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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
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x |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2023
OR
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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
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An Illinois Corporation
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I.R.S. Employer Identification No. |
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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:
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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.
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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.
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Large Accelerated Filer
x
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Accelerated Filer
o
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Non-Accelerated Filer
o
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Smaller reporting company
o
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Emerging growth company
o
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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 March 31, 2023, Abbott Laboratories had 1,738,946,799
common shares without par value outstanding.
Abbott Laboratories
Table of Contents
Abbott Laboratories and Subsidiaries
Condensed
Consolidated Statement of Earnings
(Unaudited)
(dollars in millions except per share data; shares in
thousands)
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Three Months Ended |
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March 31 |
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2023 |
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2022 |
Net sales |
$ |
9,747 |
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$ |
11,895 |
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Cost of products sold, excluding amortization of intangible
assets |
4,331 |
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4,987 |
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Amortization of intangible assets |
491 |
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512 |
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Research and development |
654 |
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697 |
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Selling, general and administrative |
2,762 |
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2,787 |
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Total operating cost and expenses |
8,238 |
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8,983 |
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Operating earnings |
1,509 |
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2,912 |
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Interest expense |
153 |
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131 |
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Interest (income) |
(101) |
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(14) |
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Net foreign exchange (gain) loss |
6 |
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(3) |
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Other (income) expense, net |
(111) |
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(78) |
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Earnings before taxes |
1,562 |
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2,876 |
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Taxes on earnings |
244 |
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429 |
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Net Earnings |
$ |
1,318 |
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$ |
2,447 |
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Basic Earnings Per Common Share |
$ |
0.75 |
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$ |
1.38 |
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Diluted Earnings Per Common Share |
$ |
0.75 |
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$ |
1.37 |
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Average Number of Common Shares Outstanding Used for Basic Earnings
Per Common Share |
1,741,738 |
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1,761,911 |
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Dilutive Common Stock Options |
9,977 |
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12,631 |
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Average Number of Common Shares Outstanding Plus Dilutive Common
Stock Options |
1,751,715 |
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1,774,542 |
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Outstanding Common Stock Options Having No Dilutive
Effect |
7,332 |
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2,655 |
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The accompanying notes to the condensed consolidated financial
statements are an integral part of this statement.
Abbott Laboratories and Subsidiaries
Condensed Consolidated Statement of Comprehensive
Income
(Unaudited)
(dollars in millions)
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Three Months Ended |
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March 31 |
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2023 |
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2022 |
Net Earnings |
$ |
1,318 |
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$ |
2,447 |
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Foreign currency translation gain (loss) adjustments |
139 |
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(106) |
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Net actuarial gains (losses) and amortization of net actuarial
losses and prior service costs and credits, net of taxes of $— in
2023 and $13 in 2022
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2 |
|
|
62 |
|
Net gains (losses) for derivative instruments designated as cash
flow hedges and other, net of taxes of $(58) in 2023 and $(15) in
2022
|
(129) |
|
|
(56) |
|
Other comprehensive income (loss) |
12 |
|
|
(100) |
|
Comprehensive Income |
$ |
1,330 |
|
|
$ |
2,347 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
2023 |
|
December 31,
2022 |
Supplemental Accumulated Other Comprehensive Income (Loss)
Information, net of tax: |
|
|
|
Cumulative foreign currency translation (loss)
adjustments |
$ |
(6,594) |
|
|
$ |
(6,733) |
|
Net actuarial (losses) and prior service (costs) and
credits |
(1,491) |
|
|
(1,493) |
|
Cumulative gains (losses) on derivative instruments designated as
cash flow hedges |
46 |
|
|
175 |
|
Accumulated Other Comprehensive Income (Loss) |
$ |
(8,039) |
|
|
$ |
(8,051) |
|
The accompanying notes to the condensed consolidated financial
statements are an integral part of this statement.
Abbott Laboratories and Subsidiaries
Condensed Consolidated Balance Sheet
(Unaudited)
(dollars in
millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
2023 |
|
December 31,
2022 |
Assets |
|
|
|
Current Assets: |
|
|
|
Cash and cash equivalents |
$ |
9,161 |
|
|
$ |
9,882 |
|
Short-term investments |
371 |
|
|
288 |
|
Trade receivables, less allowances of $503 in 2023 and $500 in
2022
|
6,020 |
|
|
6,218 |
|
Inventories: |
|
|
|
Finished products |
3,944 |
|
|
3,805 |
|
Work in process |
805 |
|
|
680 |
|
Materials |
1,924 |
|
|
1,688 |
|
Total inventories |
6,673 |
|
|
6,173 |
|
Prepaid expenses and other receivables |
2,152 |
|
|
2,663 |
|
Total Current Assets |
24,377 |
|
|
25,224 |
|
Investments |
776 |
|
|
766 |
|
Property and equipment, at cost |
20,605 |
|
|
20,212 |
|
Less: accumulated depreciation and amortization |
11,323 |
|
|
11,050 |
|
Net property and equipment |
9,282 |
|
|
9,162 |
|
Intangible assets, net of amortization |
10,006 |
|
|
10,454 |
|
Goodwill |
22,927 |
|
|
22,799 |
|
Deferred income taxes and other assets |
6,426 |
|
|
6,033 |
|
|
$ |
73,794 |
|
|
$ |
74,438 |
|
Liabilities and Shareholders’ Investment |
|
|
|
Current Liabilities: |
|
|
|
Trade accounts payable |
$ |
4,167 |
|
|
$ |
4,607 |
|
Salaries, wages and commissions |
1,098 |
|
|
1,556 |
|
Other accrued liabilities |
5,758 |
|
|
5,845 |
|
Dividends payable |
888 |
|
|
887 |
|
Income taxes payable |
334 |
|
|
343 |
|
Current portion of long-term debt |
2,285 |
|
|
2,251 |
|
Total Current Liabilities |
14,530 |
|
|
15,489 |
|
Long-term debt |
14,615 |
|
|
14,522 |
|
Post-employment obligations, deferred income taxes and other
long-term liabilities |
7,417 |
|
|
7,522 |
|
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: 2023: 1,986,904,170;
2022: 1,986,519,278
|
24,488 |
|
|
24,709 |
|
Common shares held in treasury, at cost — Shares: 2023:
247,957,371; 2022: 248,724,257
|
(15,307) |
|
|
(15,229) |
|
Earnings employed in the business |
35,868 |
|
|
35,257 |
|
Accumulated other comprehensive income (loss) |
(8,039) |
|
|
(8,051) |
|
Total Abbott Shareholders’ Investment |
37,010 |
|
|
36,686 |
|
Noncontrolling Interests in Subsidiaries |
222 |
|
|
219 |
|
Total Shareholders’ Investment |
37,232 |
|
|
36,905 |
|
|
$ |
73,794 |
|
|
$ |
74,438 |
|
The accompanying notes to the condensed consolidated financial
statements are an integral part of this statement.
Abbott Laboratories and Subsidiaries
Condensed Consolidated Statement of Shareholders’
Investment
(Unaudited)
(in millions except shares and per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31 |
|
2023 |
|
2022 |
Common Shares: |
|
|
|
Balance at January 1 |
|
|
|
Shares: 2023: 1,986,519,278; 2022: 1,985,273,421
|
$ |
24,709 |
|
|
$ |
24,470 |
|
Issued under incentive stock programs |
|
|
|
Shares: 2023: 384,892; 2022: 251,632
|
16 |
|
|
14 |
|
Share-based compensation |
296 |
|
|
324 |
|
Issuance of restricted stock awards |
(533) |
|
|
(504) |
|
Balance at March 31 |
|
|
|
Shares: 2023: 1,986,904,170; 2022: 1,985,525,053
|
$ |
24,488 |
|
|
$ |
24,304 |
|
|
|
|
|
Common Shares Held in Treasury: |
|
|
|
Balance at January 1 |
|
|
|
Shares: 2023: 248,724,257; 2022: 221,191,228
|
$ |
(15,229) |
|
|
$ |
(11,822) |
|
Issued under incentive stock programs |
|
|
|
Shares: 2023: 3,933,165; 2022: 4,144,476
|
242 |
|
|
223 |
|
Purchased |
|
|
|
Shares: 2023: 3,166,279; 2022: 17,536,012
|
(320) |
|
|
(2,127) |
|
Balance at March 31 |
|
|
|
Shares: 2023: 247,957,371; 2022: 234,582,764
|
$ |
(15,307) |
|
|
$ |
(13,726) |
|
|
|
|
|
Earnings Employed in the Business: |
|
|
|
Balance at January 1 |
$ |
35,257 |
|
|
$ |
31,528 |
|
Net earnings |
1,318 |
|
|
2,447 |
|
Cash dividends declared on common shares (per share — 2023: $0.51;
2022: $0.47)
|
(890) |
|
|
(826) |
|
Effect of common and treasury share transactions |
183 |
|
|
146 |
|
Balance at March 31 |
$ |
35,868 |
|
|
$ |
33,295 |
|
|
|
|
|
Accumulated Other Comprehensive Income (Loss): |
|
|
|
Balance at January 1 |
$ |
(8,051) |
|
|
$ |
(8,374) |
|
Other comprehensive income (loss) |
12 |
|
|
(100) |
|
Balance at March 31 |
$ |
(8,039) |
|
|
$ |
(8,474) |
|
|
|
|
|
Noncontrolling Interests in Subsidiaries: |
|
|
|
Balance at January 1 |
$ |
219 |
|
|
$ |
222 |
|
Noncontrolling Interests’ share of income, business combinations,
net of distributions and share repurchases |
3 |
|
|
8 |
|
Balance at March 31 |
$ |
222 |
|
|
$ |
230 |
|
The accompanying notes to condensed consolidated financial
statements are an integral part of this statement.
Abbott Laboratories and Subsidiaries
Condensed Consolidated Statement of Cash Flows
(Unaudited)
(dollars in
millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31 |
|
2023 |
|
2022 |
Cash Flow From (Used in) Operating Activities: |
|
|
|
Net earnings |
$ |
1,318 |
|
|
$ |
2,447 |
|
Adjustments to reconcile net earnings to net cash from operating
activities — |
|
|
|
Depreciation |
315 |
|
|
311 |
|
Amortization of intangible assets |
491 |
|
|
512 |
|
Share-based compensation |
281 |
|
|
305 |
|
Trade receivables |
233 |
|
|
(751) |
|
Inventories |
(419) |
|
|
(554) |
|
Other, net |
(1,076) |
|
|
(205) |
|
Net Cash From Operating Activities |
1,143 |
|
|
2,065 |
|
|
|
|
|
Cash Flow From (Used in) Investing Activities: |
|
|
|
Acquisitions of property and equipment |
(380) |
|
|
(321) |
|
|
|
|
|
|
|
|
|
Sales (purchases) of other investment securities, net |
(86) |
|
|
(41) |
|
Other |
4 |
|
|
2 |
|
Net Cash From (Used in) Investing Activities |
(462) |
|
|
(360) |
|
|
|
|
|
Cash Flow From (Used in) Financing Activities: |
|
|
|
Net borrowings (repayments) of short-term debt and
other |
(42) |
|
|
8 |
|
|
|
|
|
Repayments of long-term debt |
— |
|
|
(751) |
|
Purchases of common shares |
(540) |
|
|
(2,307) |
|
Proceeds from stock options exercised |
62 |
|
|
59 |
|
Dividends paid |
(890) |
|
|
(832) |
|
Net Cash From (Used in) Financing Activities |
(1,410) |
|
|
(3,823) |
|
|
|
|
|
Effect of exchange rate changes on cash and cash
equivalents |
8 |
|
|
(6) |
|
|
|
|
|
Net Increase (Decrease) in Cash and Cash Equivalents |
(721) |
|
|
(2,124) |
|
Cash and Cash Equivalents, Beginning of Year |
9,882 |
|
|
9,799 |
|
Cash and Cash Equivalents, End of Period |
$ |
9,161 |
|
|
$ |
7,675 |
|
The accompanying notes to the condensed consolidated financial
statements are an integral part of this statement.
Abbott Laboratories and Subsidiaries
Notes to the Condensed Consolidated Financial
Statements
March 31, 2023
(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, 2022. The condensed consolidated financial
statements include the accounts of the parent company and
subsidiaries, after elimination of intercompany
transactions.
Note 2 — New Accounting Standards
Recent Adopted Accounting Standards
In September 2022, the Financial Accounting Standards Board (FASB)
issued Accounting Standards Update 2022-04, Disclosure of Supplier
Finance Program Obligations, which requires an entity to report
information about its supplier finance program. Abbott adopted the
standard on January 1, 2023. The new standard did not have an
impact on Abbott's condensed consolidated financial
statements.
Abbott Laboratories and Subsidiaries
Notes to the Condensed Consolidated Financial
Statements
March 31, 2023
(Unaudited)
Note 3 — 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 March 31, 2023 |
|
Three Months Ended March 31, 2022 |
(in millions) |
|
U.S. |
|
Int’l |
|
Total |
|
U.S. |
|
Int’l |
|
Total |
Established Pharmaceutical Products — |
|
|
|
|
|
|
|
|
|
|
|
|
Key Emerging Markets |
|
$ |
— |
|
|
$ |
912 |
|
|
$ |
912 |
|
|
$ |
— |
|
|
$ |
906 |
|
|
$ |
906 |
|
Other |
|
— |
|
|
277 |
|
|
277 |
|
|
— |
|
|
241 |
|
|
241 |
|
Total |
|
— |
|
|
1,189 |
|
|
1,189 |
|
|
— |
|
|
1,147 |
|
|
1,147 |
|
Nutritionals — |
|
|
|
|
|
|
|
|
|
|
|
|
Pediatric Nutritionals |
|
459 |
|
|
465 |
|
|
924 |
|
|
338 |
|
|
509 |
|
|
847 |
|
Adult Nutritionals |
|
353 |
|
|
690 |
|
|
1,043 |
|
|
339 |
|
|
708 |
|
|
1,047 |
|
Total |
|
812 |
|
|
1,155 |
|
|
1,967 |
|
|
677 |
|
|
1,217 |
|
|
1,894 |
|
Diagnostics — |
|
|
|
|
|
|
|
|
|
|
|
|
Core Laboratory |
|
289 |
|
|
893 |
|
|
1,182 |
|
|
268 |
|
|
916 |
|
|
1,184 |
|
Molecular |
|
47 |
|
|
100 |
|
|
147 |
|
|
172 |
|
|
248 |
|
|
420 |
|
Point of Care |
|
93 |
|
|
41 |
|
|
134 |
|
|
91 |
|
|
37 |
|
|
128 |
|
Rapid Diagnostics |
|
906 |
|
|
319 |
|
|
1,225 |
|
|
2,181 |
|
|
1,344 |
|
|
3,525 |
|
Total |
|
1,335 |
|
|
1,353 |
|
|
2,688 |
|
|
2,712 |
|
|
2,545 |
|
|
5,257 |
|
Medical Devices — |
|
|
|
|
|
|
|
|
|
|
|
|
Rhythm Management |
|
260 |
|
|
267 |
|
|
527 |
|
|
248 |
|
|
276 |
|
|
524 |
|
Electrophysiology |
|
238 |
|
|
267 |
|
|
505 |
|
|
216 |
|
|
269 |
|
|
485 |
|
Heart Failure |
|
218 |
|
|
63 |
|
|
281 |
|
|
196 |
|
|
54 |
|
|
250 |
|
Vascular |
|
218 |
|
|
399 |
|
|
617 |
|
|
209 |
|
|
410 |
|
|
619 |
|
Structural Heart |
|
210 |
|
|
251 |
|
|
461 |
|
|
190 |
|
|
221 |
|
|
411 |
|
Neuromodulation |
|
155 |
|
|
41 |
|
|
196 |
|
|
143 |
|
|
36 |
|
|
179 |
|
Diabetes Care |
|
479 |
|
|
834 |
|
|
1,313 |
|
|
343 |
|
|
783 |
|
|
1,126 |
|
Total |
|
1,778 |
|
|
2,122 |
|
|
3,900 |
|
|
1,545 |
|
|
2,049 |
|
|
3,594 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
3 |
|
|
— |
|
|
3 |
|
|
3 |
|
|
— |
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
3,928 |
|
|
$ |
5,819 |
|
|
$ |
9,747 |
|
|
$ |
4,937 |
|
|
$ |
6,958 |
|
|
$ |
11,895 |
|
Note: The Acelis Connected Health business was internally
transferred from Rapid Diagnostics to Heart Failure on January 1,
2023. As a result, $29 million of sales for the first quarter
of 2022 were moved from Rapid Diagnostics to Heart
Failure.
Remaining Performance Obligations
As of March 31, 2023, the estimated revenue expected to be
recognized in the future related to performance obligations that
are unsatisfied (or partially unsatisfied) was approximately $4.1
billion in the Diagnostics segment and approximately $450 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 17 percent over
the subsequent 12 months and the remainder thereafter.
Abbott Laboratories and Subsidiaries
Notes to the Condensed Consolidated Financial
Statements
March 31, 2023
(Unaudited)
Note 3 — Revenue (Continued)
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 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.
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, 2022 |
|
$ |
500 |
|
Unearned revenue from cash received during the period |
|
122 |
|
Revenue recognized related to contract liability
balance |
|
(93) |
|
Balance at March 31, 2023 |
|
$ |
529 |
|
Note 4 — 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, 2023 and 2022 were $1.313 billion and $2.438
billion, respectively.
Other, net in Net cash from operating activities in the Condensed
Consolidated Statement of Cash Flows for the first three months of
2023 includes $282 million of pension contributions and the payment
of cash taxes of approximately $122 million. The first three months
of 2022 includes $334 million of pension contributions and the
payment of cash taxes of approximately $195 million.
The following summarizes the activity for the first three months of
2023 related to the allowance for doubtful accounts as of
March 31, 2023:
|
|
|
|
|
|
|
|
|
(in millions) |
|
|
Allowance for Doubtful Accounts: |
|
|
Balance
at December 31, 2022 |
|
$ |
262 |
|
Provisions/charges to income |
|
8 |
|
Amounts charged off and other adjustments |
|
2 |
|
Balance at March 31, 2023 |
|
$ |
272 |
|
Abbott Laboratories and Subsidiaries
Notes to the Condensed Consolidated Financial
Statements
March 31, 2023
(Unaudited)
Note 4 — Supplemental Financial Information
(Continued)
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, 2023
and December 31, 2022 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions) |
|
March 31,
2023 |
|
December 31,
2022 |
Long-term Investments: |
|
|
|
|
Equity securities |
|
$ |
565 |
|
|
$ |
558 |
|
Other |
|
211 |
|
|
208 |
|
Total |
|
$ |
776 |
|
|
$ |
766 |
|
The increase in Abbott’s long-term investments as of March 31,
2023 versus the balance as of December 31, 2022 primarily
relates to an increase in the value of securities held in a rabbi
trust and additional investments,
partially offset by equity method investment losses.
Abbott’s equity securities as of March 31, 2023, include $305
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, 2023
with a carrying value of $162 million that are accounted for under
the equity method of accounting and other equity investments with a
carrying value of approximately $88 million that do not have a
readily determinable fair value.
Note 5 — 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 Foreign
Currency Translation
(Loss) Adjustments |
|
Net Actuarial (Losses) and
Prior Service (Costs) and
Credits |
|
Cumulative Gains (Losses)
on Derivative Instruments
Designated as Cash Flow
Hedges and Other |
(in millions) |
|
2023 |
|
2022 |
|
2023 |
|
2022 |
|
2023 |
|
2022 |
Balance at January 1 |
|
$ |
(6,733) |
|
|
$ |
(5,839) |
|
|
$ |
(1,493) |
|
|
$ |
(2,670) |
|
|
$ |
175 |
|
|
$ |
135 |
|
Other comprehensive income (loss) before
reclassifications |
|
139 |
|
|
(106) |
|
|
2 |
|
|
17 |
|
|
(42) |
|
|
(34) |
|
Amounts reclassified from accumulated other comprehensive
income |
|
— |
|
|
— |
|
|
— |
|
|
45 |
|
|
(87) |
|
|
(22) |
|
Net current period comprehensive income (loss) |
|
139 |
|
|
(106) |
|
|
2 |
|
|
62 |
|
|
(129) |
|
|
(56) |
|
Balance at March 31 |
|
$ |
(6,594) |
|
|
$ |
(5,945) |
|
|
$ |
(1,491) |
|
|
$ |
(2,608) |
|
|
$ |
46 |
|
|
$ |
79 |
|
Abbott Laboratories and Subsidiaries
Notes to the Condensed Consolidated Financial
Statements
March 31, 2023
(Unaudited)
Note 5 — Changes In Accumulated Other Comprehensive Income (Loss)
(Continued)
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 12
for additional details.
Note 6 — Goodwill and Intangible Assets
The total amount of goodwill reported was $22.9 billion at
March 31, 2023 and $22.8 billion at December 31, 2022.
Foreign currency translation adjustments increased goodwill by
approximately $128 million in the first three months of 2023. The
amount of goodwill related to reportable segments at March 31,
2023 was $2.7 billion for the Established Pharmaceutical Products
segment, $286 million for the Nutritional Products segment, $3.5
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
2023.
The gross amount of amortizable intangible assets, primarily
product rights and technology, was $27.4 billion and $27.2 billion
as of March 31, 2023 and December 31, 2022, respectively.
Accumulated amortization was $18.2 billion and $17.6 billion as of
March 31, 2023 and December 31, 2022, respectively.
Foreign currency translation adjustments increased intangible
assets by $43 million in the first three months of 2023. Abbott’s
estimated annual amortization expense for intangible assets is
approximately $2.0 billion in 2023, $1.9 billion in 2024, $1.7
billion in 2025, $1.5 billion in 2026 and $1.2 billion in
2027.
Indefinite-lived intangible assets, which relate to in-process
R&D (IPR&D) acquired in a business combination, were
approximately $807 million as of March 31, 2023 and
December 31, 2022.
Note 7 — Restructuring Plans
In 2022 and 2023, Abbott management approved various plans to
streamline operations in order to reduce costs and improve
efficiencies in its medical devices, nutritional, diagnostic, and
established pharmaceutical businesses. In the first three months of
2023, Abbott recorded employee related severance and other charges
of approximately $17 million, of which approximately $6 million was
recorded in Cost of products sold, and approximately $11 million
was recorded in Selling, general and administrative
expenses.
The following summarizes the activity related to these
restructuring actions and the status of the related accruals as of
March 31, 2023:
|
|
|
|
|
|
|
|
|
(in millions) |
|
|
Accrued balance at December 31, 2022 |
|
$ |
228 |
|
Restructuring charges in 2023 |
|
17 |
|
Payments and other adjustments |
|
(61) |
|
Accrued balance at March 31, 2023 |
|
$ |
184 |
|
Abbott Laboratories and Subsidiaries
Notes to the Condensed Consolidated Financial
Statements
March 31, 2023
(Unaudited)
Note 8 — Incentive Stock Programs
In the first three months of 2023, Abbott granted 1,887,093 stock
options, 445,278 restricted stock awards and 4,761,433 restricted
stock units under its incentive stock program. At March 31,
2023, approximately 74 million shares were reserved for future
grants. Information regarding the number of options outstanding and
exercisable at March 31, 2023 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding |
|
Exercisable |
Number of shares |
|
29,760,644 |
|
|
25,107,006 |
|
Weighted average remaining life
(years)
|
|
5.4 |
|
4.7 |
Weighted average exercise price |
|
$ |
73.33 |
|
|
$ |
65.76 |
|
Aggregate intrinsic value
(in millions)
|
|
$ |
947 |
|
|
$ |
946 |
|
The total unrecognized share-based compensation cost at
March 31, 2023 amounted to approximately $760 million, which
is expected to be recognized over the next three
years.
Note 9 — 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 10 — 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 $7.1 billion at March 31, 2023 and $7.7 billion at
December 31, 2022, 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 March 31, 2023 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
March 31, 2023 and December 31, 2022, Abbott held the
gross notional amounts of $11.4 billion and $12.0 billion,
respectively, of such foreign currency forward exchange
contracts.
Abbott has designated a yen-denominated, 5-year term loan of
approximately $451 million and $446 million as of March 31,
2023 and December 31, 2022, 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 a notional
amount totaling approximately $2.9 billion at March 31, 2023
and December 31, 2022 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.
Abbott Laboratories and Subsidiaries
Notes to the Condensed Consolidated Financial
Statements
March 31, 2023
(Unaudited)
Note 10 — Financial Instruments, Derivatives and Fair Value
Measures (Continued)
The following table summarizes the amounts and location of certain
derivative financial instruments as of March 31, 2023 and
December 31, 2022:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value - Assets |
|
Fair Value - Liabilities |
(in millions) |
|
March 31,
2023 |
|
December 31,
2022 |
|
Balance Sheet Caption |
|
March 31,
2023 |
|
December 31,
2022 |
|
Balance Sheet Caption |
Interest rate swaps designated as fair value hedges: |
|
|
|
|
|
|
|
|
|
|
|
|
Non-current |
|
$ |
— |
|
|
$ |
— |
|
|
Deferred income taxes and other assets |
|
$ |
126 |
|
|
$ |
136 |
|
|
Post-employment obligations, deferred income taxes and other
long-term liabilities |
Current |
|
— |
|
|
— |
|
|
Prepaid expenses and other receivables |
|
21 |
|
|
20 |
|
|
Other accrued liabilities |
Foreign currency forward exchange contracts: |
|
|
|
|
|
|
|
|
|
|
|
|
Hedging instruments |
|
76 |
|
|
304 |
|
|
Prepaid expenses and other receivables |
|
139 |
|
|
96 |
|
|
Other accrued liabilities |
Others not designated as hedges |
|
78 |
|
|
108 |
|
|
Prepaid expenses and other receivables |
|
96 |
|
|
130 |
|
|
Other accrued liabilities |
Debt designated as a hedge of net investment in a foreign
subsidiary |
|
— |
|
|
— |
|
|
n/a |
|
451 |
|
|
446 |
|
|
Long-term debt |
|
|
$ |
154 |
|
|
$ |
412 |
|
|
|
|
$ |
833 |
|
|
$ |
828 |
|
|
|
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 months ended March 31,
2023 and 2022.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (loss) Recognized in Other Comprehensive Income
(loss) |
|
Income (expense) and
Gain (loss) Reclassified into Income |
|
|
|
|
Three Months
Ended March 31 |
|
|
Three Months
Ended March 31 |
|
|
|
(in millions) |
|
2023 |
|
2022 |
|
|
2023 |
|
2022 |
|
|
Income Statement Caption |
Foreign currency forward exchange contracts designated as cash flow
hedges |
|
$ |
(63) |
|
|
$ |
(49) |
|
|
|
$ |
126 |
|
|
$ |
27 |
|
|
|
Cost of products sold |
Debt designated as a hedge of net investment in a foreign
subsidiary |
|
(5) |
|
|
30 |
|
|
|
— |
|
|
— |
|
|
|
n/a |
Interest rate swaps designated as fair value hedges |
|
n/a |
|
n/a |
|
|
9 |
|
|
(121) |
|
|
|
Interest expense |
Abbott Laboratories and Subsidiaries
Notes to the Condensed Consolidated Financial
Statements
March 31, 2023
(Unaudited)
Note 10 — Financial Instruments, Derivatives and Fair Value
Measures (Continued)
Losses of $103 million and $51 million were recognized in the three
months ended March 31, 2023 and 2022, 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 March 31, 2023 and December 31, 2022
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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2023 |
|
December 31, 2022 |
(in millions) |
|
Carrying
Value |
|
Fair
Value |
|
Carrying
Value |
|
Fair
Value |
Long-term Investment Securities: |
|
|
|
|
|
|
|
|
Equity securities |
|
$ |
565 |
|
|
$ |
565 |
|
|
$ |
558 |
|
|
$ |
558 |
|
Other |
|
211 |
|
|
211 |
|
|
208 |
|
|
208 |
|
Total Long-term Debt |
|
(16,900) |
|
|
(16,927) |
|
|
(16,773) |
|
|
(16,313) |
|
Foreign Currency Forward Exchange Contracts: |
|
|
|
|
|
|
|
|
Receivable position |
|
154 |
|
|
154 |
|
|
412 |
|
|
412 |
|
(Payable) position |
|
(235) |
|
|
(235) |
|
|
(226) |
|
|
(226) |
|
Interest Rate Hedge Contracts: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Payable) position |
|
(147) |
|
|
(147) |
|
|
(156) |
|
|
(156) |
|
The fair value of the debt was determined based on significant
other observable inputs, including current interest
rates.
Abbott Laboratories and Subsidiaries
Notes to the Condensed Consolidated Financial
Statements
March 31, 2023
(Unaudited)
Note 10 — 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 |
(in millions) |
|
Outstanding
Balances |
|
Quoted
Prices in
Active
Markets |
|
Significant
Other
Observable
Inputs |
|
Significant
Unobservable
Inputs |
March 31, 2023: |
|
|
|
|
|
|
|
|
Equity securities |
|
$ |
315 |
|
|
$ |
315 |
|
|
$ |
— |
|
|
$ |
— |
|
Foreign currency forward exchange contracts |
|
154 |
|
|
— |
|
|
154 |
|
|
— |
|
Total Assets |
|
$ |
469 |
|
|
$ |
315 |
|
|
$ |
154 |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
Fair value of hedged long-term debt |
|
$ |
2,720 |
|
|
$ |
— |
|
|
$ |
2,720 |
|
|
$ |
— |
|
Interest rate swap derivative financial instruments |
|
147 |
|
|
— |
|
|
147 |
|
|
— |
|
Foreign currency forward exchange contracts |
|
235 |
|
|
— |
|
|
235 |
|
|
— |
|
Contingent consideration related to business
combinations |
|
133 |
|
|
— |
|
|
— |
|
|
133 |
|
Total Liabilities |
|
$ |
3,235 |
|
|
$ |
— |
|
|
$ |
3,102 |
|
|
$ |
133 |
|
|
|
|
|
|
|
|
|
|
December 31, 2022: |
|
|
|
|
|
|
|
|
Equity securities |
|
$ |
307 |
|
|
$ |
307 |
|
|
$ |
— |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
Foreign currency forward exchange contracts |
|
412 |
|
|
— |
|
|
412 |
|
|
— |
|
Total Assets |
|
$ |
719 |
|
|
$ |
307 |
|
|
$ |
412 |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
Fair value of hedged long-term debt |
|
$ |
2,691 |
|
|
$ |
— |
|
|
$ |
2,691 |
|
|
$ |
— |
|
Interest rate swap derivative financial instruments |
|
156 |
|
|
— |
|
|
156 |
|
|
— |
|
Foreign currency forward exchange contracts |
|
226 |
|
|
— |
|
|
226 |
|
|
— |
|
Contingent consideration related to business
combinations |
|
130 |
|
|
— |
|
|
— |
|
|
130 |
|
Total Liabilities |
|
$ |
3,203 |
|
|
$ |
— |
|
|
$ |
3,073 |
|
|
$ |
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 11 — 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.
Abbott Laboratories and Subsidiaries
Notes to the Condensed Consolidated Financial
Statements
March 31, 2023
(Unaudited)
Note 11 — 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
$25 million to $35 million. The recorded accrual balance at
March 31, 2023 for these proceedings and exposures was
approximately $30 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 12 — 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 months ended March 31 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
Ended March 31 |
|
|
Three Months
Ended March 31 |
(in millions) |
|
2023 |
|
2022 |
|
|
2023 |
|
2022 |
Service cost - benefits earned during the period |
|
$ |
60 |
|
|
$ |
96 |
|
|
|
$ |
9 |
|
|
$ |
13 |
|
Interest cost on projected benefit obligations |
|
114 |
|
|
76 |
|
|
|
14 |
|
|
10 |
|
Expected return on plan assets |
|
(242) |
|
|
(236) |
|
|
|
(6) |
|
|
(7) |
|
Net amortization of: |
|
|
|
|
|
|
|
|
|
Actuarial loss, net |
|
3 |
|
|
59 |
|
|
|
— |
|
|
5 |
|
Prior service cost (credit) |
|
— |
|
|
— |
|
|
|
(3) |
|
|
(6) |
|
Net cost (credit) |
|
$ |
(65) |
|
|
$ |
(5) |
|
|
|
$ |
14 |
|
|
$ |
15 |
|
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
three months of 2023 and 2022, $282 million and $334 million,
respectively, were contributed to defined benefit plans. In the
first three months of 2023 and 2022, $28 million was contributed in
each year to the post-employment medical and dental
plans.
Note 13 — Taxes on Earnings
Taxes on earnings reflect the estimated annual effective rates and
include charges for interest and penalties. In the first three
months of 2023 and 2022, taxes on earnings include approximately $3
million and $30 million, respectively, in excess tax benefits
associated with share-based compensation. In the first three months
of 2023 and 2022, taxes on earnings also include approximately $22
million and $30 million, respectively, 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 $80 million, including cash
adjustments, within the next twelve months as a result of
concluding various domestic and international tax
matters.
Abbott Laboratories and Subsidiaries
Notes to the Condensed Consolidated Financial
Statements
March 31, 2023
(Unaudited)
Note 14 — 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 and alternate-care testing
sites. For segment reporting purposes, the Core Laboratories
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.
Abbott Laboratories and Subsidiaries
Notes to the Condensed Consolidated Financial
Statements
March 31, 2023
(Unaudited)
Note 14 — 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.
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Net Sales to External Customers |
|
Operating Earnings |
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|
Three Months
Ended March 31 |
|
Three Months
Ended March 31 |
(in millions) |
|
2023 |
|
2022 |
|
2023 |
|
2022 |
Established Pharmaceutical Products |
|
$ |
1,189 |
|
|
$ |
1,147 |
|
|
$ |
300 |
|
|
$ |
242 |
|
Nutritional Products |
|
1,967 |
|
|
1,894 |
|
|
380 |
|
|
251 |
|
Diagnostic Products |
|
2,688 |
|
|
5,257 |
|
|
651 |
|
|
2,564 |
|
Medical Devices |
|
3,900 |
|
|
3,594 |
|
|
1,078 |
|
|
1,083 |
|
Total Reportable Segments |
|
9,744 |
|
|
11,892 |
|
|
2,409 |
|
|
4,140 |
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Other |
|
3 |
|
|
3 |
|
|
|
|
|
Net sales |
|
$ |
9,747 |
|
|
$ |
11,895 |
|
|
|
|
|
Corporate functions and benefit plan costs |
|
|
|
|
|
(77) |
|
|
(114) |
|
Net interest expense |
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|
|
|
|
(52) |
|
|
(117) |
|
Share-based compensation (a) |
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|
|
|
|
(281) |
|
|
(305) |
|
Amortization of intangible assets |
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|
|
|
|
(491) |
|
|
(512) |
|
Other, net (b) |
|
|
|
|
|
54 |
|
|
(216) |
|
Earnings before taxes |
|
|
|
|
|
$ |
1,562 |
|
|
$ |
2,876 |
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______________________________________
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Notes: |
2022 Sales and Operating Earnings for the Diagnostic Products and
Medical Devices reportable segments have been updated to reflect
the internal transfer of the Acelis Connected Health business from
Diagnostic Products to Medical Devices on January 1,
2023.
|
(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 months ended March 31, 2022 includes $120
million of charges related to a voluntary recall within the
Nutritional Products segment.
|
Note 15 — Subsequent Event
On April 27, 2023, Abbott completed the acquisition of
Cardiovascular Systems, Inc. (CSI) for $20 per common share, which
equated to a purchase price of approximately $850 million. The
acquisition was funded with cash on hand. CSI sells an atherectomy
system used in treating peripheral and coronary artery disease. The
acquisition adds complementary technologies to Abbott’s portfolio
of vascular device offerings. The transaction will be accounted for
as a business combination. Abbott has begun the process of
measuring, as of the acquisition date, the acquired assets and
assumed liabilities. Preliminary purchase price allocation
estimates will be disclosed in Abbott’s Form 10-Q for the period
ending June 30, 2023.
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 months ended March 31. Percent changes are versus the prior
year and are based on unrounded numbers.
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Net Sales to External Customers |
(in millions) |
|
Three Months Ended
March 31, 2023 |
|
Three Months Ended
March 31, 2022 |
|
Total
Change |
|
Impact of
Foreign
Exchange |
|
Total Change
Excl. Foreign
Exchange |
|
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|
Established Pharmaceutical Products |
|
$ |
1,189 |
|
|
$ |
1,147 |
|
|
3.7 |
% |
|
(7.4) |
% |
|
11.1 |
% |
Nutritional Products |
|
1,967 |
|
|
1,894 |
|
|
3.8 |
|
|
(3.9) |
|
|
7.7 |
|
Diagnostic Products |
|
2,688 |
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|
5,257 |
|
|
(48.9) |
|
|
(1.8) |
|
|
(47.1) |
|
Medical Devices |
|
3,900 |
|
|
3,594 |
|
|
8.5 |
|
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(3.9) |
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|
12.4 |
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Total Reportable Segments |
|
9,744 |
|
|
11,892 |
|
|
(18.1) |
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(3.3) |
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|
(14.8) |
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Other |
|
3 |
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|
3 |
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n/m |
|
n/m |
|
n/m |
Net Sales |
|
$ |
9,747 |
|
|
$ |
11,895 |
|
|
(18.1) |
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(3.3) |
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|
(14.8) |
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Total U.S. |
|
$ |
3,928 |
|
|
$ |
4,937 |
|
|
(20.4) |
|
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— |
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|
(20.4) |
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Total International |
|
$ |
5,819 |
|
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$ |
6,958 |
|
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(16.4) |
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(5.7) |
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|
(10.7) |
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______________________________________
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|
Notes: |
The Acelis Connected Health business was internally transferred
from Diagnostic Products to Medical Devices on January 1, 2023. As
a result, $29 million of sales for the first quarter of 2022 were
moved from Diagnostic Products to Medical Devices.
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|
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 |
The 14.8 percent decrease in total net sales during the first three
months of 2023, excluding the impact of foreign exchange, reflected
the decrease in demand for Abbott’s rapid diagnostic tests to
detect COVID-19, partially offset by higher growth across other
businesses. Abbott’s COVID-19 testing-related sales totaled
approximately $730 million during the first quarter of 2023 and
approximately $3.3 billion during the first quarter of 2022.
Excluding the impact of COVID-19 testing-related sales, Abbott’s
total net sales increased 4.9 percent. Excluding the impacts of
COVID-19 testing-related sales and foreign exchange, Abbott’s total
net sales increased 9.4 percent. Abbott’s net sales were
unfavorably impacted by changes in foreign exchange rates in the
first quarter as the relatively stronger U.S. dollar decreased
total international sales by 5.7 percent and total sales by 3.3
percent.
Due to the unpredictability of demand for COVID-19 tests, the
future extent to which COVID-19 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 three
months ended March 31. Percent changes are versus the prior year
and are based on unrounded numbers.
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(in millions) |
|
March 31,
2023 |
|
March 31,
2022 |
|
Total
Change |
|
Impact of
Foreign
Exchange |
|
Total Change
Excl. Foreign
Exchange |
Established Pharmaceutical Products — |
|
|
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|
Key Emerging Markets |
|
$ |
912 |
|
|
$ |
906 |
|
|
0.7 |
% |
|
(7.6) |
% |
|
8.3 |
% |
Other Emerging Markets |
|
277 |
|
|
241 |
|
|
15.0 |
|
|
(6.8) |
|
|
21.8 |
|
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|
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Nutritionals — |
|
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|
|
|
|
|
|
|
International Pediatric Nutritionals |
|
465 |
|
|
509 |
|
|
(8.6) |
|
|
(4.7) |
|
|
(3.9) |
|
U.S. Pediatric Nutritionals |
|
459 |
|
|
338 |
|
|
36.1 |
|
|
— |
|
|
36.1 |
|
International Adult Nutritionals |
|
690 |
|
|
708 |
|
|
(2.6) |
|
|
(7.0) |
|
|
4.4 |
|
U.S. Adult Nutritionals |
|
353 |
|
|
339 |
|
|
3.9 |
|
|
— |
|
|
3.9 |
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Diagnostics — |
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Core Laboratory |
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1,182 |
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1,184 |
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(0.2) |
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(5.3) |
|
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5.1 |
|
Molecular |
|
147 |
|
|
420 |
|
|
(65.0) |
|
|
(1.0) |
|
|
(64.0) |
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Point of Care |
|
134 |
|
|
128 |
|
|
4.7 |
|
|
(1.0) |
|
|
5.7 |
|
Rapid Diagnostics |
|
1,225 |
|
|
3,525 |
|
|
(65.3) |
|
|
(0.8) |
|
|
(64.5) |
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|
Medical Devices — |
|
|
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|
|
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|
Rhythm Management |
|
527 |
|
|
524 |
|
|
0.4 |
|
|
(3.6) |
|
|
4.0 |
|
Electrophysiology |
|
505 |
|
|
485 |
|
|
3.9 |
|
|
(4.9) |
|
|
8.8 |
|
Heart Failure |
|
281 |
|
|
250 |
|
|
12.4 |
|
|
(1.2) |
|
|
13.6 |
|
Vascular |
|
617 |
|
|
619 |
|
|
(0.2) |
|
|
(4.1) |
|
|
3.9 |
|
Structural Heart |
|
461 |
|
|
411 |
|
|
12.2 |
|
|
(4.2) |
|
|
16.4 |
|
Neuromodulation |
|
196 |
|
|
179 |
|
|
9.4 |
|
|
(1.8) |
|
|
11.2 |
|
Diabetes Care |
|
1,313 |
|
|
1,126 |
|
|
16.6 |
|
|
(4.4) |
|
|
21.0 |
|
Note: The Acelis Connected Health business was internally
transferred from Rapid Diagnostics to Heart Failure on January 1,
2023. As a result, $29 million of sales for the first quarter of
2022 were moved from Rapid Diagnostics to Heart
Failure.
Excluding the unfavorable effect of foreign exchange, sales in the
Key Emerging Markets for Established Pharmaceutical Products
increased 8.3 percent in the first three months of 2023, led by
growth in several countries, including Brazil, China and southeast
Asia, and across several therapeutic areas, including
cardio-metabolic, respiratory, and central nervous system/pain
management. Other Emerging Markets, excluding the effect of foreign
exchange, increased by 21.8 percent in the first three months of
2023.
Excluding the impact of foreign exchange, total Nutritional
Products sales in the first three months of 2023 increased
7.7 percent.
In
U.S. Pediatric Nutritionals, the 36.1 percent increase in sales in
the first three months of 2023 reflects
the impact of the unfavorable effects of the voluntary recall of
certain infant formula products in the first quarter of 2022,
partially offset by a decrease in 2023 Pedialyte®
sales.
Excluding the effect of foreign exchange, the 3.9 percent decrease
in International Pediatric Nutritional sales in the first three
months of 2023 primarily reflects the impact of exiting the
pediatric nutrition business in China, partially offset by growth
in several other markets.
Excluding the effect of foreign exchange, the increases of 3.9
percent in U.S. Adult Nutritionals and 4.4 percent in International
Adult Nutritionals in the first three months of 2023 were led by
growth of Ensure®
products.
The 47.1 percent decrease in Diagnostic Products sales in the first
three months of 2023, excluding the impact of foreign exchange, was
driven by lower demand for COVID-19 tests. In Rapid Diagnostics,
sales decreased 64.5 percent in the first three months of 2023,
excluding the effect of foreign exchange, due to lower demand for
COVID-19 tests. In the first three months of 2023 and 2022, Rapid
Diagnostics COVID-19 testing-related sales were $704 million and
$3.0 billion, respectively. In the first three months of 2023,
Rapid Diagnostics sales increased 5.1 percent, excluding COVID-19
testing-related sales, and increased 8.0 percent, excluding the
impact of foreign exchange and COVID-19 testing-related
sales.
In Core Laboratory Diagnostics, sales increased 5.1 percent in the
first three months of 2023, excluding the effect of foreign
exchange, due to the higher volume of routine diagnostic testing
performed in hospitals and other laboratories, partially offset by
lower test sales for the detection of COVID-19 IgG and IgM
antibodies. In the first three months of 2023 and 2022, Core
Laboratory Diagnostics COVID-19 testing-related sales were $6
million and $28 million, respectively. In the first three months of
2023, Core Laboratory Diagnostics sales increased 1.7 percent,
excluding COVID-19 testing-related sales, and increased 7.1
percent, excluding the impact of foreign exchange and COVID-19
testing-related sales.
The 64.0 percent decrease in Molecular Diagnostics sales in the
first three months of 2023, excluding the effect of foreign
exchange, was driven by
lower demand for laboratory-based molecular tests for COVID-19 as
well as lower demand for respiratory testing compared to
significantly higher-than-usual demand in the first quarter of
2022.
In the first three months of 2023 and 2022, Molecular Diagnostics
COVID-19 testing-related sales were $20 million and $246 million,
respectively. In the first three months of 2023, Molecular
Diagnostics sales decreased 27.1 percent, excluding COVID-19
testing-related sales, and decreased 24.8 percent, excluding the
impact of foreign exchange and COVID-19 testing-related
sales.
Excluding the effect of foreign exchange, total Medical Devices
sales grew 12.4 percent in the first three months of 2023, led by
double-digit growth in Diabetes Care, Structural Heart, Heart
Failure and Neuromodulation. Higher Diabetes Care sales were driven
by continued growth of FreeStyle Libre®,
Abbott’s continuous glucose monitoring system, in the U.S. and
internationally. FreeStyle Libre sales totaled $1.2 billion in the
first three months of 2023, which reflected a 25.4 percent
increase, excluding the effect of foreign exchange, over the first
three months of 2022 when FreeStyle Libre sales totaled $1.0
billion.
During the first three months of 2023, procedure volumes increased
across the cardiovascular and neuromodulation businesses. In
Structural Heart, the 16.4 percent increase in sales, excluding the
effect of foreign exchange, reflects an acceleration in the growth
of the MitraClip®
product along with contributions from recently launched products,
including Amulet®,
Navitor®,
and TriClip®.
In Vascular, the 3.9 percent increase in sales, excluding the
impact of foreign exchange, during the first three months of 2023
primarily reflects double-digit growth in endovascular
sales.
In Electrophysiology, the 8.8 percent increase in sales, excluding
the effect of foreign exchange, primarily reflects higher procedure
volumes in various European countries and the U.S. In
Neuromodulation the 11.2 percent increase in sales, excluding the
effect of foreign exchange, was driven by the recent launch of the
EternaTM
rechargeable spinal cord stimulation system for the treatment of
chronic pain along with market growth compared to the prior year
period.
In the first three months of 2023, Medical Devices received various
product approvals. In January 2023, Abbott announced that the U.S.
Food and Drug Administration (FDA) had approved Navitor, Abbott's
second-generation transcatheter aortic valve implantation system to
treat people with severe aortic stenosis who are at high or extreme
risk for open-heart surgery. In March 2023, Abbott's Freestyle
Libre continuous glucose monitoring system received U.S. FDA
clearance for integration with automated insulin delivery systems.
In March 2023, the U.S. FDA approved Abbott's
Epic®
Max stented tissue valve to treat people with aortic regurgitation
or stenosis.
The gross profit margin percentage was 50.5 percent for the first
quarter of 2023 compared to 53.8 percent for the first quarter of
2022. The decrease in the first quarter of 2023 reflects the
unfavorable effects of lower sales of COVID-19 tests, foreign
exchange, and higher costs for various manufacturing inputs,
partially offset by the impact in 2022 of the voluntary product
recall in the Nutritional business and the impact in 2023 of gross
margin improvement initiatives.
Research and development (R&D) expenses decreased $43 million,
or 6.2 percent, in the first quarter of 2023 compared to the prior
year. The decrease in R&D expenses in the first quarter of 2023
was primarily driven by the timing of spending on various projects
and the favorable impact of foreign exchange.
Selling, general and administrative expenses decreased $25 million,
or 0.9 percent, in the first quarter of 2023 compared to the prior
year as higher selling and marketing spending to drive growth
across various businesses was offset by the favorable impact of
foreign exchange and the nonrecurrence of 2022 expenses related to
the product recall in the Nutritional segment.
Other (Income) Expense, net
Other income, net increased from $78 million of income in the first
quarter of 2022 to $111 million of income in the first quarter of
2023. The
increase in
the first quarter of 2023 reflects higher income in 2023 related to
the non-service cost components of net pension and post-retirement
medical benefit costs.
Interest Expense, net
Interest expense,
net decreased $65 million
in the first quarter of 2023 due to the impact of higher interest
rates on interest income, 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 three
months of 2023 and 2022, taxes on earnings include approximately $3
million and $30 million, respectively, in excess tax benefits
associated with share-based compensation. In the first three months
of 2023 and 2022, taxes on earnings also include approximately $22
million and $30 million, respectively, 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 $80 million, including cash
adjustments, within the next twelve months as a result of
concluding various domestic and international tax
matters.
Liquidity and Capital Resources March 31, 2023 Compared with
December 31, 2022
The decrease in cash and cash equivalents from $9.9 billion at
December 31, 2022 to $9.2 billion at March 31, 2023
primarily reflects the payment of dividends, share repurchases and
capital expenditures, partially offset by the cash generated from
operations in the first three months of 2023. Working capital was
$9.8 billion at March 31, 2023 and $9.7 billion at
December 31, 2022. The increase in working capital in 2023
primarily reflects an increase in inventory and a decrease in
accounts payable, partially offset by a decrease in cash and cash
equivalents.
In the Condensed Consolidated Statement of Cash Flows, Net cash
from operating activities for the first three months of 2023
totaled approximately $1.1 billion, which reflects a decrease of
$922 million from the prior year. The decrease is primarily due to
a decline in operating earnings, partially offset by the timing of
the collection of trade receivables and a reduction in cash taxes
paid. In the first three months of 2023, Net cash from operating
activities includes $282 million of pension contributions and the
payment of cash taxes of approximately $122 million. In the first
three months of 2022, Net cash from operating activities includes
$334 million of pension contributions and the payment of cash taxes
of approximately $195 million.
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 March 31, 2023, $2.15 billion of the $5 billion authorization
remains available.
At March 31, 2023, 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.
In the first quarter of 2023, Abbott repurchased approximately 3
million of its common shares for $300 million.
As of March 31, 2023, $2.134 billion remains available for
repurchase under the share repurchase program authorized by the
board of directors in December 2021.
In the first quarter of 2023, Abbott declared a quarterly dividend
of $0.51 per share on its common shares, which represents an
increase of 8.5 percent over the $0.47 per share dividend declared
in the first quarter of 2022.
Business Acquisition
On April 27, 2023, Abbott completed the acquisition of
Cardiovascular Systems, Inc. (CSI) for $20 per common share, which
equated to a purchase price of approximately $850 million. The
acquisition was funded with cash on hand. CSI sells an atherectomy
system used in treating peripheral and coronary artery disease. The
acquisition adds complementary technologies to Abbott’s portfolio
of vascular device offerings. The transaction will be accounted for
as a business combination.
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
2022 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, 2022, 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.
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 March 31, 2023, 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, including those described in our Annual Report on
Form 10-K for the year ended December 31, 2022.
Item 2.
Unregistered
Sales of Equity Securities and Use of Proceeds
(c)Issuer
Purchases of Equity Securities
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Period |
|
(a) Total
Number of
Shares (or
Units)
Purchased |
|
(b) Average
Price Paid per
Share (or
Unit) |
|
(c) Total Number
of Shares (or
Units) Purchased
as Part of
Publicly
Announced Plans
or Programs |
|
(d) Maximum
Number (or
Approximate
Dollar Value) of
Shares (or Units)
that May Yet Be
Purchased Under
the Plans or
Programs |
|
January 1, 2023 - January 31, 2023 |
|
— |
|
(1)
|
$ |
— |
|
|
— |
|
|
$ |
2,434,092,348 |
|
(2)
|
February 1, 2023 - February 28, 2023 |
|
600,000 |
|
(1)
|
100.933 |
|
|
600,000 |
|
|
2,373,532,278 |
|
(2)
|
March 1, 2023 - March 31, 2023 |
|
2,369,830 |
|
(1)
|
101.037 |
|
|
2,369,830 |
|
|
2,134,092,391 |
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(2)
|
Total |
|
2,969,830 |
|
(1)
|
101.016 |
|
|
2,969,830 |
|
|
$ |
2,134,092,391 |
|
(2)
|
______________________________________
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.
Item 6.
Exhibits
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Exhibit
No. |
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Exhibit |
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3.1 |
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10.1 |
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31.1 |
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31.2 |
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|
Exhibits 32.1 and 32.2 are furnished herewith and should not be
deemed to be “filed” under the Securities Exchange Act of
1934. |
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32.1 |
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32.2 |
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101 |
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The following financial statements and notes from the Abbott
Laboratories Quarterly Report on Form 10-Q for the quarter ended
March 31, 2023, 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. |
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104 |
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Cover Page Interactive Data File (the cover page XBRL tags are
embedded in the Inline XBRL document and included in Exhibit
101). |
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.
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ABBOTT LABORATORIES |
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By: |
/s/ ROBERT E. FUNCK, JR. |
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Robert E. Funck, Jr. |
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Executive Vice President, Finance
and Chief Financial Officer |
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Date: May 4, 2023
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