10-QPeriod: Q3 FY2015

ABBOTT LABORATORIES Quarterly Report for Q3 Ended Sep 30, 2015

Filed November 5, 2015For Securities:ABT

Summary

Abbott Laboratories' third-quarter 2015 report (filed November 2015) showcases a period of strategic divestitures and ongoing acquisitions, impacting its financial results. The company reported net sales of $5.15 billion, a slight increase from the prior year, but this was overshadowed by significant gains from the sale of its developed markets branded generics pharmaceuticals business to Mylan N.V. and its animal health business to Zoetis. These divestitures resulted in substantial after-tax gains, significantly boosting net earnings to $3.66 billion for the nine-month period. The company also made strategic acquisitions, including CFR Pharmaceuticals, Veropharm, Topera, and Tendyne Holdings, to strengthen its position in key growth areas like Latin America, Russia, electrophysiology, and minimally invasive heart valve replacement therapies. The report highlights mixed segment performance, with strong growth in Established Pharmaceuticals (driven by emerging markets) and Nutritional Products, while Vascular Products experienced a decline, partly due to pricing pressures on DES products. Foreign exchange headwinds also presented a challenge, negatively impacting reported international sales.

Financial Highlights

55 data points
Beta

Revenue

$5.15B

53.5% Gross Margin

Net Income

$580.00M

11.3% Net Margin

EPS (Diluted)

$0.38

Total Assets

$41.73B

Cash & Equivalents

$3.13B

Free Cash Flow

$784.00M

Financial Statements
Beta
Revenue$5.15B
Cost of Revenue$2.24B
Gross Profit$2.76B
SG&A Expenses$1.67B
Operating Expenses$4.44B
Operating Income$713.00M
Interest Expense$41.00M
Net Income$580.00M
EPS (Basic)$0.39
EPS (Diluted)$0.38
Shares Outstanding (Basic)1.50B
Shares Outstanding (Diluted)1.51B

Key Highlights

  • 1Significant gains recorded from the sale of developed markets branded generics pharmaceuticals business to Mylan ($1.6B after-tax) and the animal health business to Zoetis ($130M after-tax).
  • 2Net sales for the nine months ended September 30, 2015, increased to $15.22 billion from $14.89 billion in the prior year, showing modest top-line growth.
  • 3Established Pharmaceutical Products segment showed strong growth of 29.1% (43.9% excluding foreign exchange) for the nine months, largely driven by emerging markets.
  • 4Abbott completed several strategic acquisitions in 2014 and 2015, including CFR Pharmaceuticals, Veropharm, Topera, and Tendyne Holdings, to bolster its product portfolio and market presence.
  • 5The company experienced a negative impact from foreign currency exchange rates, with a stronger U.S. dollar reducing international sales by 13.8% in Q3 2015.
  • 6Diluted Earnings Per Share (EPS) from continuing operations was $0.39 for Q3 2015, up from $0.29 in the prior year, reflecting improved operational performance.
  • 7The company declared a quarterly dividend of $0.24 per share, an increase of 9% over the prior year's quarterly dividend of $0.22.

Frequently Asked Questions

The significant increase in net earnings for the nine months ended September 30, 2015, was primarily driven by substantial after-tax gains from the sale of the developed markets branded generics pharmaceuticals business to Mylan ($1.752 billion) and the animal health business to Zoetis. These one-time gains significantly boosted the overall net earnings.

The divestitures of the developed markets branded generics pharmaceuticals and animal health businesses resulted in substantial one-time gains, significantly increasing net earnings. However, these sales also reduced the company's overall reported net sales compared to what they might have been if these businesses had continued to operate. The focus shifted towards the remaining segments and acquired businesses.

Abbott's international sales were negatively impacted by a strengthening U.S. dollar during this period. For the third quarter of 2015, foreign exchange headwinds reduced total international sales by 13.8%. Excluding this impact, international sales showed stronger growth, indicating underlying business resilience in local currencies.

Abbott completed several key acquisitions, including CFR Pharmaceuticals (expanding presence in Latin America and emerging markets), Veropharm (establishing manufacturing in Russia), Topera (entering the electrophysiology market), and Tendyne Holdings (strengthening its position in minimally invasive heart valve replacement therapies). These acquisitions were aimed at expanding its geographic reach, product portfolio, and presence in high-growth medical device and pharmaceutical areas.