Abbott Labs 4th-Quarter Profit Fell 35% on Debt-Extinguishment Charges
01/23/2013| 11:17am US/Eastern
--Abbott Labs 4Q results and 2013 outlook top Wall Street expectations
--Abbott recently spun out pharmaceutical unit as AbbVie
--Higher pharmaceutical and nutritional sales fuel growth
(Updates share prices in 3rd paragraph; adds comments from executives beginning in 6th graph.)
By Peter Loftus
Abbott Laboratories (>> Abbott Laboratories) reported a 35% decline in fourth-quarter profit on higher costs including an early debt payment, while sales rose 4.4% in the final quarter before the medical-products maker spun off its pharmaceutical business into a stand-alone company, AbbVie (>> AbbVie Inc).
Abbott's quarterly results topped Wall Street expectations, and the company issued an earnings forecast for 2013 above analysts' estimates.
Abbott shares declined 11 cents to $32.79 in recent trading, while AbbVie shares rose 63 cents, or 1.7%, to $37.05.
The Abbott Park, Ill., company spun out AbbVie to Abbott shareholders at the start of the year in a bid for a higher market valuation for Abbott Labs' diversified businesses, which are poised for stronger earnings growth in coming years than AbbVie.
The surviving Abbott Labs has four main divisions: nutritional products, established pharmaceuticals, medical devices and diagnostics.
Abbott Chief Executive Miles D. White said the surviving company is poised to capitalize on expected growth in health-care spending in emerging markets such as China. He said sales of Abbott's diagnostics products have been particularly strong in China, Brazil and Russia.
"We have a large presence in rapidly growing emerging markets," he said on a conference call with analysts.
Because the split didn't take effect until Jan. 1, Abbott on Wednesday reported fourth-quarter results for the combined entity.
Abbott said earnings for the quarter ended Dec. 31 declined 34.9% to $1.05 billion, or 66 cents a share, from $1.62 billion, or $1.02 per share, a year earlier.
The latest quarter had several charges including $858 million, or 54 cents a share, for a loss on extinguishment of debt associated with early payment of long-term debt. Abbott also incurred costs for restructuring and asset impairments.
Excluding certain items in both quarters, earnings rose to $1.51 a share from $1.45 a share.
Fourth-quarter sales rose 4.4% to $10.84 billion. Unfavorable foreign exchange reduced sales by 1.2%.
Analysts surveyed by Thomson Reuters had expected fourth-quarter earnings of $1.50 a share, on revenue of $10.58 billion.
Abbott's proprietary pharmaceuticals business--now AbbVie--posted fourth-quarter sales of $5.14 billion, up 7.4% from a year earlier. Sales of blockbuster anti-inflammatory drug Humira surged 23.1% to $2.68 billion. Sales also rose for testosterone-replacement therapy AndroGel and the Synthroid treatment for a thyroid disorder.
Combined sales of cholesterol drugs Trilipix and TriCor dropped 44% to $269 million, while sales also declined for HIV drug Kaletra. AbbVie executives are expected to further discuss pharmaceutical results in a conference call scheduled for next week.
Abbott's nutritionals unit, which sells baby formula Similac and will remain part of Abbott Labs, saw sales grow 10.2% to $1.72 billion. Sales of established pharmaceuticals, which include off-patent drugs sold primarily overseas, declined 2.4% to $1.35 billion.
Other divisions that remain part of Abbott Labs include diagnostics and diabetes care, which posted sales growth. Abbott's vascular division, which sells artery-opening stents, saw sales decline.
For full-year 2013, Abbott predicted earnings of $1.39 to $1.45 per share. Excluding intangible amortization expense, separation costs and cost-reduction items, Abbott expects earnings excluding various items of $1.98 to $2.04 per share.
Analysts were expecting earnings of $1.95 a share, excluding items, on revenue of $22.82 billion for full-year 2013.
For the first quarter, however, Abbott expects earnings of 40 cents to 42 cents a share, excluding items, which is lower than the Thomson estimate of 47 cents a share. Abbott executives said unfavorable currency rates are expected to pressure first-quarter results.
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