ABT
$75.25
Abbott Laboratories
$1.28
1.73%
Earnings Details
4th Quarter December 2018
Wednesday, January 23, 2019 7:45:00 AM
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Summary

Abbott Laboratories Misses

Abbott Laboratories (ABT) reported 4th Quarter December 2018 earnings of $0.81 per share on revenue of $7.8 billion. The consensus earnings estimate was $0.81 per share on revenue of $7.8 billion. The Earnings Whisper number was $0.83 per share. Revenue grew 2.3% on a year-over-year basis.

The company said it expects 2019 earnings of $3.15 to $3.25 per share. The current consensus earnings estimate is $3.19 per share for the year ending December 31, 2019.

Abbott Laboratories discovers, develops, manufactures and sells health care products. Its products include branded generic pharmaceuticals manufactured internationally, marketed and sold outside the United States.

Results
Reported Earnings
$0.81
Earnings Whisper
$0.83
Consensus Estimate
$0.81
Reported Revenue
$7.77 Bil
Revenue Estimate
$7.79 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Abbott Reports 2018 Results and Issues Strong Forecast for 2019

ABBOTT PARK, Ill., Jan. 23, 2019 /PRNewswire/ --  Abbott today announced financial results for the fourth quarter and full year ended Dec. 31, 2018, and issued financial outlook for 2019.

  • Full-year 2018 worldwide sales of $30.6 billion increased 11.6 percent on a reported basis and 7.3 percent on an organic* basis. 
  • Reported diluted EPS from continuing operations under GAAP was $1.31 in the full year 2018 and adjusted diluted EPS from continuing operations, which excludes specified items, was $2.88, reflecting 15.2 percent growth1.
  • Fourth-quarter worldwide sales of $7.8 billion increased 2.3 percent on a reported basis and 6.4 percent on an organic basis.
  • Reported diluted EPS from continuing operations under GAAP was $0.37 in the fourth quarter and adjusted diluted EPS from continuing operations, which excludes specified items, was $0.81.
  • Abbott issues full-year 2019 guidance for organic sales growth of 6.5 to 7.5 percent2, which excludes the impact of foreign exchange, and diluted EPS from continuing operations on a GAAP basis of $1.80 to $1.90. Projected full-year adjusted diluted EPS from continuing operations is $3.15 to $3.25, reflecting double-digit growth at the mid-point.
  • In 2018, Abbott generated strong operating cash flow and paid down more than $8 billion of debt.
  • During 2018, Abbott returned $2 billion to shareholders in the form of dividends and, in December, announced a 14.3 percent increase in its quarterly common dividend.
  • In October, Abbott received U.S. FDA approval of its HeartMate 3 left ventricular assist device as a destination (long-term use) therapy. In January 2019, Abbott announced U.S. FDA approval of its TactiCath™ Contact Force Ablation Catheter, Sensor Enabled, a new catheter designed to help physicians accurately and effectively treat atrial fibrillation, a form of irregular heartbeat.

"2018 was another outstanding year for Abbott," said Miles D. White, chairman and chief executive officer, Abbott. "We exceeded the organic sales growth range we set at the beginning of the year, achieved a number of significant advances in our pipeline, and significantly improved our balance sheet and strategic flexibility. We're very well-positioned heading into 2019."

* See note on organic growth below.

FOURTH-QUARTER AND FULL-YEAR 2018 BUSINESS OVERVIEW
Note: Management believes that measuring sales growth rates on an organic basis is an appropriate way for investors to best understand the underlying performance of the business.

For 2018, Organic sales growth:

  • Excludes prior year results for the Abbott Medical Optics (AMO) and St. Jude Medical vascular closure businesses, which were divested during the first quarter 2017;
  • Excludes the current and prior year results for Rapid Diagnostics, which reflect results for Alere Inc., which was acquired on Oct. 3, 2017;
  • Excludes the prior year fourth quarter results for a non-core business within U.S. Adult Nutrition, which was discontinued during the third quarter 2018; and
  • Excludes the impact of foreign exchange.

Following are sales by business segment and commentary for the fourth quarter and full year 2018:

Total Company

($ in millions)









% Change vs. 4Q17


Sales 4Q18


Reported


Organic


U.S.


Int'l


Total


U.S.


Int'l


Total


U.S.


Int'l


Total

Total *

2,755


5,010


7,765


3.0


2.0


2.3


4.3


7.6


6.4

Nutrition

762


1,015


1,777


(0.9)


(0.1)


(0.4)


1.5


5.1


3.6

Diagnostics

699


1,262


1,961


1.1


3.9


2.9


2.5


9.4


7.4

Established Pharmaceuticals

--


1,090


1,090


 n/a 


(4.8)


(4.8)


 n/a 


3.6


3.6

Medical Devices

1,285


1,635


2,920


6.6


6.8


6.7


6.6


10.9


9.0


* Total Q4 2018 Abbott sales from continuing operations include Other Sales of $17 million.

 








% Change vs. 12M17


Sales 12M18


Reported


Organic


U.S.


Int'l


Total


U.S.


Int'l


Total


U.S.


Int'l


Total

Total *

10,839


19,739


30,578


12.1


11.4


11.6


4.5


8.8


7.3

Nutrition

3,075


4,154


7,229


1.5


6.7


4.4


2.1


7.6


5.2

Diagnostics

2,717


4,778


7,495


49.6


25.8


33.5


3.1


8.3


6.7

Established Pharmaceuticals

--


4,422


4,422


  n/a


3.2


3.2


  n/a


7.0


7.0

Medical Devices

5,011


6,359


11,370


6.4


13.2


10.1


6.5


11.3


9.1


* Total YTD 2018 Abbott sales from continuing operations include Other Sales of $62 million.


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.

Fourth-quarter 2018 worldwide sales of $7.8 billion increased 2.3 percent on a reported basis. On an organic basis, worldwide sales increased 6.4 percent. For the full-year 2018, worldwide sales increased 11.6 percent on a reported basis and 7.3 percent on an organic basis. Refer to tables titled "Non-GAAP Reconciliation of Adjusted Historical Revenue" for a reconciliation of adjusted historical revenue.

Nutrition

($ in millions)









% Change vs. 4Q17


Sales 4Q18


Reported


Organic


U.S.


Int'l


Total


U.S.


Int'l


Total


U.S.


Int'l


Total

Total

762


1,015


1,777


(0.9)


(0.1)


(0.4)


1.5


5.1


3.6

Pediatric

467


546


1,013


3.7


(0.8)


1.2


3.7


3.7


3.7

Adult

295


469


764


(7.5)


0.9


(2.5)


(1.8)


6.6


3.5


























% Change vs. 12M17


Sales 12M18


Reported


Organic


U.S.


Int'l


Total


U.S.


Int'l


Total


U.S.


Int'l


Total

Total

3,075


4,154


7,229


1.5


6.7


4.4


2.1


7.6


5.2

Pediatric

1,843


2,254


4,097


3.7


6.7


5.3


3.7


7.2


5.6

Adult

1,232


1,900


3,132


(1.7)


6.6


3.2


(0.3)


8.0


4.6

Worldwide Nutrition sales decreased 0.4 percent on a reported basis in the fourth quarter. On an organic basis, sales increased 3.6 percent. For the full-year 2018, worldwide sales increased 4.4 percent on a reported basis and 5.2 percent on an organic basis. Refer to tables titled "Non-GAAP Reconciliation of Adjusted Historical Revenue" for a reconciliation of adjusted historical revenue.

Worldwide Pediatric Nutrition sales increased 1.2 percent on a reported basis in the fourth quarter, including an unfavorable 2.5 percent effect of foreign exchange, and increased 3.7 percent on an organic basis. International pediatric sales decreased 0.8 percent on a reported basis, including an unfavorable 4.5 percent effect of foreign exchange, and increased 3.7 percent on an organic basis. Performance in the quarter was led by above-market growth in the U.S. and strong growth across several markets in Asia and Latin America, including China, Vietnam and Mexico.

Worldwide Adult Nutrition sales decreased 2.5 percent on a reported basis in the fourth quarter, and increased 3.5 percent on an organic basis. International adult sales increased 0.9 percent on a reported basis, including an unfavorable 5.7 percent effect of foreign exchange, and increased 6.6 percent on an organic basis. Worldwide sales performance was led by strong growth of Ensure®, Abbott's market-leading complete and balanced nutrition brand, and Glucerna®, Abbott's market-leading diabetes-specific nutrition brand.

Diagnostics

($ in millions)









% Change vs. 4Q17


Sales 4Q18


Reported


Organic


U.S.


Int'l


Total


U.S.


Int'l


Total


U.S.


Int'l


Total

Total *

699


1,262


1,961


1.1


3.9


2.9


2.5


9.4


7.4

Core Laboratory

260


893


1,153


7.1


4.4


5.0


7.1


10.1


9.4

Molecular

38


85


123


1.8


1.2


1.4


1.8


4.7


3.8

Point of Care

108


29


137


(6.7)


(0.6)


(5.5)


(6.7)


1.1


(5.1)

Rapid Diagnostics *

293


255


548


(0.9)


3.9


1.3


 n/a 


 n/a 


 n/a 


* Rapid Diagnostics reflects sales from Alere Inc., which was acquired on Oct. 3, 2017. Organic growth rates above exclude results from the Rapid Diagnostics business.


n/a = Percent change is not applicable as organic results exclude Rapid Diagnostics in 2018.

 








% Change vs. 12M17


Sales 12M18


Reported


Organic


U.S.


Int'l


Total


U.S.


Int'l


Total


U.S.


Int'l


Total

Total *

2,717


4,778


7,495


49.6


25.8


33.5


3.1


8.3


6.7

Core Laboratory

985


3,401


4,386


7.0


8.3


8.0


7.0


8.3


8.0

Molecular

152


332


484


(4.8)


9.7


4.7


(4.8)


9.1


4.3

Point of Care

432


121


553


(2.0)


10.0


0.4


(2.0)


9.2


0.3

Rapid Diagnostics *

1,148


924


2,072


 n/m 


 n/m 


 n/m 


 n/m 


 n/m 


 n/m 


* Rapid Diagnostics reflects sales from Alere Inc., which was acquired on Oct. 3, 2017. Organic growth rates above exclude results from the Rapid Diagnostics business.


n/m = Percent change is not meaningful.

Worldwide Diagnostics sales increased 2.9 percent on a reported basis in the fourth quarter. On an organic basis, sales increased 7.4 percent. For the full-year 2018, worldwide sales increased 33.5 percent on a reported basis and 6.7 percent on an organic basis. Refer to tables titled "Non-GAAP Reconciliation of Adjusted Historical Revenue" for a reconciliation of adjusted historical revenue.

Core Laboratory Diagnostics sales increased 5.0 percent on a reported basis in the fourth quarter, including an unfavorable 4.4 percent effect of foreign exchange, and increased 9.4 percent on an organic basis, reflecting above-market growth in the U.S. and internationally, where Abbott is seeing continued strong adoption of Alinity, Abbott's family of innovative and highly differentiated diagnostic instruments.

Molecular Diagnostics sales increased 1.4 percent on a reported basis in the fourth quarter, including an unfavorable 2.4 percent effect of foreign exchange, and increased 3.8 percent on an organic basis. Worldwide sales were led by growth in infectious disease testing, Abbott's core area of focus in the molecular diagnostics market.

Point of Care Diagnostics sales decreased 5.5 percent on a reported basis in the fourth quarter, including an unfavorable 0.4 percent effect of foreign exchange, and decreased 5.1 percent on an organic basis.

Rapid Diagnostics worldwide sales of $548 million were led by infectious disease and cardiometabolic testing.

Established Pharmaceuticals

($ in millions)









% Change vs. 4Q17


Sales 4Q18


Reported


Organic


U.S.


Int'l


Total


U.S.


Int'l


Total


U.S.


Int'l


Total

Total

--


1,090


1,090


 n/a 


(4.8)


(4.8)


 n/a 


3.6


3.6

Key Emerging Markets

--


838


838


 n/a 


(6.2)


(6.2)


 n/a 


4.3


4.3

Other

--


252


252


 n/a 


0.2


0.2


 n/a 


1.3


1.3


























% Change vs. 12M17


Sales 12M18


Reported


Organic


U.S.


Int'l


Total


U.S.


Int'l


Total


U.S.


Int'l


Total

Total

--


4,422


4,422


 n/a 


3.2


3.2


 n/a 


7.0


7.0

Key Emerging Markets

--


3,363


3,363


 n/a 


1.7


1.7


 n/a 


7.4


7.4

Other

--


1,059


1,059


 n/a 


8.1


8.1


 n/a 


5.8


5.8

Established Pharmaceuticals sales decreased 4.8 percent on a reported basis in the fourth quarter, including an unfavorable 8.4 percent effect of foreign exchange, and increased 3.6 percent on an organic basis. As expected, sales growth in the fourth quarter was negatively impacted by a comparison versus the fourth-quarter of 2017, when organic sales grew 14.0 percent.

Key Emerging Markets include India, Brazil, Russia 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 geographies decreased 6.2 percent on a reported basis in the fourth quarter, including an unfavorable 10.5 percent effect of foreign exchange, and increased 4.3 percent on an organic basis. For the full-year 2018, sales in key emerging markets increased 1.7 percent on a reported basis and 7.4 percent on an organic basis led by double-digit growth in India and China.

Other sales increased 0.2 percent on a reported basis in the fourth quarter and 1.3 percent on an organic basis. For the full-year 2018, Other sales increased 8.1 percent on a reported basis and 5.8 percent on an organic basis.

Medical Devices

($ in millions)









% Change vs. 4Q17


Sales 4Q18


Reported


Organic


U.S.


Int'l


Total


U.S.


Int'l


Total


U.S.


Int'l


Total

Total

1,285


1,635


2,920


6.6


6.8


6.7


6.6


10.9


9.0

Cardiovascular and Neuromodulation

1,150


1,240


2,390


3.3


2.4


2.8


3.3


6.3


4.8

Rhythm Management

241


264


505


(2.6)


(6.4)


(4.6)


(2.6)


(2.3)


(2.5)

Electrophysiology

200


243


443


23.6


11.6


16.7


23.6


15.0


18.7

Heart Failure

125


53


178


(2.8)


20.9


3.2


(2.8)


24.3


4.0

Vascular

272


448


720


(5.3)


0.4


(1.8)


(5.3)


4.1


0.4

Structural Heart

135


191


326


19.6


7.9


12.4


19.6


12.4


15.2

Neuromodulation

177


41


218


1.0


(6.7)


(0.5)


1.0


(1.7)


0.5

Diabetes Care

135


395


530


46.4


23.2


28.3


46.4


28.4


32.4


























% Change vs. 12M17


Sales 12M18


Reported


Organic


U.S.


Int'l


Total


U.S.


Int'l


Total


U.S.


Int'l


Total

Total

5,011


6,359


11,370


6.4


13.2


10.1


6.5


11.3


9.1

Cardiovascular and Neuromodulation

4,554


4,883


9,437


4.0


7.7


5.9


4.2


5.9


5.0

Rhythm Management

1,019


1,072


2,091


(1.1)


(0.1)


(0.6)


(1.1)


(1.9)


(1.5)

Electrophysiology

764


904


1,668


25.5


17.1


20.8


25.5


15.0


19.6

Heart Failure

467


179


646


(4.8)


17.4


0.4


(4.8)


15.4


-

Vascular

1,126


1,803


2,929


(4.5)


5.3


1.3


(4.0)


3.6


0.5

Structural Heart

488


751


1,239


12.9


15.5


14.4


12.9


13.1


13.0

Neuromodulation

690


174


864


8.3


1.3


6.8


8.3


(0.3)


6.5

Diabetes Care

457


1,476


1,933


37.7


36.4


36.7


37.7


33.9


34.8

Worldwide Medical Devices sales increased 6.7 percent on a reported basis in the fourth quarter. On an organic basis, sales increased 9.0 percent. For the full-year 2018, worldwide sales increased 10.1 percent on a reported basis and 9.1 percent on an organic basis. Refer to tables titled "Non-GAAP Reconciliation of Adjusted Historical Revenue" for a reconciliation of adjusted historical revenue.

In Electrophysiology, growth was led by strong performance in cardiac mapping and ablation catheters. In January 2019, Abbott announced U.S. FDA approval of its TactiCath Contact Force Ablation Catheter, Sensor Enabled, a new catheter designed to help physicians accurately and effectively treat atrial fibrillation.

Growth in Structural Heart was driven by several product areas across Abbott's broad portfolio, including AMPLATZER PFO Occluder, a device designed to close a hole-like opening in the heart, and MitraClip®, Abbott's market-leading device for the minimally invasive treatment of mitral regurgitation, a leaky heart valve.

In Diabetes Care, sales increased 28.3 percent on a reported basis and 32.4 percent on an organic basis in the fourth quarter, led by rapid market uptake of FreeStyle® Libre, Abbott's revolutionary sensor-based continuous glucose monitoring system, which removes the need for routine fingersticks3 for people with diabetes.

ABBOTT ISSUES GUIDANCE FOR 2019
Abbott is issuing full-year 2019 guidance for organic sales growth of 6.5 to 7.5 percent2, which excludes the impact of foreign exchange, and diluted earnings per share from continuing operations under Generally Accepted Accounting Principles (GAAP) of $1.80 to $1.90. Abbott forecasts net specified items for the full year 2019 of $1.35 per share. Specified items include intangible amortization expense, acquisition-related expenses, charges associated with cost reduction initiatives and other expenses. Excluding specified items, projected adjusted diluted earnings per share from continuing operations would be $3.15 to $3.25 for the full year 2019.

Abbott is issuing first-quarter 2019 guidance for diluted earnings per share from continuing operations under GAAP of $0.25 to $0.27. Abbott forecasts specified items for the first quarter 2019 of $0.35 per share primarily related to intangible amortization, acquisition-related expenses, cost reduction initiatives and other expenses. Excluding specified items, projected adjusted diluted earnings per share from continuing operations would be $0.60 to $0.62 for the first quarter.

ABBOTT ANNOUNCES INCREASE IN QUARTERLY DIVIDEND
On Dec. 14, 2018, the board of directors of Abbott increased the company's quarterly dividend to $0.32 per share from $0.28 per share, an increase of 14.3 percent. Abbott's cash dividend is payable Feb. 15, 2019, to shareholders of record at the close of business on Jan. 15, 2019. This marks the 380th consecutive quarterly dividend to be paid by Abbott.

Abbott has increased its dividend payout for 47 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 leader that helps people live more fully at all stages of life. Our portfolio of life-changing technologies spans the spectrum of healthcare, with leading businesses and products in diagnostics, medical devices, nutritionals and branded generic medicines. Our 103,000 colleagues serve people in more than 160 countries.

Connect with us at www.abbott.com, on LinkedIn at www.linkedin.com/company/abbott-/, on Facebook at www.facebook.com/Abbott and on Twitter @AbbottNews and @AbbottGlobal.

Abbott will webcast its live fourth-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 webcast 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, 2017, 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.

1 Full-year 2018 diluted EPS from continuing operations on a GAAP basis reflects 555 percent growth.


2 Abbott has not provided the GAAP financial measure for organic sales growth on a forward-looking basis because the company is unable to predict the impact of foreign exchange due to the unpredictability of future changes in foreign exchange rates, which could significantly impact reported sales growth.


3 Fingersticks are required for treatment decisions when you see Check Blood Glucose symbol, when symptoms do not match system readings, when you suspect readings may be inaccurate, or when you experience symptoms that may be due to high or low blood glucose.

 

Abbott Laboratories and Subsidiaries

Condensed Consolidated Statement of Earnings

Fourth Quarter Ended December 31, 2018 and 2017

(in millions, except per share data)

(unaudited)



4Q18


4Q17


%
Change


Net Sales

$7,765


$7,589


2.3









Cost of products sold, excluding amortization expense

3,191


3,282


(2.8)


Amortization of intangible assets

488


560


(12.8)


Research and development

562


619


(9.3)


Selling, general, and administrative

2,359


2,477


(4.8)


Total Operating Cost and Expenses

6,600


6,938


(4.9)









Operating earnings

1,165


651


79.0

1)








Interest expense, net

152


211


(28.1)


Net foreign exchange (gain) loss

26


--


n/m


Debt extinguishment costs

86


--


n/m


Other (income) expense, net

(46)


(134)


(65.9)

1)

Earnings from Continuing Operations before taxes

947


574


65.0









Tax expense on Earnings from Continuing Operations

292


1,438


(79.7)

2)

Earnings (Loss) from Continuing Operations

655


(864)


n/m









Earnings (Loss) from Discontinued Operations, net of taxes

(1)


36


n/m









Net Earnings (Loss)

$654


($828)


n/m









Earnings from Continuing Operations, excluding Specified Items, as described below

$1,444


$1,303


10.8

3)








Diluted Earnings (Loss) per Common Share from:














Continuing Operations

$0.37


($0.50)


n/m


Discontinued Operations

--


0.02


n/m


Total

$0.37


($0.48)


n/m









Diluted Earnings per Common Share from Continuing Operations, excluding Specified Items, as described below

$0.81


$0.74


9.5

3)








Average Number of Common Shares Outstanding Plus Dilutive Common Stock Options 

1,774


1,746





NOTES:


See tables titled "Non-GAAP Reconciliation of Financial Information From Continuing Operations" for an explanation of certain non-GAAP financial information.

n/m = Percent change is not meaningful.

See footnotes below. 



1)

Effective January 1, 2018, Abbott adopted Accounting Standards Update 2017-07, Compensation – Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, which resulted in a retrospective reclassification of approximately $40 million of net pension-related income from Operating earnings to Other (income) expense, net for the fourth quarter of 2017.



2)

2018 Tax expense on Earnings from Continuing Operations includes an additional $85 million of tax expense for the transition tax associated with the Tax Cuts and Jobs Act (TCJA).




2017 Tax expense on Earnings from Continuing Operations includes net expense of $1.46 billion for the estimated impact of U.S. tax reform. The provisional estimate of the impact of U.S. tax reform was based on Abbott's initial analysis of the TCJA.



3)

2018 Net Earnings and Diluted Earnings per Common Share from Continuing Operations, excluding Specified Items, excludes net after-tax charges of $789 million, or $0.44 per share, for intangible amortization expense and other expenses primarily associated with acquisitions and restructuring actions, as well as additional transition tax related to the TCJA.




2017 Net Earnings and Diluted Earnings per Common Share from Continuing Operations, excluding Specified Items, excludes net after-tax charges of $2.167 billion, or $1.24 per share, for the estimated impact of U.S. tax reform, intangible amortization expense and other expenses primarily associated with acquisitions, restructuring actions and other expenses.

 

Abbott Laboratories and Subsidiaries

Condensed Consolidated Statement of Earnings

Year Ended December 31, 2018 and 2017

(in millions, except per share data)

(unaudited)



12M18


12M17


% Change


Net Sales

$30,578


$27,390


11.6









Cost of products sold, excluding amortization expense

12,706


12,409


2.4


Amortization of intangible assets

2,178


1,975


10.3


Research and development

2,300


2,260


1.7


Selling, general, and administrative

9,744


9,182


6.1


Total Operating Cost and Expenses

26,928


25,826


4.3









Operating earnings

3,650


1,564


n/m

1)








Interest expense, net

721


780


(7.6)


Net foreign exchange (gain) loss

28


(34)


n/m


Debt extinguishment costs

167


--


n/m


Other (income) expense, net

(139)


(1,413)


(90.2)

1) 2)

Earnings from Continuing Operations before taxes

2,873


2,231


28.8









Tax expense on Earnings from Continuing Operations

539


1,878


(71.3)

3)

Earnings from Continuing Operations

2,334


353


n/m









Earnings from Discontinued Operations, net of taxes

34


124


(72.6)

4)








Net Earnings

$2,368


$477


n/m









Earnings from Continuing Operations, excluding Specified Items, as described below

$5,131


$4,400


16.6

5)








Diluted Earnings per Common Share from:














Continuing Operations

$1.31


$0.20


n/m


Discontinued Operations

0.02


0.07


(71.4)

4)

Total

$1.33


$0.27


n/m









Diluted Earnings per Common Share from Continuing Operations, excluding Specified Items, as described below

$2.88


$2.50


15.2

5)








Average Number of Common Shares Outstanding Plus Dilutive Common Stock Options 

1,770


1,749





NOTES:



See tables titled "Non-GAAP Reconciliation of Financial Information From Continuing Operations" for an explanation of certain non-GAAP financial information.

n/m = Percent change is not meaningful.

See footnotes below. 



1)

Effective January 1, 2018, Abbott adopted Accounting Standards Update 2017-07, Compensation – Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, which resulted in a retrospective reclassification of approximately $160 million of net pension-related income from Operating earnings to Other (income) expense, net for the full year of 2017.



2)

2017 Other (income) expense, net includes a pretax gain of $1.163 billion from the sale of the AMO business.



3)

2018 Tax expense on Earnings from Continuing Operations includes an additional $120 million of tax expense for the transition tax associated with the TCJA, as well as the impact of approximately $90 million in excess tax benefits associated with share-based compensation.




2017 Tax expense on Earnings from Continuing Operations includes the net expense of $1.46 billion for the estimated impact of U.S. tax reform, as well as the tax associated with a $1.163 billion pretax gain on the sale of the AMO business. The provisional estimate of the impact of U.S. tax reform was based on Abbott's initial analysis of the TCJA.



4)

2018 and 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.



5)

2018 Net Earnings and Diluted Earnings per Common Share from Continuing Operations, excluding Specified Items, excludes net after-tax charges of $2.797 billion, or $1.57 per share, for intangible amortization expense and other expenses primarily associated with acquisitions and restructuring actions.




2017 Net Earnings and Diluted Earnings per Common Share from Continuing Operations, excluding Specified Items, excludes net after-tax charges of $4.047 billion, or $2.30 per share, for the estimated impact of U.S. tax reform, 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.

 

Abbott Laboratories and Subsidiaries

Non-GAAP Reconciliation of Financial Information From Continuing Operations

Fourth Quarter Ended December 31, 2018 and 2017

(in millions, except per share data) 

(unaudited)



4Q18


As
Reported
(GAAP) 


Specified
Items


As
Adjusted


% to
Sales









Intangible Amortization

$488


$(488)


--



Gross Margin

4,086


520


$4,606


59.3%

R&D

562


(2)


560


7.2%

SG&A

2,359


(91)


2,268


29.2%

Net foreign exchange (gain) loss

26


(28)


(2)



Debt extinguishment costs

86


(86)


--



Other (income) expense, net

(46)


13


(33)



Earnings from Continuing Operations before taxes 

947


714


1,661



Tax expense on Earnings from Continuing Operations

292


(75)


217



Earnings from Continuing Operations

655


789


1,444



Diluted Earnings per Share from Continuing Operations

$0.37


$0.44


$0.81



Specified items reflect intangible amortization expense of $488 million and other expenses of $226 million, primarily associated with acquisitions, restructuring actions and other expenses, as well as $85 million of additional transition tax related to the TCJA. See table titled "Details of Specified Items" for additional details regarding specified items.


4Q17


As
Reported
(GAAP)


Specified
Items


As
Adjusted 


% to
Sales









Intangible Amortization

$560


$(560)


--



Gross Margin

3,747


694


$4,441


58.5%

R&D

619


(90)


529


7.0%

SG&A

2,477


(266)


2,211


29.1%

Interest expense, net

211


(5)


206



Other (income) expense, net

(134)


69


(65)



Earnings from Continuing Operations before taxes

574


986


1,560



Tax expense on Earnings from Continuing Operations

1,438


(1,181)


257



Earnings (Loss) from Continuing Operations

(864)


2,167


1,303



Diluted Earnings (Loss) per Share from Continuing Operations

$(0.50)


$1.24


$0.74




Note: The As Reported and As Adjusted amounts reflect the impact of adopting the new accounting rules related to the recognition of retirement benefits – See Footnote 1 under table titled "Condensed Consolidated Statement of Earnings" for additional information.

Specified items reflect intangible amortization expense of $560 million and other expenses of $426 million, primarily associated with acquisitions, restructuring actions and other expenses, and the estimated net impact of U.S. tax reform of $1.46 billion. See table titled "Details of Specified Items" for additional details regarding specified items.

Abbott Laboratories and Subsidiaries

Non-GAAP Reconciliation of Financial Information From Continuing Operations

Year Ended December 31, 2018 and 2017

(in millions, except per share data) 

(unaudited) 



12M18


As
Reported
(GAAP) 


Specified
Items


As
Adjusted


% to
Sales









Intangible Amortization

$2,178


$(2,178)


--



Gross Margin

15,694


2,453


$18,147


59.3%

R&D

2,300


(87)


2,213


7.2%

SG&A

9,744


(365)


9,379


30.7%

Interest expense, net

721


(2)


719



Net foreign exchange (gain) loss

28


(29)


(1)



Debt extinguishment costs

167


(167)


--



Other (income) expense, net

(139)


3


(136)



Earnings from Continuing Operations before taxes 

2,873


3,100


5,973



Tax expense on Earnings from Continuing Operations

539


303


842



Earnings from Continuing Operations

2,334


2,797


5,131



Diluted Earnings per Share from Continuing Operations

$1.31


$1.57


$2.88



Specified items reflect intangible amortization expense of $2.178 billion and other expenses of $922 million, primarily associated with acquisitions, restructuring actions and other expenses. See table titled "Details of Specified Items" for additional details regarding specified items.


12M17


As
Reported
(GAAP)


Specified
Items


As
Adjusted 


% to
Sales









Intangible Amortization

$1,975


$(1,975)


--



Gross Margin

13,006


3,153


$16,159


59.0%

R&D

2,260


(236)


2,024


7.4%

SG&A

9,182


(861)


8,321


30.4%

Interest expense, net

780


(24)


756



Other (income) expense, net

(1,413)


1,236


(177)



Earnings from Continuing Operations before taxes

2,231


3,038


5,269



Tax expense on Earnings from Continuing Operations

1,878


(1,009)


869



Earnings from Continuing Operations

353


4,047


4,400



Diluted Earnings per Share from Continuing Operations

$0.20


$2.30


$2.50




Note: The As Reported and As Adjusted amounts reflect the impact of adopting the new accounting rules related to the recognition of retirement benefits – See Footnote 1 under table titled "Condensed Consolidated Statement of Earnings" for additional information.

Specified items reflect intangible amortization expense of $1.975 billion and other expenses of $2.226 billion, primarily associated with acquisitions, including approximately $907 million of inventory step-up amortization related to St. Jude Medical and Alere Inc., charges related to restructuring actions and other expenses, partially offset by a gain of $1.163 billion from the sale of the AMO business. Tax expense includes the estimated net impact of U.S. tax reform of $1.46 billion. See table titled "Details of Specified Items" for additional details regarding specified items.

A reconciliation of the fourth-quarter tax rates for continuing operations for 2018 and 2017 is shown below:


4Q18


($ in millions)

Pre-Tax
Income


Taxes on
Earnings


Tax
Rate


As reported (GAAP)

$947


$292


30.8%

1)

Specified items

714


(75)




Excluding specified items

$1,661


$217


13.1%










4Q17


($ in millions)

Pre-Tax
Income


Taxes on
Earnings


Tax
Rate


As reported (GAAP)

$574


$1,438


250.7%

2)

Specified items

986


(1,181)




Excluding specified items

$1,560


$257


16.5%




1)

Reported tax rate on a GAAP basis for the fourth quarter of 2018 includes the impact of an additional $85 million of tax expense for the transition tax associated with the TCJA.



2)

Reported tax rate on a GAAP basis for the fourth quarter of 2017 includes the estimated net impact of U.S. tax reform of $1.46 billion and the impact of approximately $30 million in excess tax benefits associated with share-based compensation.

A reconciliation of the full-year tax rates for continuing operations for 2018 and 2017 is shown below:


12M18


($ in millions)

Pre-Tax
Income


Taxes on
Earnings


Tax
Rate


As reported (GAAP)

$2,873


$539


18.8%

3)

Specified items

3,100


303




Excluding specified items

$5,973


$842


14.1%










12M17


($ in millions)

Pre-Tax
Income


Taxes on
Earnings


Tax
Rate


As reported (GAAP)

$2,231


$1,878


84.2%

4)

Specified items

3,038


(1,009)




Excluding specified items

$5,269


$869


16.5%




3)

Reported tax rate on a GAAP basis for 2018 includes the impact of an additional $120 million of tax expense for the transition tax associated with the TCJA, as well as the impact of approximately $90 million in excess tax benefits associated with share-based compensation.



4)

Reported tax rate on a GAAP basis for 2017 includes the estimated net impact of U.S. tax reform of $1.46 billion, the impact of taxes associated with a $1.163 billion pretax gain on the sale of the AMO business and the impact of approximately $120 million in excess tax benefits associated with share-based compensation.

 

Abbott Laboratories and Subsidiaries

Non-GAAP Reconciliation of Adjusted Historical Revenue

Fourth Quarter Ended December 31, 2018 and 2017

($ in millions) (unaudited)



4Q18


4Q17


% Change vs. 4Q17


















Non-GAAP


Abbott
Reported


Rapid
Diagnostics


Adjusted
Revenue


Abbott
Reported


Discontinued
Businessa)


Rapid
Diagnostics


Adjusted
Revenue


Reported


Reported


Organicb)





















Total Company

7,765


(548)


7,217


7,589


(18)


(540)


7,031


2.3


2.7


6.4

U.S.

2,755


(293)


2,462


2,676


(18)


(296)


2,362


3.0


4.3


4.3

Int'l

5,010


(255)


4,755


4,913


--


(244)


4,669


2.0


1.9


7.6

Total Nutrition

1,777


--


1,777


1,784


(18)


--


1,766


(0.4)


0.6


3.6

U.S.

762


--


762


769


(18)


--


751


(0.9)


1.5


1.5

Int'l

1,015


--


1,015


1,015


--


--


1,015


(0.1)


(0.1)


5.1

Adult

764


--


764


784


(18)


--


766


(2.5)


(0.2)


3.5

U.S.

295


--


295


319


(18)


--


301


(7.5)


(1.8)


(1.8)

Int'l

469


--


469


465


--


--


465


0.9


0.9


6.6

Total Diagnostics

1,961


(548)


1,413


1,906


--


(540)


1,366


2.9


3.5


7.4

U.S.

699


(293)


406


692


--


(296)


396


1.1


2.5


2.5

Int'l

1,262


(255)


1,007


1,214


--


(244)


970


3.9


3.9


9.4

Rapid Diagnostics

548


(548)


--


540


--


(540)


--


1.3


 n/a


 n/a

U.S.

293


(293)


--


296


--


(296)


--


(0.9)


 n/a


 n/a

Int'l

255


(255)


--


244


--


(244)


--


3.9


 n/a


 n/a


a) Reflects sales related to a non-core product line within the U.S. Adult Nutrition business, which was discontinued during the third quarter 2018.

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 Adjusted Historical Revenue

Year Ended December 31, 2018 and 2017

($ in millions) (unaudited)



12M18


12M17


% Change vs. 12M17










Divested or








Non-GAAP


Abbott
Reported


Rapid
Diagnostics


Adjusted
Revenue


Abbott
Reported


Discontinued
Businessesa)


Rapid
Diagnostics


Adjusted
Revenue


Reported


Reported


Organicb)





















Total Company

30,578


(2,072)


28,506


27,390


(205)


(540)


26,645


11.6


7.0


7.3

U.S.

10,839


(1,148)


9,691


9,673


(102)


(296)


9,275


12.1


4.5


4.5

Int'l

19,739


(924)


18,815


17,717


(103)


(244)


17,370


11.4


8.3


8.8

Total Nutrition

7,229


--


7,229


6,925


(18)


--


6,907


4.4


4.7


5.2

U.S.

3,075


--


3,075


3,031


(18)


--


3,013


1.5


2.1


2.1

Int'l

4,154


--


4,154


3,894


--


--


3,894


6.7


6.7


7.6

Adult

3,132


--


3,132


3,036


(18)


--


3,018


3.2


3.8


4.6

U.S.

1,232


--


1,232


1,254


(18)


--


1,236


(1.7)


(0.3)


(0.3)

Int'l

1,900


--


1,900


1,782


--


--


1,782


6.6


6.6


8.0

Total Diagnostics

7,495


(2,072)


5,423


5,616


--


(540)


5,076


33.5


6.8


6.7

U.S.

2,717


(1,148)


1,569


1,817


--


(296)


1,521


49.6


3.1


3.1

Int'l

4,778


(924)


3,854


3,799


--


(244)


3,555


25.8


8.4


8.3

Rapid Diagnostics

2,072


(2,072)


--


540


--


(540)


--


 n/m


 n/m


 n/m

U.S.

1,148


(1,148)


--


296


--


(296)


--


 n/m


 n/m


 n/m

Int'l

924


(924)


--


244


--


(244)


--


 n/m


 n/m


 n/m

Total Medical Devices

11,370


--


11,370


10,325


(12)


--


10,313


10.1


10.2


9.1

U.S.

5,011


--


5,011


4,710


(6)


--


4,704


6.4


6.5


6.5

Int'l

6,359


--


6,359


5,615


(6)


--


5,609


13.2


13.4


11.3

Cardiovascular and Neuromodulation

9,437


--


9,437


8,911


(12)


--


8,899


5.9


6.0


5.0

U.S.

4,554


--


4,554


4,378


(6)


--


4,372


4.0


4.2


4.2

Int'l

4,883


--


4,883


4,533


(6)


--


4,527


7.7


7.9


5.9

Vascular

2,929


--


2,929


2,892


(12)


--


2,880


1.3


1.7


0.5

U.S.

1,126


--


1,126


1,180


(6)


--


1,174


(4.5)


(4.0)


(4.0)

Int'l

1,803


--


1,803


1,712


(6)


--


1,706


5.3


5.6


3.6


a) Reflects sales related to the AMO and St. Jude Medical vascular closure businesses prior to divesting in the first quarter 2017, and fourth quarter sales related to a non-core product line within the U.S. Adult Nutrition business, which was discontinued during the third quarter 2018.

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

Details of Specified Items

Fourth Quarter Ended December 31, 2018

(in millions, except per share data)

(unaudited)



Acquisition or
Divestiture-
related (a)


Restructuring
and Cost
Reduction
Initiatives (b)


Intangible
Amortization


Other (c)


Total
Specifieds

Gross Margin

$              21


$                7


$          488


$        4


$      520

R&D

(7)


5


--


--


(2)

SG&A

(82)


(9)


--


--


(91)

Net foreign exchange (gain) loss

--


(28)


--


--


(28)

Debt extinguishment costs

--


--


--


(86)


(86)

Other (income) expense, net

(1)


--


--


14


13

Earnings from Continuing Operations before taxes

$            111


$              39


$          488


$       76


714

Tax expense on Earnings from Continuing Operations (d)









(75)

Earnings from Continuing Operations









$      789

Diluted Earnings per Share from Continuing Operations









$     0.44


The table above provides additional details regarding the specified items described on tables titled "Non-GAAP Reconciliation of Financial Information From Continuing Operations".



a)

Acquisition-related expenses include costs for 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 retention, severance, and the integration of systems, processes and business activities, and fair value adjustments to contingent consideration related to a business acquisition.

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.

c)

Other includes costs associated with the early extinguishment of debt, partially offset by a gain on investments.

d)

Reflects the net tax benefit associated with the specified items and additional tax expense for the transition tax associated with the TCJA.

 

Abbott Laboratories and Subsidiaries

Details of Specified Items

Fourth Quarter Ended December 31, 2017

(in millions, except per share data)

(unaudited)



Acquisition or
Divestiture-
related (a)


Restructuring
and Cost
Reduction
Initiatives (b)


Intangible
Amortization


Other (c)


Total
Specifieds

Gross Margin

$          113


$             21


$         560


$        --


$       694

R&D

(35)


(2)


--


(53)


(90)

SG&A

(242)


(24)


--


--


(266)

Interest expense, net

(5)


--


--


--


(5)

Other (income) expense, net

69


--


--


--


69

Earnings from Continuing Operations before taxes

$          326


$             47


$         560


$       53


986

Tax expense on Earnings from Continuing Operations (d)









(1,181)

Earnings from Continuing Operations









$    2,167

Diluted Earnings per Share from Continuing Operations









$      1.24


The table above provides additional details regarding the specified items described on tables titled "Non-GAAP Reconciliation of Financial Information From Continuing Operations".



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. 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. Divestiture-related items also include any gains in the period related to the sale of Mylan N.V. ordinary shares.

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.

c)

Other expense primarily relates to the impairment of an R&D asset.

d)

Reflects net expense for the estimated tax impact of the TCJA, 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

Year Ended December 31, 2018

(in millions, except per share data)

(unaudited)



Acquisition or
Divestiture-
related (a)


Restructuring
and Cost
Reduction
Initiatives (b)


Intangible
Amortization


Other (c)


Total
Specifieds

Gross Margin

$           123


$           106


$       2,178


$      46


$    2,453

R&D

(41)


1


--


(47)


(87)

SG&A

(346)


(19)


--


--


(365)

Interest expense, net

--


--


--


(2)


(2)

Net foreign exchange (gain) loss

--


(29)


--


--


(29)

Debt extinguishment costs

--


--


--


(167)


(167)

Other (income) expense, net

(2)


--


--


5


3

Earnings from Continuing Operations before taxes

$           512


$           153


$       2,178


$     257


3,100

Tax expense on Earnings from Continuing Operations (d)









303

Earnings from Continuing Operations









$    2,797

Diluted Earnings per Share from Continuing Operations









$      1.57


The table above provides additional details regarding the specified items described on tables titled "Non-GAAP Reconciliation of Financial Information From Continuing Operations".



a)

Acquisition-related expenses include 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.

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.

c)

Other includes the cost associated with the early extinguishment of debt, costs related to the acquisition of R&D assets and charges related to the impairment of certain assets, partially offset by a gain on investments.

d)

Reflects the net tax benefit associated with the specified items, additional tax expense for the transition tax associated with the TCJA and excess tax benefits associated with share based compensation.

 

Abbott Laboratories and Subsidiaries

Details of Specified Items

Year Ended December 31, 2017

(in millions, except per share data)

(unaudited)



Acquisition or
Divestiture-
related (a)


Restructuring
and Cost
Reduction
Initiatives (b)


Intangible
Amortization


Other (c)


Total
Specifieds

Gross Margin

$          983


$            195


$       1,975


$        --


$    3,153

R&D

(72)


(105)


--


(59)


(236)

SG&A

(812)


(50)


--


1


(861)

Interest expense, net

(24)


--


--


--


(24)

Other (income) expense, net

1,285


(34)


--


(15)


1,236

Earnings from Continuing Operations before taxes

$          606


$            384


$       1,975


$       73


3,038

Tax expense on Earnings from Continuing Operations (d)









(1,009)

Earnings from Continuing Operations









$    4,047

Diluted Earnings per Share from Continuing Operations









$      2.30


The table above provides additional details regarding the specified items described on tables titled "Non-GAAP Reconciliation of Financial Information From Continuing Operations".



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. Divestiture-related items also include any gains in the period related to the sale of Mylan N.V. ordinary shares.

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)

Other expense primarily relates to impairments of a financial instrument and an R&D asset as well as the acquisition of an R&D asset.

d)

Reflects net expense for the estimated tax impact of the TCJA, the net tax benefit associated with the specified items and excess tax benefits associated with share-based compensation.

 

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SOURCE Abbott