Abbott Reports Fourth-Quarter and Full-Year 2013 Results

-  Fourth-Quarter Ongoing EPS of $0.58 (GAAP EPS From Continuing Operations of $0.37) -

-  Achieved Adjusted Operating Margin Improvement in 2013  -

-  Launched Multiple New Products in 2013 Across Diverse Business Portfolio  -

-  Issues Earnings Outlook for 2014  -

ABBOTT PARK, Illinois, Jan. 22, 2014 /PRNewswire/ -- Abbott (NYSE: ABT) today announced financial results for the fourth quarter ended Dec. 31, 2013.

• Ongoing diluted EPS was $0.58 in the fourth quarter and $2.01 for the full year, reflecting double-digit growth; reported diluted EPS from continuing operations under GAAP was $0.37 in the fourth quarter and $1.50 for the full year.
• Excluding foreign exchange, fourth-quarter worldwide sales increased 3.3 percent on an operational basis. Reported sales increased 0.4 percent, including an unfavorable 2.9 percent effect of foreign exchange. The previously reported sales disruption in International Nutrition that occurred in August is estimated to have reduced Abbott's total worldwide sales growth by approximately 1.5 percentage points.
• For the full-year 2013, Abbott expanded its adjusted operating margin by 110 basis points over prior year. This was primarily driven by continuing improvements in Diagnostics and Nutrition. Operating margin under GAAP improved by 320 basis points over prior year.
• In 2013, Abbott delivered on a number of new product launches. Highlights include nearly 70 new product launches in Nutrition; XIENCE Xpedition^™ drug-eluting stent in the United States and Japan; MitraClip^®, Abbott's first-in-class device for the treatment of mitral regurgitation, in the United States; TECNIS^® OptiBlue intraocular lens (IOL) in Japan and TECNIS Toric IOL in the United States; ACCELERATOR a3600^™, a next-generation automation solution for the core laboratory; and several new diagnostic tests on the ARCHITECT^™ platform.
• Abbott issues ongoing EPS guidance for the full-year 2014 that reflects double-digit growth at the mid-point of the guidance range.
• Abbott projects an increase in its share repurchases in 2014 to more than $2 billion. In October 2013, Abbott announced a 57 percent increase in its quarterly common dividend.

"In 2013, despite some challenges, we achieved our expectations for earnings growth, including more than 100 basis points of operating margin expansion," said Miles D. White, chairman and chief executive officer, Abbott. "In 2014, we are targeting another year of double-digit ongoing earnings-per-share growth."

Fourth-Quarter Business Overview

Following are the sales by business segment for the fourth quarter and the full year, as well as commentary addressing fourth-quarter sales performance:

Total Company

Fourth-quarter 2013 worldwide sales of $5.7 billion increased 3.3 percent on an operational basis, driven by Diagnostics and Medical Devices. On a reported basis, sales increased 0.4 percent, including an unfavorable 2.9 percent effect of foreign exchange.

Sales in emerging markets in the fourth quarter were $2.3 billion, increasing 9.0 percent on an operational basis and 5.2 percent on a reported basis.

Nutrition

Worldwide Nutrition sales increased 1.1 percent in the fourth quarter on an operational basis and decreased 0.8 percent on a reported basis, including an unfavorable 1.9 percent effect of foreign exchange. Abbott's broad and diverse nutritional product portfolio is comprised of approximately 55 percent of sales in Pediatric Nutrition and 45 percent of sales in Adult Nutrition. 

Worldwide Pediatric Nutrition sales decreased 2.0 percent on an operational basis and 3.2 percent on a reported basis in the quarter, including an unfavorable 1.2 percent effect of foreign exchange. International Pediatric Nutrition sales decreased 3.1 percent on an operational basis and were impacted by a previously reported supplier recall in early August in certain international markets of pediatric nutrition products. The sales disruption is estimated to have reduced sales growth in International Pediatric Nutrition by approximately $90 million in the fourth quarter. Exclusive of this event, International Pediatric Nutrition continues to drive strong performance as it launches new product innovations and executes on geographic expansion initiatives.

Worldwide Adult Nutrition sales increased 5.0 percent on an operational basis and 2.3 percent on a reported basis in the quarter, including an unfavorable 2.7 percent effect of foreign exchange. Sales growth in the quarter was led by strong growth of Ensure^® and continued expansion of the adult nutrition market where Abbott is the global leader. International Adult Nutrition sales grew 14.0 percent on an operational basis, driven by strong growth in emerging markets. U.S. Adult Nutrition sales growth was impacted by Abbott's exit from certain non-core business lines as part of the division's margin improvement initiative.

As International Nutrition continues to recover from the supplier recall, it is well positioned to deliver on key strategic priorities in 2014. This includes launching several new products globally in both adult and pediatric nutrition; further expansion of global capacity with three new manufacturing facilities scheduled to come on line in China, India and the United States in 2014; continued operating margin expansion as this business remains on-track to achieve an operating margin ratio of more than 20 percent of sales by 2015; and shaping and growing priority adult nutrition markets. 

Diagnostics

Worldwide Diagnostics sales increased 8.8 percent in the fourth quarter on an operational basis driven by 9.3 percent growth in Core Laboratory Diagnostics and continued double-digit growth in Point of Care Diagnostics. Reported sales increased 5.9 percent, including an unfavorable 2.9 percent effect of foreign exchange. Margin initiatives in Diagnostics have continued to improve gross and operating margins versus the fourth-quarter and full-year 2012.

Core Laboratory Diagnostics sales increased 9.3 percent in the quarter on an operational basis, driven by continued above-market growth in both developed and key emerging markets, including continued strong double-digit growth in China, Brazil and Russia. Sales increased 5.9 percent on a reported basis in the quarter, including an unfavorable 3.4 percent effect of foreign exchange.

Molecular Diagnostics sales increased 0.7 percent in the quarter on an operational basis and decreased 0.2 percent on a reported basis, including an unfavorable 0.9 percent effect of foreign exchange. International sales, which represent nearly 60 percent of total Molecular Diagnostics sales, increased 9.9 percent on an operational basis driven by continued strong growth in infectious disease testing, particularly in emerging markets.

Point of Care Diagnostics sales increased 14.1 percent in the quarter on an operational basis and 13.7 percent on a reported basis, including an unfavorable 0.4 percent effect of foreign exchange. Abbott holds the leadership position in the United States, where sales increased 12.7 percent driven by continued growth in the U.S. hospital segment, as well as strong growth in the physician office segment. Overall performance was driven by balanced double-digit growth in both developed and emerging markets, with on-going investments driving further penetration in key growth markets. 

Diagnostics is expected to achieve above-market performance again in 2014, with double-digit growth in emerging markets across all businesses and several new assays launching on the ARCHITECT family of analyzers in Core Diagnostics, as well as increased penetration of Molecular and Point of Care Diagnostics. At the same time, this business continues to invest in development of several next-generation diagnostic platforms across all of its business units that are designed to positively impact patient care, improve service to customers, enhance laboratory productivity and reduce costs.

Established Pharmaceuticals

Established Pharmaceuticals sales increased 0.7 percent in the fourth quarter on an operational basis and decreased 4.3 percent on a reported basis, including an unfavorable 5.0 percent effect of foreign exchange.

Abbott is focused on 14 Key Emerging Markets that represent attractive long-term growth opportunities. Sales in these Key Emerging Markets increased 10.1 percent on an operational basis in the quarter, led by strong growth in Brazil, Russia and China. Reported sales, which include an unfavorable effect of 7.4 percent of foreign exchange, increased 2.7 percent in the quarter.

Other Markets include developed markets, such as Western Europe and Japan, and other emerging markets globally. Sales in these geographies decreased 6.7 percent in the quarter on an operational basis and 9.8 percent on a reported basis, including an unfavorable 3.1 percent effect of foreign exchange. As expected, sales growth in developed markets continues to be impacted by market conditions, particularly in Western Europe.

In 2014, Established Pharmaceuticals will continue to focus on driving growth in Key Emerging Markets, which currently represent approximately 50 percent of total sales and are projected to grow to approximately 60 percent of total sales over the next several years. Key strategic priorities to accelerate growth in these markets include continuing to build locally relevant portfolios across key therapeutic areas and tailoring local commercial activities to each market. 

Medical Devices

Worldwide Medical Devices sales increased 4.1 percent in the fourth quarter on an operational basis. Reported sales increased 2.0 percent, including an unfavorable 2.1 percent effect of foreign exchange.

Worldwide sales of Vascular products increased 3.8 percent in the quarter on an operational basis, representing a sequential improvement versus third quarter 2013; sequential growth in this business improved each quarter throughout 2013. Reported sales increased 1.7 percent, including an unfavorable 2.1 percent effect of foreign exchange. International sales comprise more than 60 percent of the total Vascular business and increased 5.3 percent operationally, driven by continued share gains of the XIENCE Xpedition drug-eluting stent and Absorb^™, Abbott's drug-eluting coronary bioresorbable vascular scaffold (BVS); sales growth of MitraClip, Abbott's first-in-class device for the treatment of mitral regurgitation; and 9.3 percent growth in Endovascular products. Sales of Vascular products in the United States increased modestly and were impacted by a year-over-year market decline, offset by an increase in XIENCE Xpedition market share and 7.9 percent growth in Endovascular products.

Worldwide Diabetes Care sales decreased 3.6 percent in the quarter on an operational basis and 4.4 percent on a reported basis, including an unfavorable 0.8 percent effect of foreign exchange. Worldwide operational sales growth was driven by International sales growth of 4.1 percent offset by the expected impact of CMS competitive bidding in the United States.

Worldwide Medical Optics sales increased 14.9 percent in the quarter on an operational basis and 10.9 percent on a reported basis, including an unfavorable 4.0 percent effect of foreign exchange. Sales of cataract products, which represent more than 65 percent of Medical Optics sales, increased strong double digits, outpacing the growth of the global cataract market. This performance was driven by continued growth in emerging markets and share gains of recently launched new products, including the TECNIS OptiBlue IOL in Japan, which provides Abbott access to the largest segment of the Japan market; the TECNIS Toric IOL in the United States for patients with astigmatism, which enables Abbott to compete in the fastest growing premium segment of the IOL market; and Abbott's introduction of its new laser cataract system, Catalys^™, following the acquisition of OptiMedica in the third quarter.

In 2014, a number of new products will drive continued growth in Medical Devices. This includes MitraClip, which received U.S. FDA approval in October and has demonstrated clinical benefits, a positive safety profile and patient quality of life improvements in multiple clinical trials; the expected U.S. FDA approval and launch of a new peripheral stent in Abbott's Endovascular portfolio; the continued geographic rollout of Absorb and XIENCE Xpedition; expected launches of new preloaded IOLs, which improve the ease of use in the surgical suite; and further penetration of the Catalys laser cataract system.

Abbott increases its return of cash to shareholders in 2014

In 2014, Abbott projects an increase in its share repurchases to more than $2 billion.

On Oct. 16, 2013, Abbott announced a 57 percent increase in the company's quarterly common dividend. Abbott's cash dividend of $0.22 per share is payable Feb. 15, 2014, to shareholders of record at the close of business on Jan. 15, 2014.

Abbott is a member of the S&P 500 Dividend Aristocrats Index, which tracks companies that have annually increased their dividend for 25 consecutive years.

Abbott issues ongoing earnings-per-share outlook for 2014

Abbott is issuing ongoing earnings-per-share guidance for the full-year 2014 of $2.16 to $2.26, representing double-digit growth at the mid-point of the guidance range.

Abbott forecasts net specified items for the full year 2014 of approximately $1.03 per share. Specified items include intangible amortization expense, charges associated with cost reduction initiatives, as well as tax expense associated with a projected one-time repatriation of 2014 ex-U.S. earnings. Including these net specified items, projected earnings per share from continuing operations under Generally Accepted Accounting Principles (GAAP) would be $1.13 to $1.23 for the full year 2014.

About Abbott

Abbott (NYSE: ABT) is a global healthcare company devoted to improving life through the development of products and technologies that span the breadth of healthcare. With a portfolio of leading, science-based offerings in diagnostics, medical devices, nutritionals and branded generic pharmaceuticals, Abbott serves people in more than 150 countries and employs approximately 70,000 people.

Visit Abbott at www.abbott.com and connect with us on Twitter at @AbbottNews.

Abbott will webcast its live fourth-quarter earnings conference call through its Investor Relations website at www.abbottinvestor.com at 8 a.m. Central time today. An archived edition of the call will be available after 11 a.m. Central time.

— Private Securities Litigation Reform Act of 1995 —
A Caution Concerning Forward-Looking Statements

Some statements in this news release may be forward-looking statements for purposes of the Private Securities Litigation Reform Act of 1995. Abbott cautions that these forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those indicated in the forward-looking statements. Economic, competitive, governmental, technological and other factors that may affect Abbott's operations are discussed in Item 1A, "Risk Factors,'' to our Annual Report on Securities and Exchange Commission Form 10-K/A for the year ended Dec. 31, 2012, and are incorporated by reference. Abbott undertakes no obligation to release publicly any revisions to forward-looking statements as a result of subsequent events or developments, except as required by law.

Non-GAAP Reconciliation of Financial Information

Specified items reflect intangible amortization expense of $198 million; expenses associated with cost reduction initiatives of $135 million; and other costs of $63 million, including integration and separation-related costs.

Specified items, as detailed in the 8-K dated April 16, 2013, include intangible amortization expense of $196 million and loss on extinguishment of debt of $1.351 billion; as well as $347 million for specified items related to Abbott's continuing operations, the removal of certain corporate expenses that transferred to AbbVie in the separation and certain expenses that will be charged to AbbVie under transition service agreements, and $46 million for an adjustment to interest expense to reflect Abbott's capital structure after the separation of AbbVie, as previously identified in Abbott's earnings release dated Jan. 23, 2013.

Specified items reflect intangible amortization expense of $791 million; expenses associated with cost reduction initiatives of $347 million; a philanthropic contribution to the Abbott Fund of $40 million; and other costs of $239 million, including integration and separation-related costs; partially offset by favorable adjustments to tax expense of $234 million related to the resolution of various tax positions from previous years and $103 million for the impact in the first quarter of U.S. tax law changes enacted in 2013 related to 2012 results.

Specified items, as detailed in the 8-K dated April 16, 2013, include intangible amortization expense of $795 million and loss on extinguishment of debt of $1.351 billion; as well as $1.047 billion for specified items related to Abbott's continuing operations, the removal of certain corporate expenses that transferred to AbbVie in the separation and certain expenses that will be charged to AbbVie under transition service agreements, and $181 million for an adjustment to interest expense to reflect Abbott's capital structure after the separation of AbbVie, partially offset by a favorable adjustment to tax expense of $218 million related to the resolution of various tax positions from a previous year, as previously identified in Abbott's earnings release dated Jan. 23, 2013.

Tax Rate Reconciliation

A reconciliation of the fourth-quarter tax rates for 2013 and 2012 is shown below:

A reconciliation of the full-year tax rates for 2013 and 2012 is shown below: