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

- October 21st, 2020

Abbott  today announced financial results for the third quarter ended Sept. 30, 2020 . Third-quarter worldwide sales of $8.9 billion increased 9.6 percent on a reported basis and 10.6 percent on an organic basis, which excludes the impact of foreign exchange. Reported diluted EPS from continuing operations under GAAP was $0.69 and adjusted diluted EPS from continuing operations, which excludes specified items, was …

Abbott (NYSE: ABT) today announced financial results for the third quarter ended Sept. 30, 2020 .

  • Third-quarter worldwide sales of $8.9 billion increased 9.6 percent on a reported basis and 10.6 percent on an organic basis, which excludes the impact of foreign exchange.
  • Reported diluted EPS from continuing operations under GAAP was $0.69 and adjusted diluted EPS from continuing operations, which excludes specified items, was $0.98 , reflecting 16.7 percent growth versus the prior year. 1
  • Abbott projects full-year 2020 diluted EPS from continuing operations on a GAAP basis of at least $2.35 and full-year adjusted diluted EPS from continuing operations of at least $3.55 .
  • In August, Abbott received FDA Emergency Use Authorization for its BinaxNOW COVID-19 Ag Card rapid test for the detection of COVID-19 infection. The test delivers results in just 15 minutes with no instrumentation required. Abbott is selling the test for $5 and offers a complementary mobile phone app, called NAVICA , that allows people who test negative to display their result.
  • During the quarter, Abbott launched FreeStyle Libre ® 2 and obtained CE Mark for FreeStyle Libre 3, which automatically delivers up-to-the-minute glucose readings, unsurpassed 14-day accuracy 2 and real-time glucose alarms in the world’s smallest and thinnest 3 wearable sensor at the same affordable price 4 as previous versions. Abbott also announced CE Mark for its Libre Sense Glucose Sport Biosensor, which helps athletes better understand the efficacy of their nutritional choices on training and athletic performance.
  • In September, Abbott obtained CE Mark for MitraClip ® G4, its next-generation MitraClip heart device, the leading minimally invasive mitral valve repair device in the world.

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

THIRD-QUARTER BUSINESS OVERVIEW
Note: Management believes that measuring sales growth rates on an organic basis is an appropriate way for investors to best understand the underlying performance of the business. Organic sales growth excludes the impact of foreign exchange.

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

Total Company
($ in millions)

% Change vs. 3Q19

Sales 3Q20

Reported

Organic

U.S.

Int’l

Total

U.S.

Int’l

Total

U.S.

Int’l

Total

Total *

3,329

5,524

8,853

17.4

5.4

9.6

17.4

7.0

10.6

Nutrition

818

1,106

1,924

3.7

1.9

2.6

3.7

4.4

4.1

Diagnostics

1,133

1,507

2,640

61.4

24.8

38.2

61.4

25.6

38.8

Established Pharmaceuticals

1,099

1,099

n/a

(9.3)

(9.3)

n/a

(3.3)

(3.3)

Medical Devices

1,363

1,807

3,170

2.2

4.4

3.4

2.2

2.9

2.6

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

% Change vs. 9M19

Sales 9M20

Reported

Organic

U.S.

Int’l

Total

U.S.

Int’l

Total

U.S.

Int’l

Total

Total *

8,823

15,084

23,907

4.6

(0.4)

1.3

4.6

2.4

3.2

Nutrition

2,438

3,273

5,711

5.0

1.7

3.1

5.0

4.6

4.8

Diagnostics

2,793

3,667

6,460

31.6

3.8

14.2

31.6

6.1

15.7

Established Pharmaceuticals

3,156

3,156

n/a

(4.7)

(4.7)

n/a

1.3

1.3

Medical Devices

3,562

4,968

8,530

(10.3)

(1.9)

(5.6)

(10.3)

(0.8)

(5.0)

* Total 9M 2020 Abbott sales from continuing operations include Other Sales of approximately $50 million.

n/a = Not Applicable.

Note: In order to compute results excluding the impact of exchange rates, current year U.S. dollar sales are multiplied or divided, as appropriate, by the current year average foreign exchange rates and then those amounts are multiplied or divided, as appropriate, by the prior year average foreign exchange rates.

Third-quarter 2020 worldwide sales of $8.9 billion increased 9.6 percent on a reported basis and 10.6 percent on an organic basis.

Nutrition
($ in millions)

% Change vs. 3Q19

Sales 3Q20

Reported

Organic

U.S.

Int’l

Total

U.S.

Int’l

Total

U.S.

Int’l

Total

Total

818

1,106

1,924

3.7

1.9

2.6

3.7

4.4

4.1

Pediatric

488

518

1,006

1.9

(8.3)

(3.7)

1.9

(6.2)

(2.5)

Adult

330

588

918

6.5

13.0

10.6

6.5

16.0

12.4

% Change vs. 9M19

Sales 9M20

Reported

Organic

U.S.

Int’l

Total

U.S.

Int’l

Total

U.S.

Int’l

Total

Total

2,438

3,273

5,711

5.0

1.7

3.1

5.0

4.6

4.8

Pediatric

1,490

1,629

3,119

5.9

(5.2)

(0.2)

5.9

(2.7)

1.2

Adult

948

1,644

2,592

3.7

9.5

7.3

3.7

13.0

9.5

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

Diagnostics
($ in millions)

% Change vs. 3Q19

Sales 3Q20

Reported

Organic

U.S.

Int’l

Total

U.S.

Int’l

Total

U.S.

Int’l

Total

Total

1,133

1,507

2,640

61.4

24.8

38.2

61.4

25.6

38.8

Core Laboratory

284

892

1,176

4.6

(1.5)

(0.1)

4.6

(0.3)

0.8

Molecular

220

238

458

536.1

211.9

313.1

536.1

212.7

313.6

Point of Care

96

35

131

(15.2)

10.6

(9.6)

(15.2)

9.8

(9.7)

Rapid Diagnostics

533

342

875

88.3

75.9

83.2

88.3

75.3

83.0

% Change vs. 9M19

Sales 9M20

Reported

Organic

U.S.

Int’l

Total

U.S.

Int’l

Total

U.S.

Int’l

Total

Total

2,793

3,667

6,460

31.6

3.8

14.2

31.6

6.1

15.7

Core Laboratory

840

2,312

3,152

5.9

(11.6)

(7.5)

5.9

(9.2)

(5.7)

Molecular

429

527

956

279.5

147.2

193.0

279.5

152.1

196.2

Point of Care

278

109

387

(17.1)

22.4

(8.8)

(17.1)

23.8

(8.5)

Rapid Diagnostics

1,246

719

1,965

41.5

16.4

31.1

41.5

18.3

31.9

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

Established Pharmaceuticals
($ in millions)

% Change vs. 3Q19

Sales 3Q20

Reported

Organic

U.S.

Int’l

Total

U.S.

Int’l

Total

U.S.

Int’l

Total

Total

1,099

1,099

n/a

(9.3)

(9.3)

n/a

(3.3)

(3.3)

Key Emerging Markets

799

799

n/a

(10.3)

(10.3)

n/a

(1.8)

(1.8)

Other

300

300

n/a

(6.3)

(6.3)

n/a

(7.7)

(7.7)

% Change vs. 9M19

Sales 9M20

Reported

Organic

U.S.

Int’l

Total

U.S.

Int’l

Total

U.S.

Int’l

Total

Total

3,156

3,156

n/a

(4.7)

(4.7)

n/a

1.3

1.3

Key Emerging Markets

2,376

2,376

n/a

(4.8)

(4.8)

n/a

3.2

3.2

Other

780

780

n/a

(4.4)

(4.4)

n/a

(4.3)

(4.3)

Established Pharmaceuticals sales decreased 9.3 percent on a reported basis in the third quarter and decreased 3.3 percent on an organic basis.

Key Emerging Markets include India , Brazil , Russia and China along with several additional emerging countries that represent the most attractive long-term growth opportunities for Abbott’s branded generics product portfolio. Sales in these geographies decreased 10.3 percent on a reported basis in the quarter and decreased 1.8 percent on an organic basis primarily due to market softness across several countries as a result of the spread of COVID-19.

Medical Devices
($ in millions)

% Change vs. 3Q19

Sales 3Q20

Reported

Organic

U.S.

Int’l

Total

U.S.

Int’l

Total

U.S.

Int’l

Total

Total

1,363

1,807

3,170

2.2

4.4

3.4

2.2

2.9

2.6

Rhythm Management

242

265

507

(8.7)

(2.7)

(5.7)

(8.7)

(4.1)

(6.4)

Electrophysiology

192

249

441

4.1

3.0

3.5

4.1

1.8

2.8

Heart Failure

144

46

190

5.7

(8.6)

1.8

5.7

(10.1)

1.4

Vascular

230

400

630

(8.3)

(10.4)

(9.7)

(8.3)

(11.2)

(10.2)

Structural Heart

159

194

353

1.0

1.9

1.5

1.0

0.4

Neuromodulation

170

36

206

2.8

(7.7)

0.8

2.8

(9.5)

0.4

Diabetes Care

226

617

843

29.6

25.9

26.9

29.6

23.6

25.2

Vascular Product Lines:

Coronary and Endovascular a

209

398

607

(8.5)

(10.1)

(9.6)

(8.5)

(10.9)

(10.1)

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

% Change vs. 9M19

Sales 9M20

Reported

Organic

U.S.

Int’l

Total

U.S.

Int’l

Total

U.S.

Int’l

Total

Total

3,562

4,968

8,530

(10.3)

(1.9)

(5.6)

(10.3)

(0.8)

(5.0)

Rhythm Management

655

727

1,382

(17.1)

(10.2)

(13.6)

(17.1)

(9.1)

(13.0)

Electrophysiology

476

652

1,128

(13.4)

(8.5)

(10.6)

(13.4)

(8.0)

(10.3)

Heart Failure

411

140

551

(4.1)

(1.9)

(3.5)

(4.1)

(1.0)

(3.3)

Vascular

628

1,108

1,736

(20.1)

(17.9)

(18.7)

(20.1)

(16.9)

(18.1)

Structural Heart

386

508

894

(13.4)

(12.2)

(12.7)

(13.4)

(11.5)

(12.3)

Neuromodulation

392

97

489

(19.3)

(21.6)

(19.7)

(19.3)

(20.2)

(19.5)

Diabetes Care

614

1,736

2,350

26.7

28.8

28.2

26.7

30.4

29.4

Vascular Product Lines:

Coronary and Endovascular a

575

1,101

1,676

(18.7)

(17.9)

(18.2)

(18.7)

(16.9)

(17.5)

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

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

In Diabetes Care, strong growth was led by FreeStyle Libre, which grew 37.9 percent on a reported basis and 35.6 percent on an organic basis. In September, Abbott obtained CE Mark for its FreeStyle Libre 3 system, which automatically delivers real-time, up-to-the-minute glucose readings, unsurpassed 14-day accuracy 2 and real-time glucose alarms in the world’s smallest and thinnest 3 wearable sensor at the same affordable price 4 as previous versions. Abbott also obtained CE Mark for its Libre Sense Glucose Sport Biosensor in Europe . Libre Sense is a consumer over-the-counter product that provides continuous glucose monitoring for athletes to better understand the efficacy of their nutrition choices on training and athletic performance.

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

ABBOTT DECLARES 387 TH CONSECUTIVE QUARTERLY DIVIDEND
On Sept. 17, 2020 , the board of directors of Abbott declared the company’s quarterly dividend of $0.36 per share. Abbott’s cash dividend is payable Nov. 16, 2020 , to shareholders of record at the close of business on Oct. 15, 2020 .

Abbott has increased its dividend payout for 48 consecutive years and is a member of the S&P 500 Dividend Aristocrats Index, which tracks companies that have annually increased their dividend for at least 25 consecutive years.

About Abbott:
Abbott is a global healthcare leader that helps people live more fully at all stages of life. Our portfolio of life-changing technologies spans the spectrum of healthcare, with leading businesses and products in diagnostics, medical devices, nutritionals and branded generic medicines. Our 107,000 colleagues serve people in more than 160 countries.

Connect with us at www.abbott.com , on LinkedIn at www.linkedin.com/company/abbott-/ , on Facebook at www.facebook.com/Abbott and on Twitter @AbbottNews.

Abbott will live webcast its third-quarter earnings conference call through its Investor Relations website at www.abbottinvestor.com at 8 a.m. Central time today. An archived edition of the webcast will be available later that day.

Private Securities Litigation Reform Act of 1995 —
A Caution Concerning Forward-Looking Statements

Some statements in this news release may be forward-looking statements for purposes of the Private Securities Litigation Reform Act of 1995. Abbott cautions that these forward-looking statements are subject to risks and uncertainties, including the impact of the COVID-19 pandemic on Abbott’s operations and financial results, that may cause actual results to differ materially from those indicated in the forward-looking statements. Economic, competitive, governmental, technological and other factors that may affect Abbott’s operations are discussed in Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended Dec. 31, 2019 and in Item 1A, “Risk Factors” in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 , and are incorporated herein by reference. Abbott undertakes no obligation to release publicly any revisions to forward-looking statements as a result of subsequent events or developments, except as required by law.

1

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

2

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

3

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

4

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

Abbott Laboratories and Subsidiaries

Condensed Consolidated Statement of Earnings

Third Quarter Ended September 30, 2020 and 2019

(in millions, except per share data)

(unaudited)

3Q20

3Q19

%
Change

Net Sales

$8,853

$8,076

9.6

Cost of products sold, excluding amortization expense

3,966

3,358

18.1

Amortization of intangible assets

510

484

5.3

Research and development

580

596

(2.8)

Selling, general, and administrative

2,302

2,440

(5.7)

Total Operating Cost and Expenses

7,358

6,878

7.0

Operating Earnings

1,495

1,198

24.8

Interest expense, net

127

143

(11.2)

Net foreign exchange (gain) loss

(7)

7

n/m

Other (income) expense, net

(46)

(55)

(16.4)

Earnings from Continuing Operations before taxes

1,421

1,103

28.9

Tax expense on Earnings from Continuing Operations

189

143

31.7

1)

Earnings from Continuing Operations

1,232

960

28.5

Earnings from Discontinued Operations, net of taxes

n/m

Net Earnings

$1,232

$960

28.5

Earnings from Continuing Operations, excluding

Specified Items, as described below

$1,760

$1,514

16.2

2)

Diluted Earnings per Common Share from:

Continuing Operations

$0.69

$0.53

30.2

Discontinued Operations

n/m

Total

$0.69

$0.53

30.2

Diluted Earnings per Common Share from Continuing

Operations, excluding Specified Items, as described below

$0.98

$0.84

16.7

2)

Average Number of Common Shares Outstanding

Plus Dilutive Common Stock Options

1,788

1,784

NOTES:

See tables titled “Non-GAAP Reconciliation of Financial Information From Continuing Operations” for an explanation of certain non-GAAP financial information.

n/m = Percent change is not meaningful.

See footnotes below.

1)

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

2)

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

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

Abbott Laboratories and Subsidiaries

Condensed Consolidated Statement of Earnings

Nine Months Ended September 30, 2020 and 2019

(in millions, except per share data)

(unaudited)

9M20

9M19

%
Change

Net Sales

$23,907

$23,590

1.3

Cost of products sold, excluding amortization expense

10,510

9,797

7.3

Amortization of intangible assets

1,624

1,453

11.8

Research and development

1,722

1,845

(6.7)

1)

Selling, general, and administrative

7,126

7,352

(3.1)

Total Operating Cost and Expenses

20,982

20,447

2.6

Operating Earnings

2,925

3,143

(6.9)

Interest expense, net

373

437

(14.8)

Net foreign exchange (gain) loss

(3)

9

n/m

Other (income) expense, net

(25)

(140)

(82.2)

Earnings from Continuing Operations before taxes

2,580

2,837

(9.0)

Tax expense on Earnings from Continuing Operations

267

199

34.1

2)

Earnings from Continuing Operations

2,313

2,638

(12.3)

Earnings from Discontinued Operations, net of taxes

20

n/m

Net Earnings

$2,333

$2,638

(11.5)

Earnings from Continuing Operations, excluding

Specified Items, as described below

$3,940

$4,105

(4.0)

3)

Diluted Earnings per Common Share from:

Continuing Operations

$1.29

$1.47

(12.2)

Discontinued Operations

0.01

n/m

Total

$1.30

$1.47

(11.6)

Diluted Earnings per Common Share from Continuing

Operations, excluding Specified Items, as described below

$2.20

$2.29

(3.9)

3)

Average Number of Common Shares Outstanding

Plus Dilutive Common Stock Options

1,785

1,781

NOTES:

See tables titled “Non-GAAP Reconciliation of Financial Information From Continuing Operations” for an explanation of certain non-GAAP financial information.

n/m = Percent change is not meaningful.

See footnotes below.

1)

In the first nine months of 2019, in conjunction with the acquisition of Cephea Valve Technologies, Inc., Abbott acquired an R&D asset valued at $102 million, which was immediately expensed.

2)

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

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

3)

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

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

Abbott Laboratories and Subsidiaries

Non-GAAP Reconciliation of Financial Information From Continuing Operations

Third Quarter Ended September 30, 2020 and 2019

(in millions, except per share data)

(unaudited)

3Q20

As
Reported
(GAAP)

Specified
Items

As
Adjusted

% to
Sales

Intangible Amortization

$            510

$     (510)

$          —

Gross Margin

4,377

705

5,082

57.4%

R&D

580

(21)

559

6.3%

SG&A

2,302

63

2,365

26.7%

Other (income) expense, net

(46)

(1)

(47)

Earnings from Continuing Operations before taxes

1,421

664

2,085

Tax expense on Earnings from Continuing Operations

189

136

325

Earnings from Continuing Operations

1,232

528

1,760

Diluted Earnings per Share from Continuing Operations

$0.69

$0.29

$0.98

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

3Q19

As
Reported
(GAAP)

Specified
Items

As
Adjusted

% to
Sales

Intangible Amortization

$            484

$      (484)

$          —

Gross Margin

4,234

546

4,780

59.2%

R&D

596

(32)

564

7.0%

SG&A

2,440

(87)

2,353

29.1%

Other (income) expense, net

(55)

(3)

(58)

Earnings from Continuing Operations before taxes

1,103

668

1,771

Tax expense on Earnings from Continuing Operations

143

114

257

Earnings from Continuing Operations

960

554

1,514

Diluted Earnings per Share from Continuing Operations

$0.53

$0.31

$0.84

Specified items reflect intangible amortization expense of $484 million and other expenses of $184 million, primarily associated with acquisitions, restructuring actions and other expenses. See 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

Nine Months Ended September 30, 2020 and 2019

(in millions, except per share data)

(unaudited)

9M20

As
Reported
(GAAP)

Specified
Items

As
Adjusted

% to
Sales

Intangible Amortization

$    1,624

$  (1,624)

$          —

Gross Margin

11,773

1,895

13,668

57.2%

R&D

1,722

(64)

1,658

6.9%

SG&A

7,126

(19)

7,107

29.7%

Other (income) expense, net

(25)

(111)

(136)

Earnings from Continuing Operations before taxes

2,580

2,089

4,669

Tax expense on Earnings from Continuing Operations

267

462

729

Earnings from Continuing Operations

2,313

1,627

3,940

Diluted Earnings per Share from Continuing Operations

$1.29

$0.91

$2.20

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

9M19

As
Reported
(GAAP)

Specified
Items

As
Adjusted

% to
Sales

Intangible Amortization

$          1,453

$   (1,453)

$          —

Gross Margin

12,340

1,595

13,935

59.1%

R&D

1,845

(159)

1,686

7.1%

SG&A

7,352

(178)

7,174

30.4%

Other (income) expense, net

(140)

(32)

(172)

Earnings from Continuing Operations before taxes

2,837

1,964

4,801

Tax expense on Earnings from Continuing Operations

199

497

696

Earnings from Continuing Operations

2,638

1,467

4,105

Diluted Earnings per Share from Continuing Operations

$1.47

$0.82

$2.29

Specified items reflect intangible amortization expense of $1.453 billion and other expenses of $511 million, primarily associated with acquisitions, restructuring actions and other expenses. See tables titled “Details of Specified Items” for additional details regarding specified items.

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

3Q20

($ in millions)

Pre-Tax
Income

Taxes on
Earnings

Tax
Rate

As reported (GAAP)

$1,421

$         189

13.3%

Specified items

664

136

Excluding specified items

$2,085

$325

15.6%

3Q19

($ in millions)

Pre-Tax
Income

Taxes on
Earnings

Tax
Rate

As reported (GAAP)

$1,103

$143

13.0%

Specified items

668

114

Excluding specified items

$1,771

$257

14.5%

1)

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

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

9M20

($ in millions)

Pre-Tax
Income

Taxes on
Earnings

Tax
Rate

As reported (GAAP)

$2,580

$267

10.4%

2)

Specified items

2,089

462

Excluding specified items

$4,669

$729

15.6%

9M19

($ in millions)

Pre-Tax
Income

Taxes on
Earnings

Tax
Rate

As reported (GAAP)

$2,837

$199

7.0%

3)

Specified items

1,964

497

Excluding specified items

$4,801

$696

14.5%

2)

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

3)

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

Abbott Laboratories and Subsidiaries

Details of Specified Items

Third Quarter Ended September 30, 2020

(in millions, except per share data)

(unaudited)

Acquisition or
Divestiture-
related (a)

Restructuring
and Cost
Reduction
Initiatives (b)

Intangible
Amortization

Other (c)

Total
Specifieds

Gross Margin

$               16

$              27

$           510

$      152

$       705

R&D

(1)

(1)

(19)

(21)

SG&A

(28)

(9)

100

63

Other (income) expense, net

(2)

1

(1)

Earnings from Continuing Operations before taxes

$               47

$              37

$           510

$        70

664

Tax expense on Earnings from Continuing Operations (d)

136

Earnings from Continuing Operations

$       528

Diluted Earnings per Share from Continuing Operations

$      0.29

The table above provides additional details regarding the specified items described on the tables titled “Non-GAAP Reconciliation of Financial Information From Continuing Operations.”

a)

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

b)

Restructuring and cost reduction initiative expenses include severance, outplacement, and other direct costs associated with specific restructuring plans and cost reduction initiatives. Restructuring and cost reduction plans consist of distinct initiatives to streamline operations including the consolidation and rationalization of business activities and facilities, workforce reductions, the transfer of product lines between manufacturing facilities, and the transfer of other business activities between sites.

c)

Other primarily relates to the impairment of an intangible asset and the costs to acquire R&D assets, partially offset by income from the settlement of litigation.

d)

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

Abbott Laboratories and Subsidiaries

Details of Specified Items

Third Quarter Ended September 30, 2019

(in millions, except per share data)

(unaudited)

Acquisition or
Divestiture-
related (a)

Restructuring
and Cost
Reduction
Initiatives (b)

Intangible
Amortization

Other (c)

Total
Specifieds

Gross Margin

$               32

$              30

$           484

$         —

$       546

R&D

(9)

(12)

(11)

(32)

SG&A

(27)

(43)

(17)

(87)

Other (income) expense, net

(3)

(3)

Earnings from Continuing Operations before taxes

$               68

$              85

$           484

$        31

668

Tax expense on Earnings from Continuing Operations (d)

114

Earnings from Continuing Operations

$       554

Diluted Earnings per Share from Continuing Operations

$      0.31

The table above provides additional details regarding the specified items described on the tables titled “Non-GAAP Reconciliation of Financial Information From Continuing Operations.”

a)

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

b)

Restructuring and cost reduction initiative expenses include severance, outplacement, inventory write-downs, asset impairments, accelerated depreciation, and other direct costs associated with specific restructuring plans and cost reduction initiatives. Restructuring and cost reduction plans consist of distinct initiatives to streamline operations including the consolidation and rationalization of business activities and facilities, workforce reductions, the transfer of product lines between manufacturing facilities, and the transfer of other business activities between sites.

c)

Other primarily relates to expenses related to certain litigation settlements and the acquisition of an R&D asset.

d)

Reflects the net tax benefit associated with the specified items and excess tax benefits associated with share-based compensation.

Abbott Laboratories and Subsidiaries

Details of Specified Items

Nine Months Ended September 30, 2020

(in millions, except per share data)

(unaudited)

Acquisition or
Divestiture-
related (a)

Restructuring
and Cost
Reduction
Initiatives (b)

Intangible
Amortization

Other (c)

Total
Specifieds

Gross Margin

$               61

$              57

$        1,624

$       153

$     1,895

R&D

(8)

(9)

(47)

(64)

SG&A

(83)

(36)

100

(19)

Other (income) expense, net

(3)

(108)

(111)

Earnings from Continuing Operations before taxes

$             155

$            102

$        1,624

$       208

2,089

Tax expense on Earnings from Continuing Operations (d)

462

Earnings from Continuing Operations

$     1,627

Diluted Earnings per Share from Continuing Operations

$      0.91

The table above provides additional details regarding the specified items described on the tables titled “Non-GAAP Reconciliation of Financial Information From Continuing Operations.”

a)

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

b)

Restructuring and cost reduction initiative expenses include severance, outplacement, and other direct costs associated with specific restructuring plans and cost reduction initiatives. Restructuring and cost reduction plans consist of distinct initiatives to streamline operations including the consolidation and rationalization of business activities and facilities, workforce reductions, the transfer of product lines between manufacturing facilities, and the transfer of other business activities between sites.

c)

Other primarily relates to impairment charges related to certain assets and the costs to acquire R&D assets, partially offset by income from the settlement of litigation.

d)

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

Abbott Laboratories and Subsidiaries

Details of Specified Items

Nine Months Ended September 30, 2019

(in millions, except per share data)

(unaudited)

Acquisition or
Divestiture-
related (a)

Restructuring
and Cost
Reduction
Initiatives (b)

Intangible
Amortization

Other (c)

Total
Specifieds

Gross Margin

$               69

$              73

$        1,453

$          —

$     1,595

R&D

(23)

(22)

(114)

(159)

SG&A

(114)

(47)

(17)

(178)

Other (income) expense, net

(10)

(22)

(32)

Earnings from Continuing Operations before taxes

$             216

$            142

$        1,453

$       153

1,964

Tax expense on Earnings from Continuing Operations (d)

497

Earnings from Continuing Operations

$     1,467

Diluted Earnings per Share from Continuing Operations

$      0.82

The table above provides additional details regarding the specified items described on the tables titled “Non-GAAP Reconciliation of Financial Information From Continuing Operations.”

a)

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

b)

Restructuring and cost reduction initiative expenses include severance, outplacement, inventory write-downs, asset impairments, accelerated depreciation, and other direct costs associated with specific restructuring plans and cost reduction initiatives. Restructuring and cost reduction plans consist of distinct initiatives to streamline operations including the consolidation and rationalization of business activities and facilities, workforce reductions, the transfer of product lines between manufacturing facilities, and the transfer of other business activities between sites.

c)

Other relates to the acquisition of an R&D asset, charges related to the impairment of certain assets, and expenses related to certain litigation settlements.

d)

Reflects the net tax benefit associated with the specified items, a reduction in the transition tax associated with the TCJA and excess tax benefits associated with share-based compensation.

Cision View original content: http://www.prnewswire.com/news-releases/abbott-reports-third-quarter-2020-results-achieves-strong-double-digit-earnings-growth-and-raises-guidance-301156820.html

SOURCE Abbott

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