Abbott Reports Fourth-Quarter 2014 Results

ABBOTT PARK, Ill., Jan. 29, 2015 /PRNewswire/ -- Abbott today announced financial results for the fourth quarter ended Dec. 31, 2014.

• Diluted EPS, excluding specified items, was $0.71 in the fourth quarter and $2.28 for the full year, above Abbott's previous guidance range and reflecting 13.4 percent growth. This includes results from both continuing and discontinued operations. Reported diluted EPS under GAAP was $0.59 in the fourth quarter and $1.49 for the full year. See page 2 for additional detail regarding financial results from discontinued operations.  
• Fourth-quarter worldwide sales of $5.4 billion from continuing operations increased 10.2 percent on an operational basis, including double-digit growth in emerging markets. Worldwide sales increased 5.6 percent on a reported basis, including an unfavorable 4.6 percent effect of foreign exchange.
• For full-year 2014, Abbott expanded its adjusted operating margin ratio from continuing operations by 200 basis points over the prior year, primarily driven by continued improvements in Diagnostics, Nutrition and Vascular. The operating margin ratio from continuing operations under GAAP improved by 190 basis points over prior year.
• Abbott issues full-year 2015 EPS guidance for continuing operations, excluding specified items, of $2.10 to $2.20. Projected full-year 2015 EPS for continuing operations under GAAP is $1.33 to $1.43.
• In December, Abbott completed its acquisitions of Topera, Inc., a medical device company focused on developing innovative electrophysiology technologies, and Veropharm, a leading Russian pharmaceutical company.  
• In Diagnostics, Abbott received European approval for its IRIDICA infectious disease testing platform and U.S. FDA clearance for a heart failure test on its ARCHITECT platform. In Medical Devices in the U.S., Abbott received FDA approval for its TECNIS^® Multifocal Low Add intraocular lens (IOL) and launched its new XIENCE Alpine^™ drug-eluting stent system, designed for complex interventions.

"We ended 2014 with good momentum, well positioned for a step-up in operational sales growth in 2015," said Miles D. White, chairman and chief executive officer, Abbott. "While we'll need to manage through currency headwinds again in 2015, we're targeting another year of top-tier earnings growth."  

Fourth-Quarter Business Overview

Note regarding presentation of financial results: Financial results from Abbott's developed markets branded generics pharmaceuticals and Animal Health businesses have been excluded from continuing operations and are reported as discontinued operations in the Earnings and EPS lines of the Consolidated Statement of Earnings due to the pending sale of these businesses to Mylan and Zoetis, respectively. Prior year and year-to-date results also have been adjusted to report the developed markets branded generics pharmaceuticals business and Animal Health business as discontinued operations. As a result, Sales and Consolidated Statement of Earnings reflect the remaining business at Abbott, reported as continuing operations. Animal Health sales were previously reported in Other Sales.

Following are sales by business segment from continuing operations and commentary for the fourth quarter and the full year:

Total Company
($ in millions)

 

Fourth-quarter 2014 worldwide sales from continuing operations of $5.4 billion increased 10.2 percent on an operational basis. Sales increased 5.6 percent on a reported basis, including an unfavorable 4.6 percent effect of foreign exchange.

Excluding the impact from CFR Pharmaceuticals and Veropharm, which Abbott acquired on Sept. 26, 2014, and Dec. 11, 2014, respectively, worldwide sales from continuing operations increased 6.5 percent on an operational basis in the quarter, driven by strong performance in Established Pharmaceuticals, Nutrition and Diagnostics.

International sales from continuing operations increased 15.6 percent on an operational basis and 8.9 percent on a reported basis in the fourth quarter.

Emerging market sales from continuing operations increased 22.8 percent on an operational basis and 17.2 percent on a reported basis in the fourth quarter. Excluding the impact from CFR Pharmaceuticals and Veropharm, emerging market sales from continuing operations increased 14.5 percent on an operational basis, driven by double-digit growth in Nutrition and Diagnostics.

Nutrition
($ in millions)           

 

 

Worldwide Nutrition sales increased 8.9 percent in the fourth quarter on an operational basis and 6.0 percent on a reported basis, including an unfavorable 2.9 percent effect of foreign exchange. Abbott Nutrition continued to increase its local presence in key markets. During 2014, Abbott opened three new manufacturing plants in China, India and the U.S. to meet increasing demand for its products, and formed a strategic partnership with the world's largest dairy cooperative, Fonterra, to invest locally in China's milk supply.

Worldwide Pediatric Nutrition sales increased 13.8 percent on an operational basis and 11.4 percent on a reported basis in the quarter, including an unfavorable 2.4 percent effect of foreign exchange. Sales growth in the quarter was led by strong international growth with the continued market uptake of recently launched products, including new infant formula products in China, Eleva^™ and Similac^® QINTI^™.

Worldwide Adult Nutrition sales increased 2.9 percent on an operational basis and decreased 0.5 percent on a reported basis in the quarter, including an unfavorable 3.4 percent effect of foreign exchange. International Adult Nutrition sales increased double digits in the quarter on an operational basis driven by the continued expansion of the adult nutrition category internationally. Abbott recently launched its new Ensure^® brand in China, which represents a significant long-term growth opportunity. U.S. Adult Nutrition sales were impacted by a decline in performance nutrition, as well as dynamics in the institutional market segment.

Diagnostics
($ in millions)

 

 

Worldwide Diagnostics sales increased 8.6 percent in the fourth quarter on an operational basis and 3.2 percent on a reported basis, including an unfavorable 5.4 percent effect of foreign exchange. This business continues to deliver durable growth across emerging and developed markets as it expands its margin, while also investing in the development of several next-generation diagnostic platforms across all of its business units.

Core Laboratory Diagnostics sales increased 8.6 percent in the quarter on an operational basis, driven by strong growth in the U.S. and internationally as a result of competitive wins and double-digit growth in emerging markets. Sales increased 2.5 percent on a reported basis, including an unfavorable 6.1 percent effect of foreign exchange. In the fourth quarter, Abbott received U.S. FDA clearance for the first automated galectin-3 test for use on its ARCHITECT platform to aid doctors in assessing the prognosis of people diagnosed with chronic heart failure.

Molecular Diagnostics sales increased 4.4 percent in the quarter on an operational basis and 0.6 percent on a reported basis, including an unfavorable 3.8 percent effect of foreign exchange. Sales growth in the quarter was driven by double-digit growth on an operational basis in the infectious disease business, which represents more than 50 percent of Molecular Diagnostics sales. U.S. growth was impacted by continued market dynamics in the oncology and genetics businesses. In December, Abbott received European approval for its IRIDICA infectious disease testing platform. IRIDICA has the potential to help identify serious infections, such as sepsis and pneumonia, sooner than the current standard of care and could help lower associated health care costs by 30 percent.

Point of Care Diagnostics sales increased 14.2 percent in the quarter on an operational basis as this business continues to build and expand its presence in targeted developed and emerging markets. Sales increased 13.6 percent on a reported basis, including an unfavorable 0.6 percent effect of foreign exchange.

Established Pharmaceuticals
($ in millions)

Note regarding presentation of financial results: In accordance with GAAP, financial results from the developed markets branded generics pharmaceuticals business have been excluded from continuing operations due to the pending sale of this business to Mylan and are reported as discontinued operations. Prior year and year-to-date results also have been adjusted to report the developed markets branded generics pharmaceuticals business as discontinued operations. Therefore, sales shown in the following charts represent continuing operations. See pages below for reconciliation of sales between continuing and discontinued operations for 2013 and 2014.

 

 

Established Pharmaceuticals sales from continuing operations increased 35.4 percent in the fourth quarter on an operational basis and 26.9 percent on a reported basis, including an unfavorable 8.5 percent effect of foreign exchange. Excluding the impact of recent acquisitions, Established Pharmaceuticals sales from continuing operations increased 9.4 percent on an operational basis in the quarter.

Key Emerging Markets include India, Russia, China and Brazil, along with several additional emerging markets that represent the most attractive long-term growth opportunities for Abbott's branded generics product portfolio. Sales in these geographies increased 10.6 percent on an operational basis led by strong growth in India, China and Russia. Sales increased 1.3 percent on a reported basis, including an unfavorable 9.3 percent effect of foreign exchange.

In December, Abbott completed its acquisition of Veropharm, a leading Russian pharmaceutical company. Through this acquisition, Abbott establishes a manufacturing footprint in Russia and obtains a portfolio of medicines that is well aligned with Abbott's current pharmaceutical therapeutic areas of focus.

Medical Devices
($ in millions)

 

 

Worldwide Medical Devices sales increased 0.4 percent in the fourth quarter on an operational basis and decreased 3.9 percent on a reported basis, including an unfavorable 4.3 percent effect of foreign exchange. In December, Abbott completed its acquisition of Topera, Inc., which provides Abbott with a foundational entry in the large, high-growth electrophysiology market. Topera's breakthrough technology can transform how physicians treat people with complex heart rhythm disorders.

Worldwide sales of Vascular products increased 1.7 percent in the quarter on an operational basis, representing a sequential improvement versus third quarter 2014. Sales decreased 2.5 percent on a reported basis, including an unfavorable 4.2 percent effect of foreign exchange. Abbott's MitraClip^® structural heart product for the treatment of mitral regurgitation and Endovascular business both grew double digits globally in the quarter on an operational basis. This growth was offset by a decline in drug-eluting stent sales. In the U.S., in the fourth quarter, Abbott launched XIENCE Alpine, its new drug-eluting stent (DES) system designed for peak performance in complex interventions. XIENCE Alpine is the only DES on the U.S. market with an indication to treat chronic total occlusions.

Worldwide Diabetes Care sales decreased 5.5 percent in the quarter on an operational basis and 9.6 percent on a reported basis, including an unfavorable 4.1 percent effect of foreign exchange. The U.S. sales were in line with expectations, as the impact of CMS reimbursement reductions and market dynamics continued to moderate. Outside of the U.S., Abbott launched its recently approved FreeStyle Libre Flash Glucose Monitoring System direct to consumers. FreeStyle^® Libre is a revolutionary new glucose sensing technology that eliminates routine finger pricks, requires no finger-prick calibration and presents data in a user-friendly, visual chart, enabling productive treatment discussions between patients and healthcare professionals.

Worldwide Medical Optics sales increased 3.6 percent in the quarter on an operational basis and decreased 0.9 percent on a reported basis, including an unfavorable 4.5 percent effect of foreign exchange. Sales of cataract products, which represent approximately 70 percent of Medical Optics sales, increased high single digits in the quarter globally on an operational basis. This growth was partially offset by market declines in the refractive and corneal businesses. In the U.S. in the quarter, Abbott received FDA approval for its TECNIS Multifocal Low Add IOL, a new premium lens that provides more range-of-vision options to patients and surgeons.  

Abbott issues earnings-per-share outlook for 2015

Abbott is issuing full-year 2015 guidance for earnings-per-share from continuing operations, excluding specified items, of $2.10 to $2.20, representing top-tier growth at the mid-point of the guidance range.

Abbott forecasts net specified items for the full year 2015 of approximately $0.77 per share. Specified items include intangible amortization expense, charges associated with cost reduction initiatives and deal and other expenses related to acquisitions.  

Including net specified items, projected earnings per share from continuing operations under Generally Accepted Accounting Principles (GAAP) would be $1.33 to $1.43 for the full year 2015.

Abbott is issuing first-quarter 2015 guidance for earnings-per-share guidance from continuing operations, excluding specified items, of $0.41 to $0.43. Abbott forecasts specified items for the first quarter 2015 of $0.23 related to the same items discussed above for the full year 2015. Including specified items, projected earnings-per-share from continuing operations under GAAP would be $0.18 to $0.20 for the first quarter.

Abbott announces increase in quarterly dividend

On Dec. 12, 2014, the board of directors of Abbott increased the company's quarterly dividend to $0.24 per share from $0.22 per share. Abbott's cash dividend is payable Feb. 15, 2015, to shareholders of record at the close of business on Jan. 15, 2015. This marks the 364^th consecutive quarterly dividend paid by Abbott.

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

About Abbott

Abbott ABT is a global healthcare company devoted to improving life through the development of products and technologies that span the breadth of healthcare. With a portfolio of leading, science-based offerings in diagnostics, medical devices, nutritionals and branded generic pharmaceuticals, Abbott serves people in more than 150 countries and employs approximately 77,000 people.

Visit Abbott at www.abbott.com and connect with us on Twitter at @AbbottNews.

Abbott will webcast its live fourth-quarter earnings conference call through its Investor Relations website at www.abbottinvestor.com at 8 a.m. Central time today. An archived edition of the call will be available 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, 2013, 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.

 

 

 

 

 

 

Non-GAAP Reconciliation of Financial Information

 

 

Specified items for continuing operations reflect intangible amortization expense of $163 million and other expenses of $152 million, primarily associated with cost reduction initiatives and deal and other expenses related to the acquisitions, as well as current quarter tax expense of $175 million associated with a one-time repatriation of 2014 ex-U.S. earnings, partially offset by favorability as a result of the resolution of various tax positions and adjustment of tax uncertainties from prior years.

 

 

Specified items for continuing operations reflect intangible amortization expense of $147 million and other expenses of $179 million, primarily associated with cost reduction initiatives, integration and separation-related costs.

Specified items for discontinued operations are primarily related to intangible amortization expense and cost reduction initiatives.

 

 

Specified items for continuing operations reflect intangible amortization expense of $555 million and other expenses of $632 million, primarily associated with cost reduction initiatives and deal and other expenses related to the acquisitions, as well as year-to-date tax expense of $440 million associated with a one-time repatriation of 2014 ex-U.S. earnings, partially offset by favorability as a result of the resolution of various tax positions and adjustment of tax uncertainties from prior years.

Specified items for discontinued operations are primarily related to intangible amortization expense, cost reduction initiatives, as well as year-to-date tax expense associated with a one-time repatriation of 2014 ex-U.S. earnings, partially offset by a favorable adjustment to tax expense related to the resolution of various tax positions from previous years.

 

 

Specified items for continuing operations reflect intangible amortization expense of $588 million and other expenses of $583 million, primarily associated with cost reduction initiatives, a philanthropic contribution to the Abbott Fund, and integration and separation-related costs, partially offset by favorable adjustments to tax expense of $230 million related to the resolution of various tax positions from previous years and $103 million for the impact of U.S. tax law changes enacted in 2013 related to 2012 results.

Specified items for discontinued operations are primarily related to intangible amortization expense and cost reduction initiatives.

Reconciliation of Tax Rate for Continuing Operations

A reconciliation of the fourth-quarter tax rates for continuing operations for 2014 and 2013 is shown below:

 

A reconciliation of the full-year tax rates for continuing operations for 2014 and 2013 is shown below:

 

Additional Financial Information

 

 

 

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SOURCE Abbott