ABT
$70.62
Abbott Laboratories
($1.42)
(1.97%)
Earnings Details
3rd Quarter September 2018
Wednesday, October 17, 2018 7:45:00 AM
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Summary

Abbott Laboratories Misses

Abbott Laboratories (ABT) reported 3rd Quarter September 2018 earnings of $0.75 per share on revenue of $7.7 billion. The consensus earnings estimate was $0.74 per share on revenue of $7.7 billion. The Earnings Whisper number was $0.76 per share. Revenue grew 12.1% on a year-over-year basis.

The company said it expects 2018 earnings of $2.87 to $2.89 per share. The company's previous guidance was earnings of $2.85 to $2.91 per share and the current consensus earnings estimate is $2.88 per share for the year ending December 31, 2018.

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
$0.75
Earnings Whisper
$0.76
Consensus Estimate
$0.74
Reported Revenue
$7.66 Bil
Revenue Estimate
$7.67 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Abbott Reports Third-Quarter 2018 Results

ABBOTT PARK, Ill., Oct. 17, 2018 /PRNewswire/ -- Abbott (NYSE: ABT) today announced financial results for the third quarter ended Sept. 30, 2018.

  • Third-quarter worldwide sales of $7.7 billion increased 12.1 percent on a reported basis and 7.8 percent on an organic* basis.
  • Reported diluted EPS from continuing operations under GAAP was $0.31 in the third quarter.
  • Adjusted diluted EPS from continuing operations, which excludes specified items, was $0.75.
  • Abbott narrowed its full-year 2018 diluted EPS guidance range from continuing operations on a GAAP basis to $1.33 to $1.35 and adjusted diluted EPS from continuing operations to $2.87 to $2.89.
  • In the U.S., Abbott received FDA approval of its FreeStyle® Libre 14 day sensor, making it the longest lasting wearable glucose sensor available. In October, Abbott obtained CE Mark for its FreeStyle Libre 2 system, a next-generation product offering with optional real-time alarms.
  • FreeStyle Libre achieving rapid market uptake, with third-quarter worldwide sales of $304 million, an increase of 101 percent versus prior year.
  • In July, Abbott received U.S. FDA approval for its third-generation version of its minimally invasive MitraClip® heart valve repair device. This new version includes design advancements that simplify the procedure and enable more patients to be treated with MitraClip.
  • In September, Abbott announced positive clinical results from its landmark COAPT study, which demonstrated that its minimally invasive MitraClip heart valve repair device improved survival and clinical outcomes for select patients with functional mitral regurgitation, a leaky heart valve resulting from advanced heart failure. The COAPT study data will be submitted to the U.S. FDA to support consideration of an expanded indication for MitraClip.

"We achieved another quarter of strong growth and our new product pipeline continues to be highly productive," said Miles D. White, chairman and chief executive officer, Abbott. "In spite of increasing currency headwinds, we're well-positioned to achieve the upper end of our initial full-year guidance."

* See note on organic growth below.

THIRD-QUARTER 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.

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; and
  • Excludes the impact of foreign exchange.

Following are sales by business segment and commentary for the third quarter and first nine months of 2018:

Total Company

($ in millions)










% Change vs. 3Q17



Sales 3Q18


Reported


Organic



U.S.


Int'l


Total


U.S.


Int'l


Total


U.S.


Int'l


Total

Total *


2,707


4,949


7,656


17.0


9.6


12.1


5.2


9.2


7.8

Nutrition


774


1,064


1,838


2.1


5.3


4.0


2.1


9.1


6.1

Diagnostics


666


1,158


1,824


80.2


27.3


42.6


6.1


8.1


7.5

Established Pharmaceuticals


--


1,159


1,159


 n/a 


(0.9)


(0.9)


 n/a 


5.9


5.9

Medical Devices


1,258


1,557


2,815


6.9


9.7


8.4


6.9


12.2


9.8


* Total 2018 Abbott sales from continuing operations include Other Sales of $20 million.

 









% Change vs. 9M17



Sales 9M18


Reported


Organic



U.S.


Int'l


Total


U.S.


Int'l


Total


U.S.


Int'l


Total

Total *


8,084


14,729


22,813


15.5


15.0


15.2


4.6


9.2


7.6

Nutrition


2,313


3,139


5,452


2.3


9.0


6.1


2.3


8.5


5.8

Diagnostics


2,018


3,516


5,534


79.4


36.0


49.2


3.3


8.0


6.6

Established Pharmaceuticals


--


3,332


3,332


 n/a 


6.1


6.1


 n/a 


8.3


8.3

Medical Devices


3,726


4,724


8,450


6.3


15.7


11.4


6.5


11.4


9.1


* Total 2018 Abbott sales from continuing operations include Other Sales of $45 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.

Third-quarter 2018 worldwide sales of $7.7 billion increased 12.1 percent on a reported basis. On an organic basis, worldwide sales increased 7.8 percent. Refer to tables titled "Non-GAAP Reconciliation of Adjusted Historical Revenue" for a reconciliation of adjusted historical revenue.

Nutrition

($ in millions)  










% Change vs. 3Q17



Sales 3Q18


Reported


Organic



U.S.


Int'l


Total


U.S.


Int'l


Total


U.S.


Int'l


Total

Total


774


1,064


1,838


2.1


5.3


4.0


2.1


9.1


6.1

Pediatric


459


580


1,039


5.5


7.4


6.6


5.5


10.9


8.5

Adult


315


484


799


(2.4)


2.9


0.8


(2.4)


7.1


3.2











% Change vs. 9M17



Sales 9M18


Reported


Organic



U.S.


Int'l


Total


U.S.


Int'l


Total


U.S.


Int'l


Total

Total


2,313


3,139


5,452


2.3


9.0


6.1


2.3


8.5


5.8

Pediatric


1,376


1,708


3,084


3.7


9.3


6.8


3.7


8.5


6.3

Adult


937


1,431


2,368


0.2


8.7


5.2


0.2


8.5


5.1

Worldwide Nutrition sales increased 4.0 percent on a reported basis in the third quarter, including an unfavorable 2.1 percent effect of foreign exchange, and increased 6.1 percent on an organic basis.

Worldwide Pediatric Nutrition sales increased 6.6 percent on a reported basis in the third quarter, including an unfavorable 1.9 percent effect of foreign exchange, and increased 8.5 percent on an organic basis. International pediatric sales increased 7.4 percent on a reported basis, including an unfavorable 3.5 percent effect of foreign exchange, and increased 10.9 percent on an organic basis. Strong performance in the quarter was led by above-market growth in the U.S. and double-digit growth in both Asia and Latin America.

Worldwide Adult Nutrition sales increased 0.8 percent on a reported basis in the third quarter, including an unfavorable 2.4 percent effect of foreign exchange, and increased 3.2 percent on an organic basis. International adult sales increased 2.9 percent on a reported basis, including an unfavorable 4.2 percent effect of foreign exchange, and increased 7.1 percent on an organic basis. 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. U.S. sales were negatively impacted by Abbott's wind down of a non-core product line.

Diagnostics

($ in millions)










% Change vs. 3Q17



Sales 3Q18


Reported


Organic



U.S.


Int'l


Total


U.S.


Int'l


Total


U.S.


Int'l


Total

Total *


666


1,158


1,824


80.2


27.3


42.6


6.1


8.1


7.5

Core Laboratory


249


837


1,086


8.2


4.3


5.2


8.2


8.1


8.1

Molecular


37


84


121


2.3


5.8


4.7


2.3


7.9


6.1

Point of Care


106


30


136


2.7


7.4


3.7


2.7


8.6


4.0

Rapid Diagnostics *


274


207


481


 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.











% Change vs. 9M17



Sales 9M18


Reported


Organic



U.S.


Int'l


Total


U.S.


Int'l


Total


U.S.


Int'l


Total

Total *


2,018


3,516


5,534


79.4


36.0


49.2


3.3


8.0


6.6

Core Laboratory


725


2,508


3,233


6.9


9.7


9.1


6.9


7.6


7.4

Molecular


114


247


361


(6.8)


12.9


5.8


(6.8)


10.9


4.5

Point of Care


324


92


416


(0.3)


13.8


2.5


(0.3)


12.1


2.2

Rapid Diagnostics *


855


669


1,524


 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 42.6 percent on a reported basis in the third quarter. On an organic basis, sales increased 7.5 percent. Refer to tables titled "Non-GAAP Reconciliation of Adjusted Historical Revenue" for a reconciliation of adjusted historical revenue.

Core Laboratory Diagnostics sales increased 5.2 percent on a reported basis in the third quarter, including an unfavorable 2.9 percent effect of foreign exchange, and increased 8.1 percent on an organic basis, reflecting above-market growth in the U.S. and internationally.

Molecular Diagnostics sales increased 4.7 percent on a reported basis in the third quarter, including an unfavorable 1.4 percent effect of foreign exchange, and increased 6.1 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 increased 3.7 percent on a reported basis in the third quarter, including an unfavorable 0.3 percent effect of foreign exchange, and increased 4.0 percent on an organic basis, led by strong international growth of Abbott's i-STAT® handheld system.

Rapid Diagnostics worldwide sales of $481 million were led by cardiometabolic testing.

Established Pharmaceuticals

($ in millions)










% Change vs. 3Q17



Sales 3Q18


Reported


Organic



U.S.


Int'l


Total


U.S.


Int'l


Total


U.S.


Int'l


Total

Total


--


1,159


1,159


 n/a 


(0.9)


(0.9)


 n/a 


5.9


5.9

Key Emerging Markets


--


866


866


 n/a 


(2.1)


(2.1)


 n/a 


6.8


6.8

Other


--


293


293


 n/a 


2.8


2.8


 n/a 


3.1


3.1











% Change vs. 9M17



Sales 9M18


Reported


Organic



U.S.


Int'l


Total


U.S.


Int'l


Total


U.S.


Int'l


Total

Total


--


3,332


3,332


 n/a 


6.1


6.1


 n/a 


8.3


8.3

Key Emerging Markets


--


2,525


2,525


 n/a 


4.6


4.6


 n/a 


8.5


8.5

Other


--


807


807


 n/a 


10.8


10.8


 n/a 


7.3


7.3

Established Pharmaceuticals sales decreased 0.9 percent on a reported basis in the third quarter, including an unfavorable 6.8 percent effect of foreign exchange, and increased 5.9 percent on an organic basis. As expected, sales growth in the quarter was negatively impacted by a comparison versus the third-quarter 2017, when sales were higher than normal due to channel restocking across the market after implementation of a new tax system in India.

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 2.1 percent on a reported basis in the third quarter, including an unfavorable 8.9 percent effect of foreign exchange, and increased 6.8 percent on an organic basis. Sales growth was led by double-digit growth in China and Russia. Excluding the negative impact from prior year purchasing patterns associated with the implementation of a new tax system in India, Abbott's Key Emerging Markets sales would have increased high-single digits on an organic basis in the third quarter.

Medical Devices

($ in millions)










% Change vs. 3Q17



Sales 3Q18


Reported


Organic



U.S.


Int'l


Total


U.S.


Int'l


Total


U.S.


Int'l


Total

Total


1,258


1,557


2,815


6.9


9.7


8.4


6.9


12.2


9.8

Cardiovascular and Neuromodulation


1,134


1,169


2,303


3.7


3.4


3.6


3.7


5.9


4.8

Rhythm Management


252


256


508


0.6


(2.0)


(0.7)


0.6


0.6


0.6

Electrophysiology


189


217


406


27.9


11.5


18.5


27.9


13.6


19.7

Heart Failure


111


41


152


(14.2)


4.4


(9.9)


(14.2)


7.4


(9.2)

Vascular


284


436


720


(2.7)


0.7


(0.7)


(2.7)


2.7


0.5

Structural Heart


126


179


305


15.8


12.0


13.6


15.8


15.1


15.4

Neuromodulation


172


40


212


4.3


(5.5)


2.3


4.3


(1.7)


3.1

Diabetes Care


124


388


512


49.0


34.0


37.4


49.0


37.2


39.8











% Change vs. 9M17



Sales 9M18


Reported


Organic



U.S.


Int'l


Total


U.S.


Int'l


Total


U.S.


Int'l


Total

Total


3,726


4,724


8,450


6.3


15.7


11.4


6.5


11.4


9.1

Cardiovascular and Neuromodulation


3,404


3,643


7,047


4.3


9.7


7.0


4.5


5.7


5.1

Rhythm Management


778


808


1,586


(0.6)


2.1


0.8


(0.6)


(1.7)


(1.2)

Electrophysiology


564


661


1,225


26.2


19.2


22.3


26.2


15.0


20.0

Heart Failure


342


126


468


(5.5)


16.0


(0.6)


(5.5)


11.8


(1.5)

Vascular


854


1,355


2,209


(4.2)


7.0


2.4


(3.5)


3.5


0.6

Structural Heart


353


560


913


10.5


18.3


15.2


10.5


13.3


12.2

Neuromodulation


513


133


646


11.1


4.0


9.5


11.1


0.2


8.7

Diabetes Care


322


1,081


1,403


34.3


42.0


40.2


34.3


36.2


35.7

Worldwide Medical Devices sales increased 8.4 percent on a reported basis in the third quarter. On an organic basis, sales increased 9.8 percent. Refer to table 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 as well as strong growth of Abbott's Confirm RxTM Insertable Cardiac Monitor (ICM), the world's first and only smartphone-compatible ICM designed to help physicians remotely identify cardiac arrhythmias.

Growth in Structural Heart was driven by several product areas across Abbott's broad portfolio, including AMPLATZERTM 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 September, Abbott announced positive clinical results from its landmark COAPT study, which demonstrated that MitraClip improved survival and clinical outcomes for select patients with functional mitral regurgitation. The COAPT study data will be submitted to the U.S. FDA to support consideration of an expanded indication for MitraClip.

In Diabetes Care, sales increased 37.4 percent on a reported basis and 39.8 percent on an organic basis, led by rapid market uptake of FreeStyle Libre, Abbott's revolutionary sensor-based continuous glucose monitoring system, which removes the need for routine fingersticks1 for people with diabetes. During the quarter, Abbott received U.S. FDA approval of its FreeStyle Libre 14 day sensor, the longest lasting glucose wearable sensor available. In October, Abbott obtained CE Mark for its FreeStyle Libre 2 system, a next-generation product offering optional real-time alarms. 

ABBOTT'S FULL-YEAR EARNINGS-PER-SHARE GUIDANCE

Abbott is narrowing its 2018 diluted earnings per share from continuing operations under Generally Accepted Accounting Principles (GAAP) to $1.33 to $1.35.

Abbott forecasts net specified items for the full year 2018 of approximately $1.54 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 $2.87 to $2.89 for the full year 2018.

Abbott is issuing fourth-quarter 2018 guidance for diluted earnings per share from continuing operations under GAAP of $0.39 to $0.41. Abbott forecasts specified items for the fourth quarter 2018 of $0.41 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 $0.80 to $0.82 for the fourth quarter.

ABBOTT DECLARES 379TH CONSECUTIVE QUARTERLY DIVIDEND

On Sept. 13, 2018, the board of directors of Abbott declared the company's quarterly dividend of $0.28 per share. Abbott's cash dividend is payable Nov. 15, 2018, to shareholders of record at the close of business on Oct. 15, 2018.

Abbott has increased its dividend payout for 46 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 99,000 people.

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

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

Third Quarter Ended September 30, 2018 and 2017

(in millions, except per share data)

(unaudited)




3Q18


3Q17


% Change


Net Sales


$7,656


$6,829


12.1










Cost of products sold, excluding amortization expense


3,166


2,876


10.1


Amortization of intangible assets


544


501


8.7


Research and development


574


568


1.1


Selling, general, and administrative


2,377


2,115


12.4


Total Operating Cost and Expenses


6,661


6,060


9.9










Operating earnings


995


769


29.2

1)









Interest expense, net


181


182


(0.4)


Net foreign exchange (gain) loss


11


(6)


n/m


Debt extinguishment costs


67


--


n/m


Other (income) expense, net


18


(33)


n/m

1)

Earnings from Continuing Operations before taxes


718


626


14.6










Tax expense on Earnings from Continuing Operations


166


65


n/m


Earnings from Continuing Operations


552


561


(1.7)










Earnings from Discontinued Operations, net of taxes


11


42


(72.4)










Net Earnings


$563


$603


(6.7)










Earnings from Continuing Operations, excluding 








Specified Items, as described below


$1,342


$1,158


15.9

2)









Diluted Earnings per Common Share from:
















Continuing Operations


$0.31


$0.32


(3.1)


Discontinued Operations


0.01


0.02


(50.0)


Total


$0.32


$0.34


(5.9)










Diluted Earnings per Common Share from Continuing 








Operations, excluding Specified Items, as described below


$0.75


$0.66


13.6

2)









Average Number of Common Shares Outstanding








Plus Dilutive Common Stock Options 


1,772


1,754












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 third quarter of 2017.



2)

2018 Net Earnings and Diluted Earnings per Common Share from Continuing Operations, excluding Specified Items, excludes net after-tax charges of $790 million, or $0.44 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 $597 million, or $0.34 per share, for intangible amortization expense and other expenses primarily associated with acquisitions and restructuring actions.

 

Abbott Laboratories and Subsidiaries

Condensed Consolidated Statement of Earnings

Nine Months Ended September 30, 2018 and 2017

(in millions, except per share data)

(unaudited)




9M18


9M17


% Change


Net Sales


$22,813


$19,801


15.2










Cost of products sold, excluding amortization expense


9,515


9,127


4.2


Amortization of intangible assets


1,690


1,415


19.5


Research and development


1,738


1,641


5.9


Selling, general, and administrative


7,385


6,705


10.1


Total Operating Cost and Expenses


20,328


18,888


7.6










Operating earnings


2,485


913


n/m

1)









Interest expense, net


569


569


0.0


Net foreign exchange (gain) loss


2


(34)


n/m


Debt extinguishment costs


81


--


n/m


Other (income) expense, net


(93)


(1,279)


(92.7)

1) 2)

Earnings from Continuing Operations before taxes


1,926


1,657


16.2










Tax expense on Earnings from Continuing Operations


247


440


(43.8)

3)

Earnings from Continuing Operations


1,679


1,217


37.9










Earnings from Discontinued Operations, net of taxes


35


88


(60.5)

4)









Net Earnings


$1,714


$1,305


31.3










Earnings from Continuing Operations, excluding 








Specified Items, as described below


$3,687


$3,097


19.0

5)









Diluted Earnings per Common Share from:
















Continuing Operations


$0.94


$0.69


36.2


Discontinued Operations


0.02


0.05


(60.0)

4)

Total


$0.96


$0.74


29.7










Diluted Earnings per Common Share from Continuing 








Operations, excluding Specified Items, as described below


$2.07


$1.76


17.6

5)









Average Number of Common Shares Outstanding








Plus Dilutive Common Stock Options 


1,769


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 $120 million of net pension-related income from Operating earnings to Other (income) expense, net for the first nine months 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 the impact of approximately $80 million in excess tax benefits associated with share-based compensation.




2017 Tax expense on Earnings from Continuing Operations includes the tax associated with a $1.163 billion pretax gain on the sale of the AMO business.



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 $2.008 billion, or $1.13 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 $1.880 billion, or $1.07 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.

 

Abbott Laboratories and Subsidiaries

Non-GAAP Reconciliation of Financial Information From Continuing Operations

Third Quarter Ended September 30, 2018 and 2017

(in millions, except per share data) 

(unaudited)




3Q18



As
Reported(GAAP)


Specified
Items


As
Adjusted


% to
Sales










Intangible Amortization


$544


$(544)


--



Gross Margin


3,946


609


$4,555


59.5%

R&D


574


(18)


556


7.3%

SG&A


2,377


(105)


2,272


29.7%

Debt extinguishment costs


67


(67)


--



Other (income) expense, net


18


(52)


(34)



Earnings from Continuing Operations before taxes 


718


851


1,569



Tax expense on Earnings from Continuing Operations


166


61


227



Earnings from Continuing Operations


552


790


1,342



Diluted Earnings per Share from Continuing Operations


$0.31


$0.44


$0.75



Specified items reflect intangible amortization expense of $544 million and other expenses of $307 million, primarily associated with acquisitions, restructuring actions and other expenses. See tables titled "Details of Specified Items" for additional details regarding specified items.



3Q17



As
Reported(GAAP)


Specified
Items


As
Adjusted


% to Sales










Intangible Amortization


$501


$(501)


--



Gross Margin


3,452


580


$4,032


59.1%

R&D


568


(91)


477


7.0%

SG&A


2,115


(90)


2,025


29.6%

Other (income) expense, net


(33)


1


(32)



Earnings from Continuing Operations before taxes


626


760


1,386



Tax expense on Earnings from Continuing Operations


65


163


228



Earnings from Continuing Operations


561


597


1,158



Diluted Earnings per Share from Continuing Operations


$0.32


$0.34


$0.66




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 on table titled "Condensed Consolidated Statement of Earnings" for additional information.

Specified items reflect intangible amortization expense of $501 million and other expenses of $259 million, primarily associated with acquisitions, restructuring actions and other expenses. See tables titled "Details of Specified Items" for additional details regarding specified items.

Abbott Laboratories and Subsidiaries

Non-GAAP Reconciliation of Financial Information From Continuing Operations

Nine Months Ended September 30, 2018 and 2017

(in millions, except per share data) 

(unaudited)




9M18



As
Reported(GAAP)


Specified Items


As
Adjusted


% to
Sales










Intangible Amortization


$1,690


$(1,690)


--



Gross Margin


11,608


1,933


$13,541


59.4%

R&D


1,738


(85)


1,653


7.2%

SG&A


7,385


(274)


7,111


31.2%

Interest expense, net


569


(2)


567



Net foreign exchange (gain) loss


2


(1)


1



Debt extinguishment costs


81


(81)


--



Other (income) expense, net


(93)


(10)


(103)



Earnings from Continuing Operations before taxes 


1,926


2,386


4,312



Tax expense on Earnings from Continuing Operations


247


378


625



Earnings from Continuing Operations


1,679


2,008


3,687



Diluted Earnings per Share from Continuing Operations


$0.94


$1.13


$2.07



Specified items reflect intangible amortization expense of $1.690 billion and other expenses of $696 million, primarily associated with acquisitions, restructuring actions and other expenses. See tables titled "Details of Specified Items" for additional details regarding specified items.



9M17



As
Reported (GAAP)


Specified Items


As
Adjusted


% to Sales










Intangible Amortization


$1,415


$(1,415)


--



Gross Margin


9,259


2,459


$11,718


59.2%

R&D


1,641


(146)


1,495


7.6%

SG&A


6,705


(595)


6,110


30.9%

Interest expense, net


569


(19)


550



Other (income) expense, net


(1,279)


1,167


(112)



Earnings from Continuing Operations before taxes


1,657


2,052


3,709



Tax expense on Earnings from Continuing Operations


440


172


612



Earnings from Continuing Operations


1,217


1,880


3,097



Diluted Earnings per Share from Continuing Operations


$0.69


$1.07


$1.76




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 on table titled "Condensed Consolidated Statement of Earnings" for additional information.

Specified items reflect intangible amortization expense of $1.415 billion and other expenses of $1.800 billion, primarily associated with acquisitions, including approximately $840 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 $1.163 billion from the sale of the AMO business. See tables titled "Details of Specified Items" for additional details regarding specified items.

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




3Q18


($ in millions)


Pre-Tax
Income


Taxes on
Earnings


Tax
Rate


As reported (GAAP)


$718


$166


23.1%


Specified items


851


61




Excluding specified items


$1,569


$227


14.5%














3Q17


($ in millions)


Pre-Tax
Income


Taxes on
Earnings


Tax
Rate


As reported (GAAP)


$626


$65


10.4%

1)

Specified items


760


163




Excluding specified items


$1,386


$228


16.5%




1)

Reported tax rate on a GAAP basis for the third quarter of 2017 includes the impact of approximately $30 million in excess tax benefits associated with share-based compensation.

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




9M18


($ in millions)


Pre-Tax
Income


Taxes on
Earnings


Tax
Rate


As reported (GAAP)


$1,926


$247


12.8%

2)

Specified items


2,386


378




Excluding specified items


$4,312


$625


14.5%














9M17


($ in millions)


Pre-Tax
Income


Taxes on
Earnings


Tax
Rate


As reported (GAAP)


$1,657


$440


26.6%

3)

Specified items


2,052


172




Excluding specified items


$3,709


$612


16.5%




2)

Reported tax rate on a GAAP basis for 2018 includes the impact of approximately $80 million in excess tax benefits associated with share-based compensation.



3)

Reported tax rate on a GAAP basis for 2017 includes the impact of taxes associated with a $1.163 billion pretax gain on the sale of the AMO business and the impact of approximately $90 million in excess tax benefits associated with share-based compensation.

 

Abbott Laboratories and Subsidiaries

Non-GAAP Reconciliation of Adjusted Historical Revenue

Third Quarter Ended September 30, 2018 and 2017

 ($ in millions) (unaudited)




3Q18


3Q17


% Change vs. 3Q17



Abbott Reported




Adjusted Revenue


Abbott Reported




Non-GAAP




Rapid Diagnostics




Reported


Reported


Organica)
















Total Company


7,656


(481)


7,175


6,829


12.1


5.1


7.8

U.S.


2,707


(274)


2,433


2,313


17.0


5.2


5.2

Int'l


4,949


(207)


4,742


4,516


9.6


5.0


9.2

Total Diagnostics


1,824


(481)


1,343


1,279


42.6


5.0


7.5

U.S.


666


(274)


392


369


80.2


6.1


6.1

Int'l


1,158


(207)


951


910


27.3


4.5


8.1

Rapid Diagnostics


481


(481)


--


--


 n/m 


 n/m 


 n/m 

U.S.


274


(274)


--


--


 n/m 


 n/m 


 n/m 

Int'l


207


(207)


--


--


 n/m 


 n/m 


 n/m 































a) 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

Nine Months Ended September 30, 2018 and 2017

 ($ in millions) (unaudited)




9M18


9M17


% Change vs. 9M17



Abbott Reported




Adjusted Revenue


Abbott Reported


Divested
Businessesa)


Adjusted Revenue




Non-GAAP




Rapid Diagnostics






Reported


Reported


Organicb)




















Total Company


22,813


(1,524)


21,289


19,801


(187)


19,614


15.2


8.5


7.6

U.S.


8,084


(855)


7,229


6,997


(84)


6,913


15.5


4.6


4.6

Int'l


14,729


(669)


14,060


12,804


(103)


12,701


15.0


10.7


9.2

Total Diagnostics


5,534


(1,524)


4,010


3,710


--


3,710


49.2


8.1


6.6

U.S.


2,018


(855)


1,163


1,125


--


1,125


79.4


3.3


3.3

Int'l


3,516


(669)


2,847


2,585


--


2,585


36.0


10.1


8.0

Rapid Diagnostics


1,524


(1,524)


--


--


--


--


 n/m 


 n/m 


 n/m 

U.S.


855


(855)


--


--


--


--


 n/m 


 n/m 


 n/m 

Int'l


669


(669)


--


--


--


--


 n/m 


 n/m 


 n/m 

Total Medical Devices


8,450


--


8,450


7,588


(12)


7,576


11.4


11.5


9.1

U.S.


3,726


--


3,726


3,504


(6)


3,498


6.3


6.5


6.5

Int'l


4,724


--


4,724


4,084


(6)


4,078


15.7


15.8


11.4

Cardiovascular and Neuromodulation

7,047


--


7,047


6,587


(12)


6,575


7.0


7.2


5.1

U.S.


3,404


--


3,404


3,264


(6)


3,258


4.3


4.5


4.5

Int'l


3,643


--


3,643


3,323


(6)


3,317


9.7


9.8


5.7

Vascular


2,209


--


2,209


2,158


(12)


2,146


2.4


2.9


0.6

U.S.


854


--


854


891


(6)


885


(4.2)


(3.5)


(3.5)

Int'l


1,355


--


1,355


1,267


(6)


1,261


7.0


7.4


3.5







































a) Reflects sales related to the AMO and St. Jude Medical vascular closure businesses prior to divesting in the first quarter 2017.

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

Third Quarter Ended September 30, 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


$              20


$                       3


$           544


$       42


$        609

R&D


(13)


(1)


--


(4)


(18)

SG&A


(103)


(2)


--


--


(105)

Debt extinguishment costs


--


--


--


(67)


(67)

Other (income) expense, net


6


--


--


(58)


(52)

Earnings from Continuing Operations before taxes


$            130


$                       6


$           544


$     171


851

Tax expense on Earnings from Continuing Operations (d)










61

Earnings from Continuing Operations










$        790

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 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, 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 and charges related to the impairment of certain assets.



d)  

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

Third Quarter Ended September 30, 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


$                26


$                    53


$          501


$         --


$       580

R&D


(11)


(74)


--


(6)


(91)

SG&A


(84)


(7)


--


1


(90)

Other (income) expense, net


16


--


--


(15)


1

Earnings from Continuing Operations before taxes


$               105


$                   134


$          501


$        20


760

Tax expense on Earnings from Continuing Operations (d)










163

Earnings from Continuing Operations










$       597

Diluted Earnings per Share from Continuing Operations










$      0.34


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. 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)    

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



d)   

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

Nine Months Ended September 30, 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


$            102


$             99


$       1,690


$      42


$    1,933

R&D


(34)


(4)


--


(47)


(85)

SG&A


(264)


(10)


--


--


(274)

Interest expense, net


--


--


--


(2)


(2)

Net foreign exchange (gain) loss


--


(1)


--


--


(1)

Debt extinguishment costs


--


--


--


(81)


(81)

Other (income) expense, net


(1)


--


--


(9)


(10)

Earnings from Continuing Operations before taxes


$            401


$           114


$       1,690


$     181


2,386

Tax expense on Earnings from Continuing Operations (d)










378

Earnings from Continuing Operations










$    2,008

Diluted Earnings per Share from Continuing Operations










$      1.13


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 an increase in fair value of an investment.



d)    

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

Nine Months Ended September 30, 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


$           870


$                 174


$       1,415


$        --


$    2,459

R&D


(37)


(103)


--


(6)


(146)

SG&A


(570)


(26)


--


1


(595)

Interest expense, net


(19)


--


--


--


(19)

Other (income) expense, net


1,216


(34)


--


(15)


1,167

Earnings from Continuing Operations before taxes


$           280


$                 337


$       1,415


$      20


2,052

Tax expense on Earnings from Continuing Operations (d)










172

Earnings from Continuing Operations










$    1,880

Diluted Earnings per Share from Continuing Operations










$      1.07


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. Other (income) expense, net includes the gain on the sale of the AMO business. 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)    

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



d)    

Reflects the net tax benefit associated with the specified items and excess tax benefits associated with share-based compensation.

 

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