Abbott Laboratories

Abbott Laboratories details

Abbott is a global healthcare leader that helps people live more fully at all stages of life. Its portfolio of life-changing technologies spans the spectrum of healthcare, with leading businesses and products in diagnostics, medical devices, nutritionals and branded generic medicines. Our 109,000 colleagues serve people in more than 160 countries.

Ticker:ABT
Employees: 113000

Filing

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended
September
30, 2022 OR o 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 Park , Illinois 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 x No o 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 x No o 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 x Accelerated Filer o Non-Accelerated Filer o Smaller reporting company o Emerging growth company o 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. o Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x As of
September
30, 2022, Abbott Laboratories had 1,7
43,573,777
common shares without par value outstanding. Table of Contents Abbott Laboratories Table of Contents Part I - Financial Information Page Item 1. Financial Statements and Supplementary Data Condensed Consolidated Statement of Earnings 3 Condensed Consolidated Statement of Comprehensive Income 4 Condensed Consolidated Balance Sheet 5 Condensed Consolidated Statement of Shareholders’ Investment 6 Condensed Consolidated Statement of Cash Flows 8 Notes to the Condensed Consolidated Financial Statements 9 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 22 Item 4. Controls and Procedures 28 Part II - Other Information 28 Item 1. Legal Proceedings 28 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 28 Item 6. Exhibits 29 Signature 30 2 Table of Contents Abbott Laboratories and Subsidiaries Condensed Consolidated Statement of Earnings (Unaudited) (dollars in millions except per share data; shares in thousands) Three Months Ended
Nine Months Ended September 30 September 30 2022 2021 2022 2021 Net sales $ 10,410 $ 10,928 $ 33,562 $ 31,607 Cost of products sold, excluding amortization of intangible assets 4,629 4,423 14,549 13,771 Amortization of intangible assets 498 520 1,517 1,533 Research and development 782 672 2,163 1,980 Selling, general and administrative 2,731 2,767 8,275 8,276 Total operating cost and expenses 8,640 8,382 26,504 25,560 Operating earnings 1,770 2,546 7,058 6,047 Interest expense 141 133 404 402 Interest (income) ( 55 ) ( 10 ) ( 95 ) ( 32 ) Net foreign exchange (gain) loss 19 4 16 7 Other (income) expense, net ( 93 ) ( 74 ) ( 253 ) ( 214 ) Earnings before taxes 1,758 2,493 6,986 5,884 Taxes on earnings 323 393 1,086 802 Net Earnings $ 1,435 $ 2,100 $ 5,900 $ 5,082 Basic Earnings Per Common Share $ 0.82 $ 1.18 $ 3.35 $ 2.85 Diluted Earnings Per Common Share $ 0.81 $ 1.17 $ 3.32 $ 2.83 Average Number of Common Shares Outstanding Used for Basic Earnings Per Common Share 1,752,968 1,774,516 1,756,209 1,776,870 Dilutive Common Stock Options 10,685 14,483 11,638 14,407 Average Number of Common Shares Outstanding Plus Dilutive Common Stock Options 1,763,653 1,788,999 1,767,847 1,791,277 Outstanding Common Stock Options Having No Dilutive Effect 5,445 2,740 2,655 2,694 The accompanying notes to the condensed consolidated financial statements are an integral part of this statement. 3 Table of Contents Abbott Laboratories and Subsidiaries Condensed Consolidated Statement of Comprehensive Income (Unaudited) (dollars in millions) Three Months Ended Nine Months Ended September 30 September 30 2022 2021 2022 2021 Net Earnings $ 1,435 $ 2,100 $ 5,900 $ 5,082 Foreign currency translation gain (loss) adjustments ( 1,008 ) ( 391 ) ( 1,429 ) ( 762 ) Net actuarial gains (losses) and amortization of net actuarial losses and prior service costs and credits, net of taxes of $ 11 and $ 36 in 2022 and $ 18 and $ 54 in 2021 56 78 172 211 Net gains (losses) for derivative instruments designated as cash flow hedges and other, net of taxes of $ 50 and $ 96 in 2022 and $ 50 and $ 98 in 2021 213 139 186 257 Other comprehensive income (loss) ( 739 ) ( 174 ) ( 1,071 ) ( 294 ) Comprehensive Income $ 696 $ 1,926 $ 4,829 $ 4,788 September 30, December 31, 2022 2021 Supplemental Accumulated Other Comprehensive Income (Loss) Information, net of tax: Cumulative foreign currency translation (loss) adjustments $ ( 7,268 ) $ ( 5,839 ) Net actuarial (losses) and prior service (costs) and credits ( 2,498 ) ( 2,670 ) Cumulative gains (losses) on derivative instruments designated as cash flow hedges and other 321 135 Accumulated other comprehensive income (loss) $ ( 9,445 ) $ ( 8,374 ) The accompanying notes to the condensed consolidated financial statements are an integral part of this statement. 4 Table of Contents Abbott Laboratories and Subsidiaries Condensed Consolidated Balance Sheet (Unaudited) (dollars in millions) September 30, December 31, 2022 2021 Assets Current Assets: Cash and cash equivalents $ 9,594 $ 9,799 Short-term investments 313 450 Trade receivables, less allowances of $ 520 in 2022 and $ 519 in 2021 6,408 6,487 Inventories: Finished products 3,407 3,081 Work in process 726 694 Materials 1,601 1,382 Total inventories 5,734 5,157 Prepaid expenses and other receivables 2,796 2,346 Total Current Assets 24,845 24,239 Investments 764 816 Property and equipment, at cost 19,306 19,364 Less: accumulated depreciation and amortization 10,617 10,405 Net property and equipment 8,689 8,959 Intangible assets, net of amortization 10,850 12,739 Goodwill 22,284 23,231 Deferred income taxes and other assets 5,369 5,212 $ 72,801 $ 75,196 Liabilities and Shareholders’ Investment Current Liabilities: Trade accounts payable $ 4,133 $ 4,408 Salaries, wages and commissions 1,426 1,625 Other accrued liabilities 5,475 5,181 Dividends payable 820 831 Income taxes payable 394 306 Current portion of long-term debt 1,117 754 Total Current Liabilities 13,365 13,105 Long-term debt 15,297 17,296 Post-employment obligations, deferred income taxes and other long-term liabilities 8,255 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: 1,985,919,440 ; 2021: 1,985,273,421 24,560 24,470 Common shares held in treasury, at cost — Shares: 2022: 242,345,663 ; 2021: 221,191,228 ( 14,555 ) ( 11,822 ) Earnings employed in the business 35,115 31,528 Accumulated other comprehensive income (loss) ( 9,445 ) ( 8,374 ) Total Abbott Shareholders’ Investment 35,675 35,802 Noncontrolling Interests in Subsidiaries 209 222 Total Shareholders’ Investment 35,884 36,024 $ 72,801 $ 75,196 The accompanying notes to the condensed consolidated financial statements are an integral part of this statement. 5 Table of Contents Abbott Laboratories and Subsidiaries Condensed Consolidated Statement of Shareholders’ Investment (Unaudited) (in millions except shares and per share data) Three Months Ended September 30 2022 2021 Common Shares: Balance at June 30 Shares: 2022: 1,985,676,735 ; 2021: 1,982,553,488 $ 24,429 $ 24,153 Issued under incentive stock programs Shares: 2022: 242,705 ; 2021: 550,366 12 26 Share-based compensation 123 113 Issuance of restricted stock awards ( 4 ) ( 7 ) Balance at September 30 Shares: 2022: 1,985,919,440 ; 2021: 1,983,103,854 $ 24,560 $ 24,285 Common Shares Held in Treasury: Balance at June 30 Shares: 2022: 234,456,992 ; 2021: 209,736,139 $ ( 13,720 ) $ ( 10,340 ) Issued under incentive stock programs Shares: 2022: 528,436 ; 2021: 545,860 31 26 Purchased Shares: 2022: 8,417,107 ; 2021: 5,626,606 ( 866 ) ( 685 ) Balance at September 30 Shares: 2022: 242,345,663 ; 2021: 214,816,885 $ ( 14,555 ) $ ( 10,999 ) Earnings Employed in the Business: Balance at June 30 $ 34,487 $ 29,053 Net earnings 1,435 2,100 Cash dividends declared on common shares (per share — 2022: $ 0.47 ; 2021: $ 0.45 ) ( 822 ) ( 799 ) Effect of common and treasury share transactions 15 22 Balance at September 30 $ 35,115 $ 30,376 Accumulated Other Comprehensive Income (Loss): Balance at June 30 $ ( 8,706 ) $ ( 9,066 ) Other comprehensive income (loss) ( 739 ) ( 174 ) Balance at September 30 $ ( 9,445 ) $ ( 9,240 ) Noncontrolling Interests in Subsidiaries: Balance at June 30 $ 226 $ 229 Noncontrolling Interests’ share of income, business combinations, net of distributions and share repurchases ( 17 ) ( 13 ) Balance at September 30 $ 209 $ 216 The accompanying notes to condensed consolidated financial statements are an integral part of this statement. 6 Table of Contents Abbott Laboratories and Subsidiaries Condensed Consolidated Statement of Shareholders’ Investment (Unaudited) (in millions except shares and per share data) Nine Months Ended September 30 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: 646,019 ; 2021: 1,946,958 36 91 Share-based compensation 572 536 Issuance of restricted stock awards ( 518 ) ( 487 ) Balance at September 30 Shares: 2022: 1,985,919,440 ; 2021: 1,983,103,854 $ 24,560 $ 24,285 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: 4,808,575 ; 2021: 5,524,291 261 265 Purchased Shares: 2022: 25,963,010 ; 2021: 10,414,554 ( 2,994 ) ( 1,222 ) Balance at September 30 Shares: 2022: 242,345,663 ; 2021: 214,816,885 $ ( 14,555 ) $ ( 10,999 ) Earnings Employed in the Business: Balance at January 1 $ 31,528 $ 27,627 Net earnings 5,900 5,082 Cash dividends declared on common shares (per share — 2022: $ 1.41 ; 2021: $ 1.35 ) ( 2,475 ) ( 2,403 ) Effect of common and treasury share transactions 162 70 Balance at September 30 $ 35,115 $ 30,376 Accumulated Other Comprehensive Income (Loss): Balance at January 1 $ ( 8,374 ) $ ( 8,946 ) Other comprehensive income (loss) ( 1,071 ) ( 294 ) Balance at September 30 $ ( 9,445 ) $ ( 9,240 ) Noncontrolling Interests in Subsidiaries: Balance at January 1 $ 222 $ 219 Noncontrolling Interests’ share of income, business combinations, net of distributions and share repurchases ( 13 ) ( 3 ) Balance at September 30 $ 209 $ 216 The accompanying notes to condensed consolidated financial statements are an integral part of this statement. 7 Table of Contents Abbott Laboratories and Subsidiaries Condensed Consolidated Statement of Cash Flows (Unaudited) (dollars in millions) Nine Months Ended September 30 2022 2021 Cash Flow From (Used in) Operating Activities: Net earnings $ 5,900 $ 5,082 Adjustments to reconcile net earnings to net cash from operating activities — Depreciation 943 1,122 Amortization of intangible assets 1,517 1,533 Share-based compensation 570 534 Trade receivables ( 409 ) ( 194 ) Inventories ( 1,224 ) ( 471 ) Other, net ( 42 ) ( 140 ) Net Cash From Operating Activities 7,255 7,466 Cash Flow From (Used in) Investing Activities: Acquisitions of property and equipment ( 1,167 ) ( 1,271 ) Acquisitions of businesses and technologies, net of cash acquired — ( 187 ) Proceeds from business dispositions 48 134 Sales (purchases) of other investment securities, net ( 3 ) ( 27 ) Other 14 14 Net Cash From (Used in) Investing Activities ( 1,108 ) ( 1,337 ) Cash Flow From (Used in) Financing Activities: Net borrowings (repayments) of short-term debt and other 37 ( 7 ) Proceeds from issuance of long-term debt 7 — Repayments of long-term debt ( 753 ) ( 45 ) Purchases of common shares ( 3,110 ) ( 1,325 ) Proceeds from stock options exercised 126 173 Dividends paid ( 2,486 ) ( 2,404 ) Net Cash From (Used in) Financing Activities ( 6,179 ) ( 3,608 ) Effect of exchange rate changes on cash and cash equivalents ( 173 ) ( 57 ) Net Increase (Decrease) in Cash and Cash Equivalents ( 205 ) 2,464 Cash and Cash Equivalents, Beginning of Year 9,799 6,838 Cash and Cash Equivalents, End of Period $ 9,594 $ 9,302
The accompanying notes to the condensed consolidated financial statements are an integral part of this statement. 8 Table of Contents Abbott Laboratories and Subsidiaries Notes to the Condensed Consolidated Financial Statements
September
30, 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 tables provide detail by sales category: Three Months Ended
September 30, 2022 Three Months Ended September 30, 2021 (in millions) U.S. Int’l Total U.S. Int’l Total Established Pharmaceutical Products — Key Emerging Markets $ — $ 993 $ 993 $ — $ 936 $ 936 Other — 333 333 — 329 329 Total — 1,326 1,326 — 1,265 1,265 Nutritionals — Pediatric Nutritionals 357 470 827 586 514 1,100 Adult Nutritionals 329 639 968 333 675 1,008 Total 686 1,109 1,795 919 1,189 2,108 Diagnostics — Core Laboratory 281 938 1,219 291 1,001 1,292 Molecular 65 118 183 162 183 345 Point of Care 92 35 127 100 35 135 Rapid Diagnostics 1,303 839 2,142 1,394 746 2,140 Total 1,741 1,930 3,671 1,947 1,965 3,912 Medical Devices — Rhythm Management 263 270 533 266 305 571 Electrophysiology 225 244 469 192 293 485 Heart Failure 177 51 228 170 59 229 Vascular 213 393 606 219 425 644 Structural Heart 207 213 420 177 215 392 Neuromodulation 156 36 192 149 41 190 Diabetes Care 423 744 1,167 323 798 1,121 Total 1,664 1,951 3,615 1,496 2,136 3,632 Other 3 — 3 6 5 11 Total $ 4,094 $ 6,316 $ 10,410 $ 4,368 $ 6,560 $ 10,928
9 Table of Contents Abbott Laboratories and Subsidiaries Notes to the Condensed Consolidated Financial Statements
September
30, 2022 (Unaudited) Note 2 — Revenue (Continued)
Nine Months Ended September 30, 2022 Nine Months Ended September 30, 2021 (in millions) U.S. Int’l Total U.S. Int’l Total Established Pharmaceutical Products — Key Emerging Markets $ — $ 2,826 $ 2,826 $ — $ 2,672 $ 2,672 Other — 870 870 — 843 843 Total — 3,696 3,696 — 3,515 3,515 Nutritionals — Pediatric Nutritionals 1,108 1,491 2,599 1,622 1,637 3,259 Adult Nutritionals 1,016 2,027 3,043 1,006 1,987 2,993 Total 2,124 3,518 5,642 2,628 3,624 6,252 Diagnostics — Core Laboratory 836 2,788 3,624 845 2,935 3,780 Molecular 308 507 815 431 651 1,082 Point of Care 284 110 394 289 112 401 Rapid Diagnostics 5,523 2,923 8,446 3,178 2,732 5,910 Total 6,951 6,328 13,279 4,743 6,430 11,173 Medical Devices — Rhythm Management 775 830 1,605 776 881 1,657 Electrophysiology 667 773 1,440 580 823 1,403 Heart Failure 523 167 690 483 167 650 Vascular 650 1,228 1,878 684 1,292 1,976 Structural Heart 604 667 1,271 537 654 1,191 Neuromodulation 456 112 568 460 124 584 Diabetes Care 1,165 2,320 3,485 865 2,292 3,157 Total 4,840 6,097 10,937 4,385 6,233 10,618 Other 8 — 8 31 18 49 Total $ 13,923 $ 19,639 $ 33,562 $ 11,787 $ 19,820 $ 31,607 Remaining Performance Obligations As of September 30, 2022, the estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) was approximately $ 3.9 billion in the Diagnostics segment and approximately $ 433
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 Financial Accounting Standards Board (FASB) 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. 10 Table of Contents Abbott Laboratories and Subsidiaries Notes to the Condensed Consolidated Financial Statements
September
30, 2022 (Unaudited) Note 2 — Revenue (Continued) 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
466 Revenue recognized related to contract liability balance ( 508 ) Balance at September 30, 2022 $ 478 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 September 30, 2022 and 2021 were $ 1.429 billion and $ 2.092 billion, respectively, and for the nine months ended September 30, 2022 and 2021 were $ 5.876 billion and $ 5.061 billion, respectively. Other, net in Net cash from operating activities in the Condensed Consolidated Statement of Cash Flows for the first nine months of 2022 includes $ 362 million of pension contributions and the payment of cash taxes of approximately $ 987 million. The first nine months of 2021 includes $ 366 million of pension contributions and the payment of cash taxes of approximately $ 990 million. The following summarizes the activity for the first nine months of 2022 related to the allowance for doubtful accounts as of September 30, 2022: (in millions) Allowance for Doubtful Accounts: Balance at December 31, 2021 $ 313 Provisions/charges to income 10 Amounts charged off and other deductions ( 49 ) Balance at September 30, 2022 $ 274
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. 11 Table of Contents Abbott Laboratories and Subsidiaries Notes to the Condensed Consolidated Financial Statements
September
30, 2022 (Unaudited) Note 3 — Supplemental Financial Information (Continued) The components of long-term investments as of
September 30, 2022 and December 31, 2021 are as follows: September 30, December 31, (in millions) 2022 2021 Long-term Investments: Equity securities $ 604 $ 748 Other 160 68 Total $ 764 $ 816 The decrease in Abbott’s long-term investments as of September 30, 2022 versus the balance as of December 31, 2021 primarily relates to a decrease in the value of investments held in a rabbi trust and the impact of equity method investment losses partially offset by an investment in long-term time deposits. Abbott’s equity securities as of September 30, 2022, include $ 285 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 September 30, 2022 with a carrying value of $ 228 million that are accounted for under the equity method of accounting and other equity investments with a carrying value of approximately $ 83 million that do not have a readily determinable fair value. In September 2021, Abbott acquired 100 percent of Walk Vascular, LLC (Walk Vascular), a commercial-stage medical device company with a minimally invasive thrombectomy system designed to remove peripheral blood clots. The purchase price, the allocation of acquired assets and liabilities, and the revenue and net income contributed by Walk Vascular since the date of acquisition are not material to Abbott’s condensed consolidated financial statements. 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 September 30 Cumulative Gains (Losses) Cumulative Foreign Net Actuarial (Losses) and on Derivative Instruments Currency Translation Prior Service (Costs) and Designated as Cash Flow (Loss) Adjustments Credits Hedges and Other (in millions) 2022 2021 2022 2021 2022 2021 Balance at June 30 $ ( 6,260 ) $ ( 5,230 ) $ ( 2,554 ) $ ( 3,738 ) $ 108 $ ( 98 ) Other comprehensive income (loss) before reclassifications ( 1,008 ) ( 391 ) 15 16 278 70 Amounts reclassified from accumulated other comprehensive income — — 41 62 ( 65 ) 69 Net current period comprehensive income (loss) ( 1,008 ) ( 391 ) 56 78 213 139 Balance at September 30 $ ( 7,268 ) $ ( 5,621 ) $ ( 2,498 ) $ ( 3,660 ) $ 321 $ 41
12 Table of Contents Abbott Laboratories and Subsidiaries Notes to the Condensed Consolidated Financial Statements
September
30, 2022 (Unaudited) Note 4 — Changes In Accumulated Other Comprehensive Income (Loss) (Continued)
Nine Months Ended September 30 Cumulative Gains (Losses) Cumulative Foreign Net Actuarial (Losses) and on Derivative Instruments Currency Translation Prior Service (Costs) and Designated as Cash Flow (Loss) Adjustments Credits Hedges and Other (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 ( 1,429 ) ( 762 ) 45 26 289 138 Amounts reclassified from accumulated other comprehensive income — — 127 185 ( 103 ) 119 Net current period comprehensive income (loss) ( 1,429 ) ( 762 ) 172 211 186 257 Balance at September 30 $ ( 7,268 ) $ ( 5,621 ) $ ( 2,498 ) $ ( 3,660 ) $ 321 $ 41 Reclassified amounts for 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 $ 22.3 billion at September 30, 2022 and $ 23.2 billion at December 31, 2021. Foreign currency translation adjustments decreased goodwill by approximately $ 946 million in the first nine months of 2022. The amount of goodwill related to reportable segments at September 30, 2022 was $ 2.6 billion for the Established Pharmaceutical Products segment, $ 286 million for the Nutritional Products segment, $ 3.5 billion for the Diagnostic Products segment, and $ 15.9 billion for the Medical Devices segment. There was no reduction of goodwill relating to impairments in the first nine months of 2022. The gross amount of amortizable intangible assets, primarily product rights and technology, was $ 26.9 billion and $ 27.7 billion as of September 30, 2022 and December 31, 2021, respectively. Accumulated amortization was $ 16.9 billion and $ 15.9 billion as of September 30, 2022 and December 31, 2021, respectively. Foreign currency translation adjustments decreased intangible assets by $ 250 million in the first nine 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 $ 807 million as of September 30, 2022 and $ 919 million as of December 31, 2021. In the third quarter of 2022, $ 111 million of impairment charges were recorded on the Research and development line of the Condensed Consolidated Statement of Earnings related to certain IPR&D intangible assets associated with the Medical Devices business segment. 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 of 2021 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.
13 Table of Contents Abbott Laboratories and Subsidiaries Notes to the Condensed Consolidated Financial Statements
September
30, 2022 (Unaudited) Note 6 — Restructuring Plans (Continued) 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 of 2021 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
September
30, 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 — — ( 10 ) ( 10 ) Accrued balance at
September 30, 2022 $ — $ — $ 13 $ 13 In 2021, Abbott management approved plans to streamline operations in order to reduce costs and improve efficiencies in Abbott’s diagnostic, established pharmaceutical, and nutritional businesses. In 2022 and 2021, Abbott management approved plans to streamline operations in its medical devices segment. Abbott recorded employees-related severance and other charges of approximately $ 12 million in the first nine months of 2022 of which approximately $ 5 million was recorded in Cost of products sold, approximately $ 2 million was recorded in Research and development, and approximately $ 5 million was recorded in Selling, general and administrative expense. The following summarizes the activity for these restructurings: (in millions) Restructuring charges recorded in 2021 $ 68 Payments and other adjustments ( 7 ) Accrued balance at December 31, 2021 61 Restructuring charges recorded in 2022 12 Payments and other adjustments ( 39 ) Accrued balance at September 30, 2022 $ 34 14 Table of Contents Abbott Laboratories and Subsidiaries Notes to the Condensed Consolidated Financial Statements September 30, 2022 (Unaudited) Note 7 — Incentive Stock Program In the first nine months of 2022, Abbott granted 2,634,647 stock options, 514,205 restricted stock awards and 5,427,697 restricted stock units under its incentive stock program. At September 30, 2022, approximately 87 million shares were reserved for future grants. Information regarding the number of options outstanding and exercisable at September 30, 2022 is as follows: Outstanding Exercisable Number of shares 29,048,449 23,310,464 Weighted average remaining life (years) 5.4 4.6 Weighted average exercise price $ 70.22 $ 59.69 Aggregate intrinsic value (in millions) $ 901 $ 890 The total unrecognized share-based compensation cost at September 30, 2022 amounted to approximately $ 600 million which is expected to be recognized over the next three years . Note 8 — Debt and Lines of Credit On March 15, 2022, Abbott repaid the $ 750 million outstanding principal amount of its 2.55 % Notes upon maturity. Note 9 — Financial Instruments, Derivatives and Fair Value Measures Certain Abbott foreign subsidiaries enter into foreign currency forward exchange contracts to manage exposures to changes in foreign exchange rates primarily for anticipated intercompany purchases by those subsidiaries whose functional currencies are not the U.S. dollar. These contracts, with gross notional amounts totaling $ 7.9 billion at September 30, 2022 and $ 8.6 billion at December 31, 2021, are designated as cash flow hedges of the variability of the cash flows due to changes in foreign exchange rates and are recorded at fair value. Accumulated gains and losses as of September 30, 2022 will be included in Cost of products sold at the time the products are sold, generally through the next twelve to eighteen months . Abbott enters into foreign currency forward exchange contracts to manage currency exposures for foreign currency denominated third-party trade payables and receivables, and for intercompany loans and trade accounts payable where the receivable or payable is denominated in a currency other than the functional currency of the entity. For intercompany loans, the contracts require Abbott to sell or buy foreign currencies, primarily European currencies, in exchange for primarily U.S. dollars and other European currencies. For intercompany and trade payables and receivables, the currency exposures are primarily the U.S. dollar and European currencies. At September 30, 2022 and December 31, 2021, Abbott held the gross notional amounts of $ 10.3 billion and $ 12.2 billion, respectively, of such foreign currency forward exchange contracts. Abbott has designated a yen-denominated, 5 -year term loan of approximately $ 413 million and $ 521 million as of September 30, 2022 and December 31, 2021, respectively, as a hedge of the net investment in certain foreign subsidiaries. The change in the value of the debt, which is due to changes in foreign exchange rates, is recorded in Accumulated other comprehensive income (loss), net of tax. Abbott is a party to interest rate hedge contracts with notional values totaling approximately $ 2.9 billion at September 30, 2022 and December 31, 2021 to manage its exposure to changes in the fair value of fixed-rate debt. These contracts are designated as fair value hedges of the variability of the fair value of fixed-rate debt due to changes in the long-term benchmark interest rates. The effect of the hedge is to change a fixed-rate interest obligation to a variable rate for that portion of the debt. Abbott records the contracts at fair value and adjusts the carrying amount of the fixed-rate debt by an offsetting amount.
15 Table of Contents Abbott Laboratories and Subsidiaries Notes to the Condensed Consolidated Financial Statements
September
30, 2022 (Unaudited) Note 9 — Financial Instruments, Derivatives and Fair Value Measures (Continued)
The following table summarizes the amounts and location of certain derivative financial instruments as of September 30, 2022 and December 31, 2021: Fair Value - Assets Fair Value - Liabilities September 30, Dec. 31, September 30, Dec. 31, (in millions) 2022 2021 Balance Sheet Caption 2022 2021 Balance Sheet Caption Interest rate swaps designated as fair value hedges $ — $ 87 Deferred income taxes and other assets $ 166 $ — Post-employment obligations, deferred income taxes and other long-term liabilities Foreign currency forward exchange contracts: Hedging instruments 760 222 Prepaid expenses and other receivables 66 65 Other accrued liabilities Others not designated as hedges 148 70 Prepaid expenses and other receivables 141 32 Other accrued liabilities Debt designated as a hedge of net investment in a foreign subsidiary — — n/a 413 521 Long-term debt $ 908 $ 379 $ 786 $ 618 The following table summarizes the activity for foreign currency forward exchange contracts designated as cash flow hedges and certain other derivative financial instruments, as well as the amounts and location of income (expense) and gain (loss) reclassified into income for the three and nine months ended September 30, 2022 and 2021. Gain (loss) Recognized in Other Income (expense) and Gain (loss) Comprehensive Income (loss) Reclassified into Income Three Months Nine Months Three Months Nine Months Ended September 30 Ended September 30 Ended September 30 Ended September 30 (in millions) 2022 2021 2022 2021 2022 2021 2022 2021 Income Statement Caption Foreign currency forward exchange contracts designated as cash flow hedges $ 350 $ 96 $ 442 $ 142 $ 79 $ ( 92 ) $ 149 $ ( 207 ) Cost of products sold Debt designated as a hedge of net investment in a foreign subsidiary 24 4 108 41 — — — — n/a Interest rate swaps designated as fair value hedges n/a n/a n/a n/a ( 85 ) ( 14 ) ( 253 ) ( 81
) Interest expense 16 Table of Contents Abbott Laboratories and Subsidiaries Notes to the Condensed Consolidated Financial Statements
September
30, 2022 (Unaudited) Note 9 — Financial Instruments, Derivatives and Fair Value Measures (Continued)
Losses of $ 27 million and $ 18 million were recognized in the three months ended September 30, 2022 and 2021, respectively, related to foreign currency forward exchange contracts not designated as a hedge. Gains of $ 225 million and $ 15 million were recognized in the nine months ended September 30, 2022 and 2021, respectively, related to foreign currency forward exchange contracts not designated as a hedge. These amounts are reported in the Condensed Consolidated Statement of Earnings on the Net foreign exchange (gain) loss line. The carrying values and fair values of certain financial instruments as of September 30, 2022 and December 31, 2021 are shown in the following table. The carrying values of all other financial instruments approximate their estimated fair values. The counterparties to financial instruments consist of select major international financial institutions. Abbott does not expect any losses from non-performance by these counterparties. September 30, 2022 December 31, 2021 Carrying Fair Carrying Fair (in millions) Value Value Value Value Long-term Investment Securities: Equity securities $ 604 $ 604 $ 748 $ 748 Other 160 160 68 68 Total Long-term Debt ( 16,414 ) ( 15,821 ) ( 18,050 ) ( 21,152 ) Foreign Currency Forward Exchange Contracts: Receivable position 908 908 292 292 (Payable) position ( 207 ) ( 207 ) ( 97 ) ( 97 ) Interest Rate Hedge Contracts: Receivable position — — 87 87 (Payable) position ( 166 ) ( 166 )
— — The fair value of the debt was determined based on significant other observable inputs, including current interest rates. 17 Table of Contents Abbott Laboratories and Subsidiaries Notes to the Condensed Consolidated Financial Statements
September
30, 2022 (Unaudited) Note 9 — Financial Instruments, Derivatives and Fair Value Measures (Continued) The following table summarizes the bases used to measure certain assets and liabilities at fair value on a recurring basis in the balance sheet: Basis of Fair Value Measurement Quoted Significant Prices in Other Significant Outstanding Active Observable Unobservable (in millions) Balances Markets Inputs Inputs
September 30, 2022: Equity securities $ 293 $ 293 $ — $ — Foreign currency forward exchange contracts 908 — 908 — Total Assets $ 1,201 $ 293 $ 908 $ — Fair value of hedged long-term debt $ 2,685 $ — $ 2,685 $ — Interest rate swap derivative financial instruments 166 — 166 — Foreign currency forward exchange contracts 207 — 207 — Contingent consideration related to business combinations 138 — — 138 Total Liabilities $ 3,196 $ — $ 3,058 $ 138
December 31, 2021: Equity securities $ 402 $ 402 $ — $ — Interest rate swap derivative financial instruments 87 — 87 — Foreign currency forward exchange contracts 292 — 292 — Total Assets $ 781 $ 402 $ 379 $ — Fair value of hedged long-term debt $ 2,926 $ — $ 2,926 $ — Foreign currency forward exchange contracts 97 — 97 — Contingent consideration related to business combinations 130 — — 130 Total Liabilities $ 3,153 $ — $ 3,023 $ 130 The fair value of foreign currency forward exchange contracts is determined using a market approach, which utilizes values for comparable derivative instruments. The fair value of debt was determined based on the face value of the debt adjusted for the fair value of the interest rate swaps, which is based on a discounted cash flow analysis using significant other observable inputs. The fair value of the contingent consideration was determined based on independent appraisals at the time of acquisition, adjusted for the time value of money and other changes in fair value. Note 10 — Litigation and Environmental Matters Abbott has been identified as a potentially responsible party for investigation and cleanup costs at a number of locations in the United States and Puerto Rico under federal and state remediation laws and is investigating potential contamination at a number of company-owned locations. Abbott has recorded an estimated cleanup cost for each site for which management believes Abbott has a probable loss exposure. No individual site cleanup exposure is expected to exceed $ 4 million, and the aggregate cleanup exposure is not expected to exceed $ 10 million. 18 Table of Contents Abbott Laboratories and Subsidiaries Notes to the Condensed Consolidated Financial Statements
September
30, 2022 (Unaudited) Note 10 — Litigation and Environmental Matters (Continued) Abbott is involved in various claims and legal proceedings, and Abbott estimates the range of possible loss for its legal proceedings and environmental exposures to be from approximately $
40 million to $50 million. The recorded accrual balance at September 30, 2022 for these proceedings and exposures was approximately $45 million. This accrual represents management’s best estimate of probable loss, as defined by FASB ASC No. 450, “Contingencies.” Within the next year, legal proceedings may occur that may result in a change in the estimated loss accrued by Abbott. While it is not feasible to predict the outcome of all such proceedings and exposures with certainty, management believes that their ultimate disposition should not have a material adverse effect on Abbott’s financial position, cash flows, or results of operations. Note 11 — Post-Employment Benefits Retirement plans consist of defined benefit, defined contribution, and medical and dental plans. Net periodic benefit costs, other than service costs, are recognized in the Other (income) expense, net line of the Condensed Consolidated Statement of Earnings. Net cost recognized for the three and nine months ended September 30 for Abbott’s major defined benefit plans and post-employment medical and dental benefit plans is as follows: Defined Benefit Plans Medical and Dental Plans Three Months Nine Months Three Months Nine Months Ended Sept. 30 Ended Sept. 30 Ended Sept. 30 Ended Sept. 30 (in millions) 2022 2021 2022 2021 2022 2021 2022 2021 Service cost - benefits earned during the period $ 92 $ 98 $ 282 $ 294 $ 13 $ 14 $ 38 $ 42 Interest cost on projected benefit obligations 74 62 225 186 9 8 27 25 Expected return on plan assets ( 231 ) ( 211 ) ( 701 ) ( 633 ) ( 8 ) ( 6 ) ( 23 ) ( 20 ) Net amortization of: Actuarial loss, net 58 79 174 238 2 7 8 21 Prior service cost (credit) — — 1 1 ( 6 ) ( 7 ) ( 18 ) ( 21 ) Net cost (credit) $ ( 7 ) $ 28 $ ( 19 ) $ 86 $ 10 $ 16 $ 32 $ 47 Abbott funds its domestic defined benefit plans according to Internal Revenue Service funding limitations. International pension plans are funded according to similar regulations. In the first nine months of 2022 and 2021, $ 362 million and $ 366 million, respectively, were contributed to defined benefit plans. In the first nine months of 2022 and 2021, $ 28 million and $ 26 million, respectively , were contributed to the post-employment medical and dental plans. Note 12 — Taxes on Earnings Taxes on earnings reflect the estimated annual effective rates and include charges for interest and penalties. In the first nine months of 2022 and 2021, taxes on earnings include approximately $ 36 million and $ 97 million, respectively, in excess tax benefits associated with share-based compensation. In the first nine months of 2022, taxes on earnings also include approximately $ 20 million of tax expense as the result of the resolution of various tax positions related to prior years. Tax authorities in various jurisdictions regularly review Abbott’s income tax filings. Abbott believes that it is reasonably possible that the recorded amount of gross unrecognized tax benefits may decrease approximately $ 75 million to $ 100
million, including cash adjustments, within the next twelve months as a result of concluding various domestic and international tax matters. 19 Table of Contents Abbott Laboratories and Subsidiaries Notes to the Condensed Consolidated Financial Statements
September
30, 2022 (Unaudited) Note 13 — Segment Information Abbott’s principal business is the discovery, development, manufacture and sale of a broad line of health care products. Abbott’s products are generally sold directly to retailers, wholesalers, hospitals, health care facilities, laboratories, physicians’ offices and government agencies throughout the world. Abbott’s reportable segments are as follows: Established Pharmaceutical Products — International sales of a broad line of branded generic pharmaceutical products. Nutritional Products — Worldwide sales of a broad line of adult and pediatric nutritional products. Diagnostic Products — Worldwide sales of diagnostic systems and tests for blood banks, hospitals, commercial laboratories, physician offices and alternate-care testing sites. For segment reporting purposes, the Core Laboratory Diagnostics, Rapid Diagnostics, Molecular Diagnostics and Point of Care Diagnostics divisions are aggregated and reported as the Diagnostic Products segment. Medical Devices — Worldwide sales of rhythm management, electrophysiology, heart failure, vascular, structural heart, neuromodulation and diabetes care products. For segment reporting purposes, the Cardiac Rhythm Management, Electrophysiology, Heart Failure, Vascular, Structural Heart, Neuromodulation and Diabetes Care divisions are aggregated and reported as the Medical Devices segment. Abbott’s underlying accounting records are maintained on a legal entity basis for government and public reporting requirements. Segment disclosures are on a performance basis consistent with internal management reporting. Intersegment transfers of inventory are recorded at standard cost and are not a measure of segment operating earnings. The cost of some corporate functions and the cost of certain employee benefits are charged to segments at predetermined rates that approximate cost. Remaining costs, if any, are not allocated to segments. In addition, intangible asset amortization is not allocated to operating segments, and intangible assets and goodwill are not included in the measure of each segment’s assets. 20 Table of Contents Abbott Laboratories and Subsidiaries Notes to the Condensed Consolidated Financial Statements
September
30, 2022 (Unaudited) Note 13 — Segment Information (Continued) The following segment information has been prepared in accordance with the internal accounting policies of Abbott, as described above, and is not presented in accordance with generally accepted accounting principles applied to the consolidated financial statements. Net Sales to External Customers Operating Earnings Three Months
Nine Months Three Months Nine Months Ended Sept. 30 Ended Sept. 30 Ended Sept. 30 Ended Sept. 30 (in millions) 2022 2021 2022 2021 2022 2021 2022 2021 Established Pharmaceutical Products $ 1,326 $ 1,265 $ 3,696 $ 3,515 $ 331 $ 293 $ 831 $ 682 Nutritional Products 1,795 2,108 5,642 6,252 69 431 550 1,388 Diagnostic Products 3,671 3,912 13,279 11,173 1,352 1,652 5,631 4,429 Medical Devices 3,615 3,632 10,937 10,618 1,039 1,160 3,272 3,375 Total Reportable Segments 10,407 10,917 33,554 31,558 2,791 3,536 10,284 9,874 Other 3 11 8 49 Net sales $ 10,410 $ 10,928 $ 33,562 $ 31,607 Corporate functions and benefit plan costs ( 115 ) ( 204 ) ( 352 ) ( 450 ) Net interest expense ( 86 ) ( 123 ) ( 309 ) ( 370 ) Share-based compensation (a) ( 123 ) ( 114 ) ( 570 ) ( 534 ) Amortization of intangible assets ( 498 ) ( 520 ) ( 1,517 ) ( 1,533 ) Other, net (b) ( 211 ) ( 82 ) ( 550 ) ( 1,103 ) Earnings before taxes $ 1,758 $ 2,493 $ 6,986 $ 5,884 ______________________________________ (a) Approximately 45 percent of the annual net cost of share-based awards will typically be recognized in the first quarter due to the timing of the granting of share-based awards. (b) Other, net for the three and nine months ended September 30, 2022 includes $ 10 million and $ 172 million, respectively, of charges related to a voluntary recall within the Nutritional Products segment and $ 111 million of charges related to the impairment of IPR&D intangible assets. Other, net for the three and nine months ended September 30, 2022 and 2021 also includes integration costs associated with the acquisition of Alere and restructuring charges. Restructuring charges in 2021 include Abbott’s restructuring plan for its COVID-19 test manufacturing network. Other, net for the nine months ended September 30, 2021 also includes costs related to certain litigation. 21 Table of Contents Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations Financial Review — Results of Operations Abbott’s revenues are derived primarily from the sale of a broad line of health care products under short-term receivable arrangements. Patent protection and licenses, technological and performance features, and inclusion of Abbott’s products under a contract most impact which products are sold; price controls, competition and rebates most impact the net selling prices of products; and foreign currency translation impacts the measurement of net sales and costs. Abbott’s primary products are medical devices, diagnostic testing products, nutritional products and branded generic pharmaceuticals. The following tables detail sales by reportable segment for the three and nine months ended September 30. Percent changes are versus the prior year and are based on unrounded numbers. Net Sales to External Customers Impact of Total Change Three Months Ended Three Months Ended Total Foreign Excl. Foreign (in millions) September 30, 2022 September 30, 2021 Change Exchange Exchange Established Pharmaceutical Products $ 1,326 $ 1,265 4.9 % (7.3) % 12.2 % Nutritional Products 1,795 2,108 (14.9) (4.6) (10.3) Diagnostic Products 3,671 3,912 (6.2) (5.6) (0.6) Medical Devices 3,615 3,632 (0.5) (6.9) 6.4 Total Reportable Segments 10,407 10,917 (4.7) (6.0) 1.3 Other 3 11 n/m n/m n/m Net Sales $ 10,410 $ 10,928 (4.7) (6.0) 1.3 Total U.S. $ 4,094 $ 4,368 (6.3) — (6.3) Total International $ 6,316 $ 6,560 (3.7) (10.0) 6.3 Net Sales to External Customers Impact of Total Change Nine Months Ended Nine Months Ended Total Foreign Excl. Foreign (in millions) September 30, 2022 September 30, 2021 Change Exchange Exchange Established Pharmaceutical Products $ 3,696 $ 3,515 5.2 % (6.4) % 11.6 % Nutritional Products 5,642 6,252 (9.8) (3.4) (6.4) Diagnostic Products 13,279 11,173 18.9 (4.2) 23.1 Medical Devices 10,937 10,618 3.0 (5.4) 8.4 Total Reportable Segments 33,554 31,558 6.3 (4.7) 11.0 Other 8 49 n/m n/m n/m Net Sales $ 33,562 $ 31,607 6.2 (4.7) 10.9 Total U.S. $ 13,923 $ 11,787 18.1 — 18.1 Total International $ 19,639 $ 19,820 (0.9) (7.4) 6.5 Notes: In order to compute results excluding the impact of exchange rates, current year U.S. dollar sales are multiplied or divided, as appropriate, by the current year average foreign exchange rates and then those amounts are multiplied or divided, as appropriate, by the prior year average foreign exchange rates. n/m = Percent change is not meaningful 22 Table of Contents The 1.3 percent increase in total net sales during the third quarter of 2022, excluding the impact of foreign exchange, reflected growth in the Medical Devices and Established Pharmaceutical Products segments partially offset by lower Nutritional Products sales as well as a year-over-year decline in COVID-19 testing-related revenues. Abbott’s COVID-19 testing-related sales totaled approximately $1.7 billion during the third quarter of 2022 and approximately $1.9 billion during the third quarter of 2021. Excluding the impact of COVID-19 testing-related sales, Abbott’s total net sales decreased 3.1 percent. Excluding the impacts of COVID-19 testing-related sales and foreign exchange, Abbott’s total net sales increased 3.2 percent. Abbott’s net sales were unfavorably impacted by changes in foreign exchange rates in the third quarter as the relatively stronger U.S. dollar decreased total international sales by 10.0 percent and total sales by 6.0 percent. The 10.9 percent increase in total net sales during the first nine months of 2022, excluding the impact of foreign exchange, reflected demand for Abbott’s rapid diagnostic tests to detect COVID-19 as well as growth in the Medical Devices and Established Pharmaceutical Products segments partially offset by lower Nutritional Products sales. Abbott’s COVID-19 testing-related sales totaled approximately $7.3 billion during the first nine months of 2022 and approximately $5.4 billion during the first nine months of 2021. Excluding the impact of COVID-19 testing-related sales, Abbott’s total net sales increased 0.1 percent. Excluding the impacts of COVID-19 testing-related sales and foreign exchange, Abbott’s total net sales increased 4.9 percent. Abbott’s net sales were unfavorably impacted by changes in foreign exchange rates in the first nine months as the relatively stronger U.S. dollar decreased total international sales by 7.4 percent and total sales by 4.7 percent. Due to the unpredictability of the duration and impact of the current COVID-19 pandemic, the future extent to which the COVID-19 pandemic will have a material effect on Abbott’s business, financial condition or results of operations is uncertain. The table below provides detail by sales category for the nine months ended September 30. Percent changes are versus the prior year and are based on unrounded numbers. Impact of Total Change Sept. 30, Sept. 30, Total Foreign Excl. Foreign (in millions) 2022 2021 Change Exchange Exchange Established Pharmaceutical Products — Key Emerging Markets $ 2,826 $ 2,672 5.8 % (6.4) % 12.2 % Other Emerging Markets 870 843 3.2 (6.3) 9.5 Nutritionals — International Pediatric Nutritionals 1,491 1,637 (8.9) (4.3) (4.6) U.S. Pediatric Nutritionals 1,108 1,622 (31.7) — (31.7) International Adult Nutritionals 2,027 1,987 2.0 (7.0) 9.0 U.S. Adult Nutritionals 1,016 1,006 1.0 — 1.0 Diagnostics — Core Laboratory 3,624 3,780 (4.1) (5.7) 1.6 Molecular 815 1,082 (24.7) (2.8) (21.9) Point of Care 394 401 (1.6) (1.2) (0.4) Rapid Diagnostics 8,446 5,910 42.9 (3.8) 46.7 Medical Devices — Rhythm Management 1,605 1,657 (3.2) (4.5) 1.3 Electrophysiology 1,440 1,403 2.6 (5.6) 8.2 Heart Failure 690 650 6.2 (2.4) 8.6 Vascular 1,878 1,976 (5.0) (4.9) (0.1) Structural Heart 1,271 1,191 6.7 (6.1) 12.8 Neuromodulation 568 584 (2.7) (2.1) (0.6) Diabetes Care 3,485 3,157 10.4 (7.0) 17.4 23 Table of Contents Excluding the unfavorable effect of foreign exchange, sales in the Key Emerging Markets for Established Pharmaceutical Products increased 12.2 percent in the first nine months of 2022, led by double-digit growth in several countries, including India and China, and therapeutic areas, including gastroenterology, central nervous system/pain management, and respiratory products. Other Emerging Markets, excluding the effect of foreign exchange, increased by 9.5 percent in the first nine months of 2022. International Pediatric Nutritional sales, excluding the effect of foreign exchange, decreased 4.6 percent in the first nine months of 2022 versus the comparable 2021 period. The decrease reflects the impact of challenging market dynamics in the infant category in Greater China partially offset by higher sales volumes in various countries in Southeast Asia and Latin America. International Adult Nutritional sales, excluding the effect of foreign exchange, increased 9.0 percent, reflecting double digit growth of the Ensure ® and Glucerna ® brands in several countries in Southeast Asia and China. In the first nine months of 2022, U.S. Adult Nutritional sales increased 1.0 percent. In U.S. Pediatric Nutritionals, Abbott initiated a voluntary recall in February 2022 of certain infant powder formula products manufactured at its facility in Sturgis, Michigan and stopped production at the facility. On May 16, 2022, Abbott entered into a consent decree with the U.S. Food and Drug Administration (FDA) on the steps necessary to resume production and maintain the Sturgis facility and operations. On July 1, Abbott restarted partial production at the facility starting with its specialty formula EleCare ® and metabolic formulas. Subsequently, Abbott restarted Similac ® production. The consent decree does not affect any other Abbott plant or operation. During the first three quarters of 2022, Abbott took various actions to mitigate the impact of the recall on the supply of formula in the U.S. These actions included the shipment of infant formula powder into the U.S. from Abbott's FDA-registered facility in Ireland; prioritization of infant formula production at its Columbus, Ohio facility; conversion of other liquid manufacturing lines into manufacturing Similac liquid ready-to-feed product; increased production of powder infant formula at its Casa Grande, Arizona manufacturing site; and importation of product from its facility in Spain as permitted by the FDA. The 31.7 percent decrease in U.S. Pediatric Nutritional sales in the first nine months of 2022 reflects the impact of the recall and the Sturgis production stoppage partially offset by increased demand for Abbott’s Pedialyte ® products. U.S. sales of infant powder formula brands associated with the recall were $277 million and $900 million in the first nine months of 2022 and 2021, respectively. The 23.1 percent increase in Diagnostic Products sales in the first nine months of 2022, excluding the impact of foreign exchange, was driven by demand for Abbott’s portfolio of COVID-19 tests in Rapid Diagnostics and growth in routine diagnostic testing in Molecular Diagnostics. In Core Laboratory Diagnostics, sales increased 1.6 percent in the first nine months of 2022, excluding the effect of foreign exchange, due to the higher volume of routine diagnostic testing from the continued roll-out of the Alinity ® platform and an expanded menu of tests. These increases were partially offset by lower sales of Abbott’s laboratory-based tests for the detection of COVID-19 IgG and IgM antibodies, which determine if someone was previously infected with the COVID-19 virus, as well as market disruptions in China due to COVID-19 quarantine restrictions in various cities primarily during the second quarter of 2022. In the first nine months of 2022 and 2021, Core Laboratory Diagnostics IgG and IgM antibody testing-related sales on Abbott’s ARCHITECT and Alinity i platforms were $51 million and $159 million, respectively. In the first nine months of 2022, Core Laboratory Diagnostics sales decreased 1.3 percent, excluding COVID-19 testing-related sales, and increased 4.6 percent, excluding the impact of foreign exchange and COVID-19 testing-related sales. The 21.9 percent decrease in Molecular Diagnostics sales in the first nine months of 2022, excluding the effect of foreign exchange, was driven by lower demand for Abbott’s laboratory-based molecular tests for COVID-19 partially offset by growth in the base business from increased routine molecular testing . In the first nine months of 2022 and 2021, Molecular Diagnostics COVID-19 testing-related sales were $375 million and $699 million, respectively. In the first nine months of 2022, Molecular Diagnostics sales increased 14.9 percent, excluding COVID-19 testing-related sales, and increased 19.4 percent, excluding the impact of foreign exchange and COVID-19 testing-related sales. In Rapid Diagnostics, sales increased 46.7 percent in the first nine months of 2022, excluding the effect of foreign exchange, due to the demand for Abbott’s COVID-19 tests on its rapid testing platforms, including the Panbio ® system, the ID NOW ® platform, and the BinaxNOW ® COVID-19 Ag Card test. In the first nine months of 2022 and 2021, Rapid Diagnostics COVID-19 testing-related sales were $6.9 billion and $4.5 billion, respectively. In the first nine months of 2022, Rapid Diagnostics sales increased 11.8 percent, excluding COVID-19 testing-related sales, and increased 14.6 percent, excluding the impact of foreign exchange and COVID-19 testing-related sales. These increases reflect higher sales 24 Table of Contents of ID NOW tests for flu, strep, and respiratory syncytial virus (RSV) as well as growth in various other Rapid Diagnostics products. Excluding the effect of foreign exchange, total Medical Devices sales grew 8.4 percent in the first nine months of 2022, driven by growth in Diabetes Care, Electrophysiology, Structural Heart and Heart Failure. Growth in Diabetes Care sales was driven by continued growth of FreeStyle Libre ® , Abbott’s continuous glucose monitoring system, in the U.S. and internationally. FreeStyle Libre sales totaled $3.1 billion in the first nine months of 2022, which reflected a 22.8 percent increase, excluding the effect of foreign exchange, over the first nine months of 2021 when FreeStyle Libre sales totaled $2.7 billion. During the third quarter of 2022, Abbott launched its FreeStyle Libre 3 system in the U.S., which automatically delivers up-to-the-minute glucose readings and 14-day accuracy in a wearable sensor. During the first nine months of 2022, procedure volumes across Abbott’s cardiovascular and neuromodulation businesses were negatively impacted by new surges of COVID-19 in various geographies as well as intermittent COVID-19 lockdown restrictions in China and healthcare staffing challenges throughout the nine months. Despite such challenges, overall volume trends improved in several businesses versus the first nine months of 2021. In Electrophysiology, the 8.2 percent growth, excluding the effect of foreign exchange, reflects the increase in procedure volumes and the continued roll‑out of Abbott’s EnSite ® X EP System with Ensite Omnipolar Technology (OT), a new cardiac mapping platform available in the U.S., Japan and across Europe. In January 2022, Abbott announced FDA clearance for the EnSite ® X EP System with EnSite OT. The system leverages the Advisor ® HD Grid Catheter to provide a 360‑degree view of the heart without regard to the orientation of the catheter in the heart. Growth in Structural Heart during the first nine months of 2022, excluding the effect of foreign exchange, was 12.8 percent, driven by growth across several areas of the business, including Amplatzer ®_ Amulet ® Left Atrial Appendage Occluder, which offers immediate closure of the left atrial appendage, an area in the heart where blood clots can form and MitraClip ® , Abbott's market-leading device for the minimally invasive treatment of mitral regurgitation, a leaky heart valve. In Vascular, sales during the first nine months of 2022, excluding the impact of foreign exchange, were virtually unchanged as higher endovascular sales were offset by the negative effect of lower average pricing for drug-eluting stents (DES) in the U.S. and a lag in the recovery of percutaneous coronary intervention case rates compared to many other cardiovascular procedures. In the first nine months of 2022, Medical Devices received various other product approvals. In February 2022, Abbott received FDA approval for an expanded indication for its CardioMEMS ® HF system, a small implantable sensor and remote monitoring system that can detect early warning signs of worsening heart failure. In April 2022, Abbott announced FDA approval for its Aveir ® single-chamber leadless pacemaker for the treatment of patients in the U.S. with slow heart rhythms. The gross profit margin percentage was 50.7 percent for the third quarter of 2022 compared to 54.8 percent for the third quarter of 2021. The decrease reflects the continued impact of the voluntary product recall and Sturgis manufacturing stoppage in the Nutritional business during the first half of 2022 as well as the prioritization of infant formula sales related to the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC). The decrease also reflects higher manufacturing and supply chain costs across Abbott's businesses, including inflation, commodities and distribution expenses as well as lower COVID-19 testing-related sales in 2022 and the nonrecurrence of a favorable change in estimate in the third quarter of 2021 related to a previously recognized restructuring plan. The gross profit margin was 52.1 percent for the first nine months of 2022 compared to 51.6 percent for the first nine months of 2021. The increase reflects the nonrecurrence of 2021 restructuring charges and the impact of higher sales of COVID-19 rapid tests during the first nine months of 2022. These favorable impacts were partially offset by the impact of the voluntary product recall and Sturgis manufacturing stoppage in the Nutritional business as well as higher manufacturing and supply chain costs across Abbott's businesses, including inflation and higher commodity and distribution expenses. The future extent to which inflation, supply chain disruptions, and unfavorable foreign exchange rates will have a material effect on Abbott's operating results is uncertain. Research and development (R&D) expenses increased $110 million, or 16.2 percent, in the third quarter of 2022 and increased $183 million, or 9.2 percent, in the first nine months of 2022 compared to the prior year. The increase in the third quarter primarily reflects the impairment of certain in-process R&D intangible assets in the third quarter of 2022. The increase in the first nine months was also driven by higher spending on various projects to advance products in development partially offset by the favorable impact of foreign exchange. 25 Table of Contents Selling, general and administrative (SG&A) expenses decreased $36 million, or 1.3 percent, in the third quarter of 2022 compared to the prior year as higher selling and marketing spending to drive growth across various businesses was more than offset by the favorable impact of foreign exchange. SG&A expenses were virtually unchanged in the first nine months of 2022 compared to the prior year as higher selling and marketing spending was offset by the nonrecurrence of certain 2021 litigation costs and the favorable impact of foreign exchange. Other (Income) Expense, net Other income, net increased from $74 million of income in the third quarter of 2021 to $93 million of income in the third quarter of 2022 and from $214 million of income in the first nine months of 2021 to $253 million of income in the first nine months of 2022. The increases in the third quarter and the first nine months of 2022 were primarily due to higher income in 2022 related to the non-service cost components of net pension and post-retirement medical benefit costs. In the first nine months of 2022, the higher year-to-date income related to the non-service cost components was partially offset by the nonrecurrence of a gain on the sale of an equity method investment that occurred in the second quarter of 2021. Interest Expense, net Interest expense, net declined $37 million in the third quarter of 2022 and $61 million in the first nine months of 2022 versus 2021 due to the impact of higher interest rates and cash and short-term investment balances on interest income and the repayment of debt in the first quarter of 2022 partially offset by the impact of interest rate hedge contracts related to certain fixed-rate debt. Taxes on Earnings Taxes on earnings reflect the estimated annual effective rates and include charges for interest and penalties. In the first nine months of 2022 and 2021, taxes on earnings include approximately $36 million and $97 million, respectively, in excess tax benefits associated with share-based compensation. In the first nine months of 2022, taxes on earnings also include approximately $20 million of tax expense as the result of the resolution of various tax positions related to prior years. Tax authorities in various jurisdictions regularly review Abbott’s income tax filings. Abbott believes that it is reasonably possible that the recorded amount of gross unrecognized tax benefits may decrease approximately $75 million to $100 million, including cash adjustments, within the next twelve months as a result of concluding various domestic and international tax matters. Liquidity and Capital Resources September 30, 2022 Compared with December 31, 2021 The decrease in cash and cash equivalents from $9.8 billion at December 31, 2021 to $9.6 billion at September 30, 2022 primarily reflects share repurchases, the payment of dividends, capital expenditures, and the repayment of debt partially offset by the cash generated from operations in the first nine months of 2022. Working capital was $11.5 billion at September 30, 2022 and $11.1 billion at December 31, 2021. The increase in working capital in 2022 primarily reflects an increase in inventory partially offset by an increase in the current portion of long-term debt and a decrease in cash and cash equivalents. In the Condensed Consolidated Statement of Cash Flows, Net cash from operating activities for the first nine months of 2022 totaled approximately $7.3 billion, a decrease of $211 million from the prior year primarily due to an increased investment in working capital partially offset by higher operating earnings. Net cash from operating activities includes $362 million of pension contributions and the payment of cash taxes of approximately $987 million in 2022. Net cash from operating activities includes $366 million of pension contributions and the payment of cash taxes of approximately $990 million in 2021. On March 15, 2022, Abbott repaid the $750 million outstanding principal amount of its 2.55% Notes upon maturity. In September 2019, the board of directors authorized the early redemption of up to $5 billion of outstanding long-term notes. As of September 30, 2022, $2.15 billion of the $5 billion authorization remains available. At September 30, 2022, Abbott’s long-term debt rating was AA- by Standard & Poor’s Corporation and A1 by Moody’s Investors Service. Abbott expects to maintain an investment grade rating. Abbott has readily available financial resources, including lines of credit of $5.0 billion which expire in 2025. 26 Table of Contents In December 2021, the board of directors authorized the repurchase of up to $5 billion of Abbott’s common shares from time to time. The new authorization was in addition to the $1.081 billion portion of the share repurchase program authorized in 2019 that was unused as of December 31, 2021. In the first nine months of 2022, Abbott repurchased 25.7 million of its common shares for $2.965 billion which fully utilized the authorization remaining under the 2019 share repurchase program and a portion of the 2021 authorization. As of September 30, 2022, $3.116 billion remains available for repurchase under the 2021 repurchase program. In each of the first three quarters of 2022, Abbott declared a quarterly dividend of $0.47 per share on its common shares, which represents an increase of 4.4 percent over the $0.45 per share dividend declared in each of the first three quarters of 2021.
Legislative Issues Abbott’s primary markets are highly competitive and subject to substantial government regulations throughout the world. Abbott expects debate to continue over the availability, method of delivery, and payment for health care products and services. It is not possible to predict the extent to which Abbott or the health care industry in general might be adversely affected by these factors in the future. A more complete discussion of these factors is contained in Item 1, Business, and Item 1A, Risk Factors, in the 2021 Annual Report on Form 10-K. Private Securities Litigation Reform Act of 1995 — A Caution Concerning Forward-Looking Statements Under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, Abbott cautions that any forward-looking statements made by Abbott 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" in our Annual Report on Form 10-K for the year ended December 31, 2021, and are incorporated herein 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. 27 Table of Contents PART I. FINANCIAL INFORMATION Item 4. Controls and Procedures (a) Evaluation of disclosure controls and procedures. The Chief Executive Officer, Robert B. Ford, and Chief Financial Officer, Robert E. Funck, Jr., evaluated the effectiveness of Abbott Laboratories’ disclosure controls and procedures as of the end of the period covered by this report, and concluded that Abbott Laboratories’ disclosure controls and procedures were effective to ensure that information Abbott is required to disclose in the reports that it files or submits with the Securities and Exchange Commission (the “Commission”) under the Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms, and to ensure that information required to be disclosed by Abbott in the reports that it files or submits under the Exchange Act is accumulated and communicated to Abbott’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. (b) Changes in internal control over financial reporting. During the quarter ended
September
30, 2022, there were no changes in Abbott’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, Abbott’s internal control over financial reporting. PART II. OTHER INFORMATION Item 1. Legal Proceedings Abbott is involved in various claims, legal proceedings and investigations as described in our Annual Report on Form 10-K for the year ended December 31, 2021 and our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2022. Item 2. Unregistered Sales of Equity Securities and Use of Proceeds (c) Issuer Purchases of Equity Securities (d) Maximum
Number (or (c) Total Number Approximate of Shares (or Dollar Value) of (a) Total Units) Purchased Shares (or Units) Number of (b) Average as Part of that May Yet Be Shares (or Price Paid per Publicly Purchased Under Units) Share (or Announced Plans the Plans or Period Purchased (1) Unit) or Programs Programs (2) July 1, 2022 - July 31, 2022 — $ — — $ 3,981,169,070 August 1, 2022 - August 31, 2022 1,050,000 102.567 1,050,000 3,873,473,475 September 1, 2022 - September 30, 2022 7,363,597 102.895 7,363,597 3,115,796,433 Total 8,413,597 $ 102.854 8,413,597 $ 3,115,796,433 ______________________________________ 1. These shares do not include the shares surrendered to Abbott to satisfy tax withholding obligations in connection with the vesting of restricted stock or restricted stock units. 2. On December 10, 2021, the board of directors authorized the repurchase of up to $5 billion of Abbott common shares, from time to time. 28 Table of Contents Item 6. Exhibits Exhibit No. Exhibit 3.1 By-Laws of Abbott Laboratories, as amended and restated effective September 15, 2022, filed as Exhibit 3.1 to the Abbott Laboratories Current Report on Form 8-K filed on September 15, 2022 . 31.1 Certification of Chief Executive Officer Required by Rule 13a-14(a) (17 CFR 240.13a-14(a)). 31.2 Certification of Chief Financial Officer Required by Rule 13a-14(a) (17 CFR 240.13a-14(a)). Exhibits 32.1 and 32.2 are furnished herewith and should not be deemed to be “filed” under the Securities Exchange Act of 1934. 32.1 Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 32.2 Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 101 The following financial statements and notes from the Abbott Laboratories Quarterly Report on Form 10-Q for the quarter and nine months ended September 30, 2022, formatted in Inline XBRL: (i) Condensed Consolidated Statement of Earnings; (ii) Condensed Consolidated Statement of Comprehensive Income; (iii) Condensed Consolidated Balance Sheet; (iv) Condensed Consolidated Statement of Shareholders’ Investment; (v) Condensed Consolidated Statement of Cash Flows; and (vi) Notes to the Condensed Consolidated Financial Statements. 104 Cover Page Interactive Data File (the cover page XBRL tags are embedded in the Inline XBRL document and included in Exhibit 101).
29 Table of Contents SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ABBOTT LABORATORIES By: /s/ Robert E. Funck, Jr. Robert E. Funck, Jr. Executive Vice President, Finance and Chief Financial Officer Date:
November 1, 2022
30