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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                   to                  

Commission File No. 1-2189

ABBOTT LABORATORIES

An Illinois Corporation

    

I.R.S. Employer Identification No.

36-0698440

100 Abbott Park Road

Abbott ParkIllinois 60064-6400

Telephone:  (224) 667-6100

Securities Registered Pursuant to Section 12(b) of the Act:

Title of Each Class

    

Trading Symbol(s)

    

Name of Each Exchange on Which Registered

Common Shares, Without Par Value

ABT

New York Stock Exchange
Chicago Stock Exchange, Inc.

Indicate by check mark whether the registrant: (l) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of l934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

    

Accelerated Filer

Non-Accelerated Filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

As of March 31, 2022, Abbott Laboratories had 1,750,942,289 common shares without par value outstanding.

2

Abbott Laboratories and Subsidiaries

Condensed Consolidated Statement of Earnings

(Unaudited)

(dollars in millions except per share data; shares in thousands)

Three Months Ended

March 31 

    

2022

    

2021

Net sales

$

11,895

$

10,456

Cost of products sold, excluding amortization of intangible assets

 

4,987

 

4,401

Amortization of intangible assets

 

512

 

509

Research and development

 

697

 

654

Selling, general and administrative

 

2,787

 

2,783

Total operating cost and expenses

 

8,983

 

8,347

Operating earnings

 

2,912

 

2,109

Interest expense

 

131

 

135

Interest (income)

 

(14)

 

(11)

Net foreign exchange (gain) loss

 

(3)

 

3

Other (income) expense, net

 

(78)

 

(61)

Earnings before taxes

 

2,876

 

2,043

Taxes on earnings

 

429

 

250

Net Earnings

$

2,447

$

1,793

Basic Earnings Per Common Share

$

1.38

$

1.00

Diluted Earnings Per Common Share

$

1.37

$

1.00

Average Number of Common Shares Outstanding Used for Basic Earnings Per Common Share

 

1,761,911

 

1,776,842

Dilutive Common Stock Options

 

12,631

 

14,661

Average Number of Common Shares Outstanding Plus Dilutive Common Stock Options

 

1,774,542

 

1,791,503

Outstanding Common Stock Options Having No Dilutive Effect

2,655

 

2,694

The accompanying notes to the condensed consolidated financial statements are an integral part of this statement.

3

Abbott Laboratories and Subsidiaries

Condensed Consolidated Statement of Comprehensive Income

(Unaudited)

(dollars in millions)

Three Months Ended

March 31 

    

2022

    

2021

Net Earnings

$

2,447

$

1,793

Foreign currency translation gain (loss) adjustments

 

(106)

 

(536)

Net actuarial gains (losses) and amortization of net actuarial (losses) and prior service (costs) and credits, net of taxes of $13 in 2022 and $18 in 2021

 

62

 

85

Net gains (losses) for derivative instruments designated as cash flow hedges, net of taxes of $(15) in 2022 and $46 in 2021

 

(56)

 

112

Other comprehensive income (loss)

(100)

(339)

Comprehensive Income (Loss)

$

2,347

$

1,454

March 31,

December 31,

2022

2021

Supplemental Accumulated Other Comprehensive Income (Loss) Information, net of tax:

Cumulative foreign currency translation (loss) adjustments

$

(5,945)

$

(5,839)

Net actuarial (losses) and prior service (costs) and credits

 

(2,608)

 

(2,670)

Cumulative gains (losses) on derivative instruments designated as cash flow hedges

 

79

 

135

Accumulated Other Comprehensive Income (Loss)

$

(8,474)

$

(8,374)

The accompanying notes to the condensed consolidated financial statements are an integral part of this statement.

4

Abbott Laboratories and Subsidiaries

Condensed Consolidated Balance Sheet

(Unaudited)

(dollars in millions)

March 31, 

December 31, 

    

2022

    

2021

Assets

Current Assets:

Cash and cash equivalents

$

7,675

$

9,799

Short-term investments

483

450

Trade receivables, less allowances of $640 in 2022 and $519 in 2021

 

7,179

 

6,487

Inventories:

Finished products

 

3,470

 

3,081

Work in process

 

695

 

694

Materials

 

1,526

 

1,382

Total inventories

 

5,691

 

5,157

Prepaid expenses and other receivables

 

2,401

 

2,346

Total Current Assets

 

23,429

 

24,239

Investments

 

763

 

816

Property and equipment, at cost

19,521

19,364

Less: accumulated depreciation and amortization

 

10,613

 

10,405

Net property and equipment

 

8,908

 

8,959

Intangible assets, net of amortization

 

12,225

 

12,739

Goodwill

 

23,179

 

23,231

Deferred income taxes and other assets

 

5,503

 

5,212

$

74,007

$

75,196

Liabilities and Shareholders’ Investment

Current Liabilities:

    

    

Trade accounts payable

$

4,757

$

4,408

Salaries, wages and commissions

 

1,147

 

1,625

Other accrued liabilities

 

5,577

 

5,181

Dividends payable

 

824

 

831

Income taxes payable

 

338

 

306

Current portion of long-term debt

 

4

 

754

Total Current Liabilities

 

12,647

 

13,105

Long-term debt

 

17,086

 

17,296

Post-employment obligations, deferred income taxes and other long-term liabilities

 

8,645

 

8,771

Commitments and Contingencies

Shareholders’ Investment:

Preferred shares, one dollar par value Authorized — 1,000,000 shares, none issued

 

 

Common shares, without par value Authorized — 2,400,000,000 shares
Issued at stated capital amount — Shares: 2022: 1,985,525,053; 2021: 1,985,273,421

 

24,304

 

24,470

Common shares held in treasury, at cost — Shares: 2022: 234,582,764; 2021: 221,191,228

 

(13,726)

 

(11,822)

Earnings employed in the business

 

33,295

 

31,528

Accumulated other comprehensive income (loss)

 

(8,474)

 

(8,374)

Total Abbott Shareholders’ Investment

 

35,399

 

35,802

Noncontrolling Interests in Subsidiaries

 

230

 

222

Total Shareholders’ Investment

 

35,629

 

36,024

$

74,007

$

75,196

The accompanying notes to the condensed consolidated financial statements are an integral part of this statement.

5

Abbott Laboratories and Subsidiaries

Condensed Consolidated Statement of Shareholders’ Investment

(Unaudited)

(in millions except shares and per share data)

Three Months Ended March 31

    

2022

    

2021

Common Shares:

Balance at January 1

Shares: 2022: 1,985,273,421; 2021: 1,981,156,896

$

24,470

$

24,145

Issued under incentive stock programs

  

  

Shares: 2022: 251,632; 2021: 1,048,595

 

14

 

47

Share-based compensation

 

324

 

304

Issuance of restricted stock awards

 

(504)

 

(473)

Balance at March 31 

  

  

Shares: 2022: 1,985,525,053; 2021: 1,982,205,491

$

24,304

$

24,023

Common Shares Held in Treasury:

Balance at January 1

Shares: 2022: 221,191,228; 2021: 209,926,622

$

(11,822)

$

(10,042)

Issued under incentive stock programs

  

  

Shares: 2022: 4,144,476; 2021: 4,818,787

223

 

231

Purchased

 

  

Shares: 2022: 17,536,012; 2021: 277,508

 

(2,127)

 

(34)

Balance at March 31 

  

  

Shares: 2022: 234,582,764; 2021: 205,385,343

$

(13,726)

$

(9,845)

Earnings Employed in the Business:

Balance at January 1

$

31,528

$

27,627

Net earnings

 

2,447

 

1,793

Cash dividends declared on common shares (per share — 2022: $0.47; 2021: $0.45)

 

(826)

 

(803)

Effect of common and treasury share transactions

 

146

 

52

Balance at March 31 

$

33,295

$

28,669

Accumulated Other Comprehensive Income (Loss):

Balance at January 1

$

(8,374)

$

(8,946)

Other comprehensive income (loss)

 

(100)

 

(339)

Balance at March 31 

$

(8,474)

$

(9,285)

Noncontrolling Interests in Subsidiaries:

Balance at January 1

$

222

$

219

Noncontrolling Interests’ share of income, business combinations, net of distributions and share repurchases

 

8

 

7

Balance at March 31 

$

230

$

226

The accompanying notes to condensed consolidated financial statements are an integral part of this statement.

6

Abbott Laboratories and Subsidiaries

Condensed Consolidated Statement of Cash Flows

(Unaudited)

(dollars in millions)

Three Months Ended March 31 

    

2022

    

2021

Cash Flow From (Used in) Operating Activities:

Net earnings

$

2,447

$

1,793

Adjustments to reconcile net earnings to net cash from operating activities —

Depreciation

 

311

 

425

Amortization of intangible assets

 

512

 

509

Share-based compensation

 

305

 

288

Trade receivables

 

(751)

 

165

Inventories

 

(554)

 

(537)

Other, net

(205)

(6)

Net Cash From Operating Activities

2,065

2,637

Cash Flow From (Used in) Investing Activities:

Acquisitions of property and equipment

 

(321)

 

(397)

Acquisitions of businesses and technologies, net of cash acquired

 

 

(15)

Sales (purchases) of other investment securities, net

(41)

(14)

Other

 

2

 

4

Net Cash (Used in) Investing Activities

 

(360)

 

(422)

Cash Flow From (Used in) Financing Activities:

Net borrowings (repayments) of short-term debt and other

8

24

Repayments of long-term debt

 

(751)

 

(2)

Purchases of common shares

 

(2,307)

 

(275)

Proceeds from stock options exercised

 

59

 

86

Dividends paid

 

(832)

 

(800)

Net Cash (Used in) Financing Activities

 

(3,823)

 

(967)

Effect of exchange rate changes on cash and cash equivalents

 

(6)

 

(32)

Net Increase (Decrease) in Cash and Cash Equivalents

 

(2,124)

 

1,216

Cash and Cash Equivalents, Beginning of Year

 

9,799

 

6,838

Cash and Cash Equivalents, End of Period

$

7,675

$

8,054

The accompanying notes to the condensed consolidated financial statements are an integral part of this statement.

7

Table of Contents

Abbott Laboratories and Subsidiaries

Notes to the Condensed Consolidated Financial Statements

March 31, 2022

(Unaudited)

Note 1 — Basis of Presentation

The accompanying unaudited, condensed consolidated financial statements have been prepared pursuant to rules and regulations of the Securities and Exchange Commission and, therefore, do not include all information and footnote disclosures normally included in audited financial statements. However, in the opinion of management, all adjustments (which include only normal adjustments) necessary to present fairly the results of operations, financial position and cash flows have been made. It is suggested that these statements be read in conjunction with the financial statements included in Abbott’s Annual Report on Form 10-K for the year ended December 31, 2021. The condensed consolidated financial statements include the accounts of the parent company and subsidiaries, after elimination of intercompany transactions.

Note 2 — Revenue

Abbott’s revenues are derived primarily from the sale of a broad line of health care products under short-term receivable arrangements. Abbott has four reportable segments: Established Pharmaceutical Products, Diagnostic Products, Nutritional Products, and Medical Devices.

The following table provides detail by sales category:

Three Months Ended March 31, 2022

Three Months Ended March 31, 2021

(in millions)

    

U.S.

    

Int’l

    

Total

    

U.S.

    

Int’l

    

Total

Established Pharmaceutical Products —

  

 

  

 

  

 

  

 

  

 

  

Key Emerging Markets

$

$

902

$

902

$

$

821

$

821

Other

 

 

245

 

245

 

 

249

249

Total

 

 

1,147

 

1,147

 

 

1,070

1,070

Nutritionals —

 

 

 

 

 

 

Pediatric Nutritionals

 

338

 

509

 

847

 

508

 

558

 

1,066

Adult Nutritionals

 

339

 

708

 

1,047

 

328

 

642

 

970

Total

 

677

 

1,217

 

1,894

 

836

 

1,200

 

2,036

Diagnostics —

 

 

 

 

 

 

Core Laboratory

 

268

 

916

 

1,184

 

271

 

911

 

1,182

Molecular

 

172

 

248

 

420

 

175

 

272

 

447

Point of Care

 

91

 

37

 

128

 

92

 

37

 

129

Rapid Diagnostics

 

2,210

 

1,344

 

3,554

 

1,103

 

1,153

 

2,256

Total

 

2,741

 

2,545

 

5,286

 

1,641

 

2,373

 

4,014

Medical Devices —

 

 

 

 

 

 

Rhythm Management

 

248

 

276

 

524

 

241

 

278

 

519

Electrophysiology

 

216

 

269

 

485

 

179

 

252

 

431

Heart Failure

 

167

 

54

 

221

 

145

 

49

 

194

Vascular

 

209

 

410

 

619

 

219

 

416

 

635

Structural Heart

 

190

 

221

 

411

 

169

 

208

 

377

Neuromodulation

 

143

 

36

 

179

 

145

 

39

 

184

Diabetes Care

343

783

1,126

253

727

980

Total

 

1,516

 

2,049

 

3,565

 

1,351

 

1,969

 

3,320

Other

 

3

 

 

3

 

10

 

6

 

16

Total

$

4,937

$

6,958

$

11,895

$

3,838

$

6,618

$

10,456

8

Note 2 — Revenue (Continued)

Remaining Performance Obligations

As of March 31, 2022, the estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) was approximately $3.8 billion in the Diagnostics segment and approximately $428 million in the Medical Devices segment. Abbott expects to recognize revenue on approximately 60 percent of these remaining performance obligations over the next 24 months, approximately 16 percent over the subsequent 12 months and the remainder thereafter.

These performance obligations primarily reflect the future sale of reagents/consumables in contracts with minimum purchase obligations, extended warranty or service obligations related to previously sold equipment, and remote monitoring services related to previously implanted devices. Abbott has applied the practical expedient described in Accounting Standards Codification (ASC) 606-10-50-14 and has not included remaining performance obligations related to contracts with original expected durations of one year or less in the amounts above.

Other Contract Assets and Liabilities

Abbott discloses Trade receivables separately in the Condensed Consolidated Balance Sheet at the net amount expected to be collected. Contract assets primarily relate to Abbott’s conditional right to consideration for work completed but not billed at the reporting date. Contract assets at the beginning and end of the period, as well as the changes in the balance, were not significant.

Contract liabilities primarily relate to payments received from customers in advance of performance under the contract. Abbott’s contract liabilities arise primarily in the Medical Devices reportable segment when payment is received upfront for various multi-period extended service arrangements.

Changes in the contract liabilities during the period are as follows:

(in millions)

    

Contract Liabilities:

Balance at December 31, 2021

$

520

Unearned revenue from cash received during the period

171

Revenue recognized related to contract liability balance

(178)

Balance at March 31, 2022

$

513

Note 3 — Supplemental Financial Information

Shares of unvested restricted stock that contain non-forfeitable rights to dividends are treated as participating securities and are included in the computation of earnings per share under the two-class method. Under the two-class method, net earnings are allocated between common shares and participating securities. Net earnings allocated to common shares for the three months ended March 31, 2022 and 2021 were $2.438 billion and $1.785 billion, respectively.

Other, net in Net cash from operating activities in the Condensed Consolidated Statement of Cash Flows for the first three months of 2022 includes $334 million of pension contributions and the payment of cash taxes of approximately $195 million. The first three months of 2021 includes $16 million of pension contributions and the payment of cash taxes of approximately $270 million.

9

Note 3 — Supplemental Financial Information (Continued)

The following summarizes the activity for the first three months of 2022 related to the allowance for doubtful accounts as of March 31, 2022:

(in millions)

    

Allowance for Doubtful Accounts:

Balance at December 31, 2021

$

313

Provisions/charges to income

3

Amounts charged off and other deductions

 

(15)

Balance at March 31, 2022

$

301

The allowance for doubtful accounts reflects the current estimate of credit losses expected to be incurred over the life of the accounts receivable. Abbott considers various factors in establishing, monitoring, and adjusting its allowance for doubtful accounts, including the aging of the accounts and aging trends, the historical level of charge-offs, and specific exposures related to particular customers. Abbott also monitors other risk factors and forward-looking information, such as country risk, when determining credit limits for customers and establishing adequate allowances.

The components of long-term investments as of March 31, 2022 and December 31, 2021 are as follows:

March 31, 

December 31, 

(in millions)

    

2022

    

2021

Long-term Investments:

Equity securities

$

703

$

748

Other

 

60

 

68

Total

$

763

$

816

The decrease in Abbott’s long-term investments as of March 31, 2022 versus the balance as of December 31, 2021 primarily relates to a decrease in the value of investments held in a rabbi trust.

Abbott’s equity securities as of March 31, 2022, include $357 million of investments in mutual funds that are held in a rabbi trust and were acquired as part of the St. Jude Medical, Inc. (St. Jude Medical) business acquisition. These investments, which are specifically designated as available for the purpose of paying benefits under a deferred compensation plan, are not available for general corporate purposes and are subject to creditor claims in the event of insolvency.

Abbott also holds certain investments as of March 31, 2022 with a carrying value of $244 million that are accounted for under the equity method of accounting and other equity investments with a carrying value of $92 million that do not have a readily determinable fair value.

10

Note 4 — Changes in Accumulated Other Comprehensive Income (Loss)

The changes in accumulated other comprehensive income (loss), net of income taxes, are as follows:

Three Months Ended March 31 

Cumulative Gains (Losses)

Cumulative Foreign

Net Actuarial (Losses) and

on Derivative Instruments

Currency Translation

 Prior Service (Costs) and

Designated as Cash Flow

Adjustments

 Credits

Hedges

(in millions)

    

2022

    

2021

    

2022

    

2021

    

2022

    

2021

Balance at January 1

$

(5,839)

$

(4,859)

$

(2,670)

$

(3,871)

$

135

$

(216)

Other comprehensive income (loss) before reclassifications

 

(106)

 

(536)

17

 

22

 

(34)

 

96

Amounts reclassified from accumulated other comprehensive income

 

 

 

45

 

63

 

(22)

 

16

Net current period comprehensive income (loss)

 

(106)

 

(536)

 

62

 

85

 

(56)

 

112

Balance at March 31 

$

(5,945)

$

(5,395)

$

(2,608)

$

(3,786)

$

79

$

(104)

(Income) loss amounts reclassified from accumulated other comprehensive income related to cash flow hedges are recorded as Cost of products sold. Net actuarial losses and prior service cost are included as a component of net periodic benefit costs; see Note 11 for additional details.

Note 5 — Goodwill and Intangible Assets

The total amount of goodwill reported was $23.2 billion at March 31, 2022 and December 31, 2021. Foreign currency translation adjustments decreased goodwill by approximately $50 million in the first three months of 2022. The amount of goodwill related to reportable segments at March 31, 2022 was $2.8 billion for the Established Pharmaceutical Products segment, $286 million for the Nutritional Products segment, $3.7 billion for the Diagnostic Products segment, and $16.4 billion for the Medical Devices segment. There was no reduction of goodwill relating to impairments in the first three months of 2022.

The gross amount of amortizable intangible assets, primarily product rights and technology, was $27.7 billion as of March 31, 2022 and December 31, 2021 and accumulated amortization was $16.4 billion as of March 31, 2022 and $15.9 billion as of December 31, 2021. Foreign currency translation adjustments increased intangible assets by $3 million in the first three months of 2022. Abbott’s estimated annual amortization expense for intangible assets is approximately $2.1 billion in 2022, $2.0 billion in 2023, $1.9 billion in 2024, $1.7 billion in 2025 and $1.6 billion in 2026.

Indefinite-lived intangible assets, which relate to in-process R&D (IPR&D) acquired in a business combination, were approximately $919 million as of March 31, 2022 and December 31, 2021.

11

Note 6 — Restructuring Plans

On May 27, 2021, Abbott management approved a restructuring plan related to its Diagnostic Products segment to align its manufacturing network for COVID-19 diagnostic tests with changes in the second quarter in projected testing demand driven by several factors, including significant reductions in cases in the U.S. and other major developed countries, the accelerated rollout of COVID-19 vaccines globally and the U.S. health authority’s updated guidance on testing for fully vaccinated individuals. In the second quarter of 2021, Abbott recorded charges of $499 million under this plan in Cost of products sold. The charge recognized in the second quarter included fixed asset write-downs of $80 million, inventory-related charges of $248 million, and other exit costs, which included contract cancellations and employee-related costs of $171 million.

In the second half of 2021, as the Delta and Omicron variants of COVID-19 spread and the number of new COVID-19 cases increased significantly, particularly in the U.S., demand for rapid COVID-19 tests increased significantly. As a result, in the second half of 2021, Abbott sold approximately $181 million of inventory that was previously estimated to have no net realizable value under the second quarter of 2021 restructuring action. In addition, the estimate of other exit costs was reduced by a net $58 million as Abbott fulfilled its purchase obligations under certain contracts for which a liability was recorded in the second quarter or Abbott settled with the counterparty in the second half of 2021.

The following summarizes the activity related to this restructuring action and the status of the related accruals as of March 31, 2022:

Inventory-

Related

Fixed Asset

Other Exit

(in millions)

    

Charges

    

Write-Downs

    

Costs

    

Total

Restructuring charges recorded in 2021

$

248

$

80

$

113

$

441

Payments

 

 

 

(90)

 

(90)

Other non-cash

 

(248)

 

(80)

 

 

(328)

Accrued balance at December 31, 2021

23

23

Payments and other adjustments

(3)

(3)

Accrued balance at March 31, 2022

$

$

$

20

$

20

In 2021, Abbott management approved plans to streamline operations in order to reduce costs and improve efficiencies in Abbott’s diagnostics, established pharmaceuticals, nutritional, and medical devices businesses. Abbott recorded employee-related severance and other charges of approximately $68 million in 2021 of which approximately $16 million was recorded in Cost of products sold, approximately $4 million was recorded in Research and development, and approximately $48 million was recorded in Selling, general and administrative expense.

The following summarizes the activity for these restructurings:

(in millions)

    

Restructuring charges

$

68

Payments and other adjustments

(7)

Accrued balance at December 31, 2021

61

Payments and other adjustments

(16)

Accrued balance at March 31, 2022

$

45

12

Note 7 — Incentive Stock Programs

In the first three months of 2022, Abbott granted 2,594,059 stock options, 514,148 restricted stock awards and 5,303,072 restricted stock units under its incentive stock program. At March 31, 2022, approximately 86 million shares were reserved for future grants. Information regarding the number of options outstanding and exercisable at March 31, 2022 is as follows:

    

Outstanding