What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2022-02-18 compared with 2021-02-19 · 126 added, 159 removed, 1013 unchanged (22% of the section changed)

7 unchanged sentences

Management Report on Internal Control Over Financial Reporting

Report of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm (PCAOB ID:

Report of Independent Registered Public Accounting Firm

35 unchanged sentences

Net actuarial gains (losses) and prior service cost and credits and amortization of net actuarial losses and prior service cost and credits, net of taxes of $ 340 in 2021, $( 79 ) in 2020 and $( 238 ) in 2019

Net (losses) gains on derivative instruments designated as cash flow hedges, net of taxes of $( 87 ) in 2020, $( 17 ) in 2019 and $ 50 in 2018

Net gains (losses) on derivative instruments designated as cash flow hedges, net of taxes of $ 63 in 2021, $( 87 ) in 2020 and $( 17 ) in 2019

Other Comprehensive Income (Loss)

3 unchanged sentences

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

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

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

Accumulated other comprehensive income (loss)

8 unchanged sentences

Share-based compensation

Amortization of inventory step-up

Investing and financing losses, net

105 unchanged sentences

Beginning of Year

Impact of adoption of new accounting standards

Other comprehensive income (loss)

38 unchanged sentences

Net earnings allocated to common shares in 2021, 2020 and 2019 were $ 7.042 billion, $ 4.473 billion and $ 3.666 billion, respectively.

Abbott Laboratories and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Note 1 — Summary of Significant Accounting Policies (Continued)

PENSION AND POST-EMPLOYMENT BENEFITS — Abbott accrues for the actuarially determined cost of pension and post-employment benefits over the service attribution periods of the employees.

2 unchanged sentences

Actuarial losses and gains are amortized over the remaining service attribution periods of the employees under the corridor method.

Abbott Laboratories and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Note 1 — Summary of Significant Accounting Policies (Continued)

FAIR VALUE MEASUREMENTS — For assets and liabilities that are measured using quoted prices in active markets, total fair value is the published market price per unit multiplied by the number of units held without consideration of transaction costs.

19 unchanged sentences

Investments in equity securities that are not traded on public stock exchanges are recorded at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments of the same issuer.

Investments in debt securities are classified as held-to-maturity, as management has both the intent and ability to hold these securities to maturity, and are reported at cost, net of any unamortized premium or discount.

Income relating to these securities is reported as interest income.

TRADE RECEIVABLE VALUATIONS — Accounts receivable are stated at the net amount expected to be collected.

5 unchanged sentences

Cost includes material and conversion costs.

Abbott Laboratories and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Note 1 — Summary of Significant Accounting Policies (Continued)

PROPERTY AND EQUIPMENT — Depreciation and amortization are provided on a straight-line basis over the estimated useful lives of the assets.

7 unchanged sentences

Product liability losses are self-insured.

Abbott Laboratories and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Note 1 — Summary of Significant Accounting Policies (Continued)

RESEARCH AND DEVELOPMENT COSTS — Internal research and development costs are expensed as incurred.

13 unchanged sentences

Recently Adopted Accounting Standards

In February 2018, the FASB issued Accounting Standards Update (ASU) 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income , which allows companies to reclassify stranded tax effects resulting from the 2017 Tax Cuts and Jobs Act, from Accumulated other comprehensive income (loss) to retained earnings (Earnings employed in the business).

Abbott adopted the new standard at the beginning of the fourth quarter of 2018.

As a result of the adoption of the new standard, approximately $ 337 million of stranded tax effects were reclassified from Accumulated other comprehensive income (loss) to Earnings employed in the business.

Abbott Laboratories and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Note 2 — New Accounting Standards (Continued)

In October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740):

Intra-Entity Transfers of Assets Other Than Inventory , which requires the recognition of the income tax effects of intercompany sales and transfers of assets, other than inventory, in the period in which the transfer occurs.

Abbott adopted the standard on January 1, 2018, using a modified retrospective approach and recorded a cumulative catch-up adjustment to Earnings employed in the business in the Consolidated Balance Sheet that was not significant.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses , which changes the methodology to be used to measure credit losses for certain financial instruments and financial assets, including trade receivables.

In June 2016, the FASB issued Accounting Standards Update (ASU) 2016-13, Financial Instruments – Credit Losses , which changes the methodology to be used to measure credit losses for certain financial instruments and financial assets, including trade receivables.

The new methodology requires the recognition of an allowance that reflects the current estimate of credit losses expected to be incurred over the life of the financial asset.

Abbott adopted the standard on January 1, 2020 and recorded a cumulative adjustment that was not significant to Earnings employed in the business in the Consolidated Balance Sheet.

Recent Accounting Standards Not Yet Adopted

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes , which among other things, eliminates certain exceptions in the current rules regarding the approach for intraperiod tax allocations and the methodology for calculating income taxes in an interim period, and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill.

The standard becomes effective for Abbott in the first quarter of 2021.

Adoption of this new standard will not have a material impact on Abbott’s consolidated financial statements.

Abbott adopted the standard on January 1, 2021.

The new standard did not have an impact on its consolidated financial statements.

Note 3 — Revenue

32 unchanged sentences

The term between invoicing and the payment due date is not significant.

Abbott Laboratories and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Note 3 — Revenue (Continued)

Management exercises judgment in estimating variable consideration.

3 unchanged sentences

Abbott provides rebates to government agencies, wholesalers, group purchasing organizations and other private entities.

Abbott Laboratories and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Note 3 — Revenue (Continued)

Rebate amounts are usually based upon the volume of purchases using contractual or statutory prices for a product.

22 unchanged sentences

The amounts as of December 31, 2021 and 2020 were not significant.

Abbott Laboratories and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Note 3 — Revenue (Continued)

Additionally, the cost of transmitters provided to customers that use Abbott’s remote monitoring service with respect to certain medical devices are capitalized as contract costs.

5 unchanged sentences

Contract assets at the beginning and end of the period, as well as the changes in the balance, were not significant.

Abbott Laboratories and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Note 3 — Revenue (Continued)

Contract liabilities primarily relate to payments received from customers in advance of performance under the contract.

10 unchanged sentences

Balance at December 31, 2021

Note 4 — Discontinued Operations and Business Dispositions

The net earnings of discontinued operations include income tax benefits of $ 24 million in 2020 and $ 39 million in 2018.

The 2020 tax benefits primarily relate to the resolution of various tax positions related to Abbott’s developed markets branded generic pharmaceuticals business which was sold to Mylan Inc.

(Mylan) in 2015.

The tax positions relate to years prior to the sale to Mylan.

The 2018 tax benefits primarily relate to the resolution of various tax positions related to the operations of AbbVie Inc.

(AbbVie) for years prior to the separation.

Abbott completed the separation of AbbVie, which was formed to hold Abbott’s research-based proprietary pharmaceuticals business, in January 2013.

Abbott retained all liabilities for all U.S.

federal and foreign income taxes on income prior to the separation.

Note 4 — Supplemental Financial Information

Other (income) expense, net, for 2021, 2020 and 2019 includes approximately $ 270 million, $ 205 million and $ 225 million of income, respectively, related to the non-service cost components of the net periodic benefit costs associated with the pension and post-retirement medical plans.

Abbott Laboratories and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Note 5 — Supplemental Financial Information (Continued)

The following summarizes the activity for 2020 related to the allowance for doubtful accounts as of December 31, 2020:

The following summarizes the activity related to the allowance for doubtful accounts:

(in millions)

5 unchanged sentences

Balance at December 31, 2020

Provisions/charges to income

Amounts charged off and other deductions

Balance at December 31, 2021

The allowance for doubtful accounts reflects the current estimate of credit losses expected to be incurred over the life of the accounts receivable.

5 unchanged sentences

Equity securities

Abbott’s long-term investments as of December 31, 2020 declined versus the balance as of December 31, 2019 due primarily to investment impairments totaling approximately $ 115 million, recorded in Other (income) expense, net within the Consolidated Statement of Earnings, which was partially offset by approximately $ 35 million of additional investments during 2020.

The decrease in Abbott’s long-term investments as of December 31, 2021 versus the balance as of December 31, 2020 primarily relates to the sale of an equity method investment partially offset by the acquisition of additional investments.

Abbott Laboratories and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Note 4 — Supplemental Financial Information (Continued)

Abbott’s equity securities as of December 31, 2021 and December 31, 2020, include $ 391 million and $ 366 million, respectively, of investments in mutual funds that are held in a rabbi trust acquired as part of the St.

3 unchanged sentences

Abbott also holds certain investments as of December 31, 2021 with a carrying value of $ 256 million that are accounted for under the equity method of accounting and other equity investments with a carrying value of $ 90 million that do not have a readily determinable fair value.

The $ 113 million carrying value is net of an approximately $ 60 million impairment of an investment in 2020 for which Abbott had previously recorded an unrealized gain of approximately $ 50 million in 2018.

Abbott Laboratories and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Note 5 — Supplemental Financial Information (Continued)

An approximately $ 60 million impairment of an investment was recorded in 2020 for which Abbott had previously recorded an unrealized gain of approximately $ 50 million in 2018.

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.

Walk Vascular’s peripheral thrombectomy system will be incorporated into Abbott’s existing endovascular portfolio.

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 consolidated financial statements.

In 2019, in conjunction with the acquisition of Cephea Valve Technologies, Inc., Abbott acquired a research & development (R&D) asset valued at $ 102 million, which was immediately expensed.

The $ 102 million of expense was recorded in the R&D line of Abbott's Consolidated Statement of Earnings.

The $ 102 million of expense was recorded in the Research and development line of Abbott’s Consolidated Statement of Earnings.

(in millions)

33 unchanged sentences

The total amount of goodwill reported was $ 23.2 billion at December 31, 2021 and $ 23.7 billion at December 31, 2020.

Foreign currency translation adjustments increased goodwill by approximately $ 550 million in 2020 and decreased goodwill $ 103 million in 2019.

Foreign currency translation adjustments decreased goodwill by $ 532 million in 2021 and increased goodwill by $ 550 million in 2020.

The amount of goodwill related to reportable segments at December 31, 2021 was $ 2.8 billion for the Established Pharmaceutical Products segment, $ 286 million for the Nutritional Products segment, $ 3.7 billion for the Diagnostic Products segment, and $ 16.4 billion for the Medical Devices segment.

There was no reduction of goodwill relating to impairments in 2020 and 2019.

There were no reductions of goodwill relating to impairments in 2021 and 2020.

Indefinite-lived intangible assets, which relate to IPR&D acquired in a business combination, were approximately $ 919 million and $ 1.2 billion at December 31, 2021 and 2020, respectively.

The decrease is due to IPR&D assets primarily related to the Medical Devices segment that became amortizable in 2021, partially offset by an increase of approximately $ 80 million related to a recent acquisition.

In 2020, a $ 55 million impairment of an IPR&D intangible asset related to the Medical Devices segment was recorded in the Research and development line of Abbott’s Consolidated Statement of Earnings.

The gross amount of amortizable intangible assets, primarily product rights and technology, was $ 27.7 billion and $ 27.8 billion as of December 31, 2021 and 2020, respectively, and accumulated amortization was $ 15.9 billion and $ 14.2 billion as of December 31, 2021 and 2020, respectively.

Foreign currency translation adjustments increased intangible assets by approximately $ 67 million in 2020 and decreased intangible assets by $ 71 million in 2019.

Amortizable intangible assets increased by approximately $ 120 million as a result of a recent acquisition and the additional assets are being amortized over 9 years .

Foreign currency translation adjustments decreased intangible assets by $ 197 million in 2021 and increased intangible assets by $ 67 million in 2020.

In 2021, asset impairments related to the Established Pharmaceutical Products segment decreased intangible assets by $ 14 million.

In 2020, asset impairments related to the Medical Devices segment decreased intangible assets by $ 148 million.

The impairment was recorded in the Cost of products sold, excluding amortization of intangible assets line of Abbott’s Consolidated Statement of Earnings.

The impairments were recorded in the Cost of products sold, excluding amortization of intangible assets line of Abbott’s Consolidated Statement of Earnings.

The estimated annual amortization expense for intangible assets recorded at December 31, 2021 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.

2 unchanged sentences

Notes to Consolidated Financial Statements (Continued)

Note 7 — Goodwill and Intangible Assets (Continued)

Indefinite-lived intangible assets, which relate to IPR&D acquired in a business combination, were approximately $ 1.2 billion and $ 1.3 billion at December 31, 2020 and 2019, respectively.

The decrease is due to an IPR&D intangible asset related to the Medical Devices segment that became amortizable in 2020 and a $ 55 million impairment of an IPR&D intangible asset related to the Medical Devices segment that was recorded in the Research and development line of Abbott’s Consolidated Statement of Earnings in 2020.

Note 7 — Restructuring Plans

On May 27, 2021, Abbott management approved a restructuring plan related to its Diagnostic Products segment to align its manufacturing network for COVID-19 diagnostic tests with changes in the second quarter in projected testing demand driven by several factors, including significant reductions in cases in the U.S.

and other major developed countries, the accelerated rollout of COVID-19 vaccines globally and the U.S.

health authority’s updated guidance on testing for fully vaccinated individuals.

In the second quarter of 2021, Abbott recorded charges of $ 499 million under this plan in Cost of products sold.

The charge recognized in the second quarter included fixed asset write-downs of $ 80 million, inventory-related charges of $ 248 million, and other exit costs, which included contract cancellations and employee-related costs of $ 171 million.

In the second half of 2021, as the Delta and Omicron variants of COVID-19 spread and the number of new COVID-19 cases increased significantly, particularly in the U.S., demand for rapid COVID-19 tests increased significantly.

As a result, in the second half of 2021, Abbott sold approximately $ 181 million of inventory that was previously estimated to have no net realizable value under the second quarter restructuring action.

In addition, the estimate of other exit costs was reduced by a net $ 58 million as Abbott fulfilled its purchase obligations under certain contracts for which a liability was recorded in the second quarter or Abbott settled with the counterparty in the second half of 2021.

The following summarizes the activity related to this restructuring action and the status of the related accruals as of December 31, 2021:

(in millions)

Restructuring charges recorded in 2021

Other non-cash

Accrued balance at December 31, 2021

From 2017 to 2021, Abbott management approved restructuring plans as part of the integration of the acquisitions of St.

4 unchanged sentences

Approximately $ 31 million was recorded in Cost of products sold, approximately $ 5 million was recorded in Research and development, and approximately $ 59 million was recorded in Selling, general and administrative expense over the last three years.

As of December 31, 2020, the accrued liabilities remaining in the Consolidated Balance Sheet related to these actions total $ 25 million and primarily represent severance obligations.

As of December 31, 2021, the accrued liabilities remaining in the Consolidated Balance Sheet related to these actions total $ 9 million.

From 2017 to 2020, Abbott management approved plans to streamline operations in order to reduce costs and improve efficiencies in various Abbott businesses including the nutritional, established pharmaceuticals and vascular businesses.

Abbott recorded employee related severance and other charges of approximately $ 36 million in 2020, $ 66 million in 2019 and $ 28 million in 2018.

Approximately $ 6 million in 2020, $ 16 million in 2019 and $ 10 million in 2018 are recorded in Cost of products sold, approximately $ 2 million in 2020, $ 28 million in 2019 and $ 2 million in 2018 are recorded in Research and development, and approximately $ 28 million in 2020, $ 22 million in 2019 and $ 16 million in 2018 are recorded in Selling, general and administrative expense.

As of December 31, 2018, the accrued balance associated with these actions was $ 70 million.

From 2019 to 2020, Abbott recorded employee-related severance and other charges totaling approximately $ 102 million, comprised of $ 36 million in 2020 and $ 66 million in 2019.

Approximately $ 22 million was recorded in Cost of products sold, approximately $ 30 million was recorded in Research and development, and approximately $ 50 million was recorded in Selling, general and administrative expense over the two years.

As of December 31, 2021, the accrued liabilities remaining in the Consolidated Balance Sheet related to these actions total $ 24 million.

In 2021, Abbott management approved plans to streamline operations in order to reduce costs and improve efficiencies in various Abbott businesses including the diagnostics, established pharmaceuticals, nutritional, and medical devices businesses.

Abbott recorded employee-related severance and other charges of approximately $ 68 million.

Approximately $ 16 million was recorded in Cost of products sold, approximately $ 4 million was recorded in Research and development, and approximately $ 48 million was recorded in Selling, general and administrative expense.

Abbott Laboratories and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Note 7 — Restructuring Plans (Continued)

The following summarizes the activity for these restructurings:

(in millions)

Accrued balance at December 31, 2017

Restructuring charges

Payments and other adjustments

Accrued balance at December 31, 2018

Restructuring charges

Payments and other adjustments

Accrued balance at December 31, 2019

Restructuring charges

Restructuring charges in 2021

Payments and other adjustments

4 unchanged sentences

In 2021, Abbott granted 2,865,115 stock options, 497,373 restricted stock awards and 4,721,696 restricted stock units under this program.

Abbott Laboratories and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Note 9 — Incentive Stock Program (Continued)

Under Abbott’s stock incentive programs, the purchase price of shares under option must be at least equal to the fair market value of the common stock on the date of grant, and the maximum term of an option is 10 years .

Options generally vest equally over three years .

Restricted stock awards generally vest over 3 years , with no more than one-third of the award vesting in any one year upon Abbott reaching a minimum return on equity target.

Restricted stock awards generally vest over three years , with no more than one-third of the award vesting in any one year upon Abbott reaching a minimum return on equity target.

Restricted stock units vest over three years and upon vesting, the recipient receives one share of Abbott stock for each vested restricted stock unit.

14 unchanged sentences

Exercisable at December 31, 2021

Abbott Laboratories and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Note 8 — Incentive Stock Program (Continued)

The following table summarizes restricted stock awards and units activity for the year ended December 31, 2021.

5 unchanged sentences

The total unrecognized compensation cost related to all share-based compensation plans at December 31, 2021 amounted to approximately $ 450 million, which is expected to be recognized over the next three years .

Abbott Laboratories and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Note 9 — Incentive Stock Program (Continued)

Total non-cash stock compensation expense charged against income from continuing operations in 2021, 2020 and 2019 for share-based plans totaled approximately $ 640 million, $ 546 million and $ 519 million, respectively, and the tax benefit recognized was approximately $ 267 million, $ 200 million and $ 197 million, respectively.

17 unchanged sentences

3.40 % Notes, due 2023

5-year term loan due 2024

27 unchanged sentences

Any borrowings under the Revolving Credit Agreement will bear interest, at Abbott’s option, based on either a base rate or Eurodollar rate, plus an applicable margin based on Abbott’s credit ratings.

Abbott Laboratories and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Note 10 — Debt and Lines of Credit (Continued)

In 2019, Abbott’s long-term borrowings and debt issuance included the following:

5 unchanged sentences

The proceeds equated to approximately $ 550 million.

Abbott Laboratories and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Note 9 — Debt and Lines of Credit (Continued)

In 2019, Abbott’s repayment of long-term debt included the following:

2 unchanged sentences

Abbott incurred a charge of $ 63 million related to the early repayment of this debt.

The 2.80 % Notes were redeemed under the board of directors’ 2018 bond redemption authorization discussed below.

The 2.80 % Notes were redeemed under a bond redemption authorization approved by the board of directors in 2018.

The 2.9 % Notes were redeemed under a bond redemption authorization approved by the board of directors in September 2019 for the early redemption of up to $ 5 billion of outstanding long-term notes.

The 2019 bond redemption authorization superseded the board’s 2018 authorization.

$ 2.15 billion of the $ 5 billion authorization remans available as of December 31, 2020.

On January 5, 2018, Abbott repaid $ 2.8 billion under a 5-year term loan agreement and $ 1.15 billion of borrowings under its lines of credit.

On February 16, 2018, the board of directors authorized the early redemption of up to $ 5 billion of outstanding long-term notes.

2018 redemptions under this authorization include the following:

● $ 0.947 billion principal amount of its 5.125 % Notes due 2019 – redeemed on March 22, 2018

● $ 1.055 billion of the $ 2.850 billion principal amount of its 2.35 % Notes due 2019 – redeemed on March 22, 2018

● $ 1.300 billion of the $ 1.795 billion outstanding principal amount of its 2.35 % Notes due 2019 – redeemed on June 22, 2018

● $ 0.495 billion outstanding principal amount of its 2.35 % Notes due 2019 – redeemed on September 28, 2018

Abbott incurred a net charge of $ 14 million related to the March 22, 2018 early repayment of debt.

On September 17, 2018, Abbott repaid upon maturity the $ 500 million aggregate principal amount outstanding of the 2.00 % Senior Notes due 2018.

On September 27, 2018, Abbott’s wholly owned subsidiary, Abbott Ireland Financing DAC, completed a euro debt offering of € 3.420 billion of long-term debt consisting of € 1.140 billion of non-interest bearing Senior Notes due 2020 at 99.727 % of par value;

€ 1.140 billion of 0.875 % Senior Notes due 2023 at 99.912 % of par value;

and € 1.140 billion of 1.50 % Senior Notes due 2026 at 99.723 % of par value.

The proceeds equated to approximately $ 4 billion.

The notes are guaranteed by Abbott.

Abbott Laboratories and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Note 10 — Debt and Lines of Credit (Continued)

On October 28, 2018, Abbott redeemed approximately $ 4 billion of debt, which included $ 750 million principal amount of its 2.00 % Notes due 2020;

$ 597 million principal amount of its 4.125 % Notes due 2020;

$ 900 million principal amount of its 3.25 % Notes due 2023;

$ 450 million principal amount of its 3.4 % Notes due 2023;

and $ 1.300 billion principal amount of its 3.75 % Notes due 2026.

These amounts were in addition to the $ 5 billion authorization in 2018 discussed above.

In conjunction with the redemption, Abbott unwound approximately $ 1.1 billion in interest rate swaps relating to the 3.40 % Note due in 2023 and the 3.75 % Note due in 2026.

Abbott incurred a net charge of $ 153 million related to the early repayment of this debt and the unwinding of related interest rate swaps.

Principal payments required on long-term debt outstanding at December 31, 2020 are $ 7 million in 2021, $ 753 million in 2022, $ 2.4 billion in 2023, $ 1.3 billion in 2024, $ 1.5 billion in 2025 and $ 12.5 billion in 2026 and thereafter.

Of the $ 5 billion authorization, $ 2.15 billion remains available as of December 31, 2021.

Principal payments required on long-term debt outstanding at December 31, 2021 are $ 754 million in 2022, $ 2.3 billion in 2023, $ 1.2 billion in 2024, $ 1.5 billion in 2025, $ 3.0 billion in 2026 and $ 9.3 billion in 2027 and thereafter.

At December 31, 2021, Abbott’s long-term debt rating was A+ by Standard & Poor’s Corporation and A2 by Moody’s.

In December 2021, Abbott repaid a short-term facility for approximately $ 195 million.

After the repayment, Abbott has no short-term borrowings.

Abbott’s weighted-average interest rate on short-term borrowings was 0.4 % at December 31, 2020 and 2019.

11 unchanged sentences

As Abbott’s leases typically do not provide an implicit rate, the interest rate used to determine the present value of the payments under each lease typically reflects Abbott’s incremental borrowing rate based on information available at the lease commencement date.

Abbott’s incremental borrowing rates at January 1, 2019 were used for operating leases that commenced prior to January 1, 2019 when ASC 842 was adopted.

Abbott’s incremental borrowing rates at January 1, 2019 were used for operating leases that commenced prior to January 1, 2019 when ASC No.

842 was adopted.

Abbott Laboratories and Subsidiaries

33 unchanged sentences

Where instruments are provided under operating lease arrangements, some portion or the entire lease revenue may be variable and subject to subsequent non-lease component (e.g., reagent) sales.

The allocation of revenue between the lease and non-lease components is based on stand-alone selling prices.

The allocation of revenue between the lease and non-lease components is based on standalone selling prices.

Operating lease revenue represented less than 3 percent of Abbott’s total net sales in the years ended December 31, 2021, 2020 and 2019.

15 unchanged sentences

The change in the value of the debt, which is due to changes in foreign exchange rates, was recorded in Accumulated other comprehensive income (loss), net of tax.

Abbott Laboratories and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Note 11 — Financial Instruments, Derivatives and Fair Value Measures (Continued)

Abbott is a party to interest rate hedge contracts totaling approximately $ 2.9 billion at December 31, 2021 and 2020, to manage its exposure to changes in the fair value of fixed-rate debt.

2 unchanged sentences

Abbott records the contracts at fair value and adjusts the carrying amount of the fixed-rate debt by an offsetting amount.

In October 2018, Abbott unwound approximately $ 1.1 billion in interest rate swaps relating to the 3.40 % Note due in 2023 and the 3.75 % Note due in 2026.

As a part of the unwinding, Abbott paid approximately $ 90 million in cash, which was included in the Financing Activities section of the Consolidated Statement of Cash Flows in 2018.

Abbott Laboratories and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Note 12 — Financial Instruments, Derivatives and Fair Value Measures (Continued)

The following table summarizes the amounts and location of certain derivative financial instruments as of December 31:

29 unchanged sentences

Interest expense

A loss of $ 171 million, a gain of $ 75 million and a loss of $ 100 million were recognized in 2020, 2019 and 2018, respectively, related to foreign currency forward exchange contracts not designated as hedges.

A gain of $ 19 million, a loss of $ 171 million and a gain of $ 75 million were recognized in 2021, 2020 and 2019, respectively, related to foreign currency forward exchange contracts not designated as hedges.

These amounts are reported in the Consolidated Statement of Earnings on the Net foreign exchange (gain) loss line.

19 unchanged sentences

The fair value of the debt was determined based on significant other observable inputs, including current interest rates.

Abbott Laboratories and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Note 12 — 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:

17 unchanged sentences

Total Liabilities

Abbott Laboratories and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Note 11 — Financial Instruments, Derivatives and Fair Value Measures (Continued)

The fair value of foreign currency forward exchange contracts is determined using a market approach, which utilizes values for comparable derivative instruments.

1 unchanged sentence

Contingent consideration relates to businesses acquired by Abbott.

The fair value of the contingent consideration was determined based on an independent appraisal adjusted for the time value of money and other changes in fair value.

The increase in contingent consideration during the year primarily reflects the fair value of the contingent consideration that resulted from a recent acquisition;

the fair value of such contingent consideration was determined based on an independent appraisal.

The maximum amount for certain contingent consideration is not determinable as it is based on a percent of certain sales.

Excluding such contingent consideration, the maximum amount estimated to be due is approximately $ 200 million, which is dependent upon attaining certain sales thresholds or based on the occurrence of certain events, such as regulatory approvals.

Abbott Laboratories and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Excluding such contingent consideration, the maximum amount that may be due under the other contingent consideration arrangements was estimated at December 31, 2021 to be approximately $ 230 million, which is dependent upon attaining certain sales thresholds or upon the occurrence of certain events, such as regulatory approvals.

The increase from the estimate at December 31, 2020 of approximately $ 200 million reflects the additional contingent consideration that resulted from a recent acquisition, partially offset by the expiration of certain contingent consideration arrangements.

Note 12 — Litigation and Environmental Matters

7 unchanged sentences

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.

Abbott Laboratories and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Note 13 — Post-Employment Benefits

17 unchanged sentences

Plan assets at fair value, December 31

Projected benefit obligations greater than plan assets, December 31

Projected benefit obligations less (greater) than plan assets, December 31

Long-term assets

1 unchanged sentence

Long-term liabilities

Net liability

Net asset (liability)

Amounts Recognized in Accumulated Other Comprehensive Income (loss):

1 unchanged sentence

Prior service cost (credits)

Abbott Laboratories and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Note 14 — Post-Employment Benefits (Continued)

The $ 1.3 billion and $ 1.9 billion of defined benefit plan losses in 2020 and 2019, respectively, that increased the projected benefit obligations in those years, primarily reflect the year-over-year decline in the discount rates used to measure the obligations.

The $ 463 million of defined benefit plan gains in 2021 that decreased the projected benefit obligations primarily reflect the year-over-year increase in the discount rates used to measure the obligations.

The $ 1.3 billion of defined benefit plan losses in 2020 that increased the projected benefit obligations primarily reflect the year-over-year decline in the discount rates used to measure the obligations.

The projected benefit obligations for non-U.S.

5 unchanged sentences

Fair value of plan assets

Abbott Laboratories and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Note 13 — Post-Employment Benefits (Continued)

For plans where the accumulated benefit obligations exceeded plan assets at December 31, 2021 and 2020, the aggregate accumulated benefit obligations, the projected benefit obligations and the aggregate plan assets were as follows:

14 unchanged sentences

Other comprehensive income (loss) for each respective year also includes:

net actuarial losses of $ 611 million for defined benefit plans and a gain of $ 23 million for medical and dental plans in 2020, net actuarial losses of $ 944 million for defined benefit plans and a loss of $ 190 million for medical and dental plans in 2019;

net actuarial losses of $ 86 million for defined benefit plans and a gain of $ 53 million for medical and dental plans in 2018.

The net actuarial losses in 2020 and 2019 are primarily due to the year-over-year decline in discount rates partially offset by the impact of actual asset returns in excess of expected returns in each of the period.

Abbott Laboratories and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Note 14 — Post-Employment Benefits (Continued)

net actuarial gains of $ 1.141 billion for defined benefit plans and a gain of $ 45 million for medical and dental plans in 2021;

net actuarial losses of $ 611 million for defined benefit plans and a gain of $ 23 million for medical and dental plans in 2020, and net actuarial losses of $ 944 million for defined benefit plans and a loss of $ 190 million for medical and dental plans in 2019.

The net actuarial gains in 2021 are primarily due to the favorable impact of actual asset returns in excess of expected returns and the year-over-year increase in discount rates.

The net actuarial losses in 2020 are primarily due to the year-over-year decline in discount rates partially offset by the impact of actual asset returns in excess of expected returns.

The weighted average assumptions used to determine benefit obligations for defined benefit plans and medical and dental plans are as follows:

9 unchanged sentences

Year that rate reaches the assumed ultimate rate

The discount rates used to measure liabilities were determined based on high-quality fixed income securities that match the duration of the expected retiree benefits.

The health care cost trend rates represent Abbott’s expected annual rates of change in the cost of health care benefits and are forward projections of health care costs as of the measurement date.

Abbott Laboratories and Subsidiaries

1 unchanged sentence

Note 13 — Post-Employment Benefits (Continued)

The discount rates used to measure liabilities were determined based on high-quality fixed income securities that match the duration of the expected retiree benefits.

The health care cost trend rates represent Abbott’s expected annual rates of change in the cost of health care benefits and are forward projections of health care costs as of the measurement date.

The following table summarizes the bases used to measure the defined benefit and medical and dental plan assets at fair value:

28 unchanged sentences

(e) A mix of index funds and actively managed accounts that are benchmarked to various corporate bond indices.

(f) Primarily United Kingdom, Japan and Eurozone government bonds.

(g) Primarily asset backed securities and an actively managed, diversified fixed income vehicle benchmarked to the one-month Libor / Euribor.

(h) Primarily funds invested by managers that have a global mandate with the flexibility to allocate capital broadly across a wide range of asset classes and strategies including, but not limited to equities, fixed income, commodities, interest rate futures, currencies and other securities to outperform an agreed upon benchmark with specific return and volatility targets.

(f) Primarily United Kingdom, Canada, Japan and Eurozone government bonds.

Abbott Laboratories and Subsidiaries

1 unchanged sentence

Note 13 — Post-Employment Benefits (Continued)

(g) Primarily asset backed securities, bank loans and actively managed, diversified fixed income vehicles benchmarked to Libor.

(h) Primarily hedge funds and funds invested by managers that have a global mandate with the flexibility to allocate capital broadly across a wide range of asset classes and strategies including, but not limited to equities, fixed income, commodities, interest rate futures, currencies and other securities to outperform an agreed upon benchmark with specific return and volatility targets.

(i) Primarily investments in private funds, such as private equity, private credit, private real estate and private energy funds.

4 unchanged sentences

The NAV is based on the value of the underlying assets owned by the fund minus its liabilities.

For approximately half of these funds, investments may be redeemed once per month, with a required 7 to 30 day notice period.

For approximately half of these funds, investments may be redeemed once per week or month, with a required 2 to 30 day notice period.

For the remaining funds, daily redemption of an investment is allowed.

32 unchanged sentences

Abbott’s contributions to this plan were $ 181 million in 2021, $ 164 million in 2020 and $ 158 million in 2019.

The 2018 contributions include amounts related to participants of the St.

Jude Medical Retirement Plan which was terminated in January 2018.

Note 14 — Taxes on Earnings from Continuing Operations

1 unchanged sentence

Deferred income taxes reflect the tax consequences on future years of differences between the tax bases of assets and liabilities and their financial reporting amounts.

In 2021, taxes on earnings from continuing operations include approximately $ 145 million in excess tax benefits associated with share-based compensation and approximately $ 55 million of net tax benefits as a result of the resolution of various tax positions related to prior years.

In 2020, taxes on earnings from continuing operations include the recognition of approximately $ 170 million of tax benefits associated with the impairment of certain assets, approximately $ 140 million of net tax benefits as a result of the resolution of various tax positions related to prior years, and approximately $ 100 million in excess tax benefits associated with share-based compensation.

In 2020, taxes on earnings from continuing operations also include a $ 26 million increase to the transition tax associated with the 2017 TCJA.

In 2020, taxes on earnings from continuing operations also include a $ 26 million increase to the transition tax liability associated with the 2017 TCJA.

The $ 26 million increase to the transition tax liability was the result of the resolution of various tax positions related to prior years.

3 unchanged sentences

The tax computation also requires the determination of the amount of post-1986 E&P considered held in cash and other specified assets.

As of December 31, 2020, the remaining balance of Abbott’s transition tax obligation is approximately $ 805 million, which will be paid over the next six years as allowed by the TCJA.

In 2019, taxes on earnings from continuing operations included an $ 86 million reduction of the transition tax and $ 68 million of tax expense resulting from tax legislation enacted in the fourth quarter of 2019 in India.

As of December 31, 2021, the remaining balance of Abbott’s transition tax obligation is approximately $ 794 million, which will be paid over the next five years as allowed by the TCJA.

Earnings from discontinued operations, net of tax, in 2020 reflect the recognition of $ 24 million of net tax benefits primarily as a result of the resolution of various tax positions related to prior years.

In 2019, taxes on earnings from continuing operations included approximately $ 100 million in excess tax benefits associated with share-based compensation, an $ 86 million reduction of the transition tax and $ 68 million of tax expense resulting from tax legislation enacted in the fourth quarter of 2019 in India.

The $ 86 million reduction to the transition tax liability was the result of the issuance of final transition tax regulations by the U.S.

Department of Treasury in 2019.

In 2018, taxes on earnings from continuing operations included $ 98 million of net tax expense related to the settlement of Abbott’s 2014-2016 federal income tax audit in the U.S., partial settlement of the former St.

Jude Medical consolidated group’s 2014 and 2015 federal income tax returns in the U.S.

and audit settlements in various countries.

In 2018, Abbott also recorded $ 130 million of additional tax expense related to the TCJA;

the $ 130 million reflected a $ 120 million increase in the transition tax from $ 2.89 billion to $ 3.01 billion and a $ 10 million reduction in the net benefit related to the remeasurement of deferred tax assets and liabilities.

Undistributed foreign earnings remain indefinitely reinvested in foreign operations.

55 unchanged sentences

Lapse of statute

The 2021 increase due to prior year tax positions includes approximately $ 714 million of international tax positions for which a deferred tax asset has not been recorded because recognition of the future benefit is not expected.

The total amount of unrecognized tax benefits that, if recognized, would impact the effective tax rate is approximately $ 1.12 billion.

26 unchanged sentences

Total Reportable Segments

(a) Net sales and operating earnings were unfavorably affected by the impact of foreign exchange in 2020, 2019 and 2018.

(a) In 2021, the impact of foreign exchange favorably impacted net sales and unfavorably impacted operating earnings.

In 2020 and 2019, the impact of foreign exchange unfavorably impacted net sales and operating earnings.

Abbott Laboratories and Subsidiaries

12 unchanged sentences

Jude Medical and Alere and restructuring charges in 2021, 2020 and 2019.

2021 restructuring charges include Abbott’s restructuring plan for its COVID-19 test manufacturing network.

Other, net for 2021 also includes costs related to certain litigation.

Other, net in 2020 also includes costs related to asset impairments, partially offset by income from the settlement of litigation.

Other, net in 2018 also includes inventory step-up amortization associated with the acquisition of Alere.

Charges for restructuring actions and other cost reduction initiatives were approximately $ 375 million in 2021, $ 125 million in 2020 and $ 215 million in 2019 .

8 unchanged sentences

Goodwill and intangible assets

All other (c)

(c) All other includes the long-term assets associated with the defined benefit plans of $ 2.27 billion in 2021 and $ 824 million in 2020.

Abbott Laboratories and Subsidiaries

2 unchanged sentences

Net Sales to External

Customers (c)

Customers (d)

(in millions)

United States

The Netherlands

All Other Countries

(d) Sales by country are based on the country that sold the product.

Long-lived assets on a geographic basis primarily include property and equipment.

12 unchanged sentences

This report appears on page 78.

President and Chief Executive Officer

Chairman of the Board and Chief Executive Officer

Executive Vice President, Finance and Chief Financial Officer

19 unchanged sentences

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

45 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data