.
Nutrition
($ in millions)
% Change vs. 2Q16
-----------------
Sales 2Q17 Reported Comparable Operational
---------- -------- ----------------------
U.S. Int'l Total U.S. Int'l Total U.S. Int'l Total
---- ----- ----- ----- ----- ----- -----
Total 773 958 1,731 3.1 (3.3) (0.6) 3.1 (1.5) 0.5
--- --- ----- --- ---- ---- --- ---- ---
Pediatric 459 528 987 8.0 (3.7) 1.4 8.0 (1.8) 2.5
Adult 314 430 744 (3.4) (2.8) (3.1) (3.4) (1.0) (2.0)
% Change vs. 1H16
-----------------
Sales 1H17 Reported Comparable Operational
---------- -------- ----------------------
U.S. Int'l Total U.S. Int'l Total U.S. Int'l Total
---- ----- ----- ----- ----- ----- -----
Total 1,503 1,870 3,373 2.4 (3.8) (1.1) 2.4 (2.2) (0.3)
----- ----- ----- --- ---- ---- --- ---- ----
Pediatric 891 1,023 1,914 7.7 (8.0) (1.3) 7.7 (6.4) (0.4)
Adult 612 847 1,459 (4.5) 1.9 (0.9) (4.5) 3.3 (0.1)
Worldwide Nutrition sales decreased 0.6 percent on a reported basis in the second quarter, including an unfavorable 1.1 percent effect of foreign exchange, and increased 0.5 percent on an operational basis.
Worldwide Pediatric Nutrition sales increased 1.4 percent on a reported basis in the second quarter, including an unfavorable 1.1 percent effect of foreign exchange, and increased 2.5 percent on an operational basis. In the U.S., above-market sales growth was driven by recently launched new products across Abbott's infant formula portfolio as well as strong growth of its PediaSure(®) toddler brand. International sales declined 3.7 percent on a reported basis and 1.8 percent on an operational basis. As expected, market conditions in China remain challenging.
Worldwide Adult Nutrition sales decreased 3.1 percent on a reported basis in the second quarter, including an unfavorable 1.1 percent effect of foreign exchange, and decreased 2.0 percent on an operational basis. Global Adult Nutrition sales were impacted by competitive and market dynamics.
Diagnostics
($ in millions)
% Change vs. 2Q16
-----------------
Sales 2Q17 Reported Comparable Operational
---------- -------- ----------------------
U.S. Int'l Total U.S. Int'l Total U.S. Int'l Total
---- ----- ----- ----- ----- ----- -----
Total 385 888 1,273 6.8 2.6 3.8 6.8 4.8 5.4
--- --- ----- --- --- --- --- --- ---
Core
Laboratory 232 788 1,020 12.5 2.0 4.2 12.5 4.4 6.1
Molecular 41 73 114 (18.6) 6.1 (4.5) (18.6) 6.7 (4.1)
Point of Care 112 27 139 8.0 11.2 8.6 8.0 12.7 8.9
% Change vs. 1H16
-----------------
Sales 1H17 Reported Comparable Operational
---------- -------- ----------------------
U.S. Int'l Total U.S. Int'l Total U.S. Int'l Total
---- ----- ----- ----- ----- ----- -----
Total 756 1,675 2,431 8.1 1.9 3.7 8.1 3.8 5.1
--- ----- ----- --- --- --- --- --- ---
Core
Laboratory 448 1,483 1,931 13.1 1.1 3.6 13.1 3.2 5.3
Molecular 86 140 226 (11.7) 8.0 (0.5) (11.7) 8.3 (0.3)
Point of Care 222 52 274 7.6 9.8 8.0 7.6 10.7 8.2
Worldwide Diagnostics sales increased 3.8 percent on a reported basis in the second quarter, including an unfavorable 1.6 percent effect of foreign exchange, and increased 5.4 percent on an operational basis.
Core Laboratory Diagnostics sales increased 4.2 percent on a reported basis in the second quarter, including an unfavorable 1.9 percent effect of foreign exchange, and increased 6.1 percent on an operational basis. In the U.S., double-digit growth was driven by share capture in Abbott's blood screening business. During the quarter, Abbott announced CE Mark of its new Alinity hq hematology system to identify and quantify different types of blood cells to help diagnose blood-related diseases. Alinity hq represents the fifth new diagnostic system the company has launched in Europe since November 2016.
Molecular Diagnostics sales decreased 4.5 percent on a reported basis in the second quarter, including an unfavorable 0.4 percent effect of foreign exchange, and decreased 4.1 percent on an operational basis. Continued growth in infectious disease testing, Abbott's core area of focus in the molecular diagnostics market, was offset by a planned scale down in other testing areas.
Point of Care Diagnostics sales increased 8.6 percent on a reported basis in the second quarter, including an unfavorable 0.3 percent effect of foreign exchange, and increased 8.9 percent on an operational basis. Sales growth in the quarter was led by continued adoption of Abbott's i-STAT(®) handheld system in the U.S. and strong growth internationally.
Established Pharmaceuticals
($ in millions)
% Change vs. 2Q16
-----------------
Sales 2Q17 Reported Comparable Operational
---------- -------- ----------------------
U.S. Int'l Total U.S. Int'l Total U.S. Int'l Total
---- ----- ----- ----- ----- ----- -----
Total -- 1,021 1,021 n/a 4.1 4.1 n/a 3.5 3.5
--- ----- ----- ---- --- --- ---- --- ---
Key
Emerging
Markets -- 798 798 n/a 5.8 5.8 n/a 4.6 4.6
Other -- 223 223 n/a (1.5) (1.5) n/a (0.2) (0.2)
% Change vs. 1H16
-----------------
Sales 1H17 Reported Comparable Operational
---------- -------- ----------------------
U.S. Int'l Total U.S. Int'l Total U.S. Int'l Total
---- ----- ----- ----- ----- ----- -----
Total -- 1,971 1,971 n/a 5.5 5.5 n/a 4.5 4.5
--- ----- ----- ---- --- --- ---- --- ---
Key
Emerging
Markets -- 1,528 1,528 n/a 10.1 10.1 n/a 8.2 8.2
Other -- 443 443 n/a (7.8) (7.8) n/a (6.1) (6.1)
Established Pharmaceuticals sales increased 4.1 percent on a reported basis in the second quarter, including a favorable 0.6 percent effect of foreign exchange, and increased 3.5 percent on an operational basis. Sales growth in the quarter was impacted by purchasing patterns associated with the implementation of a new Goods and Services Tax (GST) system in India. Excluding this transitory impact, total Established Pharmaceutical sales would have grown in the high-single digits in the second quarter.
Key Emerging Markets include Brazil, Russia, India and China, along with several additional emerging countries that represent the most attractive long-term growth opportunities for Abbott's branded generics product portfolio. Sales in these key geographies increased 5.8 percent on a reported basis and 4.6 percent on an operational basis in the second quarter. Strong growth in Russia, China, and several countries across Latin America was partially offset by the impact associated with implementation of a new GST system in India. Excluding this transitory impact, sales in Key Emerging Markets would have grown double-digits in the second quarter.
Medical Devices
($ in millions)
% Change vs. 2Q16
-----------------
Sales 2Q17 Reported Comparable Operational
---------- -------- ----------------------
U.S. Int'l Total U.S. Int'l Total U.S. Int'l Total
---- ----- ----- ----- ----- ----- -----
Total 1,191 1,405 2,596 122.4 68.0 89.2 1.7 4.4 3.2
----- ----- ----- ----- ---- ---- --- --- ---
Cardiovascular and
Neuromodulation 1,110 1,150 2,260 220.3 164.2 189.0 1.1 0.7 0.9
Rhythm Management 273 279 552 n/m n/m n/m (13.7) (4.5) (9.2)
Electrophysiology 154 189 343 n/m n/m n/m 13.0 7.7 10.0
Heart Failure 123 36 159 n/m n/m n/m 0.7 1.3 0.8
Vascular 295 436 731 (2.3) 13.5 6.6 (10.8) (2.5) (6.0)
Structural Heart 104 164 268 149.2 219.2 187.9 9.1 9.0 9.1
Neuromodulation 161 46 207 n/m n/m n/m 65.5 11.5 49.0
Diabetes Care 81 255 336 10.7 21.4 18.7 10.7 24.9 21.3
% Change vs. 1H16
-----------------
Sales 1H17 Reported Comparable Operational
---------- -------- ----------------------
U.S. Int'l Total U.S. Int'l Total U.S. Int'l Total
---- ----- ----- ----- ----- ----- -----
Total 2,327 2,664 4,991 132.5 70.0 94.3 2.6 4.8 3.8
----- ----- ----- ----- ---- ---- --- --- ---
Cardiovascular and
Neuromodulation 2,171 2,192 4,363 241.7 163.6 197.4 2.1 1.0 1.6
Rhythm Management 533 530 1,063 n/m n/m n/m (15.7) (4.3) (10.3)
Electrophysiology 299 360 659 n/m n/m n/m 11.6 9.5 10.4
Heart Failure 232 69 301 n/m n/m n/m (4.7) 3.1 (3.0)
Vascular 599 835 1,434 8.2 13.9 11.4 (3.1) (3.2) (3.1)
Structural Heart 211 313 524 180.8 220.3 203.2 15.3 10.1 12.1
Neuromodulation 297 85 382 n/m n/m n/m 64.0 16.3 50.1
Diabetes Care 156 472 628 9.5 23.1 19.4 9.5 26.7 22.0
n/m = Percent change is not
meaningful.
Worldwide Medical Devices sales increased 89.2 percent on a reported basis in the second quarter. On a comparable operational basis, sales increased 3.2 percent, or 4.4 percent excluding the comparison impact from the favorable resolution of a third-party royalty agreement last year. Refer to the tables titled Non-GAAP Reconciliation of Comparable Historical Revenue for additional detail.
Worldwide sales of Cardiovascular and Neuromodulation products were led by strong growth in Electrophysiology, Structural Heart and Neuromodulation. In Electrophysiology, Abbott announced the European launch of its Confirm Rx Insertable Cardiac Monitor (ICM), the world's first smartphone compatible ICM that helps physicians detect cardiac arrhythmias in order to guide therapy. Growth in Structural Heart was driven by continued double-digit growth of MitraClip(®), Abbott's market-leading device for the treatment of mitral regurgitation. In Neuromodulation, strong double-digit growth was led by several recently launched products for the treatment of chronic pain and movement disorders. As expected, Rhythm Management sales in the U.S. were impacted by continued competitive dynamics in the MRI-conditional category of products. In the quarter, Abbott submitted for FDA approval of MRI-conditional labeling for its Quadra Assura Cardiac Resynchronization Therapy Defibrillator (CRT-D) products and Quartet family of left ventricular leads.
Worldwide Diabetes Care sales increased 18.7 percent on a reported basis in the second quarter, including an unfavorable 2.6 percent effect of foreign exchange, and increased 21.3 percent on an operational basis. Strong double-digit international sales growth was led by continued consumer uptake of FreeStyle Libre, Abbott's revolutionary sensor-based glucose monitoring system, which received regulatory approval in Canada in June and is now available for sale in more than thirty-five countries.
ABBOTT RAISES FULL-YEAR EARNINGS-PER-SHARE GUIDANCE
Abbott is raising its full-year 2017 earnings per share guidance range, which continues to reflect double-digit growth. Abbott now projects diluted earnings per share from continuing operations under Generally Accepted Accounting Principles (GAAP) to be $1.03 to $1.13. Projected diluted earnings per share from continuing operations on an adjusted basis is now $2.43 to $2.53 for the full year 2017.
Abbott forecasts net specified items for the full year 2017 of approximately $1.40 per share. Specified items include acquisition-related expenses, intangible amortization expense, charges associated with cost reduction initiatives and other expenses, partially offset by a gain on the sale of the AMO business.
ABBOTT DECLARES 374(TH) QUARTERLY DIVIDEND
On June 9, 2017, the board of directors of Abbott declared the company's quarterly dividend of $0.265 per share. Abbott's cash dividend is payable Aug. 15, 2017, to shareholders of record at the close of business on July 14, 2017.
Abbott has increased its dividend payout for 45 consecutive years and is a member of the S&P 500 Dividend Aristocrats Index, which tracks companies that have annually increased their dividend for at least 25 consecutive years.
About Abbott:
Abbott 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 94,000 people.
Visit Abbott at www.abbott.com and connect with us on Twitter at @AbbottNews.
Abbott will webcast its live second-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 later that day.
-- 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, 2016, 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
Condensed Consolidated Statement of Earnings
Second Quarter Ended June 30, 2017 and 2016
(in millions, except per share data)
(unaudited)
2Q17 2Q16 % Change
---- ---- --------
Net Sales $6,637 $5,333 24.4
Cost of products sold, excluding amortization expense 3,173 2,287 38.7
Amortization of intangible assets 392 145 n/m
Research and development 513 348 47.5
Selling, general, and administrative 2,132 1,737 22.7
Total Operating Cost and Expenses 6,210 4,517 37.5
----- -----
Operating earnings 427 816 (47.7)
Interest expense, net 183 83 n/m
Net foreign exchange (gain) loss (12) 10 n/m
Other (income) expense, net (39) 8 n/m
--- ---
Earnings from Continuing Operations before taxes 295 715 (58.8)
Tax expense on Earnings from Continuing Operations 25 116 (78.6)
Earnings from Continuing Operations 270 599 (54.9)
Earnings from Discontinued Operations, net of taxes 13 16 (22.5)
Gain on Sale of Discontinued Operations, net of taxes -- --
--- ---
Net Earnings from Discontinued Operations, net of taxes 13 16 (22.5)
--- ---
Net Earnings $283 $615 (54.1)
==== ====
Earnings from Continuing Operations, excluding
Specified Items, as described below $1,096 $812 34.9 1)
====== ====
Diluted Earnings per Common Share from:
Continuing Operations $0.15 $0.40 (62.5)
Discontinued Operations 0.01 0.01 --
---- ----
Total $0.16 $0.41 (61.0)
===== =====
Diluted Earnings per Common Share from Continuing
Operations, excluding Specified Items, as described below $0.62 $0.55 12.7 1)
===== =====
Average Number of Common Shares Outstanding
Plus Dilutive Common Stock Options 1,749 1,480
NOTES:
See tables below for an explanation of certain non-GAAP
financial information.
n/m = Percent change is not meaningful.
See footnote below.
1) 2017 Net Earnings and Diluted Earnings per
Common Share from Continuing Operations,
excluding Specified Items, excludes net
after-tax charges of $826 million, or $0.47
per share, for intangible amortization
expense and other expenses primarily
associated with acquisitions and
restructuring actions.
2016 Net Earnings and Diluted Earnings per
Common Share from Continuing Operations,
excluding Specified Items, excludes net
after-tax charges of $213 million, or $0.15
per share, for intangible amortization
expense, expenses primarily associated with
acquisitions, including bridge facility fees,
and charges related to cost reduction
initiatives and other expenses.
Abbott Laboratories and Subsidiaries
Condensed Consolidated Statement of Earnings
First Half Ended June 30, 2017 and 2016
(in millions, except per share data)
(unaudited)
1H17 1H16 % Change
---- ---- --------
Net Sales $12,972 $10,218 27.0
Cost of products sold, excluding amortization expense 6,217 4,427 40.4
Amortization of intangible assets 914 289 n/m
Research and development 1,060 727 45.9
Selling, general, and administrative 4,556 3,435 32.6
Total Operating Cost and Expenses 12,747 8,878 43.6
------ -----
Operating earnings 225 1,340 (83.2)
Interest expense, net 387 108 n/m
Net foreign exchange (gain) loss (28) 488 n/m 1)
Other (income) expense, net (1,165) 27 n/m 2)
------ ---
Earnings from Continuing Operations before taxes 1,031 717 43.8
Tax expense on Earnings from Continuing Operations 375 62 n/m 3)
Earnings from Continuing Operations 656 655 0.1
Earnings from Discontinued Operations, net of taxes 46 260 (82.4)
Gain on Sale of Discontinued Operations, net of taxes -- 16 n/m
--- ---
Net Earnings from Discontinued Operations, net of taxes 46 276 (83.4) 4)
--- ---
Net Earnings $702 $931 (24.7)
==== ====
Earnings from Continuing Operations, excluding
Specified Items, as described below $1,939 $1,427 35.9 5)
====== ======
Diluted Earnings per Common Share from:
Continuing Operations $0.37 $0.44 (15.9)
Discontinued Operations 0.03 0.19 (84.2) 4)
---- ----
Total $0.40 $0.63 (36.5)
===== =====
Diluted Earnings per Common Share from Continuing
Operations, excluding Specified Items, as described below $1.11 $0.96 15.6 5)
===== =====
Average Number of Common Shares Outstanding
Plus Dilutive Common Stock Options 1,742 1,482
NOTES:
See tables below for an explanation of
certain non-GAAP financial information.
n/m = Percent change is not meaningful.
See footnotes below.
1) 2016 Net foreign exchange (gain)
loss includes a loss of $477
million related to the
revaluation of Abbott's net
monetary assets in Venezuela
using the Dicom exchange rate,
which is the Venezuelan
government's official floating
exchange rate.
2) 2017 Other (income) expense, net
includes a pretax gain of $1.151
billion from the sale of the AMO
business.
3) 2017 Tax expense on Earnings from
Continuing Operations includes
the tax associated with a $1.151
billion pretax gain on the sale
of the AMO business.
2016 Tax expense on Earnings from
Continuing Operations includes
the impact of a net tax benefit
of approximately $145 million as
a result of the resolution of
various tax positions from prior
years, partially offset by the
unfavorable impact of non-
deductible foreign exchange
losses related to Venezuela.
4) 2017 Earnings and Diluted Earnings
per Common Share from
Discontinued Operations, net of
taxes primarily relates to a net
tax benefit as a result of the
resolution of various tax
positions from prior years.
2016 Earnings and Diluted Earnings
per Common Share from
Discontinued Operations, net of
taxes primarily reflect the
impact of a net tax benefit of
$266 million as a result of the
resolution of various tax
positions from prior years.
5) 2017 Net Earnings and Diluted
Earnings per Common Share from
Continuing Operations, excluding
Specified Items, excludes net
after-tax charges of $1.283
billion, or $0.74 per share, for
intangible amortization expense
and other expenses primarily
associated with acquisitions and
restructuring actions, partially
offset by a gain on the sale of
the AMO business.
2016 Net Earnings and Diluted
Earnings per Common Share from
Continuing Operations, excluding
Specified Items, excludes net
after-tax charges of $772
million, or $0.52 per share, for
intangible amortization expense,
the foreign exchange loss related
to Venezuela, expenses associated
with acquisitions, including
bridge facility fees, and other
charges related to cost reduction
initiatives and other expenses,
partially offset by the favorable
impact of a net tax benefit as a
result of the resolution of
various tax positions from prior
years.
NON-GAAP RECONCILIATION OF FINANCIAL INFORMATION FROM CONTINUING OPERATIONS
Abbott Laboratories and Subsidiaries
Non-GAAP Reconciliation of Financial Information From Continuing Operations
Second Quarter Ended June 30, 2017 and 2016
(in millions, except per share data)
(unaudited)
2Q17
----
As Specified As % to
Reported Items Adjusted Sales
(GAAP)
-----
Intangible Amortization $392 $(392) --
Gross Margin 3,072 895 $3,967 59.8%
R&D 513 (15) 498 7.5%
SG&A 2,132 (138) 1,994 30.0%
Interest expense, net 183 (2) 181
Other (income) expense, net (39) 32 (7)
Earnings from Continuing Operations before taxes 295 1,018 1,313
Tax expense on Earnings from Continuing Operations 25 192 217
Earnings from Continuing Operations 270 826 1,096
Diluted Earnings per Share from Continuing Operations $0.15 $0.47 $0.62
Specified items reflect intangible amortization expense of $392 million and other expenses of $626 million, primarily associated with acquisitions, including approximately $430 million of inventory step-up amortization related to St. Jude Medical and other expenses. For additional details, refer to the table titled Details of Specified Items for the second quarter ended June 30, 2017.
2Q16
----
As Specified As % to
Reported Items Adjusted Sales
(GAAP)
-----
Intangible Amortization $145 $(145) --
Gross Margin 2,901 170 $3,071 57.6%
R&D 348 (1) 347 6.5%
SG&A 1,737 (54) 1,683 31.6%
Interest expense, net 83 (57) 26
Other (income) expense, net 8 (1) 7
Earnings from Continuing Operations before taxes 715 283 998
Tax expense on Earnings from Continuing Operations 116 70 186
Earnings from Continuing Operations 599 213 812
Diluted Earnings per Share from Continuing Operations $0.40 $0.15 $0.55
Specified items reflect intangible amortization expense of $145 million, and other expenses of $138 million, primarily associated with acquisitions, including bridge facility fees, and charges related to cost reduction initiatives and other expenses. For additional details, refer to the table titled Details of Specified Items for the second quarter ended June 30, 2016.
Abbott Laboratories and Subsidiaries
Non-GAAP Reconciliation of Financial Information From Continuing Operations
First Half Ended June 30, 2017 and 2016
(in millions, except per share data)
(unaudited)
1H17
----
As Specified As % to
Reported Items Adjusted Sales
(GAAP)
-----
Intangible Amortization $914 $(914) --
Gross Margin 5,841 1,879 $7,720 59.5%
R&D 1,060 (55) 1,005 7.7%
SG&A 4,556 (505) 4,051 31.2%
Interest expense, net 387 (19) 368
Other (income) expense, net (1,165) 1,166 1
Earnings from Continuing Operations before taxes 1,031 1,292 2,323
Tax expense on Earnings from Continuing Operations 375 9 384
Earnings from Continuing Operations 656 1,283 1,939
Diluted Earnings per Share from Continuing Operations $0.37 $0.74 $1.11
Specified items reflect intangible amortization expense of $914 million and other expenses of $1.529 billion, primarily associated with acquisitions, including approximately $820 million of inventory step-up amortization related to St. Jude Medical, charges related to restructuring actions and other expenses, partially offset by a gain of $1.151 billion from the sale of the AMO business. For additional details, refer to the table titled Details of Specified Items for the first half ended June 30, 2017.
1H16
----
As Specified As % to
Reported Items Adjusted Sales
(GAAP)
-----
Intangible Amortization $289 $(289) --
Gross Margin 5,502 342 $5,844 57.2%
R&D 727 (46) 681 6.7%
SG&A 3,435 (97) 3,338 32.7%
Interest expense, net 108 (69) 39
Net foreign exchange (gain) loss 488 (477) 11
Other (income) expense, net 27 (5) 22
Earnings from Continuing Operations before taxes 717 1,036 1,753
Tax expense on Earnings from Continuing Operations 62 264 326
Earnings from Continuing Operations 655 772 1,427
Diluted Earnings per Share from Continuing Operations $0.44 $0.52 $0.96
Specified items reflect intangible amortization expense of $289 million, the impact of the foreign exchange loss in Venezuela of $477 million, and other expenses of $270 million, primarily associated with acquisitions, including bridge facility fees, and charges related to cost reduction initiatives and other expenses, partially offset by a net tax benefit of approximately $145 million as a result of the resolution of various tax positions from prior years. For additional details, refer to the table titled Details of Specified Items for the first half ended June 30, 2016.
RECONCILIATION OF TAX RATE FOR CONTINUING OPERATIONS
A reconciliation of the second-quarter tax rates for continuing operations for 2017 and 2016 is shown below:
2Q17
----
($ in millions) Pre-Tax Taxes on Tax
Income Earnings Rate
------ -------- ----
As reported (GAAP) $295 $25 8.4% 1)
Specified items 1,018 192
----- ---
Excluding specified items $1,313 $217 16.5%
2Q16
----
($ in millions) Pre-Tax Taxes on Tax
Income Earnings Rate
------ -------- ----
As reported (GAAP) $715 $116 16.2%
Specified items 283 70
--- ---
Excluding specified items $998 $186 18.6%
1) Reported tax rate on a GAAP basis for the
second quarter of 2017 includes the impact
of approximately $25 million in excess tax
benefits associated with share-based
compensation.
A reconciliation of the year-to-date tax rates for continuing operations for 2017 and 2016 is shown below:
1H17
----
($ in millions) Pre-Tax Taxes on Tax
Income Earnings Rate
------ -------- ----
As reported (GAAP) $1,031 $375 36.4% 2)
Specified items 1,292 9
----- ---
Excluding specified items $2,323 $384 16.5%
1H16
----
($ in millions) Pre-Tax Taxes on Tax
Income Earnings Rate
------ -------- ----
As reported (GAAP) $717 $62 8.6% 3)
Specified items 1,036 264
----- ---
Excluding specified items $1,753 $326 18.6%
2) Reported tax rate on a GAAP basis
for 2017 includes the impact of
taxes associated with a $1.151
billion pretax gain on the sale
of the AMO business.
3) Reported tax rate on a GAAP basis
for 2016 includes the impact of a
net tax benefit of approximately
$145 million as a result of the
resolution of various tax
positions from prior years,
partially offset by the
unfavorable impact of non-
deductible foreign exchange
losses related to Venezuela.
Abbott Laboratories and Subsidiaries
Non-GAAP Reconciliation of Comparable Historical Revenue
Second Quarter Ended June 30, 2017 and 2016
($ in millions) (unaudited)
2Q17 2Q16 % Change vs. 2Q16
---- ---- -----------------
Abbott Divested Comparable Abbott Acquired AMO Comparable Comparable
Reported Businesses Revenue Reported St. Jude Revenue
Businessa)
---------
Reported Reported Operationalb)
-------- -------- ------------
Total Company 6,637 -- 6,637 5,333 1,484 (307) 6,510 24.4 1.9 2.9
U.S. 2,360 -- 2,360 1,655 752 (116) 2,291 42.5 3.0 3.0
Int'l 4,277 -- 4,277 3,678 732 (191) 4,219 16.3 1.4 2.9
Total Medical Devices 2,596 -- 2,596 1,372 1,484 (307) 2,549 89.2 1.9 3.2
U.S. 1,191 -- 1,191 535 752 (116) 1,171 122.4 1.7 1.7
Int'l 1,405 -- 1,405 837 732 (191) 1,378 68.0 2.0 4.4
Cardiovascular and Neuromodulation 2,260 -- 2,260 782 1,484 -- 2,266 189.0 (0.2) 0.9
U.S. 1,110 -- 1,110 346 752 -- 1,098 220.3 1.1 1.1
Int'l 1,150 -- 1,150 436 732 -- 1,168 164.2 (1.5) 0.7
Rhythm Management 552 -- 552 -- 614 -- 614 n/m (10.4) (9.2)
U.S. 273 -- 273 -- 315 -- 315 n/m (13.7) (13.7)
Int'l 279 -- 279 -- 299 -- 299 n/m (6.9) (4.5)
Electrophysiology 343 -- 343 3 313 -- 316 n/m 8.8 10.0
U.S. 154 -- 154 3 134 -- 137 n/m 13.0 13.0
Int'l 189 -- 189 -- 179 -- 179 n/m 5.5 7.7
Heart Failure 159 -- 159 -- 159 -- 159 n/m 0.2 0.8
U.S. 123 -- 123 -- 122 -- 122 n/m 0.7 0.7
Int'l 36 -- 36 -- 37 -- 37 n/m (1.5) 1.3
Vascular 731 -- 731 686 102 -- 788 6.6 (7.1) (6.0)
U.S. 295 -- 295 301 30 -- 331 (2.3) (10.8) (10.8)
Int'l 436 -- 436 385 72 -- 457 13.5 (4.3) (2.5)
Structural Heart 268 -- 268 93 156 -- 249 187.9 7.5 9.1
U.S. 104 -- 104 42 54 -- 96 149.2 9.1 9.1
Int'l 164 -- 164 51 102 -- 153 219.2 6.5 9.0
Neuromodulation 207 -- 207 -- 140 -- 140 n/m 48.1 49.0
U.S. 161 -- 161 -- 97 -- 97 n/m 65.5 65.5
Int'l 46 -- 46 -- 43 -- 43 n/m 8.4 11.5
a) Reflects reported actuals for St.
Jude Medical, excluding results from
the vascular closure business, as
well as a reduction to St. Jude
Medical sales related to the
reclassification of fees paid to
group purchasing organizations from
the Selling, general, and
administrative line.
b) In order to compute results
excluding the impact of
exchange rates, current year
U.S. dollar sales are
multiplied or divided, as
appropriate, by the current
year average foreign exchange
rates and then those amounts
are multiplied or divided, as
appropriate, by the prior
year average foreign exchange
rates.
Abbott Laboratories and Subsidiaries
Non-GAAP Reconciliation of Comparable Historical Revenue
First Half Ended June 30, 2017 and 2016
($ in millions) (unaudited)
1H17 1H16 % Change vs. 1H16
---- ---- -----------------
Abbott Divested Comparable Abbott Acquired AMO Comparable Comparable
Reported Businessesa) Revenue Reported St. Jude Revenue
Businessb)
---------
Reported Reported Operationalc)
-------- -------- ------------
Total Company 12,972 (187) 12,785 10,218 2,857 (576) 12,499 27.0 2.3 3.1
U.S. 4,684 (84) 4,600 3,186 1,485 (224) 4,447 47.0 3.4 3.4
Int'l 8,288 (103) 8,185 7,032 1,372 (352) 8,052 17.9 1.7 2.9
Total Medical Devices 4,991 (12) 4,979 2,569 2,857 (576) 4,850 94.3 2.7 3.8
U.S. 2,327 (6) 2,321 1,001 1,485 (224) 2,262 132.5 2.6 2.6
Int'l 2,664 (6) 2,658 1,568 1,372 (352) 2,588 70.0 2.7 4.8
Cardiovascular and Neuromodulation 4,363 (12) 4,351 1,467 2,857 -- 4,324 197.4 0.6 1.6
U.S. 2,171 (6) 2,165 635 1,485 -- 2,120 241.7 2.1 2.1
Int'l 2,192 (6) 2,186 832 1,372 -- 2,204 163.6 (0.8) 1.0
Rhythm Management 1,063 -- 1,063 -- 1,196 -- 1,196 n/m (11.3) (10.3)
U.S. 533 -- 533 -- 632 -- 632 n/m (15.7) (15.7)
Int'l 530 -- 530 -- 564 -- 564 n/m (6.3) (4.3)
Electrophysiology 659 -- 659 7 594 -- 601 n/m 9.7 10.4
U.S. 299 -- 299 7 262 -- 269 n/m 11.6 11.6
Int'l 360 -- 360 -- 332 -- 332 n/m 8.1 9.5
Heart Failure 301 -- 301 -- 313 -- 313 n/m (3.5) (3.0)
U.S. 232 -- 232 -- 243 -- 243 n/m (4.7) (4.7)
Int'l 69 -- 69 -- 70 -- 70 n/m 0.5 3.1
Vascular 1,434 (12) 1,422 1,287 198 -- 1,485 11.4 (4.1) (3.1)
U.S. 599 (6) 593 553 59 -- 612 8.2 (3.1) (3.1)
Int'l 835 (6) 829 734 139 -- 873 13.9 (4.9) (3.2)
Structural Heart 524 -- 524 173 300 -- 473 203.2 10.7 12.1
U.S. 211 -- 211 75 108 -- 183 180.8 15.3 15.3
Int'l 313 -- 313 98 192 -- 290 220.3 7.7 10.1
Neuromodulation 382 -- 382 -- 256 -- 256 n/m 49.4 50.1
U.S. 297 -- 297 -- 181 -- 181 n/m 64.0 64.0
Int'l 85 -- 85 -- 75 -- 75 n/m 13.9 16.3
a) Reflects sales related to the AMO
and St. Jude Medical vascular
closure businesses prior to
divesting in the first quarter 2017.
b) Reflects reported actuals for St.
Jude Medical, excluding results from
the vascular closure business, as
well as a reduction to St. Jude
Medical sales related to the
reclassification of fees paid to
group purchasing organizations from
the Selling, general, and
administrative line.
c) In order to compute results
excluding the impact of exchange
rates, current year U.S. dollar
sales are multiplied or divided, as
appropriate, by the current year
average foreign exchange rates and
then those amounts are multiplied or
divided, as appropriate, by the
prior year average foreign exchange
rates.
Abbott Laboratories and Subsidiaries
Details of Specified Items
Second Quarter Ended June 30, 2017
(in millions, except per share data)
Acquisition or Restructuring Intangible Total
Divestiture- and Cost Amortization Specifieds
related (a) Reduction
Initiatives (b)
--------------
Gross Margin $438 $65 $392 $895
R&D (12) (3) -- (15)
SG&A (134) (4) -- (138)
Interest expense, net (2) -- -- (2)
Other (income) expense, net 32 -- -- 32
--- --- --- ---
Earnings from Continuing Operations before taxes $554 $72 $392 1,018
---- --- ----
Tax expense on Earnings from Continuing Operations (c) 192
---
Earnings from Continuing Operations $826
====
Diluted Earnings per Share from Continuing Operations $0.47
=====
The table above provides additional details
regarding the specified items for the second
quarter ended June 30, 2017.
a) Acquisition-related expenses
include costs for legal,
accounting, tax, and other
services related to business
acquisitions and integration costs
which represent incremental costs
directly related to integrating
the acquired businesses and
include expenditures for
consulting, retention, severance,
and the integration of systems,
processes and business activities,
fair value adjustments to
contingent consideration related
to a business acquisition, and
inventory step-up amortization.
The specified items in interest
expense include amortization
expense associated with
acquisition-related bridge
facility fees. Divestiture-
related expenses include
incremental costs to separate the
divested businesses.
b) Restructuring and cost reduction
initiative expenses include
severance, outplacement, inventory
write-downs, asset impairments,
accelerated depreciation, and
other direct costs associated with
specific restructuring plans and
cost reduction initiatives.
Restructuring and cost reduction
plans consist of distinct
initiatives to streamline
operations including the
consolidation and rationalization
of business activities and
facilities, workforce reductions,
the transfer of product lines
between manufacturing facilities,
and the transfer of other business
activities between sites. Any
gains related to the divestiture
of a facility as part of a
restructuring program are also
included in this category.
c) Reflects the net tax benefit
associated with the specified
items and excess tax benefits
associated with share-based
compensation.
Abbott Laboratories and Subsidiaries
Details of Specified Items
Second Quarter Ended June 30, 2016
(in millions, except per share data)
Acquisition or Restructuring Intangible Total
Divestiture- and Cost Amortization Specifieds
related (a) Reduction
Initiatives (b)
--------------
Gross Margin $6 $19 $145 $170
R&D (1) -- -- (1)
SG&A (29) (25) -- (54)
Interest expense, net (57) -- -- (57)
Other (income) expense, net (1) -- -- (1)
--- --- --- ---
Earnings from Continuing Operations before taxes $94 $44 $145 283
--- --- ----
Tax expense on Earnings from Continuing Operations (c) 70
---
Earnings from Continuing Operations $213
====
Diluted Earnings per Share from Continuing Operations $0.15
=====
The table above provides additional details
regarding the specified items for the second
quarter ended June 30, 2016.
a) Acquisition-related expenses
include costs for legal,
accounting, tax, and other
services related to business
acquisitions and integration costs
which represent incremental costs
directly related to integrating
the acquired businesses and
include expenditures for
consulting, severance, and the
integration of processes and
business activities. The specified
items in interest expense include
amortization expense associated
with acquisition-related bridge
facility fees. Divestiture-
related expenses include
incremental costs to separate the
divested businesses.
b) Restructuring and cost reduction
expenses include severance,
outplacement, inventory write-
downs, asset impairments,
accelerated depreciation, and
other direct costs associated with
specific restructuring plans and
cost reduction initiatives.
Restructuring and cost reduction
plans consist of distinct
initiatives to streamline
operations including the
consolidation and rationalization
of business activities and
facilities, workforce reductions,
the transfer of product lines
between manufacturing facilities,
and the transfer of other business
activities between sites.
c) Reflects the net tax benefit
associated with the specified
items and a net tax benefit of
approximately $5 million primarily
as a result of the resolution of
various tax positions from prior
years.
Abbott Laboratories and Subsidiaries
Details of Specified Items
First Half Ended June 30, 2017
(in millions, except per share data)
Acquisition or Restructuring Intangible Total
Divestiture- and Cost Amortization Specifieds
related (a) Reduction
Initiatives (b)
--------------
Gross Margin $844 $121 $914 $1,879
R&D (26) (29) -- (55)
SG&A (486) (19) -- (505)
Interest expense, net (19) -- -- (19)
Other (income) expense, net 1,200 (34) -- 1,166
----- --- --- -----
Earnings from Continuing Operations before taxes $175 $203 $914 1,292
---- ---- ----
Tax expense on Earnings from Continuing Operations (c) 9
---
Earnings from Continuing Operations $1,283
======
Diluted Earnings per Share from Continuing Operations $0.74
=====
The table above provides additional details
regarding the specified items for the first
half ended June 30, 2017.
a) Acquisition-related expenses
include bankers' fees and costs
for legal, accounting, tax, and
other services related to business
acquisitions, integration costs
which represent incremental costs
directly related to integrating
the acquired businesses and
include expenditures for
consulting, retention, severance,
and the integration of systems,
processes and business activities,
fair value adjustments to
contingent consideration related
to a business acquisition, and
inventory step-up amortization.
The specified items in interest
expense include amortization
expense associated with
acquisition-related bridge
facility fees. Divestiture-
related expenses include
incremental costs to separate the
divested businesses as well as
bankers' fees and costs for legal,
accounting, tax, and other
services related to the
divestitures.
b) Restructuring and cost reduction
initiative expenses include
severance, outplacement, inventory
write-downs, asset impairments,
accelerated depreciation, and
other direct costs associated with
specific restructuring plans and
cost reduction initiatives.
Restructuring and cost reduction
plans consist of distinct
initiatives to streamline
operations including the
consolidation and rationalization
of business activities and
facilities, workforce reductions,
the transfer of product lines
between manufacturing facilities,
and the transfer of other business
activities between sites. Any
gains related to the divestiture
of a facility as part of a
restructuring program are also
included in this category.
c) Reflects the net tax benefit
associated with the specified
items and excess tax benefits
associated with share-based
compensation.
Abbott Laboratories and Subsidiaries
Details of Specified Items
First Half Ended June 30, 2016
(in millions, except per share data)
Acquisition or Restructuring Venezuela Intangible Other (d) Total
Divestiture- and Cost Devaluation (c) Amortization Specifieds
related (a) Reduction
Initiatives (b)
--------------
Gross Margin $10 $28 $15 $289 $ -- $342
R&D (2) (1) -- -- (43) (46)
SG&A (41) (47) (9) -- -- (97)
Interest expense, net (69) -- -- -- -- (69)
Net foreign exchange (gain) loss -- -- (477) -- -- (477)
Other (income) expense, net (3) -- (2) -- -- (5)
--- --- --- --- --- ---
Earnings from Continuing Operations before
taxes $125 $76 $503 $289 $43 1,036
---- --- ---- ---- ---
Tax expense on Earnings from Continuing Operations (e) 264
---
Earnings from Continuing Operations $772
====
Diluted Earnings per Share from Continuing Operations $0.52
=====
The table above provides additional details
regarding the specified items for the first
half ended June 30, 2016.
a) Acquisition-related expenses
include costs for legal,
accounting, tax, and other
services related to business
acquisitions and integration costs
which represent incremental costs
directly related to integrating
the acquired businesses and
include expenditures for
consulting, severance, and the
integration of processes and
business activities. The specified
items in interest expense include
amortization expense associated
with acquisition-related bridge
facility fees. Divestiture-
related expenses include
incremental costs to separate the
divested businesses.
b) Restructuring and cost reduction
expenses include severance,
outplacement, inventory write-
downs, asset impairments,
accelerated depreciation, and
other direct costs associated with
specific restructuring plans and
cost reduction initiatives.
Restructuring and cost reduction
plans consist of distinct
initiatives to streamline
operations including the
consolidation and rationalization
of business activities and
facilities, workforce reductions,
the transfer of product lines
between manufacturing facilities,
and the transfer of other business
activities between sites. Any
gains related to the divestiture
of a facility as part of a
restructuring program are also
included in this category.
c) Venezuela devaluation expenses
include the foreign exchange loss
of $477 million related to the
revaluation of Abbott's net
monetary assets in Venezuela using
the Dicom exchange rate as well as
inventory and other asset
impairments in Venezuela related
to the move to the Dicom exchange
rate. The Dicom rate is the
Venezuelan government's official
floating exchange rate.
d) Other expense relates to other
unusual significant costs, such as
the impairment of an R&D asset.
e) Reflects the net tax benefit
associated with the specified
items and a net tax benefit of
approximately $145 million
primarily as a result of the
resolution of various tax
positions from prior years.
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SOURCE Abbott
