ABT HIGHLIGHTS

• Overall revenues were down (2.5)% on weak performance in Established Pharmaceuticals (6.6)%, Nutrition (4.0)%, and Medical Devices (1.2)%. Only Diagnostic segment saw positive revenue growth of
  2.6% vs. Q1:13.
• Adjusted earnings of $0.41 were ahead of Street estimates of $0.36 and our
  forecast of $0.40. Q1:13 adjusted EPS was $0.42. GAAP earnings were $0.22.
• In our opinion, adjusting for intangible amortization, gross margin, R&D, SG&A, Other Income, and taxes for yet another quarter is excessive and provides limited credibility to the adjusted result.
• Q1:14 adjusted operating margins were higher largely due to several expenditure delays in R&D and SG&A totaling $60 million.
• US Diabetes Care fell (28)% in the quarter due to the initiation of Medicare competitive bidding. This was partially offset by 14% growth in US Medical Optics helped by new products in the cataract market.
• Other bright spots such as US Core Lab and International Molecular were both up 11%, but this was not sufficient to offset other noted declines.
• Revenue trends have slowed incrementally each quarter from 2.5% in Q2:13 to now (2.5)% in Q1:14 suggesting the turn is still ahead.
• Substantial adjustments to earnings are excessive and make it difficult to discern margin trends, raising risk profile and supporting our thesis that shares are overvalued relative to the market.