01—Abstract
Summary
Summary of the 10-K filed February 17, 2017. Cited figures are marked; the original filing is the authoritative source.
Abbott Laboratories' 2016 10-K filing highlights a year of strategic portfolio management and preparation for significant growth.
The company successfully navigated a dynamic healthcare landscape, reporting net sales of $20.85 billiona. Key strategic moves included the announcement of the sale of its vision care business (Abbott Medical Optics) to Johnson & Johnson and the ongoing, though contentious, acquisition of Alere Inc. Most notably, Abbott completed the transformative acquisition of St. Jude Medical in January 2017, significantly expanding its presence in the cardiovascular market and medical device sector. The company continued to invest in research and development, spending approximately $1.4 billion in 2016 across its diverse segments: Established Pharmaceutical Products, Nutritional Products, Diagnostic Products, and Vascular Products.
02—Key points
Key Highlights
- Net sales for the year ended December 31, 2016, were $20.85 billion.
- The company announced its intention to sell its vision care business (Abbott Medical Optics) to Johnson & Johnson for $4.325 billion.
- Abbott was actively pursuing the acquisition of Alere Inc. but also filed a complaint seeking to terminate the merger agreement due to adverse developments at Alere.
- A significant event was the completion of the acquisition of St. Jude Medical for approximately $23.6 billion in January 2017, substantially strengthening its medical device portfolio, particularly in cardiovascular.
- Research and development expenses totaled $1.4 billion in 2016, underscoring a commitment to innovation across its healthcare segments.
- Sales in emerging markets showed strong growth, increasing by 6.3% in 2016 (excluding foreign exchange), highlighting geographic diversification.
- The company increased its quarterly dividend to $0.265 per share in Q4 2016, demonstrating a commitment to returning value to shareholders.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2016, Abbott Laboratories kept $0.07.
- Revenue$20.85B100.0%
- Cost of revenue−$9.02B43.3%
- Gross profit$11.83B56.7%
- Operating costs−$8.80B42.2%
- Operating income$3.03B14.5%
- Interest, other & tax−$1.63B7.8%
- Net income$1.40B6.7%
Where FY2016 revenue went
$20.85B- Cost of revenue: $9.02B, 43% of revenue
- SG&A: $6.74B, 32% of revenue
- Net income: $1.40B, 6.7% of revenue
- Other operating costs: $2.07B, 9.9% of revenue
- Interest, other & tax: $1.63B, 7.8% of revenue
Kept 6.7% as net incomeNet income $1.40B · 6.7%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2016filed February 17, 2017Financial Statements
FY2016 against FY2015
| Line item | FY2016FY2015 | Change |
|---|---|---|
| Revenue | $20.85B$20.41B | +2.2% |
| Cost of Revenue | $9.02B$8.75B | +3.2% |
| Gross Profit | $11.83B$11.66B | +1.5% |
| SG&A Expenses | $6.74B$6.79B | −0.7% |
| Operating Expenses | $17.83B$17.54B | +1.6% |
| Operating Income | $3.03B$2.87B | +5.5% |
| Interest Expense | $431.00M$163.00M | +164.4% |
| Net Income | $1.40B$4.42B | −68.3% |
| EPS (Basic) | $0.94$2.94 | −68.0% |
| EPS (Diluted) | $0.94$2.92 | −67.8% |
| Shares Outstanding (Basic) | 1.48B1.50B | −1.3% |
| Shares Outstanding (Diluted) | 1.48B1.51B | −1.5% |
05—Questions
Frequently Asked Questions
What were Abbott's key strategic initiatives in 2016, particularly regarding acquisitions and divestitures?
In 2016, Abbott announced its intent to sell its vision care business (Abbott Medical Optics) to Johnson & Johnson. Concurrently, the company was involved in the acquisition of Alere Inc., though this faced legal challenges. The most significant strategic move was the completion of the St. Jude Medical acquisition in January 2017, which substantially expanded Abbott's medical device and cardiovascular offerings.
How did Abbott's different business segments perform in 2016?
Abbott operated across four main segments: Established Pharmaceutical Products, Nutritional Products, Diagnostic Products, and Vascular Products. Established Pharmaceuticals saw sales growth driven by emerging markets. Nutritional Products showed resilience despite challenges in China. Diagnostic Products experienced growth, aided by new product launches like the Alinity™ family. The Vascular Products segment saw growth in its MitraClip device, though offset by pricing pressures in coronary devices.
What was the financial impact of the St. Jude Medical acquisition and the Alere situation on Abbott's financial reporting for 2016?
The acquisition of St. Jude Medical was completed in January 2017, so its financial results were not included in the 2016 10-K. However, Abbott did issue $15.1 billion in debt in November 2016 to fund the cash portion of this acquisition. Regarding Alere, Abbott had filed a complaint seeking to terminate the merger agreement, indicating significant uncertainties and potential financial implications, though specific impacts for 2016 were not detailed beyond the legal actions.
How did foreign currency fluctuations affect Abbott's results in 2016?
Abbott reported that approximately 70% of its net sales were international. The company stated that the strengthening U.S. dollar negatively impacted its sales, costs, and financial position. Specifically, foreign currency exchange losses related to operations in Venezuela resulted in a $480 million charge in 2016.
06—Continue