Fourth-quarter reported sales growth of 42.3 percent; comparable operational sales growth of 7.7 percent.
|
| [24-January-2018] |
| ABBOTT PARK, Ill., Jan. 24, 2018 /PRNewswire/ -- Abbott Laboratories (NYSE: ABT) today announced financial results for the fourth quarter ended Dec. 31, 2017.
"2017 was a great year for us - we performed well, our new product pipeline was highly productive and we took some very important strategic steps forward," said Miles D. White, chairman and chief executive officer, Abbott. "We're entering 2018 with very good momentum." * See note on comparable operational growth below. FOURTH-QUARTER BUSINESS OVERVIEW Comparable operational sales growth:
Following are sales by business segment and commentary for the fourth quarter and the full year: Total Company
-------------
($ in millions)
% Change vs. 4Q16
-----------------
Sales 4Q17 Reported Comparable Operational
---------- -------- ----------------------
U.S. Int'l Total U.S. Int'l Total U.S. Int'l Total
---- ----- ----- ----- ----- ----- -----
Total * 2,676 4,913 7,589 61.7 33.6 42.3 7.2 7.9 7.7
----- ----- ----- ---- ---- ---- --- --- ---
Nutrition 769 1,015 1,784 3.2 2.8 3.0 3.2 1.1 2.0
Diagnostics 692 1,214 1,906 84.6 37.8 51.7 5.7 7.1 6.7
Established Pharmaceuticals -- 1,145 1,145 n/a 17.0 17.0 n/a 14.0 14.0
Medical Devices 1,206 1,531 2,737 129.0 85.1 102.2 10.5 8.8 9.6
* Total Abbott sales from
continuing operations include
Other Sales of $17 million. In
2016, the AMO business, which
was divested during the first
quarter 2017, was reported as
part of the Medical Devices
group. Comparable operational
growth rates above exclude
results from the AMO business.
% Change vs. 12M16
------------------
Sales 12M17 Reported Comparable Operational
----------- -------- ----------------------
U.S. Int'l Total U.S. Int'l Total U.S. Int'l Total
---- ----- ----- ----- ----- ----- -----
Total * 9,673 17,717 27,390 49.1 23.3 31.3 4.0 5.4 4.9
----- ------ ------ ---- ---- ---- --- --- ---
Nutrition 3,031 3,894 6,925 2.1 (0.9) 0.4 2.1 (0.5) 0.6
Diagnostics 1,817 3,799 5,616 26.5 12.5 16.7 5.9 5.4 5.5
Established
Pharmaceuticals -- 4,287 4,287 n/a 11.1 11.1 n/a 9.5 9.5
Medical Devices 4,710 5,615 10,325 130.1 76.3 97.3 4.7 6.6 5.7
* In 2017, total Abbott sales
from continuing operations
include Other Sales of $237
million, including sales of
$175 million from the AMO
business, which was divested
during the first quarter 2017.
In 2016, the AMO business was
reported as part of the
Medical Devices group.
Comparable operational growth
rates above exclude results
from the AMO business.
n/a = Not Applicable.
Note: In order to compute
results excluding the impact
of exchange rates, current
year U.S. dollar sales are
multiplied or divided, as
appropriate, by the current
year average foreign exchange
rates and then those amounts
are multiplied or divided, as
appropriate, by the prior year
average foreign exchange
rates.
Fourth-quarter 2017 worldwide sales of $7.6 billion increased 42.3 percent on a reported basis. On a comparable operational basis, worldwide sales increased 7.7 percent. Refer to tables titled "Non-GAAP Reconciliation of Comparable Historical Revenue" for a reconciliation of comparable historical revenue. Nutrition
---------
($ in millions)
% Change vs. 4Q16
-----------------
Sales 4Q17 Reported Comparable Operational
---------- -------- ----------------------
U.S. Int'l Total U.S. Int'l Total U.S. Int'l Total
---- ----- ----- ----- ----- ----- -----
Total 769 1,015 1,784 3.2 2.8 3.0 3.2 1.1 2.0
--- ----- ----- --- --- --- --- --- ---
Pediatric 450 550 1,000 3.6 1.5 2.4 3.6 (0.2) 1.5
Adult 319 465 784 2.7 4.3 3.6 2.7 2.8 2.8
% Change vs. 12M16
------------------
Sales 12M17 Reported Comparable Operational
----------- -------- ----------------------
U.S. Int'l Total U.S. Int'l Total U.S. Int'l Total
---- ----- ----- ----- ----- ----- -----
Total 3,031 3,894 6,925 2.1 (0.9) 0.4 2.1 (0.5) 0.6
----- ----- ----- --- ---- --- --- ---- ---
Pediatric 1,777 2,112 3,889 6.0 (4.3) 0.2 6.0 (3.9) 0.3
Adult 1,254 1,782 3,036 (3.0) 3.4 0.7 (3.0) 3.8 0.9
Worldwide Nutrition sales increased 3.0 percent on a reported basis in the fourth quarter, including a favorable 1.0 percent effect of foreign exchange, and increased 2.0 percent on an operational basis. Worldwide Pediatric Nutrition sales increased 2.4 percent on a reported basis in the fourth quarter, including a favorable 0.9 percent effect of foreign exchange, and increased 1.5 percent on an operational basis. In the U.S., continued above-market growth was led by Abbott's market-leading toddler brands, PediaSure® and Pedialyte®. International sales decreased 0.2 percent on an operational basis, as growth in China and India was offset by continued challenging market conditions in certain other international countries. Worldwide Adult Nutrition sales increased 3.6 percent on a reported basis in the fourth quarter, including a favorable 0.8 percent effect of foreign exchange, and increased 2.8 percent on an operational basis. Worldwide sales growth was led by Ensure®, Abbott's market-leading complete and balanced nutrition brand, and Glucerna®, Abbott's market-leading diabetes-specific nutrition brand. Diagnostics
-----------
($ in millions)
% Change vs. 4Q16
-----------------
Sales 4Q17 Reported Comparable Operational
---------- -------- ----------------------
U.S. Int'l Total U.S. Int'l Total U.S. Int'l Total
---- ----- ----- ---- ----- ----- ---- ----- -----
Total * 692 1,214 1,906 84.6 37.8 51.7 5.7 7.1 6.7
--- ----- ----- ---- ---- ---- --- --- ---
Core Laboratory 243 856 1,099 7.7 10.0 9.4 7.7 7.0 7.2
Molecular 37 85 122 (14.5) 15.3 4.2 (14.5) 12.4 2.4
Point of Care 116 29 145 9.8 (1.8) 7.2 9.8 (3.7) 6.8
Rapid Diagnostics * 296 244 540 n/m n/m n/m n/m n/m n/m
* Rapid Diagnostics reflects
sales from Alere, Inc., which
was acquired on Oct. 3, 2017.
Comparable operational growth
rates above exclude results
from the Rapid Diagnostics
business.
% Change vs. 12M16
------------------
Sales 12M17 Reported Comparable Operational
----------- -------- ----------------------
U.S. Int'l Total U.S. Int'l Total U.S. Int'l Total
---- ----- ----- ----- ----- ----- -----
Total * 1,817 3,799 5,616 26.5 12.5 16.7 5.9 5.4 5.5
----- ----- ----- ---- ---- ---- --- --- ---
Core Laboratory 921 3,142 4,063 9.4 4.6 5.7 9.4 4.9 5.9
Molecular 160 303 463 (12.8) 11.2 1.5 (12.8) 9.8 0.7
Point of Care 440 110 550 7.0 8.2 7.3 7.0 8.0 7.2
Rapid Diagnostics * 296 244 540 n/m n/m n/m n/m n/m n/m
* Rapid Diagnostics reflects
sales from Alere, Inc., which
was acquired on Oct. 3, 2017.
Comparable operational growth
rates above exclude results
from the Rapid Diagnostics
business.
n/m = Percent change is not
meaningful.
Worldwide Diagnostics sales increased 51.7 percent on a reported basis in the fourth quarter. On a comparable operational basis, sales increased 6.7 percent. Refer to tables titled "Non-GAAP Reconciliation of Comparable Historical Revenue" for a reconciliation of comparable historical revenue. Core Laboratory Diagnostics sales increased 9.4 percent on a reported basis in the fourth quarter, including a favorable 2.2 percent effect of foreign exchange, and increased 7.2 percent on an operational basis, reflecting continued above-market growth driven by share gains globally. Molecular Diagnostics sales increased 4.2 percent on a reported basis in the fourth quarter, including a favorable 1.8 percent effect of foreign exchange, and increased 2.4 percent on an operational basis. As expected, growth in infectious disease testing, Abbott's core area of focus in the molecular diagnostics market, was partially offset by a planned scale down in other testing areas, primarily in the U.S. Point of Care Diagnostics sales increased 7.2 percent on a reported basis in the fourth quarter, including a favorable 0.4 percent effect of foreign exchange, and increased 6.8 percent on an operational basis, led by continued adoption of Abbott's i-STAT® handheld system. Rapid Diagnostics sales of $540 million were led by infectious disease testing, including flu and strep testing. Established Pharmaceuticals
---------------------------
($ in millions)
% Change vs. 4Q16
-----------------
Sales 4Q17 Reported Comparable Operational
---------- -------- ----------------------
U.S. Int'l Total U.S. Int'l Total U.S. Int'l Total
---- ----- ----- ----- ----- ----- -----
Total -- 1,145 1,145 n/a 17.0 17.0 n/a 14.0 14.0
--- ----- ----- ---- ---- ---- ---- ---- ----
Key Emerging
Markets -- 894 894 n/a 15.0 15.0 n/a 12.5 12.5
Other -- 251 251 n/a 24.5 24.5 n/a 19.6 19.6
% Change vs. 12M16
------------------
Sales 12M17 Reported Comparable Operational
----------- -------- ----------------------
U.S. Int'l Total U.S. Int'l Total U.S. Int'l Total
---- ----- ----- ----- ----- ----- -----
Total -- 4,287 4,287 n/a 11.1 11.1 n/a 9.5 9.5
--- ----- ----- ---- ---- ---- ---- --- ---
Key Emerging
Markets -- 3,307 3,307 n/a 13.6 13.6 n/a 11.9 11.9
Other -- 980 980 n/a 3.4 3.4 n/a 2.2 2.2
Established Pharmaceuticals sales increased 17.0 percent on a reported basis in the fourth quarter, including a favorable 3.0 percent effect of foreign exchange, and increased 14.0 percent on an operational basis. Key Emerging Markets comprise several countries that represent the most attractive long-term growth opportunities for Abbott's branded generics product portfolio. Sales in these geographies increased 15.0 percent on a reported basis in the fourth quarter, including a favorable 2.5 percent effect of foreign exchange, and increased 12.5 percent on an operational basis. Operational sales growth was led by double-digit growth across several geographies, including India, China and Latin America. Other sales increased 19.6 percent on an operational basis primarily due to the favorable timing of sales in certain countries during the fourth quarter. Medical Devices
---------------
($ in millions)
% Change vs. 4Q16
-----------------
Sales 4Q17 Reported Comparable Operational
---------- -------- ----------------------
U.S. Int'l Total U.S. Int'l Total U.S. Int'l Total
---- ----- ----- ----- ----- ----- -----
Total 1,206 1,531 2,737 129.0 85.1 102.2 10.5 8.8 9.6
----- ----- ----- ----- ---- ----- ---- --- ---
Cardiovascular and Neuromodulation 1,114 1,210 2,324 263.4 192.2 222.5 10.9 3.5 6.9
Rhythm Management 247 282 529 n/m n/m n/m 5.8 (1.2) 2.0
Electrophysiology 163 218 381 n/m n/m n/m 16.4 15.8 16.1
Heart Failure 128 44 172 n/m n/m n/m 10.9 14.0 11.6
Vascular 289 445 734 9.5 22.7 17.2 (1.1) (1.9) (1.6)
Structural Heart 112 178 290 174.7 246.2 214.4 15.8 9.4 11.9
Neuromodulation 175 43 218 n/m n/m n/m 37.4 4.4 29.5
Diabetes Care 92 321 413 6.7 43.4 33.2 6.7 35.6 27.6
% Change vs. 12M16
------------------
Sales 12M17 Reported Comparable Operational
----------- -------- ----------------------
U.S. Int'l Total U.S. Int'l Total U.S. Int'l Total
---- ----- ----- ----- ----- ----- -----
Total 4,710 5,615 10,325 130.1 76.3 97.3 4.7 6.6 5.7
----- ----- ------ ----- ---- ---- --- --- ---
Cardiovascular and Neuromodulation 4,378 4,533 8,911 251.1 175.0 207.7 4.9 2.1 3.4
Rhythm Management 1,030 1,073 2,103 n/m n/m n/m (11.4) (4.6) (8.0)
Electrophysiology 609 773 1,382 n/m n/m n/m 11.9 12.0 12.0
Heart Failure 491 152 643 n/m n/m n/m 2.9 11.4 4.8
Vascular 1,180 1,712 2,892 9.2 18.0 14.2 (2.0) (1.9) (1.9)
Structural Heart 432 651 1,083 177.0 232.4 207.8 15.0 9.6 11.7
Neuromodulation 636 172 808 n/m n/m n/m 53.8 13.9 43.2
Diabetes Care 332 1,082 1,414 2.1 32.4 23.8 2.1 31.0 22.8
Worldwide Medical Devices sales increased 102.2 percent on a reported basis in the fourth quarter. On a comparable operational basis, sales increased 9.6 percent. Refer to tables titled "Non-GAAP Reconciliation of Comparable Historical Revenue" for a reconciliation of comparable historical revenue. In Cardiovascular and Neuromodulation, worldwide sales in the fourth quarter were led by double-digit growth in Electrophysiology, Heart Failure, Structural Heart and Neuromodulation. In Electrophysiology, during the fourth quarter, Abbott initiated the U.S. launch of its Confirm Rx Insertable Cardiac Monitor (ICM), the world's first and only smartphone-compatible ICM designed to help physicians remotely identify cardiac arrhythmias. Growth in Structural Heart was driven by MitraClip®, Abbott's market-leading device for the minimally-invasive treatment of mitral regurgitation. In Heart Failure, sales growth was led by market uptake of Abbott's HeartMate 3™ system, which received U.S. FDA approval in the third quarter of 2017. In Neuromodulation, strong double-digit growth was led by several recently launched products for the treatment of chronic pain and movement disorders. In the fourth quarter, in Rhythm Management, Abbott received U.S. FDA approval for MR-conditional labeling for its Quadra Assura and Quadra Assura MP cardiac resynchronization therapy defibrillator (CRT-D) devices and its Fortify Assura implantable cardioverter defibrillator (ICD). In Vascular, Abbott obtained CE Mark for its XIENCE Sierra drug-eluting coronary stent system, which enhances its competitive position in this category of the market. In Diabetes Care, worldwide sales increased 33.2 percent on a reported basis in the fourth quarter, including a favorable 5.6 percent effect of foreign exchange, and increased 27.6 percent on an operational basis. Strong double-digit international sales growth was led by FreeStyle Libre, Abbott's revolutionary CGM system. FreeStyle Libre is the only CGM system available that comes factory-calibrated and removes the need for routine fingersticks3 for people with diabetes. During the fourth quarter, Abbott initiated the U.S. launch of FreeStyle Libre, and in January 2018, Abbott announced that FreeStyle Libre is now available and approved for coverage by CMS. ABBOTT ISSUES FINANCIAL OUTLOOK FOR 2018 Abbott is issuing full-year 2018 guidance for diluted earnings per share from continuing operations under Generally Accepted Accounting Principles (GAAP) of $1.22 to $1.32. Abbott forecasts net specified items for the full year 2018 of approximately $1.58 per share. Specified items include intangible amortization expense, acquisition-related expenses, charges associated with cost reduction initiatives and other expenses. Excluding specified items, projected adjusted diluted earnings per share from continuing operations would be $2.80 to $2.90 for the full year 2018. Abbott is issuing first-quarter 2018 guidance for diluted earnings per share from continuing operations under GAAP of $0.16 to $0.18. Abbott forecasts specified items for the first quarter of $0.41 per share primarily related to intangible amortization expense, acquisition-related expenses, cost reduction initiatives and other expenses. Excluding specified items, projected adjusted diluted earnings per share from continuing operations would be $0.57 to $0.59. Abbott has stated its commitment to reduce its debt levels following the recent acquisitions of St. Jude Medical and Alere, Inc. For the full year 2017, Abbott generated operating cash flow in excess of $5.0 billion and free cash flow4 in excess of $4.0 billion. In January 2018, Abbott repaid $4.0 billion of debt and anticipates additional debt repayments throughout 2018. ABBOTT ANNOUNCES INCREASE IN QUARTERLY DIVIDEND On Dec. 15, 2017, the board of directors of Abbott increased the company's quarterly dividend to $0.280 per share from $0.265 per share. Abbott's cash dividend is payable Feb. 15, 2018, to shareholders of record at the close of business on Jan. 12, 2018. This marks the 376th consecutive quarterly dividend to be paid by Abbott. Abbott has increased its dividend payout for 46 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: Visit Abbott at www.abbott.com and connect with us on Twitter at @AbbottNews. Abbott will webcast its live fourth-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 later that day. -- Private Securities Litigation Reform Act of 1995 -- 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, 2016, 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. 1 The provisional estimate of the impact of U.S. tax reform recorded in the fourth quarter of 2017 is based on Abbott's initial analysis of the Tax Cuts and Jobs Act and may be adjusted in future periods due to, among other things, additional analysis performed by Abbott and additional guidance that may be issued by the U.S. Department of the Treasury. Abbott Laboratories and Subsidiaries
Condensed Consolidated Statement of Earnings
Fourth Quarter Ended December 31, 2017 and 2016
(in millions, except per share data)
(unaudited)
4Q17 4Q16 % Change
---- ---- --------
Net Sales $7,589 $5,333 42.3
Cost of products sold,
excluding amortization
expense 3,263 2,312 41.1
Amortization of intangible
assets 560 121 n/m
Research and development 613 343 78.9
Selling, general, and
administrative 2,462 1,609 52.9
Total Operating Cost and
Expenses 6,898 4,385 57.3
----- -----
Operating earnings 691 948 (27.0)
Interest expense, net 211 129 63.4
Net foreign exchange (gain)
loss -- (2) n/m
Other (income) expense, net (94) (54) 69.4
--- ---
Earnings from Continuing
Operations before taxes 574 875 (34.5)
Tax expense on Earnings from
Continuing Operations 1,438 110 n/m 1)
Earnings (Loss) from
Continuing Operations (864) 765 n/m
Earnings from Discontinued
Operations, net of taxes 36 33 8.4 2)
Gain on Sale of Discontinued
Operations, net of taxes -- -- --
--- ---
Net Earnings from
Discontinued Operations, net
of taxes 36 33 8.4
--- ---
Net Earnings (Loss) $(828) $798 n/m
===== ====
Earnings from Continuing
Operations, excluding
Specified Items, as described
below $1,303 $971 34.2 3)
====== ====
Diluted Earnings (Loss) per
Common Share from:
Continuing Operations $(0.50) $0.51 n/m
Discontinued Operations 0.02 0.02 --
Total $(0.48) $0.53 n/m
====== =====
Diluted Earnings per Common
Share from Continuing
Operations, excluding
Specified Items, as
described below $0.74 $0.65 13.8 3)
===== =====
Average Number of Common
Shares Outstanding
Plus Dilutive Common Stock
Options 1,746 1,483 4)
NOTES:
See tables below for an explanation of
certain non-GAAP financial information.
n/m = Percent change is not meaningful.
See footnotes below.
1) 2017 Tax expense on Earnings from
Continuing Operations includes net
expense of $1.46 billion for the
estimated impact of U.S. tax
reform. The provisional estimate
of the impact of U.S. tax reform
is based on Abbott's initial
analysis of the Tax Cuts and Jobs
Act and may be adjusted in future
periods due to, among other
things, additional analysis
performed by Abbott and additional
guidance that may be issued by the
U.S. Department of the Treasury.
2) 2017 and 2016 Earnings and Diluted
Earnings per Common Share from
Discontinued Operations primarily
reflect net favorable adjustments
to tax expense as a result of the
resolution of various tax
positions from previous years
related to discontinued
operations.
3) 2017 Earnings from Continuing
Operations, excluding Specified
Items, excludes net after-tax
charges of $2.167 billion, or
$1.24 per share, for the estimated
impact of U.S. tax reform,
intangible amortization expense
and expenses primarily associated
with acquisitions, restructuring
actions and other expenses.
2016 Earnings from Continuing
Operations, excluding Specified
Items, excludes net after-tax
charges of $206 million, or $0.14
per share, for intangible
amortization expense, expenses
primarily associated with
acquisitions, including bridge
facility fees and other debt
related costs, charges related to
cost reduction initiatives and
other expenses.
4) 2017 Average number of common
shares outstanding excludes
approximately 12.2 million shares
related to dilutive common stock
options, which would be
antidilutive as a result of the
loss in the quarter.
Abbott Laboratories and Subsidiaries
Condensed Consolidated Statement of Earnings
Year Ended December 31, 2017 and 2016
(in millions, except per share data)
(unaudited)
12M17 12M16 % Change
----- ----- --------
Net Sales $27,390 $20,853 31.3
Cost of products sold,
excluding amortization
expense 12,337 9,024 36.7
Amortization of intangible
assets 1,975 550 n/m
Research and development 2,235 1,422 57.2
Selling, general, and
administrative 9,117 6,672 36.6
Total Operating Cost and
Expenses 25,664 17,668 45.2
------ ------
Operating earnings 1,726 3,185 (45.8)
Interest expense, net 780 332 n/m
Net foreign exchange (gain)
loss (34) 495 n/m 1)
Other (income) expense, net (1,251) 945 n/m 2)
------ ---
Earnings from Continuing
Operations before taxes 2,231 1,413 57.8
Tax expense on Earnings from
Continuing Operations 1,878 350 n/m 3)
Earnings from Continuing
Operations 353 1,063 (66.8)
Earnings from Discontinued
Operations, net of taxes 124 321 (61.4)
Gain on Sale of Discontinued
Operations, net of taxes -- 16 n/m
--- ---
Net Earnings from
Discontinued Operations, net
of taxes 124 337 (63.3) 4)
--- ---
Net Earnings $477 $1,400 (65.9)
==== ======
Earnings from Continuing
Operations, excluding
Specified Items, as described
below $4,400 $3,281 34.1 5)
====== ======
Diluted Earnings per Common
Share from:
Continuing Operations $0.20 $0.71 (71.8)
Discontinued Operations 0.07 0.23 (69.6) 4)
Total $0.27 $0.94 (71.3)
===== =====
Diluted Earnings per Common
Share from Continuing
Operations, excluding
Specified Items, as
described below $2.50 $2.20 13.6 5)
===== =====
Average Number of Common
Shares Outstanding
Plus Dilutive Common Stock
Options 1,749 1,483
NOTES:
See tables below for an explanation of
certain non-GAAP financial information.
n/m = Percent change is not meaningful.
See footnotes below.
1) 2016 Net foreign exchange (gain)
loss includes a loss of $480
million related to the revaluation
of Abbott's net monetary assets in
Venezuela using the Dicom exchange
rate, which is the Venezuelan
government's official floating
exchange rate.
2) 2017 Other (income) expense, net
includes a pretax gain of $1.163
billion from the sale of the AMO
business. 2016 Other (income)
expense, net includes a charge of
$947 million related to an
adjustment of Abbott's holdings of
Mylan N.V. ordinary shares to
reflect the share price as of
Sept. 30, 2016.
3) 2017 Tax expense on Earnings from
Continuing Operations includes the
net expense of $1.46 billion for
the estimated impact of U.S. tax
reform, as well as the tax
associated with a $1.163 billion
pretax gain on the sale of the AMO
business. The provisional estimate
of the impact of U.S. tax reform
is based on Abbott's initial
analysis of the Tax Cuts and Jobs
Act and may be adjusted in future
periods due to, among other
things, additional analysis
performed by Abbott and additional
guidance that may be issued by the
U.S. Department of the Treasury.
2016 Tax expense on Earnings from
Continuing Operations includes the
impact of a net tax benefit of
approximately $225 million,
primarily as a result of the
resolution of various tax
positions from prior years,
partially offset by the
unfavorable impact of non-
deductible foreign exchange losses
related to Venezuela and an
adjustment to the equity
investment in Mylan and the
recognition of deferred taxes
associated with the sale of the
AMO business.
4) 2017 and 2016 Earnings, net of
taxes and Diluted Earnings per
Common Share from Discontinued
Operations, primarily relates to a
net tax benefit as a result of the
resolution of various tax
positions from prior years.
5) 2017 Earnings and Diluted Earnings
per Common Share from Continuing
Operations, excluding Specified
Items, excludes net after-tax
charges of $4.047 billion, or
$2.30 per share, for the estimated
impact of U.S. tax reform,
intangible amortization expense
and other expenses primarily
associated with acquisitions and
restructuring actions, partially
offset by a gain on the sale of
the AMO business.
2016 Earnings and Diluted Earnings
per Common Share from Continuing
Operations, excluding Specified
Items, excludes net after-tax
charges of $2.218 billion, or
$1.49 per share, for intangible
amortization expense, the foreign
exchange loss related to
Venezuela, an adjustment to the
equity investment in Mylan,
expenses associated with
acquisitions, including bridge
facility fees, other charges
related to cost reduction
initiatives and other expenses and
the recognition of deferred taxes
associated with the sale of AMO,
partially offset by the favorable
impact of a net tax benefit as a
result of the resolution of
various tax positions from prior
years.
NON-GAAP RECONCILIATION OF FINANCIAL INFORMATION FROM CONTINUING OPERATIONS Abbott Laboratories and Subsidiaries
Non-GAAP Reconciliation of Financial Information From Continuing Operations
Fourth Quarter Ended December 31, 2017 and 2016
(in millions, except per share data)
(unaudited)
4Q17
----
As Specified As % to
Reported Items Adjusted Sales
(GAAP)
-----
Intangible Amortization $560 $(560) --
Gross Margin 3,766 694 $4,460 58.8%
R&D 613 (90) 523 6.9%
SG&A 2,462 (266) 2,196 28.9%
Interest expense, net 211 (5) 206
Other (income) expense, net (94) 69 (25)
Earnings from Continuing
Operations before taxes 574 986 1,560
Tax expense on Earnings from
Continuing Operations 1,438 (1,181) 257
Earnings (Loss) from
Continuing Operations (864) 2,167 1,303
Diluted Earnings (Loss) per
Share from Continuing
Operations $(0.50) $1.24 $0.74
Specified items reflect intangible amortization expense of $560 million and other expenses of $426 million, primarily associated with acquisitions, restructuring actions and other expenses, and the estimated net impact of U.S. tax reform of $1.46 billion. See tables titled "Details of Specified Items" for additional details regarding specified items. 4Q16
----
As Specified As % to
Reported Items Adjusted Sales
(GAAP)
-----
Intangible
Amortization $121 $(121) --
Gross
Margin 2,900 161 $3,061 57.4%
R&D 343 (9) 334 6.3%
SG&A 1,609 (99) 1,510 28.3%
Interest
expense,
net 129 (101) 28
Net
foreign
exchange
(gain)
loss (2) 1 (1)
Other
(income)
expense,
net (54) 52 (2)
Earnings
from
Continuing
Operations
before
taxes 875 317 1,192
Tax
expense
on
Earnings
from
Continuing
Operations 110 111 221
Earnings
(Loss)
from
Continuing
Operations 765 206 971
Diluted
Earnings
(Loss)
per
Share
from
Continuing
Operations $0.51 $0.14 $0.65
Specified items reflect intangible amortization expense of $121 million and other expenses of $196 million, primarily associated with acquisitions, including bridge facility fees and other debt related costs, charges related to cost reduction initiatives and other expenses. See tables titled "Details of Specified Items" for additional details regarding specified items. Abbott Laboratories and Subsidiaries
Non-GAAP Reconciliation of Financial Information From Continuing Operations
Year Ended December 31, 2017 and 2016
(in millions, except per share data)
(unaudited)
12M17
-----
As Specified As % to
Reported Items Adjusted Sales
(GAAP)
-----
Intangible Amortization $1,975 $(1,975) --
Gross Margin 13,078 3,153 $16,231 59.3%
R&D 2,235 (236) 1,999 7.3%
SG&A 9,117 (861) 8,256 30.1%
Interest expense, net 780 (24) 756
Other (income) expense, net (1,251) 1,236 (15)
Earnings from Continuing
Operations before taxes 2,231 3,038 5,269
Tax expense on Earnings from
Continuing Operations 1,878 (1,009) 869
Earnings from Continuing
Operations 353 4,047 4,400
Diluted Earnings per Share
from Continuing Operations $0.20 $2.30 $2.50
Specified items reflect intangible amortization expense of $1.975 billion and other expenses of $2.226 billion, primarily associated with acquisitions, including approximately $907 million of inventory step-up amortization related to St. Jude Medical and Alere, Inc., charges related to restructuring actions and other expenses, partially offset by a gain of $1.163 billion from the sale of the AMO business. Tax expense includes the estimated net impact of U.S. tax reform of $1.46 billion. See tables titled "Details of Specified Items" for additional details regarding specified items. 12M16
-----
As Specified As % to
Reported Items Adjusted Sales
(GAAP)
-----
Intangible
Amortization $550 $(550) --
Gross
Margin 11,279 661 $11,940 57.3%
R&D 1,422 (77) 1,345 6.5%
SG&A 6,672 (249) 6,423 30.8%
Interest
expense,
net 332 (240) 92
Net
foreign
exchange
(gain)
loss 495 (480) 15
Other
(income)
expense,
net 945 (910) 35
Earnings
from
Continuing
Operations
before
taxes 1,413 2,617 4,030
Tax
expense
on
Earnings
from
Continuing
Operations 350 399 749
Earnings
from
Continuing
Operations 1,063 2,218 3,281
Diluted
Earnings
per
Share
from
Continuing
Operations $0.71 $1.49 $2.20
Specified items reflect intangible amortization expense of $550 million, an adjustment to the equity investment in Mylan of $947 million, the impact of the foreign exchange loss in Venezuela of $480 million, and other expenses of $640 million, primarily associated with acquisitions, including bridge facility fees, and charges related to cost reduction initiatives and other expenses and the recognition of approximately $70 million of deferred taxes associated with the sale of AMO, partially offset by a net tax benefit of approximately $225 million, primarily as a result of the resolution of various tax positions from prior years. See tables titled "Details of Specified Items" for additional details regarding specified items. Reconciliation of Tax Rate for Continuing Operations 4Q17
----
($ in millions) Pre-Tax Taxes on Tax
Income Earnings Rate
------ -------- ----
As reported (GAAP) $574 $1,438 250.7% 1)
Specified items 986 (1,181)
--- ------
Excluding specified items $1,560 $257 16.5%
4Q16
----
($ in millions) Pre-Tax Taxes on Tax
Income Earnings Rate
------ -------- ----
As reported (GAAP) $875 $110 12.7%
Specified items 317 111
--- ---
Excluding specified items $1,192 $221 18.6%
1) Reported tax
rate on a
GAAP basis
for the
fourth
quarter of
2017 includes
the estimated
net impact of
U.S. tax
reform of
$1.46 billion
and the
impact of
approximately
$30 million
in excess tax
benefits
associated
with share-
based
compensation.
A reconciliation of the full-year tax rates for continuing operations for 2017 and 2016 is shown below: 12M17
-----
($ in millions) Pre-Tax Taxes on Tax
Income Earnings Rate
------ -------- ----
As reported (GAAP) $2,231 $1,878 84.2% 2)
Specified items 3,038 (1,009)
----- ------
Excluding specified items $5,269 $869 16.5%
12M16
-----
($ in millions) Pre-Tax Taxes on Tax
Income Earnings Rate
------ -------- ----
As reported (GAAP) $1,413 $350 24.8%
Specified items 2,617 399
----- ---
Excluding specified items $4,030 $749 18.6%
2) Reported tax rate on a GAAP basis
for 2017 includes the estimated net
impact of U.S. tax reform of $1.46
billion, the impact of taxes
associated with a $1.163 billion
pre-tax gain on the sale of the
AMO business and the impact of
approximately $120 million in
excess tax benefits associated with
share-based compensation.
Abbott Laboratories and Subsidiaries
Non-GAAP Reconciliation of Comparable Historical Revenue
Fourth Quarter Ended December 31, 2017 and 2016
($ in millions) (unaudited)
4Q17 4Q16 % Change vs. 4Q16
---- ---- -----------------
Abbott Divested Comparable Abbott Acquired AMO Comparable Comparable
Reported Businesses Revenue Reported St. Jude Revenue
Businessa)
---------
Rapid Reported Reported Operationalb)
Diagnostics
-----------
Total Company 7,589 -- (540) 7,049 5,333 1,415 (323) 6,425 42.3 9.7 7.7
U.S. 2,676 -- (296) 2,380 1,655 696 (133) 2,218 61.7 7.2 7.2
Int'l 4,913 -- (244) 4,669 3,678 719 (190) 4,207 33.6 10.9 7.9
Total Diagnostics 1,906 -- (540) 1,366 1,256 -- -- 1,256 51.7 8.7 6.7
U.S. 692 -- (296) 396 375 -- -- 375 84.6 5.7 5.7
Int'l 1,214 -- (244) 970 881 -- -- 881 37.8 10.0 7.1
Rapid Diagnostics 540 -- (540) -- -- -- -- -- n/m n/m n/m
U.S. 296 -- (296) -- -- -- -- -- n/m n/m n/m
Int'l 244 -- (244) -- -- -- -- -- n/m n/m n/m
Total Medical Devices 2,737 -- -- 2,737 1,354 1,415 (323) 2,446 102.2 11.8 9.6
U.S. 1,206 -- -- 1,206 527 696 (133) 1,090 129.0 10.5 10.5
Int'l 1,531 -- -- 1,531 827 719 (190) 1,356 85.1 12.8 8.8
Cardiovascular and Neuromodulation 2,324 -- -- 2,324 721 1,415 -- 2,136 222.5 8.7 6.9
U.S. 1,114 -- -- 1,114 307 696 -- 1,003 263.4 10.9 10.9
Int'l 1,210 -- -- 1,210 414 719 -- 1,133 192.2 6.8 3.5
Rhythm Management 529 -- -- 529 -- 511 -- 511 n/m 3.7 2.0
U.S. 247 -- -- 247 -- 233 -- 233 n/m 5.8 5.8
Int'l 282 -- -- 282 -- 278 -- 278 n/m 1.9 (1.2)
Electrophysiology 381 -- -- 381 2 323 -- 325 n/m 16.8 16.1
U.S. 163 -- -- 163 2 137 -- 139 n/m 16.4 16.4
Int'l 218 -- -- 218 -- 186 -- 186 n/m 17.1 15.8
Heart Failure 172 -- -- 172 -- 152 -- 152 n/m 12.9 11.6
U.S. 128 -- -- 128 -- 116 -- 116 n/m 10.9 10.9
Int'l 44 -- -- 44 -- 36 -- 36 n/m 19.3 14.0
Vascular 734 -- -- 734 627 103 -- 730 17.2 0.6 (1.6)
U.S. 289 -- -- 289 264 27 -- 291 9.5 (1.1) (1.1)
Int'l 445 -- -- 445 363 76 -- 439 22.7 1.7 (1.9)
Structural Heart 290 -- -- 290 92 159 -- 251 214.4 14.8 11.9
U.S. 112 -- -- 112 41 56 -- 97 174.7 15.8 15.8
Int'l 178 -- -- 178 51 103 -- 154 246.2 14.1 9.4
Neuromodulation 218 -- -- 218 -- 167 -- 167 n/m 30.6 29.5
U.S. 175 -- -- 175 -- 127 -- 127 n/m 37.4 37.4
Int'l 43 -- -- 43 -- 40 -- 40 n/m 8.9 4.4
a) Reflects reported actuals for St.
Jude Medical, excluding results
from the vascular closure business,
as well as a reduction to St. Jude
Medical sales related to the
reclassification of fees paid to
group purchasing organizations from
the Selling, general, and
administrative line.
b) In order to compute results
excluding the impact of exchange
rates, current year U.S. dollar
sales are multiplied or divided, as
appropriate, by the current year
average foreign exchange rates and
then those amounts are multiplied
or divided, as appropriate, by the
prior year average foreign exchange
rates.
Abbott Laboratories and Subsidiaries
Non-GAAP Reconciliation of Comparable Historical Revenue
Year Ended December 31, 2017 and 2016
($ in millions) (unaudited)
12M17 12M16 % Change vs. 12M16
----- ----- ------------------
Abbott Divested Comparable Abbott Acquired AMO Comparable Comparable
Reported Businessesa) Revenue Reported St. Jude Revenue
Businessb)
---------
Rapid Reported Reported Operationalc)
Diagnostics
-----------
Total Company 27,390 (187) (540) 26,663 20,853 5,697 (1,195) 25,355 31.3 5.1 4.9
U.S. 9,673 (84) (296) 9,293 6,486 2,923 (475) 8,934 49.1 4.0 4.0
Int'l 17,717 (103) (244) 17,370 14,367 2,774 (720) 16,421 23.3 5.8 5.4
Total Diagnostics 5,616 -- (540) 5,076 4,813 -- -- 4,813 16.7 5.5 5.5
U.S. 1,817 -- (296) 1,521 1,437 -- -- 1,437 26.5 5.9 5.9
Int'l 3,799 -- (244) 3,555 3,376 -- -- 3,376 12.5 5.3 5.4
Rapid Diagnostics 540 -- (540) -- -- -- -- -- n/m n/m n/m
U.S. 296 -- (296) -- -- -- -- -- n/m n/m n/m
Int'l 244 -- (244) -- -- -- -- -- n/m n/m n/m
Total Medical Devices 10,325 (12) -- 10,313 5,233 5,697 (1,195) 9,735 97.3 5.9 5.7
U.S. 4,710 (6) -- 4,704 2,047 2,923 (475) 4,495 130.1 4.7 4.7
Int'l 5,615 (6) -- 5,609 3,186 2,774 (720) 5,240 76.3 7.0 6.6
Cardiovascular and Neuromodulation 8,911 (12) -- 8,899 2,896 5,697 -- 8,593 207.7 3.5 3.4
U.S. 4,378 (6) -- 4,372 1,247 2,923 -- 4,170 251.1 4.9 4.9
Int'l 4,533 (6) -- 4,527 1,649 2,774 -- 4,423 175.0 2.3 2.1
Rhythm Management 2,103 -- -- 2,103 -- 2,284 -- 2,284 n/m (8.0) (8.0)
U.S. 1,030 -- -- 1,030 -- 1,162 -- 1,162 n/m (11.4) (11.4)
Int'l 1,073 -- -- 1,073 -- 1,122 -- 1,122 n/m (4.5) (4.6)
Electrophysiology 1,382 -- -- 1,382 12 1,223 -- 1,235 n/m 11.8 12.0
U.S. 609 -- -- 609 12 532 -- 544 n/m 11.9 11.9
Int'l 773 -- -- 773 -- 691 -- 691 n/m 11.7 12.0
Heart Failure 643 -- -- 643 -- 613 -- 613 n/m 5.0 4.8
U.S. 491 -- -- 491 -- 477 -- 477 n/m 2.9 2.9
Int'l 152 -- -- 152 -- 136 -- 136 n/m 12.3 11.4
Vascular 2,892 (12) -- 2,880 2,532 402 -- 2,934 14.2 (1.7) (1.9)
U.S. 1,180 (6) -- 1,174 1,079 118 -- 1,197 9.2 (2.0) (2.0)
Int'l 1,712 (6) -- 1,706 1,453 284 -- 1,737 18.0 (1.6) (1.9)
Structural Heart 1,083 -- -- 1,083 352 611 -- 963 207.8 12.1 11.7
U.S. 432 -- -- 432 156 220 -- 376 177.0 15.0 15.0
Int'l 651 -- -- 651 196 391 -- 587 232.4 10.2 9.6
Neuromodulation 808 -- -- 808 -- 564 -- 564 n/m 43.4 43.2
U.S. 636 -- -- 636 -- 414 -- 414 n/m 53.8 53.8
Int'l 172 -- -- 172 -- 150 -- 150 n/m 14.7 13.9
a) Reflects sales related to the AMO
and St. Jude Medical vascular
closure businesses prior to
divesting in the first quarter
2017.
b) Reflects reported actuals for St.
Jude Medical, excluding results
from the vascular closure business,
as well as a reduction to St. Jude
Medical sales related to the
reclassification of fees paid to
group purchasing organizations from
the Selling, general, and
administrative line.
c) 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.
Abbott Laboratories and Subsidiaries
Details of Specified Items
Fourth Quarter Ended December 31, 2017
(in millions, except per share data)
(unaudited)
Acquisition or Restructuring Intangible Other (c) Total
Divestiture- and Cost Amortization Specifieds
related (a) Reduction
Initiatives (b)
--------------
Gross Margin $113 $21 $560 $ -- $694
R&D (35) (2) -- (53) (90)
SG&A (242) (24) -- -- (266)
Interest expense, net (5) -- -- -- (5)
Other (income) expense,
net 69 -- -- -- 69
--- --- --- --- ---
Earnings from
Continuing Operations
before taxes $326 $47 $560 $53 986
---- --- ---- ---
Tax expense on Earnings
from Continuing
Operations (d) (1,181)
------
Earnings (Loss) from
Continuing Operations $2,167
======
Diluted Earnings (Loss)
per Share from
Continuing Operations $1.24
=====
The table above provides additional details
regarding the specified items described on
tables titled "Non-GAAP Reconciliation of
Financial Information From Continuing
Operations".
a) Acquisition-related expenses
include bankers' fees and costs for
legal, accounting, tax, and other
services related to business
acquisitions, integration costs
which represent incremental costs
directly related to integrating the
acquired businesses and include
expenditures for consulting,
retention, severance, and the
integration of systems, processes
and business activities, fair value
adjustments to contingent
consideration related to a business
acquisition, and inventory step-up
amortization. Divestiture-related
expenses include incremental costs
to separate the divested businesses
as well as bankers' fees and costs
for legal, accounting, tax, and
other services related to the
divestitures. Divestiture-related
items also include any gains in the
period related to the sale of Mylan
N.V. ordinary shares.
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 expense primarily relates to
the impairment of an R&D asset.
d) Reflects net expense for the
estimated tax impact of the Tax
Cuts and Jobs Act, the net tax
benefit associated with the
specified items and excess tax
benefits associated with share-
based compensation.
Abbott Laboratories and Subsidiaries
Details of Specified Items
Fourth Quarter Ended December 31, 2016
(in millions, except per share data)
(unaudited)
Acquisition or Restructuring Venezuela Intangible Other (c) Total
Divestiture- and Cost Devaluation Amortization Specifieds
related (a) Reduction
Initiatives (b)
--------------
Gross Margin $11 $29 $ -- $121 $ -- $161
R&D (2) (7) -- -- -- (9)
SG&A (54) (28) -- -- (17) (99)
Interest expense, net (101) -- -- -- -- (101)
Net foreign exchange
(gain) loss -- -- 1 -- -- 1
Other (income) expense,
net 52 -- -- -- -- 52
--- --- --- --- --- ---
Earnings from
Continuing Operations
before taxes $116 $64 $(1) $121 $17 317
---- --- --- ---- ---
Tax expense on Earnings
from Continuing
Operations (d) 111
---
Earnings (Loss) from
Continuing Operations $206
====
Diluted Earnings (Loss)
per Share from
Continuing Operations $0.14
=====
The table above provides additional details
regarding the specified items described on
tables titled "Non-GAAP Reconciliation of
Financial Information From Continuing
Operations".
a) Acquisition-related expenses
include bankers' fees and costs
for legal, accounting, tax, and
other services related to business
acquisitions, integration costs
which represent incremental costs
directly related to integrating
the acquired businesses and
include expenditures for
consulting, retention, severance,
and the integration of systems,
processes and business activities,
fair value adjustments to
contingent consideration related
to a business acquisition,
inventory step-up amortization,
and gains on a previously held
investment for which the company
acquired a controlling interest.
The specified items in interest
expense include amortization
expense associated with
acquisition-related bridge
facility fees and net interest
expense associated with the debt
issued in November 2016 in advance
to fund the cash portion of the
acquisition of St. Jude Medical in
January 2017. Divestiture-related
expenses include incremental costs
to separate the divested
businesses as well as bankers'
fees and costs for legal,
accounting, tax, and other
services related to the
divestitures.
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. Any
gains related to the divestiture
of a facility as part of a
restructuring program are also
included in this category.
c) Other expense relates to other
unusual significant costs such as
a significant litigation
settlement.
d) Reflects the net tax benefit
associated with the specified
items and approximately $60
million of tax benefits related to
the recognition of deferred tax
assets associated with the sale of
AMO, which was pending at December
31, 2016, partially offset by
approximately $25 million
primarily as a result of the
resolution of various tax
positions from prior years.
Abbott Laboratories and Subsidiaries
Details of Specified Items
Year Ended December 31, 2017
(in millions, except per share data)
(unaudited)
Acquisition or Restructuring Intangible Other (c) Total
Divestiture- and Cost Amortization Specifieds
related (a) Reduction
Initiatives (b)
--------------
Gross Margin $983 $195 $1,975 $ -- $3,153
R&D (72) (105) -- (59) (236)
SG&A (812) (50) -- 1 (861)
Interest expense, net (24) -- -- -- (24)
Other (income) expense, net 1,285 (34) -- (15) 1,236
----- --- --- --- -----
Earnings from Continuing Operations before taxes $606 $384 $1,975 $73 3,038
---- ---- ------ ---
Tax expense on Earnings from Continuing Operations (d) (1,009)
------
Earnings from Continuing Operations $4,047
======
Diluted Earnings per Share from Continuing Operations $2.30
=====
The table above provides additional details
regarding the specified items described on
tables titled "Non-GAAP Reconciliation of
Financial Information From Continuing
Operations".
a) Acquisition-related expenses
include bankers' fees and costs for
legal, accounting, tax, and other
services related to business
acquisitions, integration costs
which represent incremental costs
directly related to integrating the
acquired businesses and include
expenditures for consulting,
retention, severance, and the
integration of systems, processes
and business activities, fair value
adjustments to contingent
consideration related to a business
acquisition, and inventory step-up
amortization. The specified items
in interest expense include
amortization expense associated
with acquisition-related bridge
facility fees. Divestiture-related
expenses include incremental costs
to separate the divested businesses
as well as bankers' fees and costs
for legal, accounting, tax, and
other services related to the
divestitures. Divestiture-related
items also include any gains in the
period related to the sale of Mylan
N.V. ordinary shares.
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. Any gains
related to the divestiture of a
facility as part of a restructuring
program are also included in this
category.
c) Other expense primarily relates to
impairments of a financial
instrument and an R&D asset as well
as the acquisition of an R&D asset.
d) Reflects net expense for the
estimated tax impact of the Tax
Cuts and Jobs Act, the net tax
benefit associated with the
specified items and excess tax
benefits associated with share-
based compensation.
Abbott Laboratories and Subsidiaries
Details of Specified Items
Year Ended December 31, 2016
(in millions, except per share data)
(unaudited)
Acquisition or Restructuring Mylan Equity Venezuela Intangible Other Total
Divestiture- and Cost Investment Devaluation Amortization (e) Specifieds
related (a) Reduction Adjustment (d)
Initiatives (b) (c)
-------------- ---
Gross Margin $24 $72 $ -- $15 $550 $ -- $661
R&D (9) (6) -- -- -- (62) (77)
SG&A (133) (89) -- (10) -- (17) (249)
Interest expense, net (240) -- -- -- -- -- (240)
Net foreign exchange
(gain) loss -- -- -- (480) -- -- (480)
Other (income) expense,
net 38 -- (947) (1) -- -- (910)
--- --- ---- --- --- --- ----
Earnings from
Continuing Operations
before taxes $368 $167 $947 $506 $550 $79 2,617
---- ---- ---- ---- ---- ---
Tax expense on Earnings
from Continuing
Operations (f) 399
---
Earnings from
Continuing Operations $2,218
======
Diluted Earnings per
Share from Continuing
Operations $1.49
=====
The table above provides additional details
regarding the specified items described on
tables titled "Non-GAAP Reconciliation of
Financial Information From Continuing
Operations".
a) Acquisition-related expenses
include bankers' fees and costs
for legal, accounting, tax, and
other services related to business
acquisitions, integration costs
which represent incremental costs
directly related to integrating
the acquired businesses and
include expenditures for
consulting, retention, severance,
and the integration of systems,
processes and business activities,
fair value adjustments to
contingent consideration related
to a business acquisition,
inventory step-up amortization,
and gains on a previously held
investment for which the company
acquired a controlling interest.
The specified items in interest
expense include amortization
expense associated with
acquisition-related bridge
facility fees and net interest
expense associated with the debt
issued in November 2016 in advance
to fund the cash portion of the
acquisition of St. Jude Medical in
January 2017. Divestiture-related
expenses include incremental costs
to separate the divested
businesses as well as bankers'
fees and costs for legal,
accounting, tax, and other
services related to the
divestitures.
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. Any
gains related to the divestiture
of a facility as part of a
restructuring program are also
included in this category.
c) Mylan equity investment adjustment
expense reflects the adjustment of
Abbott's holding of Mylan N.V.
ordinary shares due to a decline
in the fair value of the
securities which was considered by
Abbott to be other than temporary.
d) Venezuela devaluation expenses
include the foreign exchange loss
of $480 million related to the
revaluation of Abbott's net
monetary assets in Venezuela using
the Dicom exchange rate as well as
inventory and other asset
impairments in Venezuela related
to the move to the Dicom exchange
rate. The Dicom rate is the
Venezuelan government's official
floating exchange rate.
e) Other expense relates to other
unusual significant costs such as
a significant litigation
settlement and the impairment of
an R&D asset.
f) Reflects the net tax benefit
associated with the specified
items and a net tax benefit of
approximately $225 million
primarily as a result of the
resolution of various tax
positions from prior years,
partially offset by the
recognition of approximately $70
million of deferred taxes
associated with the sale of AMO,
which was pending at December 31,
2016.
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