0000001800 false Common Shares, Without Par Value ABT 0000001800 2020-10-21 2020-10-21 0000001800 us-gaap:CommonStockMember exch:XCHI 2020-10-21 2020-10-21 0000001800 us-gaap:CommonStockMember exch:XNYS 2020-10-21 2020-10-21 iso4217:USD xbrli:shares iso4217:USD xbrli:shares

Common Shares, Without Par Value

ABT

 

 

 

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

 

October 21, 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 2.02

Results of Operations and Financial Condition

 

On October 21, 2020, Abbott Laboratories announced its results of operations for the third quarter 2020.

 

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, charges related to impairment of certain assets, income related to certain litigation settlements, and tax benefits associated with specified items, tax benefits associated with the resolution of various tax positions related to prior years 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 9.01

Financial Statements and Exhibits

 

Exhibit No.

Exhibit

 

99.1

Press Release dated October 21, 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: October 21, 2020	By:	/s/ Robert E. Funck, Jr.
		Robert E. Funck, Jr.
		Executive Vice President, Finance and Chief Financial Officer

 

 

 

Exhibit 99.1

 

News Release

 

Abbott Reports Third-Quarter 2020 Results; Achieves Strong Double-Digit Earnings Growth and Raises Guidance

 

–

Third-quarter sales growth of 9.6 percent; organic sales growth of 10.6 percent

 

-

Sales growth in Medical Devices and Diagnostics improved significantly versus prior quarter

 

-

Continues to strengthen portfolio with several recent new product approvals, including FreeStyle Libre 3, Libre Sense Glucose Sport Biosensor and MitraClip G4 heart device

 

 

ABBOTT PARK, Ill., Oct. 21, 2020 — Abbott today announced financial results for the third quarter ended Sept. 30, 2020.

 

·

Third-quarter worldwide sales of $8.9 billion increased 9.6 percent on a reported basis and 10.6 percent on an organic basis, which excludes the impact of foreign exchange.

·

Reported diluted EPS from continuing operations under GAAP was $0.69 and adjusted diluted EPS from continuing operations, which excludes specified items, was $0.98, reflecting 16.7 percent growth versus the prior year.1

·

Abbott projects full-year 2020 diluted EPS from continuing operations on a GAAP basis of at least $2.35 and full-year adjusted diluted EPS from continuing operations of at least $3.55.

·

In August, Abbott received FDA Emergency Use Authorization for its BinaxNOW™ COVID-19 Ag Card rapid test for the detection of COVID-19 infection. The test delivers results in just 15 minutes with no instrumentation required. Abbott is selling the test for $5 and offers a complementary mobile phone app, called NAVICA™, that allows people who test negative to display their result.

·

During the quarter, Abbott launched FreeStyle Libre® 2 and obtained CE Mark for FreeStyle Libre 3, which automatically delivers up-to-the-minute glucose readings, unsurpassed 14-day accuracy2 and real-time glucose alarms in the world's smallest and thinnest3 wearable sensor at the same affordable price4 as previous versions. Abbott also announced CE Mark for its Libre Sense Glucose Sport Biosensor, which helps athletes better understand the efficacy of their nutritional choices on training and athletic performance.

·

In September, Abbott obtained CE Mark for MitraClip® G4, its next-generation MitraClip heart device, the leading minimally invasive mitral valve repair device in the world.

 

"Our strong results and increased guidance are a direct reflection of our ability to innovate and deliver despite challenging conditions," said Robert B. Ford, president and chief executive officer, Abbott. "Our new product pipeline continues to be highly productive, and we're well-positioned to finish the year with a lot of momentum."

 

–more–

 

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 the impact of foreign exchange.

 

Following are sales by business segment and commentary for the third quarter 2020:

 

Total Company

($ in millions)

 

														% Change vs. 3Q19
		Sales 3Q20												Reported												Organic
		U.S.				Int'l				Total				U.S.				Int'l				Total				U.S.				Int'l				Total
Total *			3,329				5,524				8,853				17.4				5.4				9.6				17.4				7.0				10.6
Nutrition			818				1,106				1,924				3.7				1.9				2.6				3.7				4.4				4.1
Diagnostics			1,133				1,507				2,640				61.4				24.8				38.2				61.4				25.6				38.8
Established Pharmaceuticals			--				1,099				1,099				n/a				(9.3	)			(9.3	)			n/a				(3.3	)			(3.3	)
Medical Devices			1,363				1,807				3,170				2.2				4.4				3.4				2.2				2.9				2.6

 

* Total Q3 2020 Abbott sales from continuing operations include Other Sales of approximately $20 million.

 

														% Change vs. 9M19
		Sales 9M20												Reported												Organic
		U.S.				Int'l				Total				U.S.				Int'l				Total				U.S.				Int'l				Total
Total *			8,823				15,084				23,907				4.6				(0.4	)			1.3				4.6				2.4				3.2
Nutrition			2,438				3,273				5,711				5.0				1.7				3.1				5.0				4.6				4.8
Diagnostics			2,793				3,667				6,460				31.6				3.8				14.2				31.6				6.1				15.7
Established Pharmaceuticals			--				3,156				3,156				n/a				(4.7	)			(4.7	)			n/a				1.3				1.3
Medical Devices			3,562				4,968				8,530				(10.3	)			(1.9	)			(5.6	)			(10.3	)			(0.8	)			(5.0	)

 

* Total 9M 2020 Abbott sales from continuing operations include Other Sales of approximately $50 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 2020 worldwide sales of $8.9 billion increased 9.6 percent on a reported basis and 10.6 percent on an organic basis.

 

–more–

 

Nutrition

($ in millions)

 

														% Change vs. 3Q19
		Sales 3Q20												Reported												Organic
		U.S.				Int'l				Total				U.S.				Int'l				Total				U.S.				Int'l				Total
Total			818				1,106				1,924				3.7				1.9				2.6				3.7				4.4				4.1
Pediatric			488				518				1,006				1.9				(8.3	)			(3.7	)			1.9				(6.2	)			(2.5	)
Adult			330				588				918				6.5				13.0				10.6				6.5				16.0				12.4

 

														% Change vs. 9M19
		Sales 9M20												Reported												Organic
		U.S.				Int'l				Total				U.S.				Int'l				Total				U.S.				Int'l				Total
Total			2,438				3,273				5,711				5.0				1.7				3.1				5.0				4.6				4.8
Pediatric			1,490				1,629				3,119				5.9				(5.2	)			(0.2	)			5.9				(2.7	)			1.2
Adult			948				1,644				2,592				3.7				9.5				7.3				3.7				13.0				9.5

 

Worldwide Nutrition sales increased 2.6 percent on a reported basis and 4.1 percent on an organic basis in the third quarter. Strong U.S. and international sales performance of Ensure^®, Abbott's market-leading complete and balanced nutrition brand, led to global Adult Nutrition sales growth of 10.6 percent on a reported basis and 12.4 percent on an organic basis. In Pediatric Nutrition, U.S. sales were led by growth of Pedialyte^®, Abbott's oral rehydration brand, and PediaSure^®. Internationally, Pediatric Nutrition growth in Southeast Asia was offset by challenging conditions in Greater China.

 

–more–

 

Diagnostics

($ in millions)

 

														% Change vs. 3Q19
		Sales 3Q20												Reported												Organic
		U.S.				Int'l				Total				U.S.				Int'l				Total				U.S.				Int'l				Total
Total			1,133				1,507				2,640				61.4				24.8				38.2				61.4				25.6				38.8
Core Laboratory			284				892				1,176				4.6				(1.5	)			(0.1	)			4.6				(0.3	)			0.8
Molecular			220				238				458				536.1				211.9				313.1				536.1				212.7				313.6
Point of Care			96				35				131				(15.2	)			10.6				(9.6	)			(15.2	)			9.8				(9.7	)
Rapid Diagnostics			533				342				875				88.3				75.9				83.2				88.3				75.3				83.0

 

														% Change vs. 9M19
		Sales 9M20												Reported												Organic
		U.S.				Int'l				Total				U.S.				Int'l				Total				U.S.				Int'l				Total
Total			2,793				3,667				6,460				31.6				3.8				14.2				31.6				6.1				15.7
Core Laboratory			840				2,312				3,152				5.9				(11.6	)			(7.5	)			5.9				(9.2	)			(5.7	)
Molecular			429				527				956				279.5				147.2				193.0				279.5				152.1				196.2
Point of Care			278				109				387				(17.1	)			22.4				(8.8	)			(17.1	)			23.8				(8.5	)
Rapid Diagnostics			1,246				719				1,965				41.5				16.4				31.1				41.5				18.3				31.9

 

Worldwide Diagnostics sales increased 38.2 percent on a reported basis in the third quarter and increased 38.8 percent on an organic basis. Strong growth in the quarter was driven by demand for Abbott's portfolio of COVID-19 diagnostics tests on its lab-based immunoassay and molecular diagnostics systems and point-of-care rapid testing platforms. Global COVID-19 testing-related sales were $881 million in the quarter.

 

–more–

 

 

Established Pharmaceuticals

($ in millions)

 

														% Change vs. 3Q19
		Sales 3Q20												Reported										Organic
		U.S.				Int'l				Total				U.S.		Int'l				Total				U.S.				Int'l				Total
Total			--				1,099				1,099			n/a			(9.3	)			(9.3	)			n/a				(3.3	)			(3.3	)
Key Emerging Markets			--				799				799			n/a			(10.3	)			(10.3	)			n/a				(1.8	)			(1.8	)
Other			--				300				300			n/a			(6.3	)			(6.3	)			n/a				(7.7	)			(7.7	)

 

														% Change vs. 9M19
		Sales 9M20												Reported										Organic
		U.S.				Int'l				Total				U.S.		Int'l				Total				U.S.				Int'l				Total
Total			--				3,156				3,156			n/a			(4.7	)			(4.7	)			n/a				1.3				1.3
Key Emerging Markets			--				2,376				2,376			n/a			(4.8	)			(4.8	)			n/a				3.2				3.2
Other			--				780				780			n/a			(4.4	)			(4.4	)			n/a				(4.3	)			(4.3	)

 

Established Pharmaceuticals sales decreased 9.3 percent on a reported basis in the third quarter and decreased 3.3 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 decreased 10.3 percent on a reported basis in the quarter and decreased 1.8 percent on an organic basis primarily due to market softness across several countries as a result of the spread of COVID-19.

 

–more–

 

Medical Devices

($ in millions)

 

														% Change vs. 3Q19
		Sales 3Q20												Reported												Organic
		U.S.				Int'l				Total				U.S.				Int'l				Total				U.S.				Int'l				Total
Total			1,363				1,807				3,170				2.2				4.4				3.4				2.2				2.9				2.6
Rhythm Management			242				265				507				(8.7	)			(2.7	)			(5.7	)			(8.7	)			(4.1	)			(6.4	)
Electrophysiology			192				249				441				4.1				3.0				3.5				4.1				1.8				2.8
Heart Failure			144				46				190				5.7				(8.6	)			1.8				5.7				(10.1	)			1.4
Vascular			230				400				630				(8.3	)			(10.4	)			(9.7	)			(8.3	)			(11.2	)			(10.2	)
Structural Heart			159				194				353				1.0				1.9				1.5				1.0				--				0.4
Neuromodulation			170				36				206				2.8				(7.7	)			0.8				2.8				(9.5	)			0.4
Diabetes Care			226				617				843				29.6				25.9				26.9				29.6				23.6				25.2
Vascular Product Lines:
Coronary and Endovasculara			209				398				607				(8.5	)			(10.1	)			(9.6	)			(8.5	)			(10.9	)			(10.1	)

 

a)

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

   

														% Change vs. 9M19
		Sales 9M20												Reported												Organic
		U.S.				Int'l				Total				U.S.				Int'l				Total				U.S.				Int'l				Total
Total			3,562				4,968				8,530				(10.3	)			(1.9	)			(5.6	)			(10.3	)			(0.8	)			(5.0	)
Rhythm Management			655				727				1,382				(17.1	)			(10.2	)			(13.6	)			(17.1	)			(9.1	)			(13.0	)
Electrophysiology			476				652				1,128				(13.4	)			(8.5	)			(10.6	)			(13.4	)			(8.0	)			(10.3	)
Heart Failure			411				140				551				(4.1	)			(1.9	)			(3.5	)			(4.1	)			(1.0	)			(3.3	)
Vascular			628				1,108				1,736				(20.1	)			(17.9	)			(18.7	)			(20.1	)			(16.9	)			(18.1	)
Structural Heart			386				508				894				(13.4	)			(12.2	)			(12.7	)			(13.4	)			(11.5	)			(12.3	)
Neuromodulation			392				97				489				(19.3	)			(21.6	)			(19.7	)			(19.3	)			(20.2	)			(19.5	)
Diabetes Care			614				1,736				2,350				26.7				28.8				28.2				26.7				30.4				29.4
Vascular Product Lines:
Coronary and Endovasculara			575				1,101				1,676				(18.7	)			(17.9	)			(18.2	)			(18.7	)			(16.9	)			(17.5	)

 

a)

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

 

Worldwide Medical Devices sales increased 3.4 percent on a reported basis in the third quarter and increased 2.6 percent on an organic basis. Sales growth and procedure volume trends across Abbott's cardiovascular and neuromodulation business areas improved significantly versus the prior quarter as demand continues to return to more normalized levels.

 

In Diabetes Care, strong growth was led by FreeStyle Libre, which grew 37.9 percent on a reported basis and 35.6 percent on an organic basis. In September, Abbott obtained CE Mark for its FreeStyle Libre 3 system, which automatically delivers real-time, up-to-the-minute glucose readings, unsurpassed 14-day accuracy² and real-time glucose alarms in the world's smallest and thinnest³ wearable sensor at the same affordable price⁴ as previous versions. Abbott also obtained CE Mark for its Libre Sense Glucose Sport Biosensor in Europe. Libre Sense is a consumer over-the-counter product that provides continuous glucose monitoring for athletes to better understand the efficacy of their nutrition choices on training and athletic performance.

 

–more–

 

Abbott's guidance for 2020

Abbott projects full-year 2020 diluted earnings per share from continuing operations under GAAP of at least $2.35. Abbott forecasts specified items for the full-year 2020 of $1.20 primarily related to intangible amortization, acquisition-related expenses, restructuring and cost reduction initiatives and other net expenses. Excluding specified items, projected adjusted diluted earnings per share from continuing operations would be at least $3.55 for full-year 2020.

 

Abbott declares 387^th consecutive QUARTERLY DIVIDEND

On Sept. 17, 2020, the board of directors of Abbott declared the company's quarterly dividend of $0.36 per share. Abbott's cash dividend is payable Nov. 16, 2020, to shareholders of record at the close of business on Oct. 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.

 

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.

 

Abbott will live webcast its 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.

 

–more–

 

— 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, including the impact of the COVID-19 pandemic on Abbott's operations and financial results, 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" in our Annual Report on Form 10-K for the year ended Dec. 31, 2019 and in Item 1A, "Risk Factors" in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, and are incorporated herein 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

 

1

Third-quarter 2020 diluted EPS from continuing operations on a GAAP basis reflects 30.2 percent growth.

2

Alva Shridhara, Timothy Bailey, Ronald Brazg, Erwin S. Budiman, Kristin Castorino, Mark P. Christiansen, Gregory Forlenza, Mark Kipnes, David R. Liljenquist, and Hanqing Liu. "Accuracy of a 14-Day Factory-Calibrated Continuous Glucose Monitoring System With Advanced Algorithm in Pediatric and Adult Population With Diabetes." Journal of Diabetes Science and Technology, (September 2020). https://doi.org/10.1177/1932296820958754.

3

Among patient-applied sensors. Data on File, Abbott Diabetes Care.

4

Based on a comparison of list prices of the FreeStyle Libre portfolio versus competitor CGM systems available worldwide. The actual cost to patients may or may not be lower than other CGM systems, depending on local reimbursement, if any.

 

–more–

 

 

Abbott Laboratories and Subsidiaries

Condensed Consolidated Statement of Earnings

Third Quarter Ended September 30, 2020 and 2019

(in millions, except per share data) 

(unaudited)

 

			3Q20				3Q19				% Change
Net Sales		$	8,853			$	8,076				9.6
Cost of products sold, excluding amortization expense			3,966				3,358				18.1
Amortization of intangible assets			510				484				5.3
Research and development			580				596				(2.8	)
Selling, general, and administrative			2,302				2,440				(5.7	)
Total Operating Cost and Expenses			7,358				6,878				7.0
Operating Earnings			1,495				1,198				24.8
Interest expense, net			127				143				(11.2	)
Net foreign exchange (gain) loss			(7	)			7				n/m
Other (income) expense, net			(46	)			(55	)			(16.4	)
Earnings from Continuing Operations before taxes			1,421				1,103				28.9
Tax expense on Earnings from Continuing Operations			189				143				31.7			1)
Earnings from Continuing Operations			1,232				960				28.5
Earnings from Discontinued Operations, net of taxes			--				--				n/m
Net Earnings		$	1,232			$	960				28.5
Earnings from Continuing Operations, excluding Specified Items, as described below		$	1,760			$	1,514				16.2			2)
Diluted Earnings per Common Share from:
Continuing Operations		$	0.69			$	0.53				30.2
Discontinued Operations			--				--				n/m
Total		$	0.69			$	0.53				30.2
Diluted Earnings per Common Share from Continuing Operations, excluding Specified Items, as described below		$	0.98			$	0.84				16.7			2)
Average Number of Common Shares Outstanding Plus Dilutive Common Stock Options			1,788				1,784

 

NOTES:

See tables on page 13 for an explanation of certain non-GAAP financial information.

n/m = Percent change is not meaningful.

See footnotes on the following page.

 

–more–

 

1)

2020 Tax expense on Earnings from Continuing Operations includes the recognition of approximately $20 million in excess tax benefits associated with share-based compensation.

 

2)

2020 Net Earnings and Diluted Earnings per Common Share from Continuing Operations, excluding Specified Items, excludes net after-tax charges of $528 million, or $0.29 per share, for intangible amortization and impairment expenses and other net expenses primarily associated with acquisitions, restructuring actions and income from a litigation settlement.

 

2019 Net Earnings and Diluted Earnings per Common Share from Continuing Operations, excluding Specified Items, excludes net after-tax charges of $554 million, or $0.31 per share, for intangible amortization expense and other expenses primarily associated with acquisitions and restructuring actions.

 

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Abbott Laboratories and Subsidiaries

Condensed Consolidated Statement of Earnings

Nine Months Ended September 30, 2020 and 2019

(in millions, except per share data)

(unaudited)

 

			9M20				9M19				% Change
Net Sales		$	23,907			$	23,590				1.3
Cost of products sold, excluding amortization expense			10,510				9,797				7.3
Amortization of intangible assets			1,624				1,453				11.8
Research and development			1,722				1,845				(6.7	)		1)
Selling, general, and administrative			7,126				7,352				(3.1	)
Total Operating Cost and Expenses			20,982				20,447				2.6
Operating Earnings			2,925				3,143				(6.9	)
Interest expense, net			373				437				(14.8	)
Net foreign exchange (gain) loss			(3	)			9				n/m
Other (income) expense, net			(25	)			(140	)			(82.2	)
Earnings from Continuing Operations before taxes			2,580				2,837				(9.0	)
Tax expense on Earnings from Continuing Operations			267				199				34.1			2)
Earnings from Continuing Operations			2,313				2,638				(12.3	)
Earnings from Discontinued Operations, net of taxes			20				--				n/m
Net Earnings		$	2,333			$	2,638				(11.5	)
Earnings from Continuing Operations, excluding Specified Items, as described below		$	3,940			$	4,105				(4.0	)		3)
Diluted Earnings per Common Share from:
Continuing Operations		$	1.29			$	1.47				(12.2	)
Discontinued Operations			0.01				--				n/m
Total		$	1.30			$	1.47				(11.6	)
Diluted Earnings per Common Share from Continuing Operations, excluding Specified Items, as described below		$	2.20			$	2.29				(3.9	)		3)
Average Number of Common Shares Outstanding Plus Dilutive Common Stock Options			1,785				1,781

 

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.

 

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1)

In the first nine months of 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)

2020 Tax expense on Earnings from Continuing Operations includes the recognition of approximately $80 million of net tax benefits as a result of the resolution of various tax positions related to prior years and approximately $87 million in excess tax benefits associated with share-based compensation.

 

2019 Tax expense on Earnings from Continuing Operations includes the impact of a $78 million reduction of the transition tax associated with the Tax Cuts and Jobs Act (TCJA) and approximately $95 million in excess tax benefits associated with share-based compensation.

 

3)

2020 Net Earnings and Diluted Earnings per Common Share from Continuing Operations, excluding Specified Items, excludes net after-tax charges of $1.627 billion, or $0.91 per share, for intangible amortization expense, impairment charges and other net expense primarily associated with acquisitions, restructuring actions and income from a litigation settlement.

 

2019 Net Earnings and Diluted Earnings per Common Share from Continuing Operations, excluding Specified Items, excludes net after-tax charges of $1.467 billion, or $0.82 per share, for intangible amortization expense and other expenses primarily associated with acquisitions and restructuring actions.

 

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Abbott Laboratories and Subsidiaries 

Non-GAAP Reconciliation of Financial Information From Continuing Operations

Third Quarter Ended September 30, 2020 and 2019

(in millions, except per share data)

(unaudited)

 

		3Q20
			As Reported (GAAP)				Specified Items				As Adjusted				% to Sales
Intangible Amortization		$	510			$	(510	)		$	--
Gross Margin			4,377				705				5,082				57.4	%
R&D			580				(21	)			559				6.3	%
SG&A			2,302				63				2,365				26.7	%
Other (income) expense, net			(46	)			(1	)			(47	)
Earnings from Continuing Operations before taxes			1,421				664				2,085
Tax expense on Earnings from Continuing Operations			189				136				325
Earnings from Continuing Operations			1,232				528				1,760
Diluted Earnings per Share from Continuing Operations		$	0.69			$	0.29			$	0.98

 

Specified items reflect intangible amortization expense of $510 million and other net expenses of $154 million, primarily associated with acquisitions, restructuring actions, other expenses and litigation settlement income. See page 16 for additional details regarding specified items.

 

		3Q19
			As Reported (GAAP)				Specified Items				As Adjusted				% to Sales
Intangible Amortization		$	484			$	(484	)		$	--
Gross Margin			4,234				546				4,780				59.2	%
R&D			596				(32	)			564				7.0	%
SG&A			2,440				(87	)			2,353				29.1	%
Other (income) expense, net			(55	)			(3	)			(58	)
Earnings from Continuing Operations before taxes			1,103				668				1,771
Tax expense on Earnings from Continuing Operations			143				114				257
Earnings from Continuing Operations			960				554				1,514
Diluted Earnings per Share from Continuing Operations		$	0.53			$	0.31			$	0.84

 

Specified items reflect intangible amortization expense of $484 million and other expenses of $184 million, primarily associated with acquisitions, restructuring actions and other expenses. See page 17 for additional details regarding specified items.

 

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Abbott Laboratories and Subsidiaries

Non-GAAP Reconciliation of Financial Information From Continuing Operations

Nine Months Ended September 30, 2020 and 2019

(in millions, except per share data)

(unaudited)

 

		9M20
			As Reported (GAAP)				Specified Items				As Adjusted				% to Sales
Intangible Amortization		$	1,624			$	(1,624	)		$	--
Gross Margin			11,773				1,895				13,668				57.2	%
R&D			1,722				(64	)			1,658				6.9	%
SG&A			7,126				(19	)			7,107				29.7	%
Other (income) expense, net			(25	)			(111	)			(136	)
Earnings from Continuing Operations before taxes			2,580				2,089				4,669
Tax expense on Earnings from Continuing Operations			267				462				729
Earnings from Continuing Operations			2,313				1,627				3,940
Diluted Earnings per Share from Continuing Operations		$	1.29			$	0.91			$	2.20

 

Specified items reflect intangible amortization expense of $1.624 billion and other net expenses of $465 million, primarily associated with acquisitions, restructuring actions, other expenses and litigation settlement income. See page 18 for additional details regarding specified items.

 

		9M19
			As Reported (GAAP)				Specified Items				As Adjusted				% to Sales
Intangible Amortization		$	1,453			$	(1,453	)		$	--
Gross Margin			12,340				1,595				13,935				59.1	%
R&D			1,845				(159	)			1,686				7.1	%
SG&A			7,352				(178	)			7,174				30.4	%
Other (income) expense, net			(140	)			(32	)			(172	)
Earnings from Continuing Operations before taxes			2,837				1,964				4,801
Tax expense on Earnings from Continuing Operations			199				497				696
Earnings from Continuing Operations			2,638				1,467				4,105
Diluted Earnings per Share from Continuing Operations		$	1.47			$	0.82			$	2.29

 

Specified items reflect intangible amortization expense of $1.453 billion and other expenses of $511 million, primarily associated with acquisitions, restructuring actions and other expenses. See page 19 for additional details regarding specified items.

 

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A reconciliation of the third-quarter tax rates for continuing operations for 2020 and 2019 is shown below:

 

		3Q20
($ in millions)			Pre-Tax Income				Taxes on Earnings				Tax Rate
As reported (GAAP)		$	1,421			$	189				13.3	%  1)
Specified items			664				136
Excluding specified items		$	2,085			$	325				15.6	%

 

		3Q19
($ in millions)			Pre-Tax Income				Taxes on Earnings				Tax Rate
As reported (GAAP)		$	1,103			$	143				13.0	%
Specified items			668				114
Excluding specified items		$	1,771			$	257				14.5	%

 

1)

2020 Tax expense on Earnings from Continuing Operations includes the recognition of approximately $20 million in excess tax benefits associated with share-based compensation.

 

A reconciliation of the year-to-date tax rates for continuing operations for 2020 and 2019 is shown below:

 

		9M20
($ in millions)			Pre-Tax Income				Taxes on Earnings				Tax Rate
As reported (GAAP)		$	2,580			$	267				10.4	%  2)
Specified items			2,089				462
Excluding specified items		$	4,669			$	729				15.6	%

 

		9M19
($ in millions)			Pre-Tax Income				Taxes on Earnings				Tax Rate
As reported (GAAP)		$	2,837			$	199				7.0	%  3)
Specified items			1,964				497
Excluding specified items		$	4,801			$	696				14.5	%

 

2)

2020 Tax expense on Earnings from Continuing Operations includes the recognition of approximately $80 million of net tax benefits as a result of the resolution of various tax positions related to prior years and approximately $87 million in excess tax benefits associated with share-based compensation.

 

3)

Reported tax rate on a GAAP basis for 2019 includes the impact of a $78 million reduction of the transition tax associated with the TCJA and approximately $95 million in excess tax benefits associated with share-based compensation.

 

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Abbott Laboratories and Subsidiaries

Details of Specified Items

Third Quarter Ended September 30, 2020

(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		$	16			$	27			$	510			$	152			$	705
R&D			(1	)			(1	)			--				(19	)			(21	)
SG&A			(28	)			(9	)			--				100				63
Other (income) expense, net			(2	)			--				--				1				(1	)
Earnings from Continuing Operations before taxes		$	47			$	37			$	510			$	70				664
Tax expense on Earnings from Continuing Operations (d)																			136
Earnings from Continuing Operations																		$	528
Diluted Earnings per Share from Continuing Operations																		$	0.29

  

The table above provides additional details regarding the specified items described on page 13.

 

a)

Acquisition-related expenses include integration costs, which represent incremental costs directly related to integrating the acquired businesses and include expenditures for retention and the integration of systems, processes and business activities.

 

b)

Restructuring and cost reduction initiative expenses include severance, outplacement, 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 the impairment of an intangible asset and the costs to acquire R&D assets, partially offset by income from the settlement of litigation.

 

d)

Reflects the net tax benefit associated with the specified items, the resolution of prior years' tax positions and excess tax benefits associated with share-based compensation.

 

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Abbott Laboratories and Subsidiaries

Details of Specified Items

Third Quarter Ended September 30, 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		$	32			$	30			$	484			$	--			$	546
R&D			(9	)			(12	)			--				(11	)			(32	)
SG&A			(27	)			(43	)			--				(17	)			(87	)
Other (income) expense, net			--				--				--				(3	)			(3	)
Earnings from Continuing Operations before taxes		$	68			$	85			$	484			$	31				668
Tax expense on Earnings from Continuing Operations (d)																			114
Earnings from Continuing Operations																		$	554
Diluted Earnings per Share from Continuing Operations																		$	0.31

 

The table above provides additional details regarding the specified items described on page 13.

 

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, 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 primarily relates to expenses related to certain litigation settlements 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.

 

–more–

 

Abbott Laboratories and Subsidiaries

Details of Specified Items

Nine Months Ended September 30, 2020

(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		$	61			$	57			$	1,624			$	153			$	1,895
R&D			(8	)			(9	)			--				(47	)			(64	)
SG&A			(83	)			(36	)			--				100				(19	)
Other (income) expense, net			(3	)			--				--				(108	)			(111	)
Earnings from Continuing Operations before taxes		$	155			$	102			$	1,624			$	208				2,089
Tax expense on Earnings from Continuing Operations (d)																			462
Earnings from Continuing Operations																		$	1,627
Diluted Earnings per Share from Continuing Operations																		$	0.91

 

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

 

a)

Acquisition-related expenses include 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, 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 impairment charges related to certain assets and the costs to acquire R&D assets, partially offset by income from the settlement of litigation.

 

d)

Reflects the net tax benefit associated with the specified items, the resolution of prior years' tax positions and excess tax benefits associated with share-based compensation.

 

–more–

  

Abbott Laboratories and Subsidiaries 

Details of Specified Items

Nine Months Ended September 30, 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		$	69			$	73			$	1,453			$	--			$	1,595
R&D			(23	)			(22	)			--				(114	)			(159	)
SG&A			(114	)			(47	)			--				(17	)			(178	)
Other (income) expense, net			(10	)			--				--				(22	)			(32	)
Earnings from Continuing Operations before taxes		$	216			$	142			$	1,453			$	153				1,964
Tax expense on Earnings from Continuing Operations (d)																			497
Earnings from Continuing Operations																		$	1,467
Diluted Earnings per Share from Continuing Operations																		$	0.82

 

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, 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 relates to the acquisition of an R&D asset, 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.

 

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