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0000001800 false Common Shares, Without Par Value ABT 0000001800 2020-01-21 2020-01-22 0000001800 us-gaap:CommonStockMember exch:XCHI 2020-01-21 2020-01-22 0000001800 us-gaap:CommonStockMember exch:XNYS 2020-01-21 2020-01-22 iso4217:USD xbrli:shares iso4217:USD xbrli:shares
   

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

 

 

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

 

January 22, 2020

Date of Report (Date of earliest event reported)

 

ABBOTT LABORATORIES

(Exact name of registrant as specified in charter)

 

 

 

Illinois   1-2189   36-0698440
(State or other Jurisdiction   (Commission File Number)   (IRS Employer
of Incorporation)       Identification No.)

 

 

 

100 Abbott Park Road

Abbott Park, Illinois 60064-6400

(Address of principal executive offices)(Zip Code)

 

Registrant’s telephone number, including area code:  (224) 667-6100

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨                 Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨                 Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨                 Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨                 Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Securities Registered Pursuant to Section 12(b) of the Act:

 

Title of Each Class   Trading 
Symbol(s)		   Name of Each Exchange
on Which Registered
Common Shares, Without Par Value   ABT   New York Stock Exchange
Chicago Stock Exchange, Inc.

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company  ¨

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ¨

 

 

 

 

 

 

Item 2.02Results of Operations and Financial Condition

 

On January 22, 2020, Abbott Laboratories announced its results of operations for the fourth quarter and full year 2019.

 

Furnished as Exhibit 99.1, and incorporated herein by reference, is the news release issued by Abbott announcing those results.  In that news release, Abbott uses various non-GAAP financial measures including, among others, net earnings from continuing operations excluding specified items.  These non-GAAP financial measures adjust for factors that are unusual or unpredictable, such as expenses primarily associated with acquisitions and restructuring actions, charges related to cost reduction initiatives, the acquisition of R&D assets, costs associated with the early extinguishment of debt, charges related to impairment of certain assets, and tax benefits associated with specified items, a reduction in the transition tax associated with the Tax Cuts and Jobs Act and excess tax benefits associated with share-based compensation.  These non-GAAP financial measures also exclude intangible amortization expense to provide greater visibility on the results of operations excluding these costs, similar to how Abbott’s management internally assesses performance.  Abbott’s management believes the presentation of these non-GAAP financial measures provides useful information to investors regarding Abbott’s results of operations as these non-GAAP financial measures allow investors to better evaluate ongoing business performance.  Abbott’s management also uses these non-GAAP financial measures internally to monitor performance of the businesses.  Abbott, however, cautions investors to consider these non-GAAP financial measures in addition to, and not as a substitute for, financial measures prepared in accordance with GAAP.  

 

Item 9.01Financial Statements and Exhibits

 

 Exhibit No.  Exhibit
     
99.1  Press Release dated January 22, 2020 (furnished pursuant to Item 2.02).
     
104  Cover Page Interactive Data File (the cover page XBRL tags are embedded in the Inline XBRL document).

 

 

 

 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

  ABBOTT LABORATORIES
     
Date: January 22, 2020 By: /s/ Brian B. Yoor
    Brian B. Yoor
    Executive Vice President, Finance and Chief Financial Officer

 

 

Exhibit 99.1 

 

 

News Release

 

Abbott Reports Fourth-Quarter 2019 Results; Announces Strong Forecast for 2020

 

·Fourth-quarter sales growth of 7.1 percent; organic sales growth of 8.5 percent
·Fourth-quarter GAAP EPS growth from continuing operations of 59.5 percent and adjusted EPS growth from continuing operations of 17.3 percent
·Several businesses achieved double-digit sales growth
·Forecast reflects continued top-tier sales and earnings growth for 2020
 

ABBOTT PARK, Ill., Jan. 22, 2020 — Abbott today announced financial results for the fourth quarter and full year ended Dec. 31, 2019.

 

·Fourth-quarter worldwide sales of $8.3 billion increased 7.1 percent on a reported basis and 8.5 percent on an organic* basis.
·Reported diluted EPS from continuing operations under GAAP was $0.59 in the fourth quarter. Adjusted diluted EPS from continuing operations, which excludes specified items, was $0.95, an increase of 17.3 percent versus prior year1.
·Abbott issues full-year 2020 guidance for organic sales growth of 7.0 to 8.0 percent2, which excludes the impact of foreign exchange, and diluted EPS from continuing operations on a GAAP basis of $2.35 to $2.45. Projected full-year adjusted diluted EPS from continuing operations is $3.55 to $3.65, reflecting double-digit growth at the mid-point.
·Medical Devices sales increased 9.7 percent on a reported basis and 11.3 percent on an organic basis in the fourth quarter. Sales performance was led by double-digit organic sales growth in Heart Failure, Electrophysiology, Structural Heart and Diabetes Care.
·Established Pharmaceuticals sales increased 7.8 percent on a reported basis and 10.0 percent on an organic basis in the fourth quarter. Sales performance was led by growth across several countries in Latin America and Asia.
·Core Laboratory Diagnostics sales increased 8.4 percent on a reported basis and 10.0 percent on an organic basis in the fourth quarter. Sales performance was led by above-market growth in the U.S. and internationally, where Abbott is achieving continued strong adoption of its Alinity® family of innovative and highly differentiated diagnostic instruments.

 

“Our focus on organic growth is driving top-tier performance,” said Miles D. White, chairman and chief executive officer, Abbott. “We're entering 2020 with very good momentum and targeting continued strong growth.”

 

—more—

 

 

* See note on organic growth on the next page.

 

 

 

 

fourth-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 the results for a non-core business within U.S. Adult Nutrition during the first nine months of 2018 as this business 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 2019:

 

Total Company

($ in millions)

 

               % Change vs. 4Q18 
   Sales 4Q19   Reported   Organic  
   U.S.   Int'l   Total   U.S.   Int'l   Total   U.S.   Int'l   Total  
Total *  2,960   5,354   8,314   7.5   6.9   7.1   7.5   9.1   8.5  
Nutrition  789   1,079   1,868   3.6   6.4   5.2   3.6   7.5   5.8  
Diagnostics  766   1,292   2,058   9.6   2.4   5.0   9.6   4.6   6.4  
Established Pharmaceuticals  —   1,174   1,174    n/a    7.8   7.8    n/a    10.0   10.0  
Medical Devices  1,404   1,800   3,204   9.2   10.1   9.7   9.2   12.9   11.3  

 

 

* Total Q4 2019 Abbott sales from continuing operations include Other Sales of $10 million.

 

               % Change vs. 12M18 
   Sales 12M19   Reported   Organic  
   U.S.   Int'l   Total   U.S.   Int'l   Total   U.S.   Int'l   Total  
Total *  11,398   20,506   31,904   5.2   3.9   4.3   5.5   8.8   7.7  
Nutrition  3,110   4,299   7,409   1.1   3.5   2.5   2.4   7.5   5.3  
Diagnostics  2,887   4,826   7,713   6.3   1.0   2.9   6.3   5.7   5.9  
Established Pharmaceuticals  —   4,486   4,486    n/a    1.4   1.4    n/a    7.3   7.3  
Medical Devices  5,374   6,865   12,239   7.2   8.0   7.6   7.2   13.0   10.5  

 

 

* Total 12M 2019 Abbott sales from continuing operations include Other Sales of $57 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 2019 worldwide sales of $8.3 billion increased 7.1 percent on a reported basis. On an organic basis, worldwide sales increased 8.5 percent. Refer to page 17 for a reconciliation of adjusted historical revenue.

 

 2 

 

 

Nutrition

($ in millions)

 

               % Change vs. 4Q18 
   Sales 4Q19   Reported   Organic  
   U.S.   Int'l   Total   U.S.   Int'l   Total   U.S.   Int'l   Total  
Total  789   1,079   1,868   3.6   6.4   5.2   3.6   7.5   5.8  
Pediatric  473   564   1,037   1.2   3.4   2.4   1.2   4.1   2.8  
Adult  316   515   831   7.3   9.9   8.9   7.3   11.5   9.9  

 

               % Change vs. 12M18 
   Sales 12M19   Reported   Organic  
   U.S.   Int'l   Total   U.S.   Int'l   Total   U.S.   Int'l   Total  
Total  3,110   4,299   7,409   1.1   3.5   2.5   2.4   7.5   5.3  
Pediatric  1,879   2,282   4,161   1.9   1.3   1.6   1.9   4.6   3.4  
Adult  1,231   2,017   3,248   (0.1)  6.2   3.7   3.2   10.9   7.9  

 

Worldwide Nutrition sales increased 5.2 percent on a reported basis in the fourth quarter. On an organic basis, sales increased 5.8 percent. Refer to page 17 for a reconciliation of adjusted historical revenue.

 

Worldwide Pediatric Nutrition sales increased 2.4 percent on a reported basis in the fourth quarter, including an unfavorable 0.4 percent effect of foreign exchange, and increased 2.8 percent on an organic basis. International sales increased 3.4 percent on a reported basis and 4.1 percent on an organic basis. Sales growth was led by Abbott's market-leading toddler brands, PediaSure® and Pedialyte®.

 

Worldwide Adult Nutrition sales increased 8.9 percent on a reported basis in the fourth quarter and increased 9.9 percent on an organic basis. International Adult Nutrition sales increased 9.9 percent on a reported basis and 11.5 percent on an organic basis in the fourth quarter. Sales performance in the quarter 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.

 

 3 

 

 

Diagnostics

($ in millions)

 

               % Change vs. 4Q18 
   Sales 4Q19   Reported   Organic 
   U.S.   Int’l   Total   U.S.   Int’l   Total   U.S.   Int’l   Total 
Total   766    1,292    2,058    9.6    2.4    5.0    9.6    4.6    6.4 
Core Laboratory   293    956    1,249    13.2    7.0    8.4    13.2    9.1    10.0 
Molecular   36    80    116    (4.1)   (6.5)   (5.7)   (4.1)   (4.5)   (4.4)
Point of Care   104    33    137    (4.9)   16.0    (0.5)   (4.9)   17.4    (0.2)
Rapid Diagnostics   333    223    556    13.6    (12.3)   1.5    13.6    (9.8)   2.7 

 

               % Change vs. 12M18 
   Sales 12M19   Reported   Organic 
   U.S.   Int’l   Total   U.S.   Int’l   Total   U.S.   Int’l   Total 
Total   2,887    4,826    7,713    6.3    1.0    2.9    6.3    5.7    5.9 
Core Laboratory   1,086    3,570    4,656    10.3    4.9    6.2    10.3    9.9    10.0 
Molecular   149    293    442    (1.8)   (11.7)   (8.6)   (1.8)   (8.4)   (6.3)
Point of Care   438    123    561    1.4    1.7    1.5    1.4    3.9    1.9 
Rapid Diagnostics   1,214    840    2,054    5.7    (9.0)   (0.8)   5.7    (4.4)   1.2 

 

Worldwide Diagnostics sales increased 5.0 percent on a reported basis in the fourth quarter, including an unfavorable 1.4 percent effect of foreign exchange, and increased 6.4 percent on an organic basis.

 

Core Laboratory Diagnostics sales increased 8.4 percent on a reported basis and 10.0 percent on an organic basis in the fourth quarter. Sales performance was led by above-market growth in the U.S. and internationally, where Abbott is achieving continued strong adoption of its Alinity family of innovative and highly differentiated diagnostic instruments. During the quarter, Abbott announced the Australian Red Cross Blood Services selected its Alinity-S system for the country’s blood and plasma screening.

 

Molecular Diagnostics sales decreased 5.7 percent on a reported basis in the fourth quarter, including an unfavorable 1.3 percent effect of foreign exchange, and decreased 4.4 percent on an organic basis.

 

Point of Care Diagnostics sales decreased 0.5 percent on a reported basis in the fourth quarter, including an unfavorable 0.3 percent effect of foreign exchange, and decreased 0.2 percent on an organic basis.

 

Rapid Diagnostics sales increased 1.5 percent on a reported basis in the fourth quarter, including an unfavorable 1.2 percent effect of foreign exchange, and increased 2.7 percent on an organic basis. Organic sales growth was led by infectious disease testing in developed markets and cardio-metabolic testing globally, partially offset by lower infectious disease testing sales in Africa.

 

 4 

 

 

Established Pharmaceuticals

($ in millions)

 

               % Change vs. 4Q18 
   Sales 4Q19   Reported   Organic 
   U.S.   Int’l   Total   U.S.   Int’l   Total   U.S.   Int’l   Total 
Total   —    1,174    1,174     n/a     7.8    7.8     n/a     10.0    10.0 
Key Emerging Markets   —    896    896     n/a     7.0    7.0     n/a     9.5    9.5 
Other   —    278    278     n/a     10.4    10.4     n/a     11.6    11.6 

 

               % Change vs. 12M18 
   Sales 12M19   Reported   Organic 
   U.S.   Int’l   Total   U.S.   Int’l   Total   U.S.   Int’l   Total 
Total   —    4,486    4,486     n/a     1.4    1.4     n/a     7.3    7.3 
Key Emerging Markets   —    3,392    3,392     n/a     0.9    0.9     n/a     7.9    7.9 
Other   —    1,094    1,094     n/a     3.3    3.3     n/a     5.6    5.6 

 

Established Pharmaceuticals sales increased 7.8 percent on a reported basis in the fourth quarter, including an unfavorable 2.2 percent effect of foreign exchange, and increased 10.0 percent on an organic basis.

 

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 increased 7.0 percent on a reported basis in the fourth quarter and increased 9.5 percent on an organic basis, which excludes an unfavorable 2.5 percent effect of foreign exchange. Organic sales growth was led by performance across several geographies in Latin America and Asia.

 

Other sales increased 10.4 percent on a reported basis in the fourth quarter, including an unfavorable 1.2 percent effect of foreign exchange, and increased 11.6 percent on an organic basis.

 

 5 

 

 

Medical Devices

($ in millions)

 

               % Change vs. 4Q18 
   Sales 4Q19   Reported   Organic 
   U.S.   Int’l   Total   U.S.   Int’l   Total   U.S.   Int’l   Total 
Total   1,404    1,800    3,204    9.2    10.1    9.7    9.2    12.9    11.3 
Rhythm Management   267    277    544    1.8    2.8    2.3    1.8    5.5    3.7 
Electrophysiology   193    266    459    7.7    11.8    10.0    7.7    13.1    10.8 
Heart Failure   146    52    198    16.8    (0.8)   11.6    16.8    2.1    12.5 
Vascular   260    454    714    (4.6)   1.5    (0.8)   (4.6)   3.2    0.3 
Structural Heart   170    206    376    25.7    7.7    15.1    25.7    10.8    17.0 
Neuromodulation   175    47    222    (0.9)   14.6    2.0    (0.9)   20.0    3.0 
Diabetes Care   193    498    691    43.5    26.0    30.5    43.5    30.3    33.7 
                                              
Vascular Product Lines:                                             
   Coronary and Endovasculara)   239    452    691    (2.9)   1.2    (0.3)   (2.9)   2.9    0.8 

 

 

a)Includes drug-eluting stents, balloon catheters, guidewires, vascular imaging/diagnostics products, vessel closure, carotid and other coronary and peripheral products.

 

               % Change vs. 12M18 
   Sales 12M19   Reported   Organic 
   U.S.   Int’l   Total   U.S.   Int’l   Total   U.S.   Int’l   Total 
Total   5,374    6,865    12,239    7.2    8.0    7.6    7.2    13.0    10.5 
Rhythm Management   1,057    1,087    2,144    (4.4)   (0.6)   (2.5)   (4.4)   4.4    0.0 
Electrophysiology   742    979    1,721    9.5    10.8    10.2    9.5    14.8    12.5 
Heart Failure   574    195    769    22.9    9.4    19.1    22.9    14.1    20.5 
Vascular   1,047    1,803    2,850    (7.0)   0.0    (2.7)   (7.0)   4.1    (0.2)
Structural Heart   616    784    1,400    26.1    4.3    12.9    26.1    9.7    16.2 
Neuromodulation   660    171    831    (4.2)   (1.8)   (3.8)   (4.2)   4.7    (2.4)
Diabetes Care   678    1,846    2,524    48.3    25.1    30.6    48.3    31.8    35.7 
                                              
Vascular Product Lines:                                             
   Coronary and Endovasculara)   947    1,793    2,740    (3.9)   0.0    (1.4)   (3.9)   4.1    1.3 

 

 

a)Includes drug-eluting stents, balloon catheters, guidewires, vascular imaging/diagnostics products, vessel closure, carotid and other coronary and peripheral products.

 

Note: Insertable Cardiac Monitor (ICM) sales, which had previously been reported in Electrophysiology, are now included in Rhythm Management. Historical periods have been adjusted to reflect this change.

 

Worldwide Medical Devices sales increased 9.7 percent on a reported basis in the fourth quarter and increased 11.3 percent on an organic basis, led by double-digit growth in Electrophysiology, Heart Failure, Structural Heart and Diabetes Care.

 

In Electrophysiology, growth was led by strong performance in cardiac diagnostic and ablation catheters, which are used to help physicians accurately and effectively treat atrial fibrillation, a form of irregular heartbeat.

 

 6 

 

 

In Heart Failure, double-digit growth was driven by market adoption of Abbott's HeartMate 3® left ventricular assist device, which has been shown to improve survival and clinical outcomes in patients with advanced heart failure.

 

Growth in Structural Heart was led by MitraClip®, Abbott’s market-leading device for the minimally invasive treatment of mitral regurgitation, or a leaky mitral heart valve. Worldwide sales of MitraClip were $191 million in the fourth quarter, an increase of 27.1 percent on a reported basis and 28.8 percent on an organic basis versus the prior year.

 

In Diabetes Care, sales increased 30.5 percent on a reported basis and 33.7 percent on an organic basis in the fourth quarter. Sales growth in the quarter was led by FreeStyle Libre®, Abbott’s revolutionary continuous glucose monitoring system, with worldwide sales of $534 million, an increase of 58.5 percent on a reported basis and 62.4 percent on an organic basis versus the prior year.

 

 7 

 

 

Abbott issues guidance for 2020

 

Abbott is issuing full-year 2020 guidance for organic sales growth of 7.0 to 8.0 percent2, which excludes the impact of foreign exchange, and diluted earnings per share from continuing operations under Generally Accepted Accounting Principles (GAAP) of $2.35 to $2.45. Abbott forecasts net specified items for the full year 2020 of $1.20 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 $3.55 to $3.65 for the full year 2020.

 

Abbott is issuing first-quarter 2020 guidance for diluted earnings per share from continuing operations under GAAP of $0.40 to $0.42. Abbott forecasts specified items for the first quarter 2020 of $0.29 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 $0.69 to $0.71 for the first quarter.

 

Abbott announces increase in QUARTERLY DIVIDEND

 

On Dec. 13, 2019, the board of directors of Abbott increased the company's quarterly dividend to $0.36 per share from $0.32 per share, an increase of 12.5 percent. Abbott's cash dividend is payable Feb. 14, 2020, to shareholders of record at the close of business on Jan. 15, 2020.

 

Abbott has increased its dividend payout for 48 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.

 

 8 

 

 

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 107,000 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 8:30 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, 2018, and are incorporated by reference. Abbott undertakes no obligation to release publicly any revisions to forward-looking statements as a result of subsequent events or developments, except as required by law.

 

Abbott Financial:

Scott Leinenweber, 224-668-0791

Michael Comilla, 224-668-1872

Laura Dauer, 224-667-2299

 

Abbott Media:

Darcy Ross, 224-667-3655

Elissa Maurer, 224-668-3309

 

 

1 Fourth-quarter 2019 diluted EPS from continuing operations on a GAAP basis reflects 59.5 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.

 

 9 

 

 

Abbott Laboratories and Subsidiaries

Condensed Consolidated Statement of Earnings

Fourth Quarter Ended December 31, 2019 and 2018

(in millions, except per share data)

(unaudited)

 

    4Q19    4Q18    % Change      
Net Sales  $8,314   $7,765    7.1      
                     
Cost of products sold, excluding amortization expense   3,434    3,191    7.7      
Amortization of intangible assets   483    488    (1.1)     
Research and development   595    562    6.0      
Selling, general, and administrative   2,413    2,359    2.3      
Total Operating Cost and Expenses   6,925    6,600    4.9      
                     
Operating Earnings   1,389    1,165    19.2      
                     
Interest expense, net   139    152    (8.5)     
Net foreign exchange (gain) loss   (2)   26    n/m      
Debt extinguishment costs   63    86    (27.1)     
Other (income) expense, net   (51)   (46)   13.5      
Earnings from Continuing Operations before taxes   1,240    947    31.1      
                     
Tax expense on Earnings from Continuing Operations   191    292    (34.5)   1)
Earnings from Continuing Operations   1,049    655    60.3      
                     
Earnings from Discontinued Operations, net of taxes   —    (1)   n/m      
                     
Net Earnings  $1,049   $654    60.6      
                     
Earnings from Continuing Operations, excluding Specified Items, as described below  $1,705   $1,444    18.1    2)
                     
Diluted Earnings per Common Share from:                    
Continuing Operations  $0.59   $0.37    59.5      
Discontinued Operations   —    —    n/m      
Total  $0.59   $0.37    59.5      
                     
Diluted Earnings per Common Share from Continuing Operations, excluding Specified Items, as described below  $0.95   $0.81    17.3    2)
                     
Average Number of Common Shares Outstanding Plus Dilutive Common Stock Options   1,781    1,774           

 

NOTES:

 

See tables on page 14 for an explanation of certain non-GAAP financial information.

 

n/m = Percent change is not meaningful.

 

See footnotes on the following page.

 

 10 

 

 

 

1)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).

 

2)2019 Net Earnings and Diluted Earnings per Common Share from Continuing Operations, excluding Specified Items, excludes net after-tax charges of $656 million, or $0.36 per share, for intangible amortization expense and other expenses primarily associated with acquisitions and restructuring actions.

 

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.

 

 11 

 

 

Abbott Laboratories and Subsidiaries

Condensed Consolidated Statement of Earnings

Year Ended December 31, 2019 and 2018

(in millions, except per share data)

(unaudited)

 

    12M19   12M18   % Change      
Net Sales  $31,904   $30,578    4.3      
                     
Cost of products sold, excluding amortization expense   13,231    12,706    4.1      
Amortization of intangible assets   1,936    2,178    (11.1)     
Research and development   2,440    2,300    6.1    1)
Selling, general, and administrative   9,765    9,744    0.2      
Total Operating Cost and Expenses   27,372    26,928    1.7      
                     
Operating Earnings   4,532    3,650    24.2      
                     
Interest expense, net   576    721    (20.1)     
Net foreign exchange (gain) loss   7    28    (74.1)     
Debt extinguishment costs   63    167    (62.6)     
Other (income) expense, net   (191)   (139)   38.2      
Earnings from Continuing Operations before taxes   4,077    2,873    42.0      
                     
Tax expense on Earnings from Continuing Operations   390    539    (27.6)   2)
Earnings from Continuing Operations   3,687    2,334    58.0      
                     
Earnings from Discontinued Operations, net of taxes   —    34    n/m      
                     
Net Earnings  $3,687   $2,368    55.7      
                     
Earnings from Continuing Operations, excluding Specified Items, as described below  $5,810   $5,131    13.2    3)
                     
Diluted Earnings per Common Share from:                    
Continuing Operations  $2.06   $1.31    57.3      
Discontinued Operations   —    0.02    n/m      
Total  $2.06   $1.33    54.9      
                     
Diluted Earnings per Common Share from Continuing Operations, excluding Specified Items, as described below  $3.24   $2.88    12.5    3)
                     
Average Number of Common Shares Outstanding Plus Dilutive Common Stock Options   1,781    1,770           

 

NOTES:

 

See tables on page 15 for an explanation of certain non-GAAP financial information.

 

n/m = Percent change is not meaningful.

 

See footnotes on the following page.

 

 12 

 

 

 

1)In 2019, in conjunction with the acquisition of Cephea Valve Technologies, Inc., Abbott acquired an R&D asset valued at $102 million, which was immediately expensed.

 

2)2019 Tax expense on Earnings from Continuing Operations includes the impact of a $86 million reduction of the transition tax associated with the Tax Cuts and Jobs Act (TCJA) and approximately $100 million in excess tax benefits associated with share-based compensation.

 

  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.

 

3)2019 Net Earnings and Diluted Earnings per Common Share from Continuing Operations, excluding Specified Items, excludes net after-tax charges of $2.123 billion, or $1.18 per share, for intangible amortization expense and other expenses primarily associated with acquisitions and restructuring actions.

 

  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.

 

 13 

 

 

Abbott Laboratories and Subsidiaries

Non-GAAP Reconciliation of Financial Information From Continuing Operations

Fourth Quarter Ended December 31, 2019 and 2018

(in millions, except per share data)

(unaudited)

 

 4Q19 
   As
Reported
(GAAP) 		    Specified
Items		    As
Adjusted		    % to
Sales		 
Intangible Amortization $483   $(483)   —      
Gross Margin  4,397    545    4,942    59.4%
R&D  595    (39)   556    6.7%
SG&A  2,413    (62)   2,351    28.3%
Debt extinguishment costs  63    (63)   —      
Other (income) expense, net  (51)   (5)   (56)     
Earnings from Continuing Operations before taxes  1,240    714    1,954      
Tax expense on Earnings from Continuing Operations  191    58    249      
Earnings from Continuing Operations  1,049    656    1,705      
Diluted Earnings per Share from Continuing Operations $0.59   $0.36   $0.95      

 

Specified items reflect intangible amortization expense of $483 million and other expenses of $231 million, primarily associated with acquisitions, restructuring actions and other expenses. See page 18 for additional details regarding specified items.

 

 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 page 19 for additional details regarding specified items.

 

 14 

 

 

Abbott Laboratories and Subsidiaries

Non-GAAP Reconciliation of Financial Information From Continuing Operations

Year Ended December 31, 2019 and 2018

(in millions, except per share data)

(unaudited)

 

    12M19 
    As
Reported
(GAAP) 		    Specified
Items		    As
Adjusted		    % to
Sales		 
Intangible Amortization  $1,936   $(1,936)   —      
Gross Margin   16,737    2,140    18,877    59.2%
R&D   2,440    (198)   2,242    7.0%
SG&A   9,765    (240)   9,525    29.9%
Debt extinguishment costs   63    (63)   —      
Other (income) expense, net   (191)   (37)   (228)     
Earnings from Continuing Operations before taxes   4,077    2,678    6,755      
Tax expense on Earnings from Continuing Operations   390    555    945      
Earnings from Continuing Operations   3,687    2,123    5,810      
Diluted Earnings per Share from Continuing Operations  $2.06   $1.18   $3.24      

 

Specified items reflect intangible amortization expense of $1.936 billion and other expenses of $742 million, primarily associated with acquisitions, restructuring actions and other expenses. See page 20 for additional details regarding specified items.

 

    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 page 21 for additional details regarding specified items.

 

 15 

 

 

A reconciliation of the fourth-quarter tax rates for continuing operations for 2019 and 2018 is shown below:

 

    4Q19       
($ in millions)   Pre-Tax
Income		    Taxes on
Earnings		   Tax
Rate		       
As reported (GAAP)  $1,240   $191   15.4%      
Specified items   714    58           
Excluding specified items  $1,954   $249   12.8%      

 

    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%    

 

 

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.

 

A reconciliation of the year-to-date tax rates for continuing operations for 2019 and 2018 is shown below:

 

    12M19     
($ in millions)   Pre-Tax
Income		    Taxes on
Earnings		   Tax
Rate		     
As reported (GAAP)  $4,077   $390   9.6%  2)
Specified items   2,678    555         
Excluding specified items  $6,755   $945   14.0%    

 

    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%    

 

 

2)Reported tax rate on a GAAP basis for 2019 includes the impact of a $86 million reduction of the transition tax associated with the TCJA and approximately $100 million in excess tax benefits associated with share-based compensation.

 

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.

 

 16 

 

 

Abbott Laboratories and Subsidiaries

Non-GAAP Reconciliation of Adjusted Historical Revenue

Year Ended December 31, 2019 and 2018

($ in millions) (unaudited)

 

    12M19   12M18    % Change vs. 12M18 
    Abbott    Abbott    Discontinued    Adjusted         Non-GAAP 
    Reported    Reported    Businessa)    Revenue    Reported    Reported    Organicb) 
Total Company   31,904    30,578    (38)   30,540    4.3    4.5    7.7 
U.S.   11,398    10,839    (38)   10,801    5.2    5.5    5.5 
Int'l   20,506    19,739    —    19,739    3.9    3.9    8.8 
Total Nutrition   7,409    7,229    (38)   7,191    2.5    3.0    5.3 
U.S.   3,110    3,075    (38)   3,037    1.1    2.4    2.4 
Int'l   4,299    4,154    —    4,154    3.5    3.5    7.5 
Adult   3,248    3,132    (38)   3,094    3.7    5.0    7.9 
U.S.   1,231    1,232    (38)   1,194    (0.1)   3.2    3.2 
Int'l   2,017    1,900    —    1,900    6.2    6.2    10.9 

 

 

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.

 

 17 

 

 

Abbott Laboratories and Subsidiaries

Details of Specified Items

Fourth Quarter Ended December 31, 2019

(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  $34   $28   $483   $—   $545 
R&D   (15)   (22)   —    (2)   (39)
SG&A   (39)   (23)   —    —    (62)
Debt extinguishment costs   —    —    —    (63)   (63)
Other (income) expense, net   (5)   —    —    —    (5)
Earnings from Continuing Operations before taxes  $93   $73   $483   $65    714 
Tax expense on Earnings from Continuing Operations (d)                       58 
Earnings from Continuing Operations                      $656 
Diluted Earnings per Share from Continuing Operations                      $0.36 

 

The table above provides additional details regarding the specified items described on page 14.

 

 

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.

 

b)Restructuring and cost reduction initiative expenses include severance, outplacement, asset impairments, 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 primarily relates to costs associated with the early extinguishment of debt.

 

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

 

 18 

 

 

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 page 14.

 

 

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.

 

 19 

 

 

Abbott Laboratories and Subsidiaries

Details of Specified Items

Year Ended December 31, 2019

(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  $103   $101   $1,936   $—   $2,140 
R&D   (38)   (44)   —    (116)   (198)
SG&A   (153)   (70)   —    (17)   (240)
Debt extinguishment costs   —    —    —    (63)   (63)
Other (income) expense, net   (15)   —    —    (22)   (37)
Earnings from Continuing Operations before taxes  $309   $215   $1,936   $218    2,678 
Tax expense on Earnings from Continuing Operations (d)                       555 
Earnings from Continuing Operations                      $2,123 
Diluted Earnings per Share from Continuing Operations                      $1.18 

 

The table above provides additional details regarding the specified items described on page 15.

 

 

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, asset impairments, 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 relates to the acquisition of R&D assets, costs associated with the early extinguishment of debt, charges related to the impairment of certain assets, and expenses related to certain litigation settlements.

 

d)Reflects the net tax benefit associated with the specified items, a reduction in the transition tax associated with the TCJA and excess tax benefits associated with share-based compensation.

 

 20 

 

 

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 page 15.

 

 

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.

 

# # #

 

 21