Abbott Reports Third-Quarter 2013 Results

- Third-Quarter Ongoing EPS of $0.55 (GAAP EPS From Continuing Operations of $0.49) -
- Announces 57 Percent Increase in Quarterly Common Dividend -
- Confirms Full-Year 2013 Ongoing EPS Guidance Range -
- Delivers Strong Gross Margin and Operating Margin Improvements -

PR Newswire

ABBOTT PARK, Ill., Oct. 16, 2013 /PRNewswire/ -- Abbott today announced financial results for the third quarter ended Sept. 30, 2013.

  • Third-quarter adjusted diluted EPS was $0.55, above the previous guidance range; reported diluted EPS from continuing operations under GAAP was $0.49. Sales growth this quarter was negatively affected by a sales disruption in International Nutrition, which was offset in the quarter by strong performance across other businesses, gross and operating margin improvements, expense controls and a lower tax rate.
  • Abbott is announcing today an increase in the quarterly common dividend of 57 percent to $0.22 per share, payable on Feb. 15, 2014, to shareholders of record at the close of business on Jan. 15, 2014. This will mark the 42nd consecutive year that Abbott has increased its dividend payout and demonstrates Abbott's continued commitment to increasing its return of cash to shareholders while investing for long-term growth.
  • Abbott is confirming its full-year 2013 ongoing EPS guidance range of $1.98 to $2.04. Including specified items, Abbott's projected full-year 2013 EPS from continuing operations under GAAP would be $1.46 to $1.52.
  • Excluding foreign exchange, worldwide sales increased 4.3 percent on an operational basis. Reported sales increased 2.0 percent, including an unfavorable 2.3 percent effect of foreign exchange. The sales disruption in International Nutrition is estimated to have reduced Abbott's total worldwide sales growth by nearly 2 percentage points.
  • Third-quarter adjusted gross margin ratio of 55.9 percent increased 70 basis points over prior year, ahead of expectations, driven by continuing improvements in Nutrition and Diagnostics. The adjusted operating margin ratio of 19.3 percent increased 210 basis points over prior year. The gross margin and operating margin ratios under GAAP were 50.7 and 11.7 percent, respectively. 
  • In August, Abbott completed two acquisitions in its Medical Devices business: IDEV Technologies, which expands Abbott's endovascular portfolio, and OptiMedica, which provides an immediate entry point into the laser cataract surgery market.

"We continued to have strong earnings performance, in spite of a supplier recall that impacted our International Nutrition business," said Miles D. White, chairman and chief executive officer, Abbott. ''Today we also are announcing a significant increase in our quarterly dividend."

Third-Quarter Business Overview

Following are the sales by business segment for the third quarter and the first nine months of the year, as well as commentary addressing third-quarter sales performance:

Total Company









% Change vs. 3Q12



Sales ($ in millions) 3Q13




Int'l


Total



U.S.


Int'l


Total


U.S.


Operational


Reported


Operational


Reported

Total Sales *


1,587


3,782


5,369


3.3


4.7


1.4


4.3


2.0

Nutrition


725


910


1,635


1.6


4.9


2.2


3.4


1.9

Diagnostics


320


805


1,125


15.0


8.9


5.5


10.5


8.0

Established Pharmaceuticals

-


1,235


1,235


 n/a 


0.6


(2.9)


0.6


(2.9)

Medical Devices


520


822


1,342


(0.1)


6.6


3.2


3.9


1.9


















* Total Abbott Sales include Other Sales of $32 million.












% Change vs. 9M12



Sales ($ in millions) 9M13




Int'l


Total



U.S.


Int'l


Total


U.S.


Operational


Reported


Operational


Reported

Total Sales *


4,681


11,512


16,193


(1.0)


6.1


3.4


4.0


2.1

Nutrition


2,157


2,881


5,038


0.2


12.6


11.1


7.0


6.2

Diagnostics


916


2,433


3,349


7.0


8.6


5.5


8.1


5.9

Established Pharmaceuticals

-


3,686


3,686


 n/a 


0.7


(2.4)


0.7


(2.4)

Medical Devices


1,540


2,486


4,026


(6.4)


4.8


1.7


0.3


(1.5)


















* Total Abbott Sales include Other Sales of $94 million.






n/a = Not Applicable.

Note: Operational growth reflects percentage change over the prior year excluding the impact of exchange rates.

 

Third-quarter 2013 worldwide sales of $5.4 billion increased 4.3 percent on an operational basis, with strong performance in Diagnostics and Medical Devices. The sales disruption in International Nutrition is estimated to have reduced Abbott's total worldwide sales growth by nearly 2 percentage points. On a reported basis, sales increased 2.0 percent, including an unfavorable 2.3 percent effect of foreign exchange.

Sales in developed markets in the third quarter were $3.2 billion, increasing 1.8 percent on an operational basis and relatively flat on a reported basis. This operational sales growth represents a sequential improvement versus second quarter, driven by low-single-digit growth in Medical Devices and Nutrition and mid-single-digit growth in Diagnostics. Leading market positions and new technologies are delivering profitable growth in developed markets.  

Sales in emerging markets in the third quarter were $2.2 billion, increasing 8.1 percent on an operational basis and 5.3 percent on a reported basis.


Nutrition









% Change vs. 3Q12



Sales ($ in millions) 3Q13




Int'l


Total



U.S.


Int'l


Total


U.S.


Operational


Reported


Operational


Reported

Total Sales


725


910


1,635


1.6


4.9


2.2


3.4


1.9

Pediatric


371


515


886


2.1


3.0


1.7


2.7


1.9

Adult


354


395


749


1.0


7.5


2.9


4.4


2.0




























































% Change vs. 9M12



Sales ($ in millions) 9M13




Int'l


Total



U.S.


Int'l


Total


U.S.


Operational


Reported


Operational


Reported

Total Sales


2,157


2,881


5,038


0.2


12.6


11.1


7.0


6.2

Pediatric


1,127


1,708


2,835


0.4


14.4


14.2


8.4


8.2

Adult


1,030


1,173


2,203


(0.1)


10.2


7.0


5.2


3.6

Worldwide Nutrition sales increased 3.4 percent in the third quarter on an operational basis and 1.9 percent on a reported basis, including an unfavorable 1.5 percent effect of foreign exchange. Abbott's broad and diverse nutritional product portfolio is comprised of approximately 55 percent of sales in Pediatric Nutrition and 45 percent of sales in Adult Nutrition. 

Worldwide Pediatric Nutrition sales increased 2.7 percent on an operational basis and 1.9 percent on a reported basis in the quarter, including an unfavorable 0.8 percent effect of foreign exchange. International Pediatric sales increased 3.0 percent on an operational basis and were negatively impacted by a supplier recall in early August in certain international markets of pediatric nutrition products. While there were no health issues associated with this supplier recall and the supplier subsequently determined that the products had been safe for consumption, this event created significant disruption in these markets. As a result, Abbott also anticipates International Pediatric Nutrition sales in the fourth quarter 2013 and the first half 2014 to be lower than previous expectations.

The sales disruption is estimated to have reduced sales growth in International Pediatric Nutrition by approximately $90 million in the third quarter. Exclusive of this event, International Pediatric Nutrition continues to drive strong performance as it launches new product innovations and executes on geographic expansion initiatives.

Worldwide Adult Nutrition sales increased 4.4 percent on an operational basis and 2.0 percent on a reported basis in the quarter, including an unfavorable 2.4 percent effect of foreign exchange. Sales growth in the quarter was led by strong growth of Ensure® and continued expansion of the adult nutrition market where Abbott is the global leader. International Adult Nutrition sales grew 7.5 percent on an operational basis, driven by strong growth in emerging markets. U.S. Adult Nutrition sales growth was negatively impacted by Abbott's exit this year from certain non-core business lines as part of the division's margin improvement initiative, which was offset by double-digit growth of Ensure.


Diagnostics









% Change vs. 3Q12



Sales ($ in millions) 3Q13




Int'l


Total



U.S.


Int'l


Total


U.S.


Operational


Reported


Operational


Reported

Total Sales


320


805


1,125


15.0


8.9


5.5


10.5


8.0

Core Laboratory


187


721


908


15.3


7.7


4.2


9.1


6.3

Molecular


50


67


117


6.7


24.0


22.2


16.0


15.0

Point of Care


83


17


100


20.1


5.3


2.2


17.1


16.5




























































% Change vs. 9M12



Sales ($ in millions) 9M13




Int'l


Total



U.S.


Int'l


Total


U.S.


Operational


Reported


Operational


Reported

Total Sales


916


2,433


3,349


7.0


8.6


5.5


8.1


5.9

Core Laboratory


521


2,185


2,706


2.1


8.3


5.1


7.1


4.5

Molecular


150


192


342


5.4


14.3


12.3


10.2


9.1

Point of Care


245


56


301


20.6


1.9


0.8


16.6


16.4

Worldwide Diagnostics sales increased 10.5 percent in the third quarter on an operational basis. The results exceeded previous expectations and reflect strong double-digit growth in Molecular and Point of Care Diagnostics, as well as high single-digit growth in the Core Laboratory business. Reported sales increased 8.0 percent, including an unfavorable 2.5 percent effect of foreign exchange. Diagnostics gross and operating margin improved versus the third quarter of 2012, and this business segment is ahead of schedule to achieve its operating margin target. Diagnostics is continuing the development of multiple new system 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 9.1 percent in the quarter on an operational basis, driven by strong growth in key emerging markets and the United States. Reported sales increased 6.3 percent, including an unfavorable 2.8 percent effect of foreign exchange. International sales growth of 7.7 percent on an operational basis was driven by continued strong performance in key emerging markets. U.S. growth of 15.3 percent was the result of several large health system customers selecting Abbott's integrated and flexible solutions to manage large testing volumes and increase operational efficiencies. Also in September, preliminary results from a clinical study sponsored by the British Heart Foundation suggested that Abbott's ARCHITECT High Sensitive Troponin test, currently available outside the United States, may help improve the diagnosis and prognosis of patients presenting with symptoms of a heart attack. Data showed the test could be particularly beneficial for women, who are often under-diagnosed.

Molecular Diagnostics sales increased 16.0 percent in the quarter on an operational basis. Reported worldwide Molecular sales increased 15.0 percent, including an unfavorable 1.0 percent effect of foreign exchange. Sales were driven by strong infectious disease growth, particularly in emerging markets due to the impact of recent tenders, as well as the continued growth of companion diagnostics.

Point of Care Diagnostics also contributed to strong sales growth, increasing 17.1 percent in the quarter on an operational basis and 16.5 percent on a reported basis, including an unfavorable 0.6 percent effect of foreign exchange. Abbott holds the leadership position in the United States, where sales increased 20.1 percent driven by continued growth in the U.S. hospital segment, as well as strong growth in the physician office segment. Overall performance was driven by balanced double-digit growth in both developed and emerging markets, with on-going investments driving further penetration in key growth markets.


Established Pharmaceuticals









% Change vs. 3Q12



Sales ($ in millions) 3Q13




Int'l


Total



U.S.


Int'l


Total


U.S.


Operational


Reported


Operational


Reported

Total Sales


-


1,235


1,235


n/a


0.6


(2.9)


0.6


(2.9)

Key Emerging Markets


-


573


573


n/a


2.3


(3.4)


2.3


(3.4)

Other Markets


-


662


662


n/a


(0.9)


(2.4)


(0.9)


(2.4)




























































% Change vs. 9M12



Sales ($ in millions) 9M13




Int'l


Total



U.S.


Int'l


Total


U.S.


Operational


Reported


Operational


Reported

Total Sales


-


3,686


3,686


n/a


0.7


(2.4)


0.7


(2.4)

Key Emerging Markets


-


1,747


1,747


n/a


5.0


1.1


5.0


1.1

Other Markets


-


1,939


1,939


n/a


(3.0)


(5.3)


(3.0)


(5.3)


















n/a = Not Applicable.










Established Pharmaceuticals sales increased 0.6 percent in the third quarter on an operational basis and decreased 2.9 percent on a reported basis, including an unfavorable 3.5 percent effect of foreign exchange.

Sales in Key Emerging Markets increased 2.3 percent on an operational basis in the quarter. Reported sales decreased 3.4 percent, including an unfavorable 5.7 percent effect of foreign exchange. Abbott is focused on implementing tailored strategies to drive accelerated growth across its key emerging markets. While recent macroeconomic and market pressures in certain emerging markets resulted in somewhat slower sales growth this quarter, growth rates in emerging markets have and are expected to continue to outpace the overall global economy and remain attractive over the long-term.     

Other Markets include developed markets, such as Western Europe and Japan, and other emerging markets globally. Sales in these geographies decreased 0.9 percent in the quarter on an operational basis and 2.4 percent on a reported basis, including an unfavorable 1.5 percent effect of foreign exchange.

Medical Devices









% Change vs. 3Q12



Sales ($ in millions) 3Q13




Int'l


Total



U.S.


Int'l


Total


U.S.


Operational


Reported


Operational


Reported

Total Sales


520


822


1,342


(0.1)


6.6


3.2


3.9


1.9

Vascular


301


446


747


1.8


2.9


(0.2)


2.5


0.6

Diabetes Care


122


197


319


(9.4)


8.7


7.6


1.0


0.4

Medical Optics


97


179


276


7.5


14.0


7.2


11.7


7.3


















Vascular Product Lines:

















DES/BVSa)


130


254


384


(6.2)


4.3


(1.2)


0.7


(3.0)

Other Coronary Productsb)


48


89


137


2.0


(9.3)


(9.9)


(5.7)


(6.1)

Endovascularc)


62


55


117


3.0


10.6


11.6


6.4


6.9




























































% Change vs. 9M12



Sales ($ in millions) 9M13




Int'l


Total



U.S.


Int'l


Total


U.S.


Operational


Reported


Operational


Reported

Total Sales


1,540


2,486


4,026


(6.4)


4.8


1.7


0.3


(1.5)

Vascular


863


1,377


2,240


(8.7)


3.8


0.7


(1.3)


(3.1)

Diabetes Care


390


570


960


(6.6)


5.4


4.2


0.2


(0.5)

Medical Optics


287


539


826


1.5


7.1


1.9


5.1


1.7


















Vascular Product Lines:

















DES/BVSa)


384


776


1,160


(10.2)


5.4


0.6


(0.1)


(3.2)

Other Coronary Productsb)


145


285


430


(2.0)


(4.0)


(5.2)


(3.3)


(4.2)

Endovascularc)


183


168


351


0.6


7.4


7.6


3.7


3.8


















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 3.9 percent in the third quarter on an operational basis. Reported sales increased 1.9 percent, including an unfavorable 2.0 percent effect of foreign exchange.

Worldwide Vascular sales increased 2.5 percent in the quarter on an operational basis, representing a continued sequential improvement versus second quarter 2013 and consistent with previous guidance. Reported sales increased 0.6 percent, including an unfavorable 1.9 percent effect of foreign exchange. International Vascular sales comprise approximately 60 percent of total Vascular sales and increased 2.9 percent operationally, driven by the continued share gains in key geographies of XIENCE Xpedition and Absorb, Abbott's drug eluting coronary bioresorbable vascular scaffold (BVS). In August, Abbott launched XIENCE Xpedition in Japan, further expanding Abbott's share position. Growth in sales of MitraClip®, Abbott's first-in-class device for the treatment of mitral regurgitation, and double-digit sales growth in Endovascular also contributed to international growth. U.S. Vascular sales were impacted by a year-over-year market decline, partially offset by an increase in XIENCE Xpedition market share and growth in Endovascular.

Worldwide Diabetes Care sales increased 1.0 percent in the quarter on an operational basis. Reported sales increased 0.4 percent, including an unfavorable 0.6 percent effect of foreign exchange. International sales growth of 8.7 percent was driven by continued double-digit growth in emerging markets, partially offset by the expected impact of the implementation of the CMS competitive bidding program in the United States.

Worldwide Medical Optics sales increased 11.7 percent in the quarter on an operational basis, exceeding previous expectations. Reported sales increased 7.3 percent, including an unfavorable 4.4 percent effect of foreign exchange. Cataract sales, which represent approximately 65 percent of total Medical Optics sales, increased strong double digits, outpacing the market. This strong growth was driven by share gains of new products, including the recent launch of the TECNIS® OptiBlue intraocular lens (IOL) in Japan, which provides Abbott access to the largest segment of the Japan market, and the TECNIS Toric IOL in the United States for patients with astigmatism, which enables Abbott to compete in the fastest-growing premium segment of the IOL market. This growth was partially offset by a decline in refractive sales driven by continued soft market conditions.


Abbott confirms its full-year 2013 ongoing EPS guidance range

Abbott is confirming its full-year 2013 ongoing earnings-per-share guidance range of $1.98 to $2.04, reflecting double-digit growth. Abbott forecasts net specified items for the full year 2013 of approximately $0.52 per share. Including these net specified items, projected earnings per share from continuing operations under Generally Accepted Accounting Principles (GAAP) would be $1.46 to $1.52 for the full year 2013. Specified items are primarily associated with intangible amortization expense and cost reduction initiatives, partially offset by favorable adjustments to tax expense related to the resolution of various tax positions from previous years and the impact in the first quarter of the favorable effect of U.S. tax law changes enacted in 2013 related to 2012 results.    

Abbott announces 57 percent dividend increase payable Feb. 2014

Today Abbott is announcing an increase in the company's quarterly common dividend to $0.22 per share from $0.14 per share, representing an increase of 57 percent. The change takes effect with the dividend that will be paid on Feb. 15, 2014, to shareholders of record at the close of business on Jan. 15, 2014. This will mark the 42nd consecutive year Abbott has increased its dividend.

Separately, on Sept. 12, 2013, the board of directors of Abbott declared the company's quarterly common dividend of $0.14 per share. Abbott's cash dividend is payable Nov. 15, 2013, to shareholders of record at the close of business on Oct. 15, 2013.

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 (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 70,000 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/A for the year ended Dec. 31, 2012, 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

Third Quarter Ended September 30, 2013 and 2012

(in millions, except per share data)

(unaudited)




3Q13


3Q12


% Change


Net Sales


$5,369


$5,265


2.0










Cost of products sold, excluding amortization expense


2,450


2,489


(1.6)


Amortization of intangible assets


197


195


0.9


Research and development


357


351


1.8


Selling, general, and administrative


1,735


1,920


(9.7)


Total Operating Cost and Expenses


4,739


4,955


(4.4)










Operating earnings


630


310


103.3

1)









Net interest expense


24


88


(73.1)


Net foreign exchange (gain) loss


5


(12)


n/m


Other (income) expense, net


(27)


3


n/m


Earnings from Continuing Operations before taxes


628


231


171.7

1)









Taxes on Earnings from Continuing Operations


(145)


(108)


(34.3)

2)

Net Earnings from Continuing Operations


773


339


128.0

1)









Earnings from Discontinued Operations, net of taxes


193


1,604


n/m

3)









Net Earnings


$966


$1,943


(50.3)










Net Earnings from Continuing Operations Excluding 


$873


$666


31.1

4)

Specified Items, as described below
















Diluted Earnings per Common Share from Continuing Operations


$0.49


$0.21


133.3

1)









Diluted Earnings per Common Share from Discontinued Operations

$0.12


$1.00


n/m










Diluted Earnings per Common Share 


$0.61


$1.21


(49.6)










Diluted Earnings per Common Share from Continuing 


$0.55


$0.42


31.0

4)

Operations, Excluding Specified Items, as described below
















Average Number of Common Shares Outstanding


1,567


1,589




Plus Dilutive Common Stock Options and Awards










1)

Increase versus prior year primarily relates to strong operating performance, certain costs included in Abbott's 2012 Continuing Operations that transferred or are being charged to AbbVie in 2013, as well as lower expense associated with cost reduction initiatives in 2013 versus 2012. Net Earnings and EPS also reflect a favorable adjustment to tax expense as discussed in note 2.



2)

2013 Taxes on Earnings from Continuing Operations includes a favorable adjustment to tax expense of $241 million, or $0.15 per share, as a result of the resolution of various tax positions from previous years. 2012 Taxes on Earnings from Continuing Operations includes a favorable adjustment to tax expense of $196 million, or $0.12 per share, as a result of the resolution of various tax positions from a previous year. These favorable items are classified as specified items and are excluded from ongoing results, as discussed below.



3)

2013 Earnings from Discontinued Operations, net of taxes, includes a favorable adjustment to tax expense of $193 million, or $0.12 per share, as a result of the resolution of various tax positions from a previous year related to AbbVie operations.



4)

2013 Net Earnings from Continuing Operations Excluding Specified Items excludes net after-tax charges of $100 million, or $0.06 per share, for intangible amortization expense; expenses associated with cost reduction initiatives; a philanthropic contribution to the Abbott Fund; and other costs, including integration and separation-related costs; partially offset by a favorable tax adjustment, as discussed in note 2.




2012 Net Earnings from Continuing Operations Excluding Specified Items excludes net after-tax charges of $327 million, or $0.21 per share, as detailed in the 8-K dated April 16, 2013, for intangible amortization expense as well as specified items previously identified in Abbott's earnings release dated Oct. 17, 2012, related to Abbott's continuing operations, certain costs that transferred or will be charged to AbbVie and, an interest expense adjustment to reflect Abbott's capital structure after the separation of AbbVie, partially offset by a favorable tax adjustment, as discussed in note 2.



NOTES:

a)

See tables on page 11 for an explanation of certain non-GAAP financial information.

b)

"Discontinued Operations" reflect the operations of the AbbVie business, which became an independent company on
Jan.1, 2013.



n/m = Percent change is not meaningful.

       


Abbott Laboratories and Subsidiaries

Consolidated Statement of Earnings

Nine Months Ended September 30, 2013 and 2012

(in millions, except per share data)

(unaudited)




9M13


9M12


% Change


Net Sales


$16,193


$15,862


2.1










Cost of products sold, excluding amortization expense


7,427


7,219


2.9


Amortization of intangible assets


593


599


(1.0)


Research and development


1,066


1,084


(1.7)


Selling, general, and administrative


5,234


5,577


(6.1)


Total Operating Cost and Expenses


14,320


14,479


(1.1)










Operating earnings


1,873


1,383


35.4

1)









Net interest expense


73


217


(66.4)


Net foreign exchange (gain) loss


44


(23)


n/m


Other (income) expense, net


(28)


(35)


(19.8)


Earnings from Continuing Operations before taxes


1,784


1,224


45.7

1)









Taxes on Earnings from Continuing Operations


(10)


123


n/m

2)

Net Earnings from Continuing Operations


1,794


1,101


62.9

1)









Earnings from Discontinued Operations, net of taxes


193


3,809


n/m

3)









Net Earnings


$1,987


$4,910


(59.5)










Net Earnings from Continuing Operations Excluding 


$2,272


$2,000


13.6

4)

Specified Items, as described below
















Diluted Earnings per Common Share from Continuing Operations


$1.13


$0.69


63.8

1)









Diluted Earnings per Common Share from Discontinued Operations

$0.12


$2.37


n/m










Diluted Earnings per Common Share 


$1.25


$3.06


(59.2)










Diluted Earnings per Common Share from Continuing 


$1.43


$1.25


14.4

4)

Operations, Excluding Specified Items, as described below
















Average Number of Common Shares Outstanding


1,576


1,589




Plus Dilutive Common Stock Options and Awards










1)

Increase versus prior year primarily relates to strong operating performance, certain costs included in Abbott's 2012 Continuing Operations that transferred or are being charged to AbbVie in 2013, as well as lower expense associated with cost reduction initiatives in 2013 versus 2012. Net Earnings and EPS also reflect favorable adjustments to tax expense as discussed in note 2.



2)

2013 Taxes on Earnings from Continuing Operations includes a favorable adjustment to tax expense of $241 million, or $0.15 per share, related to the resolution of various tax positions from previous years as well as a favorable adjustment to tax expense of $103 million, or $0.07 per share, for the impact in the first quarter of U.S. tax law changes enacted in 2013 related to 2012 results. 2012 Taxes on Earnings from Continuing Operations includes a favorable adjustment to tax expense of $196 million, or $0.12 per share, as a result of the resolution of various tax positions from a previous year. These favorable items are classified as specified items and are excluded from ongoing results, as discussed below.



3)

2013 Earnings from Discontinued Operations, net of taxes, includes a favorable adjustment to tax expense of $193 million, or $0.12 per share, as a result of the resolution of various tax positions from a previous year related to AbbVie operations.



4)

2013 Net Earnings from Continuing Operations Excluding Specified Items excludes net after-tax charges of $478 million, or $0.30 per share, for intangible amortization expense; expenses associated with cost reduction initiatives; a philanthropic contribution to the Abbott Fund; and other costs, including integration and separation-related costs; partially offset by favorable tax adjustments, as discussed in note 2.  




2012 Net Earnings from Continuing Operations Excluding Specified Items excludes net after-tax charges of $899 million, or $0.56 per share, as detailed in the 8-K dated April 16, 2013, for intangible amortization expense as well as specified items previously identified in Abbott's earnings release dated Oct. 17, 2012, related to Abbott's continuing operations, certain costs that transferred or will be charged to AbbVie, and an interest expense adjustment to reflect Abbott's capital structure after the separation of AbbVie, partially offset by a favorable tax adjustment, as discussed in note 2.


NOTES:

c)

See tables on page 12 for an explanation of certain non-GAAP financial information.

d)

"Discontinued Operations" reflect the operations of the AbbVie business, which became an independent company on Jan.1, 2013.


n/m = Percent change is not meaningful.

Non-GAAP Reconciliation of Financial Information


Abbott Laboratories and Subsidiaries

Non-GAAP Reconciliation of Financial Information

Third Quarter Ended September 30, 2013 and 2012

(in millions, except per share data)

(unaudited)




3Q13



As

Reported
(GAAP)


Specified

Items


As

Adjusted


% to

Sales










Intangible Amortization Expense


$197


($197)


--



Gross Margin


$2,722


$280


$3,002


55.9%

R&D


$357


($12)


$345


6.4%

SG&A


$1,735


($115)


$1,620


30.2%

Earnings from Continuing Operations before taxes 


$628


$407


$1,035



Taxes on Earnings from Continuing Operations


($145)


$307


$162



Net Earnings from Continuing Operations


$773


$100


$873



Diluted Earnings per Share from Continuing Operations

$0.49


$0.06


$0.55












Specified items reflect intangible amortization expense of $197 million; expenses associated with cost reduction initiatives of $99 million; a philanthropic contribution to the Abbott Fund of $40 million; and other costs of $71 million, including integration and separation-related costs; partially offset by a favorable adjustment to tax expense of $241 million related to the resolution of various tax positions from previous years.



3Q12



As

reported

(GAAP)


Specified

Items


As

Adjusted


% to

Sales










Intangible Amortization Expense


$195


($195)


--



Gross Margin


$2,581


$328


$2,909


55.2%

R&D


$351


($5)


$346


6.6%

SG&A


$1,920


($261)


$1,659


31.5%

Net Interest Expense


$88


($62)


$26



Earnings from Continuing Operations before taxes


$231


$656


$887



Taxes on Earnings from Continuing Operations


($108)


$329


$221



Net Earnings from Continuing Operations


$339


$327


$666



Diluted Earnings per Share from Continuing Operations

$0.21


$0.21


$0.42



Specified items, as detailed in the 8-K dated April 16, 2013, include intangible amortization expense of $195 million as well as $399 million for specified items related to Abbott's continuing operations, the removal of certain corporate costs that transferred to AbbVie in the separation and certain costs that will be charged to AbbVie under transition service agreements and $62 million for an adjustment to interest expense to reflect Abbott's capital structure after the separation of AbbVie, partially offset by a favorable adjustment to tax expense of $196 million related to the resolution of various tax positions from a previous year, as previously identified in Abbott's earnings release dated Oct. 17, 2012.

 

Abbott Laboratories and Subsidiaries

Non-GAAP Reconciliation of Financial Information

Nine Months Ended September 30, 2013 and 2012

(in millions, except per share data)

(unaudited)




9M13



As

reported

(GAAP)


Specified

Items


As

Adjusted


% to

Sales










Intangible Amortization Expense


$593


($593)


--



Gross Margin


$8,173


$823


$8,996


55.6%

R&D


$1,066


($17)


$1,049


6.5%

SG&A


$5,234


($164)


$5,070


31.3%

Net Foreign Exchange (Gain)/Loss


$44


($15)


$29



Other (Income)/Expense


($28)


($3)


($31)



Earnings from Continuing Operations before taxes 


$1,784


$1,022


$2,806



Taxes on Earnings from Continuing Operations


($10)


$544


$534



Net Earnings from Continuing Operations


$1,794


$478


$2,272



Diluted Earnings per Share from Continuing Operations

$1.13


$0.30


$1.43



Specified items reflect intangible amortization expense of $593 million; expenses associated with cost reduction initiatives of $206 million; a philanthropic contribution to the Abbott Fund of $40 million; and other costs of $183 million, including integration and separation-related costs; partially offset by favorable adjustments to tax expense of $241 million related to the resolution of various tax positions from previous years and $103 million for the impact in the first quarter of U.S. tax law changes enacted in 2013 related to 2012 results.



9M12



As

reported

(GAAP)


Specified

Items


As

Adjusted


% to

Sales










Intangible Amortization Expense


$599


($599)


--



Gross Margin


$8,044


$784


$8,828


55.7%

R&D


$1,084


($8)


$1,076


6.8%

SG&A


$5,577


($507)


$5,070


32.0%

Net Interest Expense


$217


($134)


$83



Earnings from Continuing Operations before taxes


$1,224


$1,433


$2,657



Taxes on Earnings from Continuing Operations


$123


$534


$657



Net Earnings from Continuing Operations


$1,101


$899


$2,000



Diluted Earnings per Share from Continuing Operations

$0.69


$0.56


$1.25



Specified items, as detailed in the 8-K dated April 16, 2013, include intangible amortization expense of $599 million as well as $700 million for specified items related to Abbott's continuing operations, the removal of certain corporate costs that transferred to AbbVie in the separation and certain costs that will be charged to AbbVie under transition service agreements and $134 million for an adjustment to interest expense to reflect Abbott's capital structure after the separation of AbbVie, partially offset by a favorable adjustment to tax expense of $196 million related to the resolution of various tax positions from a previous year, as previously identified in Abbott's earnings release dated Oct. 17, 2012.

Tax Rate Reconciliation

Abbott's year-to-date Tax Rate on Earnings from Continuing Operations is 19.0 percent on ongoing basis and (0.6%) on a GAAP basis. A reconciliation of the year-to-date tax rates for 2013 and 2012 is shown below: 




9M13


(dollars in millions)


Pre-Tax Income 1)


Taxes on Earnings


Tax
Rate


As reported (GAAP)


1,784


(10)


(0.6%)


Specified Items


1,022


544


53.2%

2)

Excluding specified items


2,806


534


19.0%























9M12


(dollars in millions)


Pre-Tax Income 1)


Taxes on Earnings


Tax
Rate


As reported (GAAP)


1,224


123


10.1%


Specified Items


1,433


534


37.3%

3)

Excluding specified items


2,657


657


24.7%




1)

Pre-Tax Income from Continuing Operations.



2)

Specified Items include a favorable adjustment to tax expense of $241 million from the resolution of various tax positions from previous years as well as a favorable adjustment to tax expense of $103 million for the impact in the first quarter of U.S. tax law changes enacted in 2013 related to 2012 results.



3)

Specified Items include a favorable adjustment to tax expense of $196 million from the resolution of a previous year's tax positions.

A reconciliation of the third-quarter tax rates for 2013 and 2012 is shown below:




3Q13


(dollars in millions)


Pre-Tax Income 4)


Taxes on Earnings


Tax
Rate


As reported (GAAP)


628


(145)


(23.0%)


Specified Items


407


307


75.5%

5)

Excluding specified items


1,035


162


15.7%























3Q12


(dollars in millions)


Pre-Tax Income 4)


Taxes on Earnings


Tax
Rate


As reported (GAAP)


231


(108)


(46.5%)


Specified Items


656


329


50.2%

6)

Excluding specified items


887


221


25.0%




4)

Pre-Tax Income from Continuing Operations.



5)

Specified Items include a favorable adjustment to tax expense of $241 million from the resolution of various tax positions from previous years.



6)

Specified Items include a favorable adjustment to tax expense of $196 million from the resolution of a previous year's tax positions.

 

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