10-QPeriod: Q2 FY2016

ABBOTT LABORATORIES Quarterly Report for Q2 Ended Jun 30, 2016

Filed August 3, 2016For Securities:ABT

Summary

Abbott Laboratories reported revenue of $5.33 billion for the three months ended June 30, 2016, a 3.2% increase year-over-year, with a 6.4% increase excluding foreign exchange impacts. Net earnings for the quarter were $615 million, or $0.41 per diluted share. The company continued to navigate a challenging foreign exchange environment, particularly the devaluation of the Venezuelan bolivar which resulted in a significant foreign currency loss. Significant events during the quarter included progress on two major pending acquisitions: Alere Inc. and St. Jude Medical, Inc. These acquisitions, if completed, are expected to substantially reshape Abbott's business portfolio, particularly in the diagnostics and cardiovascular device sectors. The company also continues to manage its divestitures, with ongoing responsibilities related to the AbbVie separation. Investors should note the strategic direction towards consolidating its position in medical devices and diagnostics.

Financial Highlights

54 data points
Beta

Revenue

$5.33B

54.4% Gross Margin

Net Income

$615.00M

11.5% Net Margin

EPS (Diluted)

$0.41

Total Assets

$39.83B

Cash & Equivalents

$2.58B

Free Cash Flow

$662.00M

Financial Statements
Beta
Revenue$5.33B
Cost of Revenue$2.29B
Gross Profit$2.90B
SG&A Expenses$1.74B
Operating Expenses$4.52B
Operating Income$816.00M
Interest Expense$103.00M
Net Income$615.00M
EPS (Basic)$0.41
EPS (Diluted)$0.41
Shares Outstanding (Basic)1.47B
Shares Outstanding (Diluted)1.48B

Key Highlights

  • 1Reported Q2 2016 revenue of $5.33 billion, a 3.2% increase year-over-year (6.4% excluding foreign exchange).
  • 2Net earnings for Q2 2016 were $615 million, or $0.41 per diluted share.
  • 3Significant negative impact from foreign exchange, particularly in Venezuela, leading to a $477 million foreign currency loss in Q1 2016 impacting cash flows and Q2 results.
  • 4Progress made on the acquisitions of Alere Inc. (diagnostics) and St. Jude Medical (cardiovascular devices), with regulatory reviews underway.
  • 5Established Pharmaceutical Products segment saw a slight revenue increase of 0.4% ($980 million), with strong growth in key emerging markets excluding FX impacts.
  • 6Nutritional Products segment reported revenue of $1.74 billion, a 1.4% increase, driven by U.S. pediatric and international adult nutritionals.
  • 7Vascular Products segment showed an 8.3% revenue increase ($782 million), primarily due to growth in coronary devices, though offset by lower DES sales.

Frequently Asked Questions

Foreign currency fluctuations had a notable negative impact. The stronger U.S. dollar decreased total international sales by 3.2% in Q2 2016. A significant event was the revaluation of Venezuelan operations due to the country's hyperinflationary status, resulting in a $477 million foreign currency loss in the first quarter of 2016, which impacted cash flow. While excluding FX impacts, total net sales grew by 6.4%, the actual reported growth was lower due to these currency headwinds.

Abbott is actively pursuing two transformative acquisitions: Alere Inc. for approximately $5.8 billion to bolster its diagnostics business, and St. Jude Medical for approximately $25 billion to significantly enhance its cardiovascular device offerings. Both deals are subject to regulatory approvals and shareholder consent, with ongoing reviews by bodies like the FTC.

The Established Pharmaceutical Products segment saw modest growth of 0.4%, driven by emerging markets, though negatively impacted by foreign exchange. Nutritional Products revenue increased by 1.4%, supported by U.S. pediatric and international adult products. Diagnostic Products grew 4.1%, benefiting from market share gains. The Vascular Products segment demonstrated the strongest growth at 8.3%, largely due to its coronary and endovascular devices, though sales of DES products were lower.

Abbott continues to report results from divested businesses as discontinued operations. In the first six months of 2016, this included a $16 million after-tax gain related to the sale of the animal health business. The ongoing reporting also reflects tax benefits from the resolution of tax positions related to the prior separation of AbbVie.