Abbott Reports Double-Digit Sales and Ongoing Earnings Growth in Fourth Quarter; Issues Strong Ongoing Earnings Outlook for 2011 Abbott (NYSE: ABT) today announced financial results for the fourth quarter ended Dec. 31, 2010. Diluted earnings per share, excluding specified...

ABBOTT PARK, Ill., Jan. 26, 2011 /PRNewswire/ -- Abbott (NYSE: ABT ) today announced financial results for the fourth quarter ended Dec. 31, 2010 .

"Despite a very challenging environment, 2010 was another productive year for Abbott, resulting in strong financial performance," said Miles D. White , chairman and chief executive officer, Abbott. "We also took decisive long-term strategic actions to expand our emerging markets presence and late-stage pipeline to better position Abbott for sustainable long-term growth. We anticipate delivering another year of double-digit ongoing earnings-per-share growth in 2011."

Business Highlights

Abbott issues earnings-per-share outlook for 2011

Abbott is issuing ongoing earnings-per-share guidance for the full-year 2011 of $4.54 to $4.64 . The midpoint of this guidance range reflects growth of 10 percent over 2010. Abbott's 2011 outlook reflects the previously outlined incremental impact of costs associated with U.S. Healthcare Reform, as well as the impact of European austerity measures.

Abbott forecasts specified items for the full-year 2011 of approximately $0.78 per share, primarily associated with acquisition integration and cost reduction initiatives, including restructuring actions announced today to streamline commercial and manufacturing operations in Abbott's U.S. pharmaceutical business (see Q&A 3), and in-process R&D related to the Reata collaboration. Including these specified items, projected earnings per share under Generally Accepted Accounting Principles (GAAP) would be $3.76 to $3.86 for the full-year 2011.

Abbott declares quarterly dividend

On Dec. 10, 2010 , the board of directors of Abbott declared the company's quarterly common dividend of 44 cents per share, an increase of 10 percent over the prior year. The cash dividend is payable Feb. 15, 2011 , to shareholders of record at the close of business on Jan. 14, 2011 . This marks the 348th consecutive dividend paid by Abbott since 1924.

Abbott is a global, broad-based health care company devoted to the discovery, development, manufacture and marketing of pharmaceuticals and medical products, including nutritionals, devices and diagnostics. The company employs nearly 90,000 people and markets its products in more than 130 countries.

Abbott's news releases and other information are available on the company's Web site at www.abbott.com . Abbott will webcast its live fourth-quarter earnings conference call through its Investor Relations Web site at www.abbottinvestor.com at 8 a.m. Central time today. An archived edition of the call will be available after 11 a.m. Central time .

— Private Securities Litigation Reform Act of 1995 —

A Caution Concerning Forward-Looking Statements

Some statements in this news release may be forward-looking statements for purposes of the Private Securities Litigation Reform Act of 1995. Abbott cautions that these forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those indicated in the forward-looking statements. Economic, competitive, governmental, technological and other factors that may affect Abbott's operations are discussed in Item 1A, "Risk Factors," to our Annual Report on Securities and Exchange Commission Form 10-K for the year ended Dec. 31, 2009, in Item 1A, "Risk Factors," to our quarterly reports on Securities and Exchange Commission Form 10-Q for the quarters ended March 31, 2010 and September 30, 2010 , 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.

Questions & Answers

Q1) What drove the strong sales growth in the quarter?

A1) Worldwide Pharmaceutical sales increased 22.5 percent, including an unfavorable 0.9 percent effect of exchange rates, driven by strong international pharmaceutical sales growth of approximately 30 percent. Sales in the quarter reflected the contribution from the Solvay Pharmaceuticals and Piramal Healthcare Solutions acquisitions, which closed in February 2010 and September 2010 , respectively.

U.S. growth of HUMIRA was 13.2 percent. International operational sales growth for HUMIRA was 17.4 percent, which excludes an unfavorable 4.5 percent effect of exchange rates. Global lipid franchise sales growth was 19 percent, including the international TriCor sales contribution from the Solvay acquisition. U.S. Niaspan sales growth of 12.7 percent exceeded the growth rate of the overall cholesterol market.

Double-digit growth in Worldwide Vascular sales was driven by international vascular sales growth of approximately 37 percent. Abbott holds the number-one global position in metallic stents, guidewires, as well as drug-eluting stents with XIENCE V and XIENCE PRIME. Globally, Abbott's drug-eluting stent franchise continues to perform well, including strong international performance in Europe and Japan .

Worldwide Nutritional products sales growth was flat, including a favorable 1.3 percent impact from exchange. Growth in the United States during the quarter was negatively impacted by the infant nutrition recall that was announced in September. Production resumed in October. Inventory is near normal operating levels, and we are recapturing market share.

Growth in Worldwide Diagnostics was driven by high-single-digit growth in U.S. diagnostics sales, with continued double-digit growth in Abbott's Molecular and Point of Care diagnostics businesses.

Q2) What drove the strong increase in the fourth-quarter gross margin ratio?

A2) The gross margin ratio before and after specified items is shown below (dollars in millions):

The adjusted gross margin ratio of 60.6 percent increased 230 basis points from the prior year when the adjusted gross margin ratio was 58.3 percent. This increase was driven by strong performance across several businesses, including vascular, pharmaceuticals, diabetes and diagnostics, as well as a favorable impact from foreign exchange rates.

Q3) What is Abbott doing to further reduce costs and improve profitability?

A3) In response to changes in the healthcare industry, including U.S. Health Care Reform and the challenging regulatory environment, today Abbott announced a restructuring in its U.S. pharmaceutical business to streamline commercial and manufacturing operations, improve efficiencies and reduce costs.

Abbott forecasts total specified items associated with this cost reduction initiative over the next several years of approximately $295 million , which includes transfer of product manufacturing to other facilities. These charges include employee-related costs of approximately $135 million , accelerated depreciation of approximately $65 million , and other related exit costs of approximately $95 million mainly related to product transfers. Non-cash charges included in the total will be approximately $65 million , reflecting primarily accelerated depreciation.

Specified items related to this initiative of approximately $165 million are forecast to occur in 2011, with roughly $140 million projected in the first quarter.

Q4) What drove SG&A and R&D investment in the quarter?

A4) In the fourth quarter, both SG&A and R&D investment increased strong double-digits, reflecting Abbott's continued investment in programs to drive future growth, as well as increases associated with the addition of Solvay Pharmaceuticals. Ongoing R&D expense as a percentage of sales was nearly 10 percent, reflecting continued investment in Abbott's broad-based pipeline, including programs in vascular devices, immunology, neuroscience, oncology and HCV.

Q5) What was the tax rate for the fourth-quarter 2010?

A5) The ongoing tax rate this quarter was 16.4 percent, in line with Abbott's previous forecast, and reconciled below:

Q6) How did specified items affect reported results?

A6) Specified items impacted fourth-quarter results as follows:

Restructuring/integration (acquisitions/cost reductions) is primarily associated with acquisition closing, restructuring, and integration costs for the Solvay Pharmaceuticals and Piramal Healthcare Solutions acquisitions. This item also includes cost reduction initiatives to improve efficiencies, primarily related to continuing efforts in the vascular and core laboratory diagnostic businesses.

Acquired in-process research and development is related to the agreement with Reata to develop and commercialize bardoxolone methyl outside the United States , excluding certain Asian markets.

The impact of specified items by Consolidated Statement of Earnings line item is as follows (dollars in millions):

Q7) What are the key areas of focus in Abbott's broad-based pipeline?

A7) Across its businesses, Abbott has more than 350 clinical trials underway and expects to deliver more than 75 new products or indications over the next five years. In 2010, we added a total of four new molecular entities that are in late-stage development, and expect to have nearly 20 new molecular entities and indications in Phase 2 or 3 development by the end of 2011. We also expect numerous new trial starts and new data presentations throughout the year. Following are select highlights from breakthrough research across both pharmaceuticals and medical products pipelines: