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Abbott Laboratories
16 July 2014
Abbott Reports Second-Quarter 2014 Results
- Second-Quarter Ongoing EPS of $0.54, Above Previous Guidance Range and
Representing Double-Digit Earnings-Per-Share Growth -
- GAAP EPS from Continuing Operations of $0.30 -
- Raises Full-Year 2014 EPS Guidance Range -
- Continues to Shape Abbott for Long-Term Growth with Agreements to Acquire
CFR Pharmaceuticals and Veropharm, and to Sell its Developed Markets Branded
Generics Pharmaceuticals Business to Mylan -
ABBOTT PARK, Ill., July 16, 2014 /PRNewswire/ -- Abbott today announced
financial results for the second quarter ended June 30, 2014.
· Ongoing diluted EPS was $0.54 in the second quarter, representing growth of
17.4 percent, and above the previous guidance range of $0.50 to $0.52;
reported diluted EPS from continuing operations under GAAP was $0.30.
· Abbott is raising its full-year 2014 ongoing EPS guidance to $2.19 to $2.29
from $2.16 to $2.26, reflecting double-digit growth at the mid-point of the
range. Projected full-year 2014 EPS from continuing operations under GAAP is
$1.16 to $1.26. Guidance for both ongoing and GAAP EPS from continuing
operations includes the developed markets branded generics pharmaceuticals
business, which is expected to be reported as discontinued operations starting
in the third quarter of 2014.
· Second-quarter worldwide sales increased 3.0 percent on an operational
basis and 1.9 percent on a reported basis, including an unfavorable 1.1
percent effect of foreign exchange.
· On July 14, 2014, Abbott announced that it will sell its developed markets
branded generics pharmaceuticals business to Mylan. This transaction is
expected to positively impact Abbott's 2015 sales and earnings-per-share
growth rates as the company focuses its branded generics pharmaceuticals
business on emerging markets.
· In the second quarter, Abbott announced agreements to acquire Latin
American pharmaceutical company, CFR Pharmaceuticals and Russian
pharmaceutical company, Veropharm. CFR Pharmaceuticals will more than double
Abbott's branded generics presence in Latin America. Through the acquisition
of Veropharm, Abbott will immediately establish a larger footprint and
manufacturing presence in Russia.
· On July 10, 2014, Abbott and Fonterra announced a strategic alliance to
develop a proposed dairy farm hub in China, establishing direct ownership and
operation of dairies and production of milk in China.
"We're ahead of our expectations through the first half of the year and are
raising our EPS guidance range as we continue to shape the company for
long-term growth," said Miles D. White, chairman and chief executive officer,
Abbott.
Second-Quarter Business Overview
Following are sales by business segment and commentary for the second quarter
and first half of the year:
Total Company
($ in millions)
% Change vs. 2Q13
Sales 2Q14 Int'l Total
U.S. Int'l Total U.S. Operational Reported Operational Reported
Total * 1,561 3,990 5,551 0.1 4.2 2.7 3.0 1.9
Nutrition 724 1,007 1,731 1.4 4.4 1.7 3.1 1.6
Diagnostics 325 864 1,189 7.2 4.9 3.9 5.5 4.8
Established Pharmaceuticals -- 1,216 1,216 n/a 2.3 (0.1) 2.3 (0.1)
Medical Devices 490 883 1,373 (5.4) 4.7 5.3 0.8 1.2
* Total Abbott Sales include Other Sales of $42 million.
% Change vs. 1H13
Sales 1H14 Int'l Total
U.S. Int'l Total U.S. Operational Reported Operational Reported
Total * 3,050 7,745 10,795 (1.4) 3.0 0.2 1.8 (0.3)
Nutrition 1,413 1,949 3,362 (1.3) 2.2 (1.1) 0.7 (1.2)
Diagnostics 635 1,671 2,306 6.6 4.8 2.7 5.3 3.7
Established Pharmaceuticals -- 2,367 2,367 n/a 0.8 (3.4) 0.8 (3.4)
Medical Devices 958 1,727 2,685 (6.1) 4.7 3.8 0.6 --
* Total Abbott Sales include Other Sales of $75 million.
n/a = Not Applicable.
Note: Operational growth reflects percentage change over the prior year excluding the impact of exchange rates.
Second-quarter 2014 worldwide sales of $5.6 billion increased 3.0 percent on
an operational basis, representing sequential improvement versus the first
quarter, and Abbott is on track for sales growth acceleration in the second
half of 2014. Sales increased 1.9 percent on a reported basis, including an
unfavorable 1.1 percent effect of foreign exchange.
International sales, which comprise more than 70 percent of total Abbott
sales, increased 4.2 percent on an operational basis and 2.7 percent on a
reported basis in the second quarter.
Sales in emerging markets, which comprise more than 40 percent of total Abbott
sales, increased 7.7 percent on an operational basis and 4.1 percent on a
reported basis in the second quarter. The August 2013 sales disruption in
International Nutrition is estimated to have reduced Abbott's sales growth in
emerging markets by approximately 1.8 percentage points.
Abbott launched several new products in the second quarter. Highlights include
the TECNIS® Symfony extended range of vision intraocular lens (IOL) in Europe
and a new diabetes test on the ARCHITECT platform in the U.S. In addition, in
its Nutrition business, Abbott opened two new manufacturing facilities and
launched several new products to meet increasing global demand for pediatric
and adult nutrition.
Nutrition
($ in millions)
% Change vs. 2Q13
Sales 2Q14 Int'l Total
U.S. Int'l Total U.S. Operational Reported Operational Reported
Total 724 1,007 1,731 1.4 4.4 1.7 3.1 1.6
Pediatric 391 572 963 2.1 0.5 (2.2) 1.1 (0.5)
Adult 333 435 768 0.6 10.0 7.5 5.7 4.4
% Change vs. 1H13
Sales 1H14 Int'l Total
U.S. Int'l Total U.S. Operational Reported Operational Reported
Total 1,413 1,949 3,362 (1.3) 2.2 (1.1) 0.7 (1.2)
Pediatric 756 1,116 1,872 (1.6) (3.7) (6.5) (2.8) (4.5)
Adult 657 833 1,490 (1.1) 11.1 7.1 5.5 3.3
Worldwide Nutrition sales increased 3.1 percent in the second quarter on an
operational basis and 1.6 percent on a reported basis, including an
unfavorable 1.5 percent effect of foreign exchange. This business continues to
expect full-year operating margin expansion.
Worldwide Pediatric Nutrition sales increased 1.1 percent on an operational
basis and decreased 0.5 percent on a reported basis in the quarter, including
an unfavorable 1.6 percent effect of foreign exchange. The August 2013 sales
disruption in International Nutrition is estimated to have impacted the
year-over-year sales growth comparison in International Pediatric Nutrition by
approximately $40 million in the second quarter. Abbott is recapturing share
in the affected markets, launched several new Pediatric Nutrition products
during the quarter and opened a new state-of-the-art nutrition manufacturing
plant in China. This plant will manufacture new Similac® QINTI™ infant formula
in Abbott's innovative packaging.
Worldwide Adult Nutrition sales increased 5.7 percent on an operational basis
and 4.4 percent on a reported basis in the quarter, including an unfavorable
1.3 percent effect of foreign exchange. Sales growth in the quarter was led by
strong growth of Ensure® and double-digit growth in emerging markets. Abbott
continues to shape and grow priority international markets as it launches new
products in 2014, including the recent launch of a new adult brand, Enevo™ in
Japan, Abbott's largest adult nutrition market outside of the U.S. Abbott also
opened a new liquid nutrition manufacturing plant in the U.S. during the
second quarter to meet increasing global demand for its adult nutrition
brands.
On July 10, 2014, Abbott and Fonterra announced a strategic alliance to
develop a proposed dairy farm hub in China. The strategic alliance will
establish direct ownership and operation of dairies and production of milk in
China. This alliance will leverage Fonterra's expertise in dairy nutrition and
farming in China and Abbott's continued commitment to business development in
China.
Diagnostics
($ in millions)
% Change vs. 2Q13
Sales 2Q14 Int'l Total
U.S. Int'l Total U.S. Operational Reported Operational Reported
Total 325 864 1,189 7.2 4.9 3.9 5.5 4.8
Core Laboratory 189 779 968 11.3 5.8 4.5 6.8 5.8
Molecular 52 64 116 0.5 (5.3) (4.0) (2.8) (2.1)
Point of Care 84 21 105 3.0 7.1 6.4 3.8 3.7
% Change vs. 1H13
Sales 1H14 Int'l Total
U.S. Int'l Total U.S. Operational Reported Operational Reported
Total 635 1,671 2,306 6.6 4.8 2.7 5.3 3.7
Core Laboratory 371 1,502 1,873 11.1 4.9 2.5 6.0 4.1
Molecular 98 129 227 (1.2) 3.0 2.9 1.2 1.1
Point of Care 166 40 206 2.0 8.5 7.0 3.3 3.0
Worldwide Diagnostics sales increased 5.5 percent in the second quarter on an
operational basis and 4.8 percent on a reported basis, including an
unfavorable 0.7 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 5.8 percent on a reported basis, including an
unfavorable 1.0 percent effect of foreign exchange. U.S. sales growth of 11.3
percent was primarily driven by continued market share gains as customers
select Abbott's integrated and flexible solutions to manage large testing
volumes and increase operational efficiencies. International sales growth of
5.8 percent on an operational basis was driven by continued strong growth in
emerging markets. Also in the second quarter, Abbott launched a new test on
its ARCHITECT platform in the U.S. to quickly and accurately diagnose, monitor
and identify people at risk for diabetes.
Molecular Diagnostics sales decreased 2.8 percent in the quarter on an
operational basis, impacted by the timing of tenders in the infectious disease
business in several emerging markets, which are expected to drive higher
growth in the second half of 2014. Sales decreased 2.1 percent on a reported
basis, including a favorable 0.7 percent effect of foreign exchange.
Established Pharmaceuticals
($ in millions)
% Change vs. 2Q13
Sales 2Q14 Int'l Total
U.S. Int'l Total U.S. Operational Reported Operational Reported
Total -- 1,216 1,216 n/a 2.3 (0.1) 2.3 (0.1)
Developed and Other Markets -- 600 600 n/a (4.7) (4.4) (4.7) (4.4)
Key Emerging Markets -- 616 616 n/a 9.7 4.4 9.7 4.4
% Change vs. 1H13
Sales 1H14 Int'l Total
U.S. Int'l Total U.S. Operational Reported Operational Reported
Total -- 2,367 2,367 n/a 0.8 (3.4) 0.8 (3.4)
Developed and Other Markets -- 1,220 1,220 n/a (3.1) (4.3) (3.1) (4.3)
Key Emerging Markets -- 1,147 1,147 n/a 5.0 (2.4) 5.0 (2.4)
n/a = Not Applicable.
Established Pharmaceuticals sales increased 2.3 percent in the second quarter
on an operational basis, representing sequential improvement versus the first
quarter. Sales decreased 0.1 percent on a reported basis, including an
unfavorable 2.4 percent effect of foreign exchange.
Developed and Other Markets include developed markets, such as Western Europe
and Japan, and other emerging markets globally. Sales in these geographies
were in line with expectations and decreased 4.7 percent in the quarter on an
operational basis and 4.4 percent on a reported basis, including a favorable
0.3 percent effect of foreign exchange.
Key Emerging Markets include India, Russia, Brazil and China, along with 10
additional emerging markets that represent the most attractive long-term
growth opportunities for Abbott's branded generics product portfolio. Sales in
these geographies increased 9.7 percent on an operational basis in the quarter
driven by double-digit sales growth in India, Brazil and China. Sales
increased 4.4 percent on a reported basis, including an unfavorable 5.3
percent effect of foreign exchange. Based upon current exchange rates, this
business would have an improved comparison from the impact of foreign exchange
in Key Emerging Markets in the second half of 2014.
Abbott announced several transactions in the quarter in its Established
Pharmaceuticals business to continue to shape Abbott for long-term growth. 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. The transaction is expected to close in
the first quarter of 2015.
Abbott also announced two acquisitions in the quarter in its Established
Pharmaceuticals business. On May 16, 2014, Abbott announced an agreement to
acquire 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. Abbott expects to complete the acquisition of CFR
Pharmaceuticals by the end of the third quarter of 2014. Additionally, on June
23, 2014, Abbott announced an agreement to acquire Veropharm, a leading
Russian pharmaceutical company, which would allow Abbott to immediately
establish a larger footprint and manufacturing presence in Russia. Abbott
expects to complete the acquisition of Veropharm in the fourth quarter of
2014.
Medical Devices
($ in millions)
% Change vs. 2Q13
Sales 2Q14 Int'l Total
U.S. Int'l Total U.S. Operational Reported Operational Reported
Total 490 883 1,373 (5.4) 4.7 5.3 0.8 1.2
Vascular 281 484 765 (1.9) 3.4 4.3 1.4 1.9
Diabetes Care 98 196 294 (27.3) 2.0 2.5 (10.1) (9.8)
Medical Optics 111 203 314 14.5 10.9 10.9 12.2 12.2
Vascular Product Lines:
DES/BVSa) 110 260 370 (13.8) (0.5) (0.5) (4.9) (4.9)
Other Coronary Productsb) 50 100 150 0.8 3.0 4.2 2.2 3.1
Endovascularc) 68 68 136 9.8 17.1 19.1 13.3 14.2
% Change vs. 1H13
Sales 1H14 Int'l Total
U.S. Int'l Total U.S. Operational Reported Operational Reported
Total 958 1,727 2,685 (6.1) 4.7 3.8 0.6 --
Vascular 546 957 1,503 (2.7) 3.6 2.8 1.2 0.7
Diabetes Care 195 382 577 (27.4) 2.9 2.3 (9.8) (10.1)
Medical Optics 217 388 605 14.3 9.5 7.7 11.1 9.9
Vascular Product Lines:
DES/BVSa) 221 517 738 (13.0) 0.9 (1.0) (3.7) (4.9)
Other Coronary Productsb) 98 197 295 1.7 0.7 0.7 1.0 1.0
Endovascularc) 127 130 257 4.8 15.3 16.1 9.8 10.2
a) Includes drug-eluting stents and bioresorbable vascular scaffold (BVS) product portfolio.
b) Includes guide wires, balloon catheters and other coronary products.
c) Includes vessel closure, carotid stents and other peripheral products.
Worldwide Medical Devices sales increased 0.8 percent in the second quarter on
an operational basis and 1.2 percent on a reported basis, including a
favorable 0.4 percent effect of foreign exchange.
Worldwide sales of Vascular products increased 1.4 percent in the quarter on
an operational basis and 1.9 percent on a reported basis, including a
favorable 0.5 percent effect of foreign exchange. International sales comprise
approximately 65 percent of the total Vascular business and increased 3.4
percent operationally, primarily driven by sales growth of MitraClip®,
Abbott's first-in-class device for the treatment of mitral regurgitation, and
double-digit growth in Endovascular products. In addition, data presented at
international medical meetings continue to reinforce strong clinical results
of the Absorb Bioresorbable Vascular Scaffold in a broad range of patients. In
the U.S., strong sales growth in Endovascular products, including sales of the
Supera® peripheral stent, was offset by a decline in drug-eluting stent (DES)
sales due to a year-over-year decline in the DES market and market share.
Worldwide Diabetes Care sales decreased 10.1 percent in the quarter on an
operational basis and 9.8 percent on a reported basis, including a favorable
0.3 percent effect of foreign exchange. As expected, U.S. sales continue to be
impacted by CMS reimbursement reductions and market dynamics. Outside of the
U.S., Abbott is driving growth in emerging markets and expects to bring its
FreeStyle® Libre next-generation glucose sensing technology to Europe in the
second half of 2014.
Worldwide Medical Optics sales increased 12.2 percent in the quarter on an
operational and a reported basis. Sales of cataract products, which represent
nearly 70 percent of Medical Optics sales, increased strong double digits,
outpacing the growth of the global cataract market. This performance was
driven by continued share gains of recently launched products, including
TECNIS OptiBlue and TECNIS OptiBlue Preloaded IOLs in Japan and TECNIS Toric
IOL in the U.S. and Japan, as well as further penetration of Abbott's Catalys®
Precision Laser System for cataract surgery. Abbott recently received CE Mark
for TECNIS Symfony extended range of vision IOL, which is a new premium lens
that is intended to provide patients a continuous range of vision, including
far, intermediate and near distances, with reduced incidence of halo and
glare.
Abbott raises its full-year 2014 earnings-per-share guidance range
Abbott is raising its full-year 2014 ongoing earnings-per-share guidance range
to $2.19 to $2.29 from $2.16 to $2.26, representing double-digit growth at the
mid-point of the range. This guidance includes the developed markets branded
generics pharmaceuticals business.
Abbott continues to forecast net specified items for the full year 2014 of
$1.03 per share. Specified items include intangible amortization expense and
charges associated with cost reduction initiatives, 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. The forecast for specified items
excludes deal and other expenses, to be provided at a future date, related to
the recently announced acquisitions and sale of the developed markets branded
generics pharmaceuticals business.
Including net specified items and prior to the reclassification of the
developed markets branded generics pharmaceuticals business as discontinued
operations starting in the third quarter of 2014, projected earnings per share
from continuing operations under Generally Accepted Accounting Principles
(GAAP) would be $1.16 to $1.26 for the full year 2014.
Abbott declares 362nd quarterly dividend
On June 13, 2014, the board of directors of Abbott declared the company's
quarterly dividend of $0.22 per share. Abbott's cash dividend is payable Aug.
15, 2014, to shareholders of record at the close of business on July 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.comand connect with us on Twitter at @AbbottNews.
Abbott will webcast its live second-quarter earnings conference call through
its Investor Relations website at www.abbottinvestor.comat 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.
Abbott Laboratories and Subsidiaries
Consolidated Statement of Earnings
Second Quarter Ended June 30, 2014 and 2013
(in millions, except per share data)
(unaudited)
2Q14 2Q13 % Change
Net Sales $5,551 $5,446 1.9
Cost of products sold, excluding amortization expense 2,506 2,545 (1.5)
Amortization of intangible assets 161 197 (18.3)
Research and development 335 363 (7.5)
Selling, general, and administrative 1,788 1,714 4.3
Total Operating Cost and Expenses 4,790 4,819 (0.6)
Operating earnings 761 627 21.2
Interest expense, net 20 23 (18.8)
Net foreign exchange (gain) loss 1 11 (92.8)
Other (income) expense, net 3 (8) n/m
Earnings from Continuing Operations before taxes 737 601 22.7
Taxes on Earnings from Continuing Operations 277 125 n/m 1)
Earnings from Continuing Operations 460 476 (3.4)
Earnings from Discontinued Operations, net of taxes 6 -- n/m 2)
Net Earnings $466 $476 (2.2)
Net Earnings from Continuing Operations, excluding
Specified Items, as described below $829 $724 14.6 3)
Diluted Earnings per Common Share from Continuing Operations $0.30 $0.30 --
Diluted Earnings per Common Share from Discontinued Operations -- -- --
Diluted Earnings per Common Share $0.30 $0.30 --
Diluted Earnings per Common Share from Continuing
Operations, excluding Specified Items, as described below $0.54 $0.46 17.4 3)
Average Number of Common Shares Outstanding
Plus Dilutive Common Stock Options and Awards 1,517 1,577
1) Increase over prior year is driven primarily by 2014 current quarter tax expense associated with a one-time repatriation of 2014 ex-U.S. earnings, which is classified as a specified item.
2) 2014 Earnings from Discontinued Operations, net of taxes, includes a net favorable adjustment to tax expense of $6 million, primarily as a result of the resolution of various tax positions from previous years related to AbbVie operations.
3) 2014 Net Earnings from Continuing Operations, excluding Specified Items, excludes net after-tax charges of $369 million, or $0.24 per share, for intangible amortization expense, expenses associated with cost reduction initiatives, as well as current quarter tax expense associated with a one-time repatriation of 2014 ex-U.S. earnings.
2013 Net Earnings from Continuing Operations, excluding Specified Items, excludes after-tax charges of $248 million, or $0.16 per share, for intangible amortization expense, cost reduction initiatives and other costs.
NOTES:
a) See tables below for an explanation of certain non-GAAP financial information.
n/m = Percent change is not meaningful.
Abbott Laboratories and Subsidiaries
Consolidated Statement of Earnings
First Half Ended June 30, 2014 and 2013
(in millions, except per share data)
(unaudited)
1H14 1H13 % Change
Net Sales $10,795 $10,824 (0.3)
Cost of products sold, excluding amortization expense 4,976 4,977 --
Amortization of intangible assets 335 396 (15.4)
Research and development 722 709 1.8
Selling, general, and administrative 3,550 3,500 1.4
Total Operating Cost and Expenses 9,583 9,582 --
Operating earnings 1,212 1,242 (2.5)
Interest expense, net
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