10-QPeriod: Q3 FY2014

ABBOTT LABORATORIES Quarterly Report for Q3 Ended Sep 30, 2014

Filed November 6, 2014For Securities:ABT

Summary

Abbott Laboratories reported third-quarter 2014 results with net sales of $5.1 billion, an increase of 5.8% over the prior year, or 6.7% excluding the impact of foreign exchange. Net earnings for the quarter were $538 million, or $0.36 per diluted share, a decrease compared to the prior year primarily due to the classification of certain business results as discontinued operations. The company successfully completed the significant acquisition of CFR Pharmaceuticals for approximately $3.4 billion, which is expected to bolster its branded generics pharmaceutical presence in Latin America and emerging markets. Abbott also announced its plan to sell its developed markets branded generics pharmaceuticals business to Mylan Inc., with the transaction expected to close in early 2015.

Financial Highlights

53 data points
Beta

Revenue

$5.08B

51.7% Gross Margin

Net Income

$538.00M

10.6% Net Margin

EPS (Diluted)

$0.36

Total Assets

$42.51B

Cash & Equivalents

$3.61B

Free Cash Flow

$924.00M

Financial Statements
Beta
Revenue$5.08B
Cost of Revenue$2.32B
Gross Profit$2.63B
SG&A Expenses$1.59B
Operating Expenses$4.35B
Operating Income$728.00M
Interest Expense$35.00M
Net Income$538.00M
EPS (Basic)$0.36
EPS (Diluted)$0.36
Shares Outstanding (Basic)1.51B
Shares Outstanding (Diluted)1.52B

Key Highlights

  • 1Net sales increased by 5.8% year-over-year to $5.1 billion in Q3 2014, demonstrating continued top-line growth, especially in international markets.
  • 2Acquisition of CFR Pharmaceuticals for $3.4 billion closed in late September 2014, significantly expanding Abbott's presence in Latin America and emerging markets.
  • 3Abbott announced the planned sale of its developed markets branded generics pharmaceuticals business to Mylan Inc., a strategic move to focus on core areas.
  • 4Earnings from discontinued operations, primarily related to the planned sale of the developed markets branded generics business, impacted overall net earnings.
  • 5The company saw strong performance in its Nutritional Products and Diagnostic Products segments, with notable growth in international markets for Nutritional Products.
  • 6Gross profit margin improved to 51.7% in Q3 2014 from 50.2% in Q3 2013, driven by efficiency initiatives and favorable cost resolutions.
  • 7Abbott increased its quarterly common share dividend by 57% to $0.22 per share, reflecting confidence in its financial health and commitment to returning capital to shareholders.

Frequently Asked Questions

The acquisition of CFR Pharmaceuticals closed on September 26, 2014, and its financial results were included in Abbott's statements from that date. The immediate impact on operating results for the third quarter of 2014 was not significant. However, the acquisition, totaling $3.4 billion, is strategically important for expanding Abbott's branded generics pharmaceutical presence in Latin America and emerging markets.

The decrease in net earnings for the quarter and year-to-date was largely due to the classification of the developed markets branded generics pharmaceuticals business as 'discontinued operations' following the announcement of its planned sale to Mylan. This reclassification affects comparability between periods and masks the underlying operational performance.

The planned sale of this business to Mylan Inc. is a strategic decision to streamline Abbott's portfolio and focus on core growth areas such as nutritional products, diagnostics, established pharmaceuticals (in emerging markets), and vascular products. This divestiture is expected to be completed in the first quarter of 2015.

The strengthening U.S. dollar negatively impacted international sales. Excluding the effect of foreign exchange, total net sales grew by 6.7% for the quarter and 3.9% for the first nine months, indicating underlying business strength driven by volume growth in key segments.