0000001800 false Common Shares, Without Par Value ABT 0000001800 2020-07-16 2020-07-16 0000001800 us-gaap:CommonStockMember exch:XCHI 2020-07-16 2020-07-16 0000001800 us-gaap:CommonStockMember exch:XNYS 2020-07-16 2020-07-16 iso4217:USD xbrli:shares iso4217:USD xbrli:shares
   

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

 

 

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

 

July 16, 2020

Date of Report (Date of earliest event reported)

 

ABBOTT LABORATORIES

(Exact name of registrant as specified in charter)

 

 

 

Illinois   1-2189   36-0698440
(State or other Jurisdiction   (Commission File Number)   (IRS Employer
of Incorporation)       Identification No.)

 

 

 

100 Abbott Park Road

Abbott Park, Illinois 60064-6400

(Address of principal executive offices)(Zip Code)

 

Registrant’s telephone number, including area code:  (224) 667-6100

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨                 Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨                 Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨                 Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨                 Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Securities Registered Pursuant to Section 12(b) of the Act:

 

Title of Each Class Trading
Symbol(s)

Name of Each Exchange

on Which Registered

Common Shares, Without Par Value ABT New York Stock Exchange
 Chicago Stock Exchange, Inc.

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company  ¨

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ¨

 

 

 

 

Item 2.02Results of Operations and Financial Condition

 

On July 16, 2020, Abbott Laboratories announced its results of operations for the second quarter 2020.

 

Furnished as Exhibit 99.1, and incorporated herein by reference, is the news release issued by Abbott announcing those results.  In that news release, Abbott uses various non-GAAP financial measures including, among others, net earnings from continuing operations excluding specified items.  These non-GAAP financial measures adjust for factors that are unusual or unpredictable, such as expenses primarily associated with acquisitions and restructuring actions, charges related to cost reduction initiatives, the acquisition of R&D assets, charges related to impairment of certain assets, and tax benefits associated with specified items, a reduction in the transition tax associated with the Tax Cuts and Jobs Act, tax benefits associated with the resolution of various tax positions related to prior years and excess tax benefits associated with share-based compensation.  These non-GAAP financial measures also exclude intangible amortization expense to provide greater visibility on the results of operations excluding these costs, similar to how Abbott’s management internally assesses performance.  Abbott’s management believes the presentation of these non-GAAP financial measures provides useful information to investors regarding Abbott’s results of operations as these non-GAAP financial measures allow investors to better evaluate ongoing business performance.  Abbott’s management also uses these non-GAAP financial measures internally to monitor performance of the businesses.  Abbott, however, cautions investors to consider these non-GAAP financial measures in addition to, and not as a substitute for, financial measures prepared in accordance with GAAP.  

 

Item 9.01Financial Statements and Exhibits

 

Exhibit No.   Exhibit
     
99.1   Press Release dated July 16, 2020 (furnished pursuant to Item 2.02).
     
104   Cover Page Interactive Data File (the cover page XBRL tags are embedded in the Inline XBRL document).

 

 

 

 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

  ABBOTT LABORATORIES
   
   
Date: July 16, 2020 By: /s/ Robert E. Funck, Jr.
    Robert E. Funck, Jr.
    Executive Vice President, Finance
and Chief Financial Officer

 

 

Exhibit 99.1

 

 

News Release

 

 

 

Abbott Reports Second-Quarter 2020 Results, Exceeds Analysts' Expectations

 

-Worldwide sales of $7.3 billion in the second quarter, including $615 million of COVID-19 diagnostic testing-related sales
-Growth rates in business areas initially most impacted by COVID-19 improved significantly over the course of the second quarter
-Abbott continues to strengthen its portfolio with several recent regulatory approvals, including FreeStyle Libre 2, TriClip and Gallant heart devices
 
 

ABBOTT PARK, Ill., July 16, 2020 — Abbott today announced financial results for the second quarter ended June 30, 2020.

·Second-quarter worldwide sales of $7.3 billion decreased 8.2 percent on a reported basis and 5.4 percent on an organic basis, which excludes the impact of foreign exchange.
·Reported diluted EPS from continuing operations under GAAP was $0.30 and adjusted diluted EPS from continuing operations, which excludes specified items, was $0.57 in the second quarter.
·Abbott projects full-year 2020 diluted EPS from continuing operations on a GAAP basis of at least $2.00 and full-year adjusted diluted EPS from continuing operations of at least $3.25.
·In April, Abbott announced CE Mark approval for its TriClip™ heart valve repair system, the world's first minimally invasive, clip-based tricuspid heart valve repair device.
·In June, Abbott announced U.S. FDA approval of FreeStyle® Libre 2 as an integrated continuous glucose monitoring (iCGM) system for adults and children ages 4 and older with diabetes, achieving the highest level of accuracy and performance standards.1
·Last week, Abbott announced U.S. FDA approval of its next-generation Gallant™ implantable cardioverter defibrillator and cardiac resynchronization therapy defibrillator devices to help manage heart rhythm disorders. These devices offer Bluetooth technology and a new patient smartphone app for improved remote monitoring and enhanced patient-physician engagement.

 

"Our diversified business model has proven to be a true strength during this time," said Robert B. Ford, president and chief executive officer, Abbott. "We're a leader in the global COVID-19 testing efforts, we've continued to advance our pipeline and, importantly, we saw significant improvements in growth trends throughout the quarter in the business areas that were initially most impacted by the pandemic."

 

—more—

 

 

 

 

SECOND-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 second quarter 2020:

 

Total Company

($ in millions)

 

               % Change vs. 2Q19 
   Sales 2Q20   Reported   Organic 
   U.S.   Int'l   Total   U.S.   Int'l   Total   U.S.   Int'l   Total 
Total *  2,638    4,690    7,328    (7.4)   (8.6)   (8.2)   (7.4)   (4.2)   (5.4)
Nutrition  808    1,075    1,883    2.9    (1.4)   0.4    2.9    3.3    3.1 
Diagnostics  857    1,137    1,994    23.2    (5.9)   4.7    23.2    (2.2)   7.1 
Established Pharmaceuticals  --    1,013    1,013     n/a     (8.6)   (8.6)    n/a     (0.7)   (0.7)
Medical Devices  966    1,457    2,423    (29.0)   (15.0)   (21.2)   (29.0)   (12.7)   (19.9)

 

* Total Q2 2020 Abbott sales from continuing operations include Other Sales of approximately $15 million.

 

               % Change vs. 1H19 
   Sales 1H20   Reported   Organic 
   U.S.   Int'l   Total   U.S.   Int'l   Total   U.S.   Int'l   Total 
Total *   5,494    9,560    15,054    (1.9)   (3.5)   (3.0)   (1.9)   0.0    (0.7)
Nutrition   1,620    2,167    3,787    5.7    1.5    3.3    5.7    4.7    5.1 
Diagnostics   1,660    2,160    3,820    16.9    (7.1)   2.0    16.9    (3.9)   4.0 
Established Pharmaceuticals   --    2,057    2,057     n/a     (2.1)   (2.1)    n/a     4.0    4.0 
Medical Devices   2,199    3,161    5,360    (16.6)   (5.2)   (10.2)   (16.6)   (2.7)   (8.8)

 

* Total 1H 2020 Abbott sales from continuing operations include Other Sales of approximately $30 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.

 

Second-quarter 2020 worldwide sales of $7.3 billion decreased 8.2 percent on a reported basis. On an organic basis, worldwide sales decreased 5.4 percent. First-half 2020 worldwide sales of $15.1 billion decreased 3.0 percent on a reported basis and 0.7 percent on an organic basis.

 

2 

 

 

Nutrition

($ in millions)

 

               % Change vs. 2Q19 
    Sales 2Q20  Reported   Organic 
    U.S.   Int'l   Total  U.S.   Int'l   Total   U.S.   Int'l   Total 
Total    808    1,075    1,883   2.9    (1.4)   0.4    2.9    3.3    3.1 
Pediatric    484    540    1,024   2.1    (6.4)   (2.6)   2.1    (2.2)   (0.3)
Adult    324    535    859   4.2    4.3    4.3    4.2    9.3    7.4 

 

                % Change vs. 1H19 
    Sales 1H20   Reported   Organic 
    U.S.   Int'l   Total   U.S.   Int'l   Total   U.S.   Int'l   Total 
Total    1,620    2,167    3,787    5.7    1.5    3.3    5.7    4.7    5.1 
Pediatric    1,002    1,111    2,113    8.0    (3.6)   1.6    8.0    (1.0)   3.0 
Adult    618    1,056    1,674    2.2    7.6    5.5    2.2    11.5    7.9 

 

Worldwide Nutrition sales increased 0.4 percent on a reported basis and 3.1 percent on an organic basis in the second 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 7.4 percent on an organic basis. In Pediatric Nutrition, sales were led by U.S. growth of Pedialyte®, Abbott’s oral rehydration brand, as well as growth in Southeast Asia, which were offset by challenging conditions in Greater China.

 

For the first half of 2020, worldwide Nutrition sales increased 3.3 percent on a reported basis and 5.1 percent on an organic basis, including organic sales growth of 3.0 percent in Pediatric Nutrition and 7.9 percent in Adult Nutrition.

  

3 

 

 

Diagnostics

($ in millions)

 

               % Change vs. 2Q19 
   Sales 2Q20   Reported   Organic 
   U.S.   Int'l   Total   U.S.   Int'l   Total   U.S.   Int'l   Total 
Total   857    1,137    1,994    23.2    (5.9)   4.7    23.2    (2.2)   7.1 
Core Laboratory   289    698    987    6.4    (22.2)   (15.5)   6.4    (19.0)   (13.1)
Molecular   144    215    359    276.7    209.9    233.6    276.7    222.1    241.4 
Point of Care   79    39    118    (30.6)   25.8    (18.3)   (30.6)   29.0    (17.6)
Rapid Diagnostics   345    185    530    26.9    (12.6)   9.6    26.9    (9.2)   11.0 

 

               % Change vs. 1H19 
   Sales 1H20   Reported   Organic 
   U.S.   Int'l   Total   U.S.   Int'l   Total   U.S.   Int'l   Total 
Total   1,660    2,160    3,820    16.9    (7.1)   2.0    16.9    (3.9)   4.0 
Core Laboratory   556    1,420    1,976    6.7    (16.9)   (11.4)   6.7    (14.0)   (9.2)
Molecular   209    289    498    166.1    111.1    131.1    166.1    118.2    135.7 
Point of Care   182    74    256    (18.0)   28.9    (8.4)   (18.0)   31.4    (7.8)
Rapid Diagnostics   713    377    1,090    19.3    (10.9)   6.8    19.3    (7.8)   8.1 

 

Worldwide Diagnostics sales increased 4.7 percent on a reported basis in the second quarter, including an unfavorable 2.4 percent effect of foreign exchange, and increased 7.1 percent on an organic basis.

 

In Core Laboratory Diagnostics, lower routine diagnostics testing due to COVID-19 was partially offset by sales of Abbott's COVID-19 laboratory-based tests for the detection of the IgG antibody, which determines if someone was previously infected with the virus. Core Laboratory IgG antibody testing-related sales on Abbott's Architect® and Alinity™ i platforms were $152 million in the quarter.

 

Molecular Diagnostics sales increased 233.6 percent on a reported basis and 241.4 percent on an organic basis in the second quarter. Strong growth was driven by demand for Abbott's laboratory-based molecular tests for COVID-19 on its m2000™ and Alinity™ m platforms. Molecular Diagnostics COVID-19 testing-related sales were $283 million in the quarter.

 

Rapid Diagnostics sales increased 9.6 percent on a reported basis and 11.0 percent on an organic basis in the second quarter. Lower base business sales were more than offset by strong demand for Abbott's point-of-care COVID-19 molecular test on its ID NOW™ platform. Rapid Diagnostics COVID-19 testing-related sales were $180 million in the quarter.

  

4 

 

 

Established Pharmaceuticals

($ in millions)

 

               % Change vs. 2Q19
   Sales 2Q20   Reported  Organic 
   U.S.   Int'l   Total   U.S.  Int'l   Total   U.S.   Int'l   Total 
Total   --    1,013    1,013    n/a   (8.6)   (8.6)    n/a     (0.7)   (0.7)
Key Emerging Markets   --    764    764    n/a   (10.3)   (10.3)    n/a     (0.4)   (0.4)
Other   --    249    249    n/a   (2.6)   (2.6)    n/a     (1.5)   (1.5)

 

               % Change vs. 1H19
   Sales 1H20   Reported  Organic 
   U.S.   Int'l   Total   U.S.  Int'l   Total   U.S.   Int'l   Total 
Total   --    2,057    2,057    n/a   (2.1)   (2.1)    n/a     4.0    4.0 
Key Emerging Markets   --    1,577    1,577    n/a   (1.7)   (1.7)    n/a     5.9    5.9 
Other   --    480    480    n/a   (3.1)   (3.1)    n/a     (2.1)   (2.1)

 

Established Pharmaceuticals sales decreased 8.6 percent on a reported basis in the second quarter and decreased 0.7 percent on an organic basis. For the first half of 2020, Established Pharmaceuticals sales decreased 2.1 percent on a reported basis and increased 4.0 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 second quarter and decreased 0.4 percent on an organic basis. Sales growth in certain countries, including double-digit growth in China, was more than offset by lower demand due to the increased spread of COVID-19 across several emerging market countries, including Russia, Brazil and Colombia.

  

5 

 

Medical Devices

($ in millions)

 

            % Change vs. 2Q19 
   Sales 2Q20  Reported  Organic 
   U.S.  Int'l  Total  U.S.  Int'l  Total  U.S.  Int'l  Total 
Total  966  1,457  2,423  (29.0) (15.0) (21.2) (29.0) (12.7) (19.9)
Rhythm Management  185  216  401  (32.2) (21.3) (26.7) (32.2) (19.2) (25.7)
Electrophysiology  120  179  299  (37.2) (25.8) (30.8) (37.2) (24.7) (30.2)
Heart Failure  115  43  158  (22.9) (15.2) (20.9) (22.9) (13.3) (20.4)
Vascular  168  313  481  (37.6) (31.9) (34.0) (37.6) (29.9) (32.7)
Structural Heart  91  132  223  (40.1) (34.2) (36.7) (40.1) (33.0) (36.0)
Neuromodulation  85  21  106  (49.2) (52.0) (49.8) (49.2) (50.3) (49.4)
Diabetes Care  202  553  755  27.2  24.7  25.4  27.2  28.7  28.3 
                             
Vascular Product Lines:                            

Coronary and Endovasculara

  155  311  466  (36.5) (32.1) (33.6) (36.5) (30.0) (32.3)

 

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

 

            % Change vs. 1H19 
   Sales 1H20  Reported  Organic 
   U.S.  Int'l  Total  U.S.  Int'l  Total  U.S.  Int'l  Total 
Total  2,199  3,161  5,360  (16.6) (5.2) (10.2) (16.6) (2.7) (8.8)
Rhythm Management  413  462  875  (21.3) (14.0) (17.6) (21.3) (11.7) (16.4)
Electrophysiology  284  403  687  (22.2) (14.4) (17.8) (22.2) (12.9) (17.0)
Heart Failure  267  94  361  (8.6) 1.7  (6.1) (8.6) 4.0  (5.6)
Vascular  398  708  1,106  (25.7) (21.6) (23.1) (25.7) (19.7) (21.9)
Structural Heart  227  314  541  (21.3) (19.1) (20.0) (21.3) (17.1) (18.9)
Neuromodulation  222  61  283  (30.7) (28.1) (30.1) (30.7) (25.2) (29.5)
Diabetes Care  388  1,119  1,507  25.1  30.4  29.0  25.1  34.3  31.9 
                             
Vascular Product Lines:                            
Coronary and Endovasculara  366  703  1,069  (23.6) (21.8) (22.4) (23.6) (19.8) (21.1)

 

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 decreased 21.2 percent on a reported basis in the second quarter and decreased 19.9 percent on an organic basis. Sales growth was negatively impacted by reduced cardiovascular and neuromodulation procedure volumes due to COVID-19. Procedure volume trends improved significantly over the course of the second quarter as both demand for procedures and availability of healthcare resources began to return to more normalized levels.

 

In Diabetes Care, strong growth was led by FreeStyle Libre, which grew 36.8 percent on a reported basis and 39.9 percent on an organic basis versus the prior year. In June, Abbott announced U.S. FDA approval of FreeStyle Libre 2 as an integrated continuous glucose monitoring (iCGM) system for adults and children ages 4 and older with diabetes, achieving the highest level of accuracy and performance standards.1 The FreeStyle Libre 2 system will be available in the coming weeks at participating pharmacies and durable medical equipment providers at the same price as the currently available FreeStyle Libre 14 day system.

 

6 

 

 

Abbott's guidance for 2020

Abbott projects full-year 2020 diluted earnings per share from continuing operations under GAAP of at least $2.00. Abbott forecasts specified items for the full-year 2020 of $1.25 primarily related to intangible amortization, acquisition-related expenses, restructuring and cost reduction initiatives and other expenses. Excluding specified items, projected adjusted diluted earnings per share from continuing operations would be at least $3.25 for full-year 2020.

 

Abbott declares 386th consecutive QUARTERLY DIVIDEND

On June 12, 2020, the board of directors of Abbott declared the company's quarterly dividend of $0.36 per share. Abbott's cash dividend is payable August 17, 2020, to shareholders of record at the close of business on July 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.

 

7 

 

 

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 and @AbbottGlobal.

 

Abbott will webcast its live second-quarter earnings conference call through its Investor Relations website at www.abbottinvestor.com at 8:30 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.

 

 

Abbott Financial:

Scott Leinenweber, 224-668-0791

Michael Comilla, 224-668-1872

Laura Dauer, 224-667-2299

  
   

Abbott Media:

Darcy Ross, 224-667-3655

  
 

 

1 Based on FDA iCGM special controls.

 

8 

 

 

Abbott Laboratories and Subsidiaries

Condensed Consolidated Statement of Earnings

Second Quarter Ended June 30, 2020 and 2019

(in millions, except per share data)

(unaudited)

 

    2Q20   2Q19  % Change  
Net Sales  $7,328   $7,979   (8.2)  
                
Cost of products sold, excluding amortization expense   3,263    3,279   (0.5)  
Amortization of intangible assets   553    483   14.7  
Research and development   564    577   (2.1)  
Selling, general, and administrative   2,276    2,434   (6.5)  
Total Operating Cost and Expenses   6,656    6,773   (1.7)  
                
Operating Earnings   672    1,206   (44.3)  
                
Interest expense, net   125    146   (15.3)  
Net foreign exchange (gain) loss   (1)   (4)  (81.2)  
Other (income) expense, net   22    (38)  n/m  
Earnings from Continuing Operations before taxes   526    1,102   (52.3)  
                
Tax expense (benefit) on Earnings from Continuing Operations   (11)   96   n/m 1)
Earnings from Continuing Operations   537    1,006   (46.6)  
                
Earnings from Discontinued Operations, net of taxes   --    --   n/m  
                
Net Earnings  $537   $1,006   (46.6)  
                
Earnings from Continuing Operations, excluding               
Specified Items, as described below  $1,018   $1,465   (30.5) 2)
                
Diluted Earnings per Common Share from:               
Continuing Operations  $0.30   $0.56   (46.4)  
Discontinued Operations   --    --   n/m  
Total  $0.30   $0.56   (46.4)  
                
Diluted Earnings per Common Share from Continuing Operations, excluding Specified Items, as described below  $0.57   $0.82   (30.5) 2)
                
Average Number of Common Shares Outstanding Plus Dilutive Common Stock Options   1,785    1,781      

 

NOTES:

See tables on page 13 for an explanation of certain non-GAAP financial information.

n/m = Percent change is not meaningful.

See footnotes on the following page.

 

9 

 

 

 

1)2020 Tax expense (benefit) 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 $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 $481 million, or $0.27 per share, for intangible amortization expense, other expenses primarily associated with acquisitions and restructuring actions and charges for equity investment impairments.

 

2019 Net Earnings and Diluted Earnings per Common Share from Continuing Operations, excluding Specified Items, excludes net after-tax charges of $459 million, or $0.26 per share, for intangible amortization expense and other expenses primarily associated with acquisitions and restructuring actions.

 

10 

 

 

Abbott Laboratories and Subsidiaries

Condensed Consolidated Statement of Earnings

First Half Ended June 30, 2020 and 2019

(in millions, except per share data)

(unaudited)

 

    1H20   1H19  % Change  
Net Sales  $15,054   $15,514   (3.0)  
                
Cost of products sold, excluding amortization expense   6,544    6,439   1.6  
Amortization of intangible assets   1,114    969   15.0  
Research and development   1,142    1,249   (8.6) 1)
Selling, general, and administrative   4,824    4,912   (1.8)  
Total Operating Cost and Expenses   13,624    13,569   0.4  
                
Operating Earnings   1,430    1,945   (26.5)  
                
Interest expense, net   246    294   (16.5)  
Net foreign exchange (gain) loss   4    2   n/m  
Other (income) expense, net   21    (85)  n/m  
Earnings from Continuing Operations before taxes   1,159    1,734   (33.2)  
                
Tax expense (benefit) on Earnings from Continuing Operations   78    56   40.3 2)
Earnings from Continuing Operations   1,081    1,678   (35.6)  
                
Earnings from Discontinued Operations, net of taxes   20    --   n/m  
                
Net Earnings  $1,101   $1,678   (34.4)  
                
Earnings from Continuing Operations, excluding Specified Items, as described below  $2,180   $2,591   (15.8) 3)
                
Diluted Earnings per Common Share from:               
Continuing Operations  $0.60   $0.94   (36.2)  
Discontinued Operations   0.01    --   n/m  
Total  $0.61   $0.94   (35.1)  
                
Diluted Earnings per Common Share from Continuing Operations, excluding Specified Items, as described below  $1.22   $1.45   (15.9) 3)
                
Average Number of Common Shares Outstanding Plus Dilutive Common Stock Options   1,783    1,779      

 

NOTES:

See tables on page 14 for an explanation of certain non-GAAP financial information.

n/m = Percent change is not meaningful.

See footnotes on the following page.

 

11 

 

 

 

1)In the first six 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 (benefit) 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 $70 million in excess tax benefits associated with share-based compensation.

 

2019 Tax expense (benefit) 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 $90 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 $1.099 billion, or $0.62 per share, for intangible amortization expense and other expenses primarily associated with acquisitions and restructuring actions.

 

2019 Net Earnings and Diluted Earnings per Common Share from Continuing Operations, excluding Specified Items, excludes net after-tax charges of $913 million, or $0.51 per share, for intangible amortization expense and other expenses primarily associated with acquisitions and restructuring actions.

 

12 

 

 

Abbott Laboratories and Subsidiaries

Non-GAAP Reconciliation of Financial Information From Continuing Operations

Second Quarter Ended June 30, 2020 and 2019

(in millions, except per share data)

(unaudited)

 

    2Q20
    As
Reported
(GAAP)		   Specified
Items		   As
Adjusted		   % to
Sales		 
Intangible Amortization  $553  $(553) $--     
Gross Margin   3,512   591   4,103   56.0%
R&D   564   (28)  536   7.3%
SG&A   2,276   (24)  2,252   30.7%
Other (income) expense, net   22   (68)  (46)    
Earnings from Continuing Operations before taxes   526   711   1,237     
Tax expense (benefit) on Earnings from Continuing Operations   (11)  230   219     
Earnings from Continuing Operations   537   481   1,018     
Diluted Earnings per Share from Continuing Operations  $0.30  $0.27  $0.57     

 

Specified items reflect intangible amortization expense of $553 million and other expenses of $158 million, primarily associated with acquisitions, restructuring actions and other expenses. See page 16 for additional details regarding specified items.

 

    2Q19
    As
Reported
(GAAP)		   Specified
Items		   As
Adjusted		   % to
Sales		 
Intangible Amortization  $483  $(483) $--     
Gross Margin   4,217   522   4,739   59.4%
R&D   577   (12)  565   7.1%
SG&A   2,434   (46)  2,388   29.9%
Other (income) expense, net   (38)  (16)  (54)    
Earnings from Continuing Operations before taxes   1,102   596   1,698     
Tax expense (benefit) on Earnings from Continuing Operations   96   137   233     
Earnings from Continuing Operations   1,006   459   1,465     
Diluted Earnings per Share from Continuing Operations  $0.56  $0.26  $0.82     

 

Specified items reflect intangible amortization expense of $483 million and other expenses of $113 million, primarily associated with acquisitions, restructuring actions and other expenses. See page 17 for additional details regarding specified items.

 

13 

 

 

Abbott Laboratories and Subsidiaries

Non-GAAP Reconciliation of Financial Information From Continuing Operations

First Half Ended June 30, 2020 and 2019

(in millions, except per share data)

(unaudited)

 

    1H20  
    

As
Reported

(GAAP)

   Specified
Items		   As
Adjusted		   % to
Sales		 
Intangible Amortization  $1,114  $(1,114) $--     
Gross Margin   7,396   1,190   8,586   57.0%
R&D   1,142   (43)  1,099   7.3%
SG&A   4,824   (82)  4,742   31.5%
Other (income) expense, net   21   (110)  (89)    
Earnings from Continuing Operations before taxes   1,159   1,425   2,584     
Tax expense (benefit) on Earnings from Continuing Operations   78   326   404     
Earnings from Continuing Operations   1,081   1,099   2,180     
Diluted Earnings per Share from Continuing Operations  $0.60  $0.62  $1.22     

 

Specified items reflect intangible amortization expense of $1.114 billion and other expenses of $311 million, primarily associated with acquisitions, restructuring actions and other expenses. See page 18 for additional details regarding specified items.

 

    1H19
    As
Reported (GAAP)		   Specified
Items		   As
Adjusted		   % to
Sales		 
Intangible Amortization  $969  $(969) $--     
Gross Margin   8,106   1,049   9,155   59.0%
R&D   1,249   (127)  1,122   7.2%
SG&A   4,912   (91)  4,821   31.1%
Other (income) expense, net   (85)  (29)  (114)    
Earnings from Continuing Operations before taxes   1,734   1,296   3,030     
Tax expense (benefit) on Earnings from Continuing Operations   56   383   439     
Earnings from Continuing Operations   1,678   913   2,591     
Diluted Earnings per Share from Continuing Operations  $0.94  $0.51  $1.45     

 

Specified items reflect intangible amortization expense of $969 million and other expenses of $327 million, primarily associated with acquisitions, restructuring actions and other expenses. See page 19 for additional details regarding specified items.

 

14 

 

 

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

 

    2Q20     
($ in millions)   Pre-Tax
Income		    Taxes on Earnings   Tax
Rate		       
As reported (GAAP)  $526   $(11)  (2.1%)     1)
Specified items   711    230           
Excluding specified items  $1,237   $219   17.7%      

 

    2Q19    
($ in millions)   Pre-Tax
Income		    Taxes on Earnings   Tax
Rate		       
As reported (GAAP)  $1,102   $96   8.7%      
Specified items   596    137           
Excluding specified items  $1,698   $233   13.7%      

 

1)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 $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:

 

    1H20        
($ in millions)   Pre-Tax Income    Taxes on Earnings   Tax
Rate		       
As reported (GAAP)  $1,159   $78   6.7%     2)
Specified items   1,425    326           
Excluding specified items  $2,584   $404   15.6%      

 

    1H19        
($ in millions)   Pre-Tax Income    Taxes on Earnings   Tax
Rate		       
As reported (GAAP)  $1,734   $56   3.2%     3)
Specified items   1,296    383           
Excluding specified items  $3,030   $439   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 $70 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 $90 million in excess tax benefits associated with share-based compensation.

 

15 

 

 

Abbott Laboratories and Subsidiaries

Details of Specified Items

Second Quarter Ended June 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  $22   $15   $553   $1   $591 
R&D   (3)   (2)   --    (23)   (28)
SG&A   (27)   3    --    --    (24)
Other (income) expense, net   (3)   --    --    (65)   (68)
Earnings from Continuing Operations before taxes  $55   $14   $553   $89    711 
Tax expense on Earnings from Continuing Operations (d)                       230 
Earnings from Continuing Operations                      $481 
Diluted Earnings per Share from Continuing Operations                      $0.27 

 

The table above provides additional details regarding the specified items described on page 13.

 

 

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 the impairment of equity investments and the costs to acquire research and development assets.

 

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.

 

16 

 

 

Abbott Laboratories and Subsidiaries

Details of Specified Items

Second Quarter Ended June 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  $18   $21   $483   $--   $522 
R&D   (7)   (5)   --    --    (12)
SG&A   (44)   (2)   --    --    (46)
Other (income) expense, net   (7)   --    --    (9)   (16)
Earnings from Continuing Operations before taxes  $76   $28   $483   $9    596 
Tax expense on Earnings from Continuing Operations (d)                       137 
Earnings from Continuing Operations                      $459 
Diluted Earnings per Share from Continuing Operations                      $0.26 

 

The table above provides additional details regarding the specified items described on page 13.

 

 

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 primarily relates to the impairment of an equity investment.

 

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

 

17 

 

 

Abbott Laboratories and Subsidiaries

Details of Specified Items

First Half Ended June 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  $45   $30   $1,114   $1   $1,190 
R&D   (7)   (8)   --   (28)   (43)
SG&A   (55)   (27)   --    --    (82)
Other (income) expense, net   (1)   --    --    (109)   (110)
Earnings from Continuing Operations before taxes  $108   $65   $1,114   $138    1,425 
Tax expense on Earnings from Continuing Operations (d)                       326 
Earnings from Continuing Operations                      $1,099 
Diluted Earnings per Share from Continuing Operations                      $0.62 

 

The table above provides additional details regarding the specified items described on page 14.

 

 

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 the impairment of equity investments and the costs to acquire research and development assets.

 

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.

 

18 

 

 

Abbott Laboratories and Subsidiaries

Details of Specified Items

First Half Ended June 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  $37   $43   $969   $--   $1,049 
R&D   (14)   (10)   --    (103)   (127)
SG&A   (87)   (4)   --    --    (91)
Other (income) expense, net   (10)   --    --    (19)   (29)
Earnings from Continuing Operations before taxes  $148   $57   $969   $122    1,296 
Tax expense on Earnings from Continuing Operations (d)                       383 
Earnings from Continuing Operations                      $913 
Diluted Earnings per Share from Continuing Operations                      $0.51 

 

The table above provides additional details regarding the specified items described on page 14.

 

 

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 relates to the acquisition of an R&D asset and charges related to the impairment of certain assets.

 

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.

 

###

 

19 

 

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Jul. 16, 2020
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Entity File Number 1-2189
Entity Registrant Name ABBOTT LABORATORIES
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Entity Tax Identification Number 36-0698440
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Entity Address, City or Town Abbott Park
Entity Address, State or Province IL
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City Area Code 224
Local Phone Number 667-6100
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