Abbott Reports Third-Quarter 2014 Results
– Third-Quarter Adjusted EPS Above Previous Guidance Range, Including Results From Discontinued Operations Related to Mylan Transaction –
– Raises Mid-Point of Full-Year 2014 EPS Guidance; Excluding Specified Items, Represents Double-Digit Growth –
ABBOTT PARK, Illinois, Oct. 22, 2014 /PRNewswire/ -- Abbott today announced financial results for the third quarter ended Sept. 30, 2014.
"We reported another quarter of sequential sales growth, including improved performance in our branded generics pharmaceuticals and nutrition businesses, and we are particularly pleased with the growth in our vision care business," said Miles D. White, chairman and chief executive officer, Abbott.
Third-Quarter Business Overview
Note regarding presentation of financial results beginning this quarter: On July 14, 2014, Abbott announced the sale of its developed markets branded generics pharmaceuticals business to Mylan. In accordance with GAAP, financial results from the developed markets branded generics pharmaceuticals business have been excluded from continuing operations and are reported as discontinued operations in the Earnings and EPS lines of the Consolidated Statement of Earnings. Prior year and year-to-date results also have been adjusted to report the developed markets branded generics pharmaceuticals business as discontinued operations. As a result, Sales and Consolidated Statement of Earnings reflect the remaining business at Abbott, reported as continuing operations.
Following are sales by business segment from continuing operations and commentary for the third quarter and the first nine months of the year:
Total Company
($ in millions)
Third-quarter 2014 worldwide sales from continuing operations of $5.1 billion increased 6.7 percent on an operational basis and 5.8 percent on a reported basis, including an unfavorable 0.9 percent effect of foreign exchange.
International sales from continuing operations, which comprise approximately 70 percent of total Abbott sales, increased 10.2 percent on an operational basis and 8.9 percent on a reported basis in the third quarter.
Emerging market sales from continuing operations, which will now comprise nearly 50 percent of total Abbott sales, increased 15.0 percent on an operational basis and 13.8 percent on a reported basis in the third quarter, driven by double-digit growth in Nutrition, Diagnostics and Established Pharmaceuticals.
Nutrition
($ in millions)
Worldwide Nutrition sales increased 10.1 percent in the third quarter on an operational basis and 9.3 percent on a reported basis, including an unfavorable 0.8 percent effect of foreign exchange.
Worldwide Pediatric Nutrition sales increased 8.6 percent on an operational basis and 8.0 percent on a reported basis in the quarter, including an unfavorable 0.6 percent effect of foreign exchange. Sales growth in the quarter was led by market uptake of recently launched products, including new infant formula products, Eleva™ and Similac® QINTI™, which were launched earlier this year in China.
Worldwide Adult Nutrition sales increased 11.8 percent on an operational basis and 10.8 percent on a reported basis in the quarter, including an unfavorable 1.0 percent effect of foreign exchange. Sales growth in the quarter was led by strong growth of Ensure® and continued expansion of the adult nutrition category internationally.
Abbott recently announced the opening of its new nutrition manufacturing plant in India to meet increasing demand for its pediatric and adult nutrition products. This new manufacturing plant and Abbott's nutrition R&D center in India will work together to deliver innovations that address unmet health needs while also meeting specific local tastes and preferences.
Diagnostics
($ in millions)
Worldwide Diagnostics sales increased 6.2 percent in the third quarter on an operational basis and 4.9 percent on a reported basis, including an unfavorable 1.3 percent effect of foreign exchange. This business continues to invest in the development of several next-generation diagnostic platforms across all of its business units that are designed to positively impact patient care, improve service to customers, enhance laboratory productivity and reduce costs.
Core Laboratory Diagnostics sales increased 6.8 percent in the quarter on an operational basis and 5.2 percent on a reported basis, including an unfavorable 1.6 percent effect of foreign exchange. International sales growth of 8.3 percent on an operational basis was driven by continued strong growth in emerging markets. U.S. sales growth in the quarter was impacted by comparison to the third quarter 2013 when sales were higher due to the timing of equipment sales.
Molecular Diagnostics sales increased 1.1 percent in the quarter on an operational basis, impacted by market dynamics in its smaller businesses, as well as the timing of tenders in its infectious disease business in several emerging markets. Sales increased 0.9 percent on a reported basis, including an unfavorable 0.2 percent effect of foreign exchange.
Point of Care Diagnostics sales increased 6.7 percent in the quarter on an operational and a reported basis as this business continues to build and expand its presence in targeted developed and emerging markets.
Established Pharmaceuticals
($ in millions)
Note regarding presentation of financial results beginning this quarter: In accordance with GAAP, financial results from the developed markets branded generics pharmaceuticals business have been excluded from continuing operations due to the pending sale of this business to Mylan and are reported as discontinued operations. Prior year and year-to-date results have also been adjusted to report the developed markets branded generics pharmaceuticals business as discontinued operations. Therefore, sales shown in the following charts represent continuing operations.
On July 14, 2014, Abbott announced that it will sell its developed markets branded generics pharmaceuticals business to Mylan. This transaction is expected to positively impact Abbott's 2015 sales and earnings-per-share growth rates as the company focuses its branded generics pharmaceuticals business entirely on emerging markets. Abbott expects to close the transaction in the first quarter of 2015.
Established Pharmaceuticals sales from continuing operations increased 12.9 percent in the third quarter on an operational basis and 11.5 percent on a reported basis, including an unfavorable 1.4 percent effect of foreign exchange.
Key Emerging Markets include India, Russia, Brazil and China, along with several additional emerging markets that represent the most attractive long-term growth opportunities for Abbott's branded generics product portfolio. Sales in these geographies increased 10.2 percent on an operational basis led by strong growth in India, Russia, Mexico and Vietnam. Sales increased 9.0 percent on a reported basis, including an unfavorable 1.2 percent effect of foreign exchange.
On Sept. 26, 2014, Abbott completed its acquisition of Latin American pharmaceutical company CFR Pharmaceuticals. This acquisition more than doubles Abbott's branded generics presence in Latin America and immediately establishes Abbott among the top 10 pharmaceutical companies in the region.
Medical Devices
($ in millions)
Worldwide Medical Devices sales decreased 0.6 percent in the third quarter on an operational basis and 1.0 percent on a reported basis, including an unfavorable 0.4 percent effect of foreign exchange.
Worldwide sales of Vascular products decreased 2.1 percent in the quarter on an operational basis and 2.4 percent on a reported basis, including an unfavorable 0.3 percent effect of foreign exchange. Sales growth in the quarter was impacted by a comparison to the third quarter 2013 when Abbott realized the final sales true-up related to a third-party agreement. Abbott's Endovascular business and its structural heart product, MitraClip®, for the treatment of mitral regurgitation, delivered double-digit global growth in the quarter. In the U.S., MitraClip recently received improved reimbursement and National Medicare coverage. Worldwide sales of Vascular products were also impacted by a decline in drug-eluting stent sales.
In September, Abbott presented the one-year results from the ABSORB II randomized clinical trial demonstrating that its Absorb Bioresorbable Vascular Scaffold is comparable to Abbott's leading XIENCE drug-eluting stent in treating people with coronary artery disease. In addition, the study showed that people treated with Absorb experienced significantly lower rates of angina, or chest pain.
Worldwide Diabetes Care sales decreased 5.3 percent in the quarter on an operational basis and 5.8 percent on a reported basis, including an unfavorable 0.5 percent effect of foreign exchange. In the U.S., the impact of CMS reimbursement reductions and market dynamics moderated in the quarter, in line with expectations. Outside of the U.S., Abbott is driving growth in both emerging and developed markets.
In September, Abbott announced CE Mark for its FreeStyle Libre Flash Glucose Monitoring System. FreeStyle Libre is a revolutionary new glucose sensing technology that eliminates routine finger pricks, requires no finger-prick calibration and presents data in a user-friendly, visual chart, enabling productive treatment discussions between patients and healthcare professionals.
Worldwide Medical Optics sales increased 9.0 percent in the quarter on an operational basis and 8.3 percent on a reported basis, including an unfavorable 0.7 percent effect of foreign exchange. Sales of cataract products, which represent nearly 70 percent of Medical Optics sales, increased double digits, outpacing the growth of the global cataract market. This performance was driven by continued share gains of recently launched intraocular lenses (IOLs), as well as further penetration of Abbott's Catalys® Precision Laser System for cataract surgery. In addition, Abbott recently announced that it will broaden its global presence by building a new manufacturing facility in Malaysia to support growing global demand for its IOLs.
Abbott raises the mid-point and narrows its full-year 2014 earnings-per-share guidance range
Abbott is raising the mid-point and narrowing its full-year 2014 earnings-per-share guidance, excluding specified items, to $2.25 to $2.27 from $2.19 to $2.29, representing double-digit growth. This guidance includes results from the developed markets branded generics pharmaceuticals business, reported as discontinued operations due to the pending sale of this business to Mylan.
Abbott continues to forecast net specified items for the full year 2014 of $1.03 per share. Specified items include intangible amortization expense, charges associated with cost reduction initiatives, deal and other expenses related to the acquisitions and pending sale of the developed markets branded generics pharmaceuticals business, as well as tax expense associated with a one-time repatriation of 2014 ex-U.S. earnings, partially offset by a net favorable adjustment to tax expense related to the resolution of various tax positions from previous years.
Including net specified items, projected earnings per share under Generally Accepted Accounting Principles (GAAP) would be $1.22 to $1.24 for the full year 2014, including results from both continuing and discontinued operations.
Abbott is issuing fourth-quarter 2014 earnings-per-share guidance, excluding specified items, of $0.68 to $0.70, representing double-digit growth. Abbott forecasts specified items for the fourth quarter 2014 of $0.36. Including specified items, projected earnings-per-share under GAAP would be $0.32 to $0.34 for the fourth quarter. This guidance includes results from both continuing and discontinued operations.
Abbott announces $3 billion share repurchase program and declares 363rd quarterly dividend
On Sept. 11, 2014, the board of directors of Abbott authorized the repurchase of up to $3 billion of Abbott's common shares, as market conditions warrant and subject to regulatory considerations. The board of directors also declared the company's quarterly dividend of $0.22 per share. Abbott's cash dividend is payable Nov. 15, 2014, to shareholders of record at the close of business on Oct. 15, 2014.
Abbott is a member of the S&P 500 Dividend Aristocrats Index, which tracks companies that have annually increased their dividend for 25 consecutive years.
About Abbott
Abbott (NYSE: ABT) 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 69,000 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 call will be available after 11 a.m. Central time.
—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, 2013, 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.
Non-GAAP Reconciliation of Financial Information
Specified items for continuing operations reflect intangible amortization expense of $132 million and other expenses of $162 million, primarily associated with cost reduction initiatives and deal and other expenses related to the acquisitions, as well as current quarter tax expense of $110 million associated with a one-time repatriation of 2014 ex-U.S. earnings.
Specified items for discontinued operations are primarily related to current quarter tax expense associated with a one-time repatriation of 2014 ex-U.S. earnings.
Specified items for continuing operations reflect intangible amortization expense of $146 million; expenses associated with cost reduction initiatives of $81 million; a philanthropic contribution to the Abbott Fund of $40 million; and other expenses of $70 million, including integration and separation-related costs; partially offset by a favorable adjustment to tax expense of $237 million related to the resolution of various tax provisions from previous years.
Specified items for discontinued operations are primarily related to cost reductions initiatives.
Specified items for continuing operations reflect intangible amortization expense of $392 million and other expenses of $479 million, primarily associated with cost reduction initiatives and deal and other expenses related to the acquisitions, as well as year-to-date tax expense of $264 million associated with a one-time repatriation of 2014 ex-U.S. earnings.
Specified items for discontinued operations are primarily related to intangible amortization expense, cost reduction initiatives, as well as year-to-date tax expense associated with a one-time repatriation of 2014 ex-U.S. earnings, net of a favorable adjustment to tax expense related to the resolution of various tax positions from previous years.
Specified items for continuing operations reflect intangible amortization expense of $441 million; expenses associated with cost reduction initiatives of $185 million; a philanthropic contribution to the Abbott Fund of $40 million; and other costs of $179 million, including integration and separation-related costs; partially offset by favorable adjustments to tax expense of $237 million related to the resolution of various tax positions from previous years and $103 million for the impact of U.S. tax law changes enacted in 2013 related to 2012 results.
Specified items for discontinued operations are primarily related to cost reductions initiatives.
Reconciliation of Tax Rate for Continuing Operations
A reconciliation of the third-quarter tax rates for continuing operations for 2014 and 2013 is shown below:
A reconciliation of the year-to-date tax rates for continuing operations for 2014 and 2013 is shown below:
Additional Financial Information
