10-QPeriod: Q1 FY2016

ABBOTT LABORATORIES Quarterly Report for Q1 Ended Mar 31, 2016

Filed May 4, 2016For Securities:ABT

Summary

Abbott Laboratories reported net sales of $4.885 billion for the first quarter of 2016, a slight decrease of 0.2% compared to the same period in 2015. However, when excluding the unfavorable impact of foreign exchange, net sales grew by 5.1%, driven by strong performance in its Established Pharmaceutical Products, Nutritional Products, and Diagnostic Products segments. Despite a significant foreign currency loss related to Venezuela and increased R&D expenses, the company's ongoing strategic acquisitions and product growth indicate a focus on future expansion. Investors should note the substantial planned acquisitions of Alere and St. Jude Medical, which will significantly alter the company's scale and financial structure, alongside the continued commitment to returning capital to shareholders through dividends and share repurchases.

Financial Highlights

53 data points
Beta

Revenue

$4.88B

53.2% Gross Margin

Net Income

$316.00M

6.5% Net Margin

EPS (Diluted)

$0.21

Total Assets

$39.64B

Cash & Equivalents

$3.33B

Free Cash Flow

-$336.00M

Financial Statements
Beta
Revenue$4.88B
Cost of Revenue$2.14B
Gross Profit$2.60B
SG&A Expenses$1.70B
Operating Expenses$4.36B
Operating Income$524.00M
Interest Expense$58.00M
Net Income$316.00M
EPS (Basic)$0.21
EPS (Diluted)$0.21
Shares Outstanding (Basic)1.48B
Shares Outstanding (Diluted)1.48B

Key Highlights

  • 1Net sales for Q1 2016 were $4.885 billion, a 0.2% decrease year-over-year, but a 5.1% increase excluding foreign exchange impacts.
  • 2Established Pharmaceutical Products, Nutritional Products, and Diagnostic Products segments showed growth (excluding FX), with Key Emerging Markets and U.S. Pediatric Nutritionals being notable contributors.
  • 3Abbott recorded a significant foreign currency loss of $477 million in Q1 2016 due to revaluing Venezuelan operations to a new, less favorable exchange rate (DICOM).
  • 4Research and development expenses increased by 21.0% due to an impairment of an in-process R&D asset, but core R&D spending by segment remains substantial.
  • 5The company announced definitive agreements to acquire Alere Inc. for $5.8 billion and St. Jude Medical for approximately $25 billion, signaling a strong push for growth through acquisitions.
  • 6Abbott returned capital to shareholders through $385 million in dividends paid and $408 million in share repurchases during the quarter.
  • 7The company continued to resolve prior tax positions, resulting in significant net tax benefits recorded in both continuing and discontinued operations.

Frequently Asked Questions

The substantial decrease in net earnings from $2.292 billion in Q1 2015 to $316 million in Q1 2016 was primarily due to a large after-tax gain of $1.737 billion recognized in Q1 2015 from the sale of developed markets branded generics pharmaceuticals business. The current quarter's earnings were impacted by a significant foreign currency loss related to Venezuela and the absence of such large gains from prior period divestitures.

The planned acquisitions of Alere (diagnostics) and St. Jude Medical (cardiovascular devices) are expected to significantly advance Abbott's presence and leadership in global diagnostics and cardiovascular devices, respectively. These strategic moves represent a significant push for growth and will substantially increase the company's scale and financial leverage, requiring substantial debt financing.

In the first quarter of 2016, Abbott recorded a foreign currency loss of $477 million due to revaluing its net monetary assets in Venezuela following the government's shift to a less favorable exchange rate (DICOM). While this had a material impact on the quarter's results, Abbott's Venezuelan operations represent only about 0.1% of its consolidated assets, and further losses are not expected to be material.

Abbott demonstrates its commitment to returning capital through consistent dividend payments, increasing the quarterly dividend by 8% year-over-year to $0.26 per share. The company also engaged in share repurchases, spending $408 million in the first quarter of 2016. The company also has significant credit facilities in place to support its operations and strategic initiatives.