Full Press Release Details
ABBOTT PARK, Ill., Jan. 23, 2019 /PRNewswire/ -- Abbott today announced financial results for the fourth quarter and full year ended Dec. 31, 2018 , and issued financial outlook for 2019.
"2018 was another outstanding year for Abbott," said Miles D. White , chairman and chief executive officer, Abbott. "We exceeded the organic sales growth range we set at the beginning of the year, achieved a number of significant advances in our pipeline, and significantly improved our balance sheet and strategic flexibility. We're very well-positioned heading into 2019."
FOURTH-QUARTER AND FULL-YEAR 2018 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.
For 2018, Organic sales growth:
Following are sales by business segment and commentary for the fourth quarter and full year 2018:
| Total Company | |||||||||||||||||
| ($ in millions) | |||||||||||||||||
| % Change vs. 4Q17 | |||||||||||||||||
| Sales 4Q18 | Reported | Organic | |||||||||||||||
| U.S. | Int'l | Total | U.S. | Int'l | Total | U.S. | Int'l | Total | |||||||||
| Total * | 2,755 | 5,010 | 7,765 | 3.0 | 2.0 | 2.3 | 4.3 | 7.6 | 6.4 | ||||||||
| Nutrition | 762 | 1,015 | 1,777 | (0.9) | (0.1) | (0.4) | 1.5 | 5.1 | 3.6 | ||||||||
| Diagnostics | 699 | 1,262 | 1,961 | 1.1 | 3.9 | 2.9 | 2.5 | 9.4 | 7.4 | ||||||||
| Established Pharmaceuticals | -- | 1,090 | 1,090 | n/a | (4.8) | (4.8) | n/a | 3.6 | 3.6 | ||||||||
| Medical Devices | 1,285 | 1,635 | 2,920 | 6.6 | 6.8 | 6.7 | 6.6 | 10.9 | 9.0 |
| % Change vs. 12M17 | |||||||||||||||||
| Sales 12M18 | Reported | Organic | |||||||||||||||
| U.S. | Int'l | Total | U.S. | Int'l | Total | U.S. | Int'l | Total | |||||||||
| Total * | 10,839 | 19,739 | 30,578 | 12.1 | 11.4 | 11.6 | 4.5 | 8.8 | 7.3 | ||||||||
| Nutrition | 3,075 | 4,154 | 7,229 | 1.5 | 6.7 | 4.4 | 2.1 | 7.6 | 5.2 | ||||||||
| Diagnostics | 2,717 | 4,778 | 7,495 | 49.6 | 25.8 | 33.5 | 3.1 | 8.3 | 6.7 | ||||||||
| Established Pharmaceuticals | -- | 4,422 | 4,422 | n/a | 3.2 | 3.2 | n/a | 7.0 | 7.0 | ||||||||
| Medical Devices | 5,011 | 6,359 | 11,370 | 6.4 | 13.2 | 10.1 | 6.5 | 11.3 | 9.1 |
| * Total YTD 2018 Abbott sales from continuing operations include Other Sales of $62 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. |
Fourth-quarter 2018 worldwide sales of $7.8 billion increased 2.3 percent on a reported basis. On an organic basis, worldwide sales increased 6.4 percent. For the full-year 2018, worldwide sales increased 11.6 percent on a reported basis and 7.3 percent on an organic basis. Refer to tables titled "Non-GAAP Reconciliation of Adjusted Historical Revenue" for a reconciliation of adjusted historical revenue.
| Nutrition | |||||||||||||||||
| ($ in millions) | |||||||||||||||||
| % Change vs. 4Q17 | |||||||||||||||||
| Sales 4Q18 | Reported | Organic | |||||||||||||||
| U.S. | Int'l | Total | U.S. | Int'l | Total | U.S. | Int'l | Total | |||||||||
| Total | 762 | 1,015 | 1,777 | (0.9) | (0.1) | (0.4) | 1.5 | 5.1 | 3.6 | ||||||||
| Pediatric | 467 | 546 | 1,013 | 3.7 | (0.8) | 1.2 | 3.7 | 3.7 | 3.7 | ||||||||
| Adult | 295 | 469 | 764 | (7.5) | 0.9 | (2.5) | (1.8) | 6.6 | 3.5 | ||||||||
| % Change vs. 12M17 | |||||||||||||||||
| Sales 12M18 | Reported | Organic | |||||||||||||||
| U.S. | Int'l | Total | U.S. | Int'l | Total | U.S. | Int'l | Total | |||||||||
| Total | 3,075 | 4,154 | 7,229 | 1.5 | 6.7 | 4.4 | 2.1 | 7.6 | 5.2 | ||||||||
| Pediatric | 1,843 | 2,254 | 4,097 | 3.7 | 6.7 | 5.3 | 3.7 | 7.2 | 5.6 | ||||||||
| Adult | 1,232 | 1,900 | 3,132 | (1.7) | 6.6 | 3.2 | (0.3) | 8.0 | 4.6 |
Worldwide Nutrition sales decreased 0.4 percent on a reported basis in the fourth quarter. On an organic basis, sales increased 3.6 percent. For the full-year 2018, worldwide sales increased 4.4 percent on a reported basis and 5.2 percent on an organic basis. Refer to tables titled "Non-GAAP Reconciliation of Adjusted Historical Revenue" for a reconciliation of adjusted historical revenue.
Worldwide Pediatric Nutrition sales increased 1.2 percent on a reported basis in the fourth quarter, including an unfavorable 2.5 percent effect of foreign exchange, and increased 3.7 percent on an organic basis. International pediatric sales decreased 0.8 percent on a reported basis, including an unfavorable 4.5 percent effect of foreign exchange, and increased 3.7 percent on an organic basis. Performance in the quarter was led by above-market growth in the U.S. and strong growth across several markets in Asia and Latin America , including China , Vietnam and Mexico .
Worldwide Adult Nutrition sales decreased 2.5 percent on a reported basis in the fourth quarter, and increased 3.5 percent on an organic basis. International adult sales increased 0.9 percent on a reported basis, including an unfavorable 5.7 percent effect of foreign exchange, and increased 6.6 percent on an organic basis. Worldwide sales performance was led by strong growth of 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. 4Q17 | |||||||||||||||||
| Sales 4Q18 | Reported | Organic | |||||||||||||||
| U.S. | Int'l | Total | U.S. | Int'l | Total | U.S. | Int'l | Total | |||||||||
| Total * | 699 | 1,262 | 1,961 | 1.1 | 3.9 | 2.9 | 2.5 | 9.4 | 7.4 | ||||||||
| Core Laboratory | 260 | 893 | 1,153 | 7.1 | 4.4 | 5.0 | 7.1 | 10.1 | 9.4 | ||||||||
| Molecular | 38 | 85 | 123 | 1.8 | 1.2 | 1.4 | 1.8 | 4.7 | 3.8 | ||||||||
| Point of Care | 108 | 29 | 137 | (6.7) | (0.6) | (5.5) | (6.7) | 1.1 | (5.1) | ||||||||
| Rapid Diagnostics * | 293 | 255 | 548 | (0.9) | 3.9 | 1.3 | n/a | n/a | n/a |
| * Rapid Diagnostics reflects sales from Alere Inc., which was acquired on Oct. 3, 2017. Organic growth rates above exclude results from the Rapid Diagnostics business. |
| n/a = Percent change is not applicable as organic results exclude Rapid Diagnostics in 2018. |
| % Change vs. 12M17 | |||||||||||||||||
| Sales 12M18 | Reported | Organic | |||||||||||||||
| U.S. | Int'l | Total | U.S. | Int'l | Total | U.S. | Int'l | Total | |||||||||
| Total * | 2,717 | 4,778 | 7,495 | 49.6 | 25.8 | 33.5 | 3.1 | 8.3 | 6.7 | ||||||||
| Core Laboratory | 985 | 3,401 | 4,386 | 7.0 | 8.3 | 8.0 | 7.0 | 8.3 | 8.0 | ||||||||
| Molecular | 152 | 332 | 484 | (4.8) | 9.7 | 4.7 | (4.8) | 9.1 | 4.3 | ||||||||
| Point of Care | 432 | 121 | 553 | (2.0) | 10.0 | 0.4 | (2.0) | 9.2 | 0.3 | ||||||||
| Rapid Diagnostics * | 1,148 | 924 | 2,072 | 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. Organic growth rates above exclude results from the Rapid Diagnostics business. |
| n/m = Percent change is not meaningful. |
Worldwide Diagnostics sales increased 2.9 percent on a reported basis in the fourth quarter. On an organic basis, sales increased 7.4 percent. For the full-year 2018, worldwide sales increased 33.5 percent on a reported basis and 6.7 percent on an organic basis. Refer to tables titled "Non-GAAP Reconciliation of Adjusted Historical Revenue" for a reconciliation of adjusted historical revenue.
Core Laboratory Diagnostics sales increased 5.0 percent on a reported basis in the fourth quarter, including an unfavorable 4.4 percent effect of foreign exchange, and increased 9.4 percent on an organic basis, reflecting above-market growth in the U.S. and internationally, where Abbott is seeing continued strong adoption of Alinity ™ , Abbott's family of innovative and highly differentiated diagnostic instruments.
Molecular Diagnostics sales increased 1.4 percent on a reported basis in the fourth quarter, including an unfavorable 2.4 percent effect of foreign exchange, and increased 3.8 percent on an organic basis. Worldwide sales were led by growth in infectious disease testing, Abbott's core area of focus in the molecular diagnostics market.
Point of Care Diagnostics sales decreased 5.5 percent on a reported basis in the fourth quarter, including an unfavorable 0.4 percent effect of foreign exchange, and decreased 5.1 percent on an organic basis.
Rapid Diagnostics worldwide sales of $548 million were led by infectious disease and cardiometabolic testing.
| Established Pharmaceuticals | |||||||||||||||||
| ($ in millions) | |||||||||||||||||
| % Change vs. 4Q17 | |||||||||||||||||
| Sales 4Q18 | Reported | Organic | |||||||||||||||
| U.S. | Int'l | Total | U.S. | Int'l | Total | U.S. | Int'l | Total | |||||||||
| Total | -- | 1,090 | 1,090 | n/a | (4.8) | (4.8) | n/a | 3.6 | 3.6 | ||||||||
| Key Emerging Markets | -- | 838 | 838 | n/a | (6.2) | (6.2) | n/a | 4.3 | 4.3 | ||||||||
| Other | -- | 252 | 252 | n/a | 0.2 | 0.2 | n/a | 1.3 | 1.3 | ||||||||
| % Change vs. 12M17 | |||||||||||||||||
| Sales 12M18 | Reported | Organic | |||||||||||||||
| U.S. | Int'l | Total | U.S. | Int'l | Total | U.S. | Int'l | Total | |||||||||
| Total | -- | 4,422 | 4,422 | n/a | 3.2 | 3.2 | n/a | 7.0 | 7.0 | ||||||||
| Key Emerging Markets | -- | 3,363 | 3,363 | n/a | 1.7 | 1.7 | n/a | 7.4 | 7.4 | ||||||||
| Other | -- | 1,059 | 1,059 | n/a | 8.1 | 8.1 | n/a | 5.8 | 5.8 |
Established Pharmaceuticals sales decreased 4.8 percent on a reported basis in the fourth quarter, including an unfavorable 8.4 percent effect of foreign exchange, and increased 3.6 percent on an organic basis. As expected, sales growth in the fourth quarter was negatively impacted by a comparison versus the fourth-quarter of 2017, when organic sales grew 14.0 percent.
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 6.2 percent on a reported basis in the fourth quarter, including an unfavorable 10.5 percent effect of foreign exchange, and increased 4.3 percent on an organic basis. For the full-year 2018, sales in key emerging markets increased 1.7 percent on a reported basis and 7.4 percent on an organic basis led by double-digit growth in India and China .
Other sales increased 0.2 percent on a reported basis in the fourth quarter and 1.3 percent on an organic basis. For the full-year 2018, Other sales increased 8.1 percent on a reported basis and 5.8 percent on an organic basis.
| Medical Devices | |||||||||||||||||
| ($ in millions) | |||||||||||||||||
| % Change vs. 4Q17 | |||||||||||||||||
| Sales 4Q18 | Reported | Organic | |||||||||||||||
| U.S. | Int'l | Total | U.S. | Int'l | Total | U.S. | Int'l | Total | |||||||||
| Total | 1,285 | 1,635 | 2,920 | 6.6 | 6.8 | 6.7 | 6.6 | 10.9 | 9.0 | ||||||||
| Cardiovascular and Neuromodulation | 1,150 | 1,240 | 2,390 | 3.3 | 2.4 | 2.8 | 3.3 | 6.3 | 4.8 | ||||||||
| Rhythm Management | 241 | 264 | 505 | (2.6) | (6.4) | (4.6) | (2.6) | (2.3) | (2.5) | ||||||||
| Electrophysiology | 200 | 243 | 443 | 23.6 | 11.6 | 16.7 | 23.6 | 15.0 | 18.7 | ||||||||
| Heart Failure | 125 | 53 | 178 | (2.8) | 20.9 | 3.2 | (2.8) | 24.3 | 4.0 | ||||||||
| Vascular | 272 | 448 | 720 | (5.3) | 0.4 | (1.8) | (5.3) | 4.1 | 0.4 | ||||||||
| Structural Heart | 135 | 191 | 326 | 19.6 | 7.9 | 12.4 | 19.6 | 12.4 | 15.2 | ||||||||
| Neuromodulation | 177 | 41 | 218 | 1.0 | (6.7) | (0.5) | 1.0 | (1.7) | 0.5 | ||||||||
| Diabetes Care | 135 | 395 | 530 | 46.4 | 23.2 | 28.3 | 46.4 | 28.4 | 32.4 | ||||||||
| % Change vs. 12M17 | |||||||||||||||||
| Sales 12M18 | Reported | Organic | |||||||||||||||
| U.S. | Int'l | Total | U.S. | Int'l | Total | U.S. | Int'l | Total | |||||||||
| Total | 5,011 | 6,359 | 11,370 | 6.4 | 13.2 | 10.1 | 6.5 | 11.3 | 9.1 | ||||||||
| Cardiovascular and Neuromodulation | 4,554 | 4,883 | 9,437 | 4.0 | 7.7 | 5.9 | 4.2 | 5.9 | 5.0 | ||||||||
| Rhythm Management | 1,019 | 1,072 | 2,091 | (1.1) | (0.1) | (0.6) | (1.1) | (1.9) | (1.5) | ||||||||
| Electrophysiology | 764 | 904 | 1,668 | 25.5 | 17.1 | 20.8 | 25.5 | 15.0 | 19.6 | ||||||||
| Heart Failure | 467 | 179 | 646 | (4.8) | 17.4 | 0.4 | (4.8) | 15.4 | - | ||||||||
| Vascular | 1,126 | 1,803 | 2,929 | (4.5) | 5.3 | 1.3 | (4.0) | 3.6 | 0.5 | ||||||||
| Structural Heart | 488 | 751 | 1,239 | 12.9 | 15.5 | 14.4 | 12.9 | 13.1 | 13.0 | ||||||||
| Neuromodulation | 690 | 174 | 864 | 8.3 | 1.3 | 6.8 | 8.3 | (0.3) | 6.5 | ||||||||
| Diabetes Care | 457 | 1,476 | 1,933 | 37.7 | 36.4 | 36.7 | 37.7 | 33.9 | 34.8 |
Worldwide Medical Devices sales increased 6.7 percent on a reported basis in the fourth quarter. On an organic basis, sales increased 9.0 percent. For the full-year 2018, worldwide sales increased 10.1 percent on a reported basis and 9.1 percent on an organic basis. Refer to tables titled "Non-GAAP Reconciliation of Adjusted Historical Revenue" for a reconciliation of adjusted historical revenue.
In Electrophysiology, growth was led by strong performance in cardiac mapping and ablation catheters. In January 2019 , Abbott announced U.S. FDA approval of its TactiCath Contact Force Ablation Catheter, Sensor Enabled, a new catheter designed to help physicians accurately and effectively treat atrial fibrillation.
Growth in Structural Heart was driven by several product areas across Abbott's broad portfolio, including AMPLATZER ™ PFO Occluder, a device designed to close a hole-like opening in the heart, and MitraClip ® , Abbott's market-leading device for the minimally invasive treatment of mitral regurgitation, a leaky heart valve.
In Diabetes Care, sales increased 28.3 percent on a reported basis and 32.4 percent on an organic basis in the fourth quarter, led by rapid market uptake of FreeStyle ® Libre, Abbott's revolutionary sensor-based continuous glucose monitoring system, which removes the need for routine fingersticks 3 for people with diabetes.
ABBOTT ISSUES GUIDANCE FOR 2019 Abbott is issuing full-year 2019 guidance for organic sales growth of 6.5 to 7.5 percent 2 , which excludes the impact of foreign exchange, and diluted earnings per share from continuing operations under Generally Accepted Accounting Principles (GAAP) of $1.80 to $1.90 . Abbott forecasts net specified items for the full year 2019 of $1.35 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 $3.15 to $3.25 for the full year 2019.
Abbott is issuing first-quarter 2019 guidance for diluted earnings per share from continuing operations under GAAP of $0.25 to $0.27 . Abbott forecasts specified items for the first quarter 2019 of $0.35 per share primarily related to intangible amortization, acquisition-related expenses, cost reduction initiatives and other expenses. Excluding specified items, projected adjusted diluted earnings per share from continuing operations would be $0.60 to $0.62 for the first quarter.
ABBOTT ANNOUNCES INCREASE IN QUARTERLY DIVIDEND On Dec. 14, 2018 , the board of directors of Abbott increased the company's quarterly dividend to $0.32 per share from $0.28 per share, an increase of 14.3 percent. Abbott's cash dividend is payable Feb. 15, 2019 , to shareholders of record at the close of business on Jan. 15, 2019 . This marks the 380 th consecutive quarterly dividend to be paid by Abbott.
Abbott has increased its dividend payout for 47 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 103,000 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 and @AbbottGlobal.
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 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 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, 2017 , 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 Full-year 2018 diluted EPS from continuing operations on a GAAP basis reflects 555 percent growth. |
| 2 Abbott has not provided the GAAP financial measure for organic sales growth on a forward-looking basis because the company is unable to predict the impact of foreign exchange due to the unpredictability of future changes in foreign exchange rates, which could significantly impact reported sales growth. |
| 3 Fingersticks are required for treatment decisions when you see Check Blood Glucose symbol, when symptoms do not match system readings, when you suspect readings may be inaccurate, or when you experience symptoms that may be due to high or low blood glucose. |
| Abbott Laboratories and Subsidiaries | ||||||
| Condensed Consolidated Statement of Earnings | ||||||
| Fourth Quarter Ended December 31, 2018 and 2017 | ||||||
| (in millions, except per share data) | ||||||
| (unaudited) | ||||||
| 4Q18 | 4Q17 | % Change | ||||
| Net Sales | $7,765 | $7,589 | 2.3 | |||
| Cost of products sold, excluding amortization expense | 3,191 | 3,282 | (2.8) | |||
| Amortization of intangible assets | 488 | 560 | (12.8) | |||
| Research and development | 562 | 619 | (9.3) | |||
| Selling, general, and administrative | 2,359 | 2,477 | (4.8) | |||
| Total Operating Cost and Expenses | 6,600 | 6,938 | (4.9) | |||
| Operating earnings | 1,165 | 651 | 79.0 | 1) | ||
| Interest expense, net | 152 | 211 | (28.1) | |||
| Net foreign exchange (gain) loss | 26 | -- | n/m | |||
| Debt extinguishment costs | 86 | -- | n/m | |||
| Other (income) expense, net | (46) | (134) | (65.9) | 1) | ||
| Earnings from Continuing Operations before taxes | 947 | 574 | 65.0 | |||
| Tax expense on Earnings from Continuing Operations | 292 | 1,438 | (79.7) | 2) | ||
| Earnings (Loss) from Continuing Operations | 655 | (864) | n/m | |||
| Earnings (Loss) from Discontinued Operations, net of taxes | (1) | 36 | n/m | |||
| Net Earnings (Loss) | $654 | ($828) | n/m | |||
| Earnings from Continuing Operations, excluding Specified Items, as described below | $1,444 | $1,303 | 10.8 | 3) | ||
| Diluted Earnings (Loss) per Common Share from: | ||||||
| Continuing Operations | $0.37 | ($0.50) | n/m | |||
| Discontinued Operations | -- | 0.02 | n/m | |||
| Total | $0.37 | ($0.48) | n/m | |||
| Diluted Earnings per Common Share from Continuing Operations, excluding Specified Items, as described below | $0.81 | $0.74 | 9.5 | 3) | ||
| Average Number of Common Shares Outstanding Plus Dilutive Common Stock Options | 1,774 | 1,746 |
| 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) | Effective January 1, 2018, Abbott adopted Accounting Standards Update 2017-07, Compensation – Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost , which resulted in a retrospective reclassification of approximately $40 million of net pension-related income from Operating earnings to Other (income) expense, net for the fourth quarter of 2017. |
| 2) | 2018 Tax expense on Earnings from Continuing Operations includes an additional $85 million of tax expense for the transition tax associated with the Tax Cuts and Jobs Act (TCJA). |
| 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 was based on Abbott's initial analysis of the TCJA. | |
| 3) | 2018 Net Earnings and Diluted Earnings per Common Share from Continuing Operations, excluding Specified Items, excludes net after-tax charges of $789 million, or $0.44 per share, for intangible amortization expense and other expenses primarily associated with acquisitions and restructuring actions, as well as additional transition tax related to the TCJA. |
| 2017 Net Earnings and Diluted Earnings per Common Share 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 other expenses primarily associated with acquisitions, restructuring actions and other expenses. |
| Abbott Laboratories and Subsidiaries | ||||||
| Condensed Consolidated Statement of Earnings | ||||||
| Year Ended December 31, 2018 and 2017 | ||||||
| (in millions, except per share data) | ||||||
| (unaudited) | ||||||
| 12M18 | 12M17 | % Change | ||||
| Net Sales | $30,578 | $27,390 | 11.6 | |||
| Cost of products sold, excluding amortization expense | 12,706 | 12,409 | 2.4 | |||
| Amortization of intangible assets | 2,178 | 1,975 | 10.3 | |||
| Research and development | 2,300 | 2,260 | 1.7 | |||
| Selling, general, and administrative | 9,744 | 9,182 | 6.1 | |||
| Total Operating Cost and Expenses | 26,928 | 25,826 | 4.3 | |||
| Operating earnings | 3,650 | 1,564 | n/m | 1) | ||
| Interest expense, net | 721 | 780 | (7.6) | |||
| Net foreign exchange (gain) loss | 28 | (34) | n/m | |||
| Debt extinguishment costs | 167 | -- | n/m | |||
| Other (income) expense, net | (139) | (1,413) | (90.2) | 1) 2) | ||
| Earnings from Continuing Operations before taxes | 2,873 | 2,231 | 28.8 | |||
| Tax expense on Earnings from Continuing Operations | 539 | 1,878 | (71.3) | 3) | ||
| Earnings from Continuing Operations | 2,334 | 353 | n/m | |||
| Earnings from Discontinued Operations, net of taxes | 34 | 124 | (72.6) | 4) | ||
| Net Earnings | $2,368 | $477 | n/m | |||
| Earnings from Continuing Operations, excluding Specified Items, as described below | $5,131 | $4,400 | 16.6 | 5) | ||
| Diluted Earnings per Common Share from: | ||||||
| Continuing Operations | $1.31 | $0.20 | n/m | |||
| Discontinued Operations | 0.02 | 0.07 | (71.4) | 4) | ||
| Total | $1.33 | $0.27 | n/m | |||
| Diluted Earnings per Common Share from Continuing Operations, excluding Specified Items, as described below | $2.88 | $2.50 | 15.2 | 5) | ||
| Average Number of Common Shares Outstanding Plus Dilutive Common Stock Options | 1,770 | 1,749 |
| 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) | Effective January 1, 2018, Abbott adopted Accounting Standards Update 2017-07, Compensation – Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost , which resulted in a retrospective reclassification of approximately $160 million of net pension-related income from Operating earnings to Other (income) expense, net for the full year of 2017. |
| 2) | 2017 Other (income) expense, net includes a pretax gain of $1.163 billion from the sale of the AMO business. |
| 3) | 2018 Tax expense on Earnings from Continuing Operations includes an additional $120 million of tax expense for the transition tax associated with the TCJA, as well as the impact of approximately $90 million in excess tax benefits associated with share-based compensation. |
| 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 was based on Abbott's initial analysis of the TCJA. | |
| 4) | 2018 and 2017 Earnings and Diluted Earnings per Common Share from Discontinued Operations, net of taxes primarily relates to a net tax benefit as a result of the resolution of various tax positions from prior years. |
| 5) | 2018 Net Earnings and Diluted Earnings per Common Share from Continuing Operations, excluding Specified Items, excludes net after-tax charges of $2.797 billion, or $1.57 per share, for intangible amortization expense and other expenses primarily associated with acquisitions and restructuring actions. |
| 2017 Net 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. |
| Abbott Laboratories and Subsidiaries | |||||||
| Non-GAAP Reconciliation of Financial Information From Continuing Operations | |||||||
| Fourth Quarter Ended December 31, 2018 and 2017 | |||||||
| (in millions, except per share data) | |||||||
| (unaudited) | |||||||
| 4Q18 | |||||||
| As Reported (GAAP) | Specified Items | As Adjusted | % to Sales | ||||
| Intangible Amortization | $488 | $(488) | -- | ||||
| Gross Margin | 4,086 | 520 | $4,606 | 59.3% | |||
| R&D | 562 | (2) | 560 | 7.2% | |||
| SG&A | 2,359 | (91) | 2,268 | 29.2% | |||
| Net foreign exchange (gain) loss | 26 | (28) | (2) | ||||
| Debt extinguishment costs | 86 | (86) | -- | ||||
| Other (income) expense, net | (46) | 13 | (33) | ||||
| Earnings from Continuing Operations before taxes | 947 | 714 | 1,661 | ||||
| Tax expense on Earnings from Continuing Operations | 292 | (75) | 217 | ||||
| Earnings from Continuing Operations | 655 | 789 | 1,444 | ||||
| Diluted Earnings per Share from Continuing Operations | $0.37 | $0.44 | $0.81 |
Specified items reflect intangible amortization expense of $488 million and other expenses of $226 million , primarily associated with acquisitions, restructuring actions and other expenses, as well as $85 million of additional transition tax related to the TCJA. See table titled "Details of Specified Items" for additional details regarding specified items.
| 4Q17 | |||||||
| As Reported (GAAP) | Specified Items | As Adjusted | % to Sales | ||||
| Intangible Amortization | $560 | $(560) | -- | ||||
| Gross Margin | 3,747 | 694 | $4,441 | 58.5% | |||
| R&D | 619 | (90) | 529 | 7.0% | |||
| SG&A | 2,477 | (266) | 2,211 | 29.1% | |||
| Interest expense, net | 211 | (5) | 206 | ||||
| Other (income) expense, net | (134) | 69 | (65) | ||||
| 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 table 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, 2018 and 2017 | |||||||
| (in millions, except per share data) | |||||||
| (unaudited) | |||||||
| 12M18 | |||||||
| As Reported (GAAP) | Specified Items | As Adjusted | % to Sales | ||||
| Intangible Amortization | $2,178 | $(2,178) | -- | ||||
| Gross Margin | 15,694 | 2,453 | $18,147 | 59.3% | |||
| R&D | 2,300 | (87) | 2,213 | 7.2% | |||
| SG&A | 9,744 | (365) | 9,379 | 30.7% | |||
| Interest expense, net | 721 | (2) | 719 | ||||
| Net foreign exchange (gain) loss | 28 | (29) | (1) | ||||
| Debt extinguishment costs | 167 | (167) | -- | ||||
| Other (income) expense, net | (139) | 3 | (136) | ||||
| Earnings from Continuing Operations before taxes | 2,873 | 3,100 | 5,973 | ||||
| Tax expense on Earnings from Continuing Operations | 539 | 303 | 842 | ||||
| Earnings from Continuing Operations | 2,334 | 2,797 | 5,131 | ||||
| Diluted Earnings per Share from Continuing Operations | $1.31 | $1.57 | $2.88 |
Specified items reflect intangible amortization expense of $2.178 billion and other expenses of $922 million , primarily associated with acquisitions, restructuring actions and other expenses. See table titled "Details of Specified Items" for additional details regarding specified items.
| 12M17 | |||||||
| As Reported (GAAP) | Specified Items | As Adjusted | % to Sales | ||||
| Intangible Amortization | $1,975 | $(1,975) | -- | ||||
| Gross Margin | 13,006 | 3,153 | $16,159 | 59.0% | |||
| R&D | 2,260 | (236) | 2,024 | 7.4% | |||
| SG&A | 9,182 | (861) | 8,321 | 30.4% | |||
| Interest expense, net | 780 | (24) | 756 | ||||
| Other (income) expense, net | (1,413) | 1,236 | (177) | ||||
| 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 $1.46 billion . See table titled "Details of Specified Items" for additional details regarding specified items.
A reconciliation of the fourth-quarter tax rates for continuing operations for 2018 and 2017 is shown below:
| 4Q18 | ||||||
| ($ in millions) | Pre-Tax Income | Taxes on Earnings | Tax Rate | |||
| As reported (GAAP) | $947 | $292 | 30.8% | 1) | ||
| Specified items | 714 | (75) | ||||
| Excluding specified items | $1,661 | $217 | 13.1% | |||
| 4Q17 | ||||||
| ($ in millions) | Pre-Tax Income | Taxes on Earnings | Tax Rate | |||
| As reported (GAAP) | $574 | $1,438 | 250.7% | 2) | ||
| Specified items | 986 | (1,181) | ||||
| Excluding specified items | $1,560 | $257 | 16.5% |
| 1) | Reported tax rate on a GAAP basis for the fourth quarter of 2018 includes the impact of an additional $85 million of tax expense for the transition tax associated with the TCJA. |
| 2) | 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 $30 million in excess tax benefits associated with share-based compensation. |
A reconciliation of the full-year tax rates for continuing operations for 2018 and 2017 is shown below:
| 12M18 | ||||||
| ($ in millions) | Pre-Tax Income | Taxes on Earnings | Tax Rate | |||
| As reported (GAAP) | $2,873 | $539 | 18.8% | 3) | ||
| Specified items | 3,100 | 303 | ||||
| Excluding specified items | $5,973 | $842 | 14.1% | |||
| 12M17 | ||||||
| ($ in millions) | Pre-Tax Income | Taxes on Earnings | Tax Rate | |||
| As reported (GAAP) | $2,231 | $1,878 | 84.2% | 4) | ||
| Specified items | 3,038 | (1,009) | ||||
| Excluding specified items | $5,269 | $869 | 16.5% |
| 3) | Reported tax rate on a GAAP basis for 2018 includes the impact of an additional $120 million of tax expense for the transition tax associated with the TCJA, as well as the impact of approximately $90 million in excess tax benefits associated with share-based compensation. |
| 4) | 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 pretax gain on the sale of the AMO business and the impact of approximately $120 million in excess tax benefits associated with share-based compensation. |
| Abbott Laboratories and Subsidiaries | |||||||||||||||||||
| Non-GAAP Reconciliation of Adjusted Historical Revenue | |||||||||||||||||||
| Fourth Quarter Ended December 31, 2018 and 2017 | |||||||||||||||||||
| ($ in millions) (unaudited) | |||||||||||||||||||
| 4Q18 | 4Q17 | % Change vs. 4Q17 | |||||||||||||||||
| Non-GAAP | |||||||||||||||||||
| Abbott Reported | Rapid Diagnostics | Adjusted Revenue | Abbott Reported | Discontinued Business a) | Rapid Diagnostics | Adjusted Revenue | Reported | Reported | Organic b) | ||||||||||
| Total Company | 7,765 | (548) | 7,217 | 7,589 | (18) | (540) | 7,031 | 2.3 | 2.7 | 6.4 | |||||||||
| U.S. | 2,755 | (293) | 2,462 | 2,676 | (18) | (296) | 2,362 | 3.0 | 4.3 | 4.3 | |||||||||
| Int'l | 5,010 | (255) | 4,755 | 4,913 | -- | (244) | 4,669 | 2.0 | 1.9 | 7.6 | |||||||||
| Total Nutrition | 1,777 | -- | 1,777 | 1,784 | (18) | -- | 1,766 | (0.4) | 0.6 | 3.6 | |||||||||
| U.S. | 762 | -- | 762 | 769 | (18) | -- | 751 | (0.9) | 1.5 | 1.5 | |||||||||
| Int'l | 1,015 | -- | 1,015 | 1,015 | -- | -- | 1,015 | (0.1) | (0.1) | 5.1 | |||||||||
| Adult | 764 | -- | 764 | 784 | (18) | -- | 766 | (2.5) | (0.2) | 3.5 | |||||||||
| U.S. | 295 | -- | 295 | 319 | (18) | -- | 301 | (7.5) | (1.8) | (1.8) | |||||||||
| Int'l | 469 | -- | 469 | 465 | -- | -- | 465 | 0.9 | 0.9 | 6.6 | |||||||||
| Total Diagnostics | 1,961 | (548) | 1,413 | 1,906 | -- | (540) | 1,366 | 2.9 | 3.5 | 7.4 | |||||||||
| U.S. | 699 | (293) | 406 | 692 | -- | (296) | 396 | 1.1 | 2.5 | 2.5 | |||||||||
| Int'l | 1,262 | (255) | 1,007 | 1,214 | -- | (244) | 970 | 3.9 | 3.9 | 9.4 | |||||||||
| Rapid Diagnostics | 548 | (548) | -- | 540 | -- | (540) | -- | 1.3 | n/a | n/a | |||||||||
| U.S. | 293 | (293) | -- | 296 | -- | (296) | -- | (0.9) | n/a | n/a | |||||||||
| Int'l | 255 | (255) | -- | 244 | -- | (244) | -- | 3.9 | n/a | n/a |
| a) Reflects sales related to a non-core product line within the U.S. Adult Nutrition business, which was discontinued during the third quarter 2018. |
| 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 Adjusted Historical Revenue | |||||||||||||||||||
| Year Ended December 31, 2018 and 2017 | |||||||||||||||||||
| ($ in millions) (unaudited) | |||||||||||||||||||
| 12M18 | 12M17 | % Change vs. 12M17 | |||||||||||||||||
| Divested or | Non-GAAP | ||||||||||||||||||
| Abbott Reported | Rapid Diagnostics | Adjusted Revenue | Abbott Reported | Discontinued Businesses a) | Rapid Diagnostics | Adjusted Revenue | Reported | Reported | Organic b) | ||||||||||
| Total Company | 30,578 | (2,072) | 28,506 | 27,390 | (205) | (540) | 26,645 | 11.6 | 7.0 | 7.3 | |||||||||
| U.S. | 10,839 | (1,148) | 9,691 | 9,673 | (102) | (296) | 9,275 | 12.1 | 4.5 | 4.5 | |||||||||
| Int'l | 19,739 | (924) | 18,815 | 17,717 | (103) | (244) | 17,370 | 11.4 | 8.3 | 8.8 | |||||||||
| Total Nutrition | 7,229 | -- | 7,229 | 6,925 | (18) | -- | 6,907 | 4.4 | 4.7 | 5.2 | |||||||||
| U.S. | 3,075 | -- | 3,075 | 3,031 | (18) | -- | 3,013 | 1.5 | 2.1 | 2.1 | |||||||||
| Int'l | 4,154 | -- | 4,154 | 3,894 | -- | -- | 3,894 | 6.7 | 6.7 | 7.6 | |||||||||
| Adult | 3,132 | -- | 3,132 | 3,036 | (18) | -- | 3,018 | 3.2 | 3.8 | 4.6 | |||||||||
| U.S. | 1,232 | -- | 1,232 | 1,254 | (18) | -- | 1,236 | (1.7) | (0.3) | (0.3) | |||||||||
| Int'l | 1,900 | -- | 1,900 | 1,782 | -- | -- | 1,782 | 6.6 | 6.6 | 8.0 | |||||||||
| Total Diagnostics | 7,495 | (2,072) | 5,423 | 5,616 | -- | (540) | 5,076 | 33.5 | 6.8 | 6.7 | |||||||||
| U.S. | 2,717 | (1,148) | 1,569 | 1,817 | -- | (296) | 1,521 | 49.6 | 3.1 | 3.1 | |||||||||
| Int'l | 4,778 | (924) | 3,854 | 3,799 | -- | (244) | 3,555 | 25.8 | 8.4 | 8.3 | |||||||||
| Rapid Diagnostics | 2,072 | (2,072) | -- | 540 | -- | (540) | -- | n/m | n/m | n/m | |||||||||
| U.S. | 1,148 | (1,148) | -- | 296 | -- | (296) | -- | n/m | n/m | n/m | |||||||||
| Int'l | 924 | (924) | -- | 244 | -- | (244) | -- | n/m | n/m | n/m | |||||||||
| Total Medical Devices | 11,370 | -- | 11,370 | 10,325 | (12) | -- | 10,313 | 10.1 | 10.2 | 9.1 | |||||||||
| U.S. | 5,011 | -- | 5,011 | 4,710 | (6) | -- | 4,704 | 6.4 | 6.5 | 6.5 | |||||||||
| Int'l | 6,359 | -- | 6,359 | 5,615 | (6) | -- | 5,609 | 13.2 | 13.4 | 11.3 | |||||||||
| Cardiovascular and Neuromodulation | 9,437 | -- | 9,437 | 8,911 | (12) | -- | 8,899 | 5.9 | 6.0 | 5.0 | |||||||||
| U.S. | 4,554 | -- | 4,554 | 4,378 | (6) | -- | 4,372 | 4.0 | 4.2 | 4.2 | |||||||||
| Int'l | 4,883 | -- | 4,883 | 4,533 | (6) | -- | 4,527 | 7.7 | 7.9 | 5.9 | |||||||||
| Vascular | 2,929 | -- | 2,929 | 2,892 | (12) | -- | 2,880 | 1.3 | 1.7 | 0.5 | |||||||||
| U.S. | 1,126 | -- | 1,126 | 1,180 | (6) | -- | 1,174 | (4.5) | (4.0) | (4.0) | |||||||||
| Int'l | 1,803 | -- | 1,803 | 1,712 | (6) | -- | 1,706 | 5.3 | 5.6 | 3.6 |
| a) Reflects sales related to the AMO and St. Jude Medical vascular closure businesses prior to divesting in the first quarter 2017, and fourth quarter sales related to a non-core product line within the U.S. Adult Nutrition business, which was discontinued during the third quarter 2018. |
| 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 | |||||||||
| Details of Specified Items | |||||||||
| Fourth Quarter Ended December 31, 2018 | |||||||||
| (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 | $ 21 | $ 7 | $ 488 | $ 4 | $ 520 | ||||
| R&D | (7) | 5 | -- | -- | (2) | ||||
| SG&A | (82) | (9) | -- | -- | (91) | ||||
| Net foreign exchange (gain) loss | -- | (28) | -- | -- | (28) | ||||
| Debt extinguishment costs | -- | -- | -- | (86) | (86) | ||||
| Other (income) expense, net | (1) | -- | -- | 14 | 13 | ||||
| Earnings from Continuing Operations before taxes | $ 111 | $ 39 | $ 488 | $ 76 | 714 | ||||
| Tax expense on Earnings from Continuing Operations (d) | (75) | ||||||||
| Earnings from Continuing Operations | $ 789 | ||||||||
| Diluted Earnings per Share from Continuing Operations | $ 0.44 |
| 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 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, and fair value adjustments to contingent consideration related to a business acquisition. |
| 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 includes costs associated with the early extinguishment of debt, partially offset by a gain on investments. |
| d) | Reflects the net tax benefit associated with the specified items and additional tax expense for the transition tax associated with the TCJA. |
| Abbott Laboratories and Subsidiaries | |||||||||
| Details of Specified Items | |||||||||
| Fourth Quarter Ended December 31, 2017 | |||||||||
| (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 | $ 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 from Continuing Operations | $ 2,167 | ||||||||
| Diluted Earnings 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 TCJA, 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, 2018 | |||||||||
| (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 | $ 123 | $ 106 | $ 2,178 | $ 46 | $ 2,453 | ||||
| R&D | (41) | 1 | -- | (47) | (87) | ||||
| SG&A | (346) | (19) | -- | -- | (365) | ||||
| Interest expense, net | -- | -- | -- | (2) | (2) | ||||
| Net foreign exchange (gain) loss | -- | (29) | -- | -- | (29) | ||||
| Debt extinguishment costs | -- | -- | -- | (167) | (167) | ||||
| Other (income) expense, net | (2) | -- | -- | 5 | 3 | ||||
| Earnings from Continuing Operations before taxes | $ 512 | $ 153 | $ 2,178 | $ 257 | 3,100 | ||||
| Tax expense on Earnings from Continuing Operations (d) | 303 | ||||||||
| Earnings from Continuing Operations | $ 2,797 | ||||||||
| Diluted Earnings per Share from Continuing Operations | $ 1.57 |
| 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 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. |
| 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 includes the cost associated with the early extinguishment of debt, costs related to the acquisition of R&D assets and charges related to the impairment of certain assets, partially offset by a gain on investments. |
| d) | Reflects the net tax benefit associated with the specified items, additional tax expense for the transition tax associated with the TCJA and excess tax benefits associated with share based compensation. |
| Abbott Laboratories and Subsidiaries | |||||||||
| Details of Specified Items | |||||||||
| Year Ended December 31, 2017 | |||||||||
| (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 | $ 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 TCJA, the net tax benefit associated with the specified items and excess tax benefits associated with share-based compensation. |