UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
OR
For the transition period from to
Commission File No.
An |
| I.R.S. Employer Identification No. |
Telephone: (
Securities Registered Pursuant to Section 12(b) of the Act:
Title of Each Class |
| Trading Symbol(s) |
| Name of Each Exchange on Which Registered |
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.
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).
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.
☒ | Accelerated Filer | ☐ | |
Non-Accelerated Filer | ☐ | Smaller reporting company | ☐ |
Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of March 31, 2021, Abbott Laboratories had
Abbott Laboratories
Table of Contents
Page | |
Item 1. Financial Statements and Supplementary Data | |
3 | |
4 | |
5 | |
Condensed Consolidated Statement of Shareholders’ Investment | 6 |
7 | |
8 | |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations | 18 |
23 | |
23 | |
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds | 23 |
24 | |
25 |
2
Abbott Laboratories and Subsidiaries
Condensed Consolidated Statement of Earnings
(Unaudited)
(dollars in millions except per share data; shares in thousands)
Three Months Ended March 31 | ||||||
| 2021 |
| 2020 | |||
Net sales | $ | | $ | | ||
Cost of products sold, excluding amortization of intangible assets |
| |
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Amortization of intangible assets |
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Research and development |
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Selling, general and administrative |
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Total operating cost and expenses |
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Operating earnings |
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Interest expense |
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Interest (income) |
| ( |
| ( | ||
Net foreign exchange (gain) loss |
| |
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Other (income) expense, net |
| ( |
| ( | ||
Earnings from continuing operations before tax |
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Tax expense on earnings from continuing operations |
| |
| | ||
Earnings from continuing operations |
| |
| | ||
Earnings from discontinued operations, net of tax | — | | ||||
Net Earnings | $ | | $ | | ||
Basic Earnings Per Common Share — | ||||||
Continuing operations | $ | | $ | | ||
Discontinued operations |
| — |
| | ||
Net earnings | $ | | $ | | ||
Diluted Earnings Per Common Share — | ||||||
Continuing operations | $ | | $ | | ||
Discontinued operations |
| — |
| | ||
Net earnings | $ | | $ | | ||
Average Number of Common Shares Outstanding Used for Basic Earnings Per Common Share |
| |
| | ||
Dilutive Common Stock Options |
| |
| | ||
Average Number of Common Shares Outstanding Plus Dilutive Common Stock Options |
| |
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Outstanding Common Stock Options Having No Dilutive Effect | |
| | |||
The accompanying notes to the condensed consolidated financial statements are an integral part of this statement.
3
Abbott Laboratories and Subsidiaries
Condensed Consolidated Statement of Comprehensive Income
(Unaudited)
(dollars in millions)
Three Months Ended March 31 | ||||||
| 2021 |
| 2020 | |||
Net Earnings | $ | | $ | | ||
Foreign currency translation gain (loss) adjustments |
| ( |
| ( | ||
Net actuarial gains (losses) and amortization of net actuarial (losses) and prior service (cost) and credits, |
| |
| | ||
Net gains (losses) for derivative instruments designated as cash flow hedges, |
| |
| | ||
Other comprehensive income (loss) | ( | ( | ||||
Comprehensive Income (Loss) | $ | | $ | ( | ||
March 31, | December 31, | |||||
| 2021 |
| 2020 | |||
Supplemental Accumulated Other Comprehensive Income (Loss) Information, net of tax: | ||||||
Cumulative foreign currency translation (loss) adjustments | $ | ( | $ | ( | ||
Net actuarial (losses) and prior service (cost) and credits |
| ( |
| ( | ||
Cumulative gains (losses) on derivative instruments designated as cash flow hedges |
| ( |
| ( | ||
Accumulated Other Comprehensive Income (Loss) | $ | ( | $ | ( | ||
The accompanying notes to the condensed consolidated financial statements are an integral part of this statement.
4
Abbott Laboratories and Subsidiaries
Condensed Consolidated Balance Sheet
(Unaudited)
(dollars in millions)
March 31, | December 31, | |||||
| 2021 |
| 2020 | |||
Assets | ||||||
Current Assets: | ||||||
Cash and cash equivalents | $ | | $ | | ||
Short-term investments |
| |
| | ||
Trade receivables, less allowances of $ |
| |
| | ||
Inventories: | ||||||
Finished products |
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Work in process |
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Materials |
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Total inventories |
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Prepaid expenses and other receivables |
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Total Current Assets |
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Investments |
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Property and equipment, at cost | | | ||||
Less: accumulated depreciation and amortization |
| |
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Net property and equipment |
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Intangible assets, net of amortization |
| |
| | ||
Goodwill |
| |
| | ||
Deferred income taxes and other assets |
| |
| | ||
$ | | $ | | |||
Liabilities and Shareholders’ Investment | ||||||
Current Liabilities: |
|
| ||||
Short-term borrowings | $ | | $ | | ||
Trade accounts payable |
| |
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Salaries, wages and commissions |
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Other accrued liabilities |
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Dividends payable |
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Income taxes payable |
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Current portion of long-term debt |
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Total Current Liabilities |
| |
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Long-term debt |
| |
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Post-employment obligations, deferred income taxes and other long-term liabilities |
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Commitments and Contingencies | ||||||
Shareholders’ Investment: | ||||||
Preferred shares, |
|
| ||||
Common shares, without par value Authorized — |
| |
| | ||
Common shares held in treasury, at cost — Shares: 2021: |
| ( |
| ( | ||
Earnings employed in the business |
| |
| | ||
Accumulated other comprehensive income (loss) |
| ( |
| ( | ||
Total Abbott Shareholders’ Investment |
| |
| | ||
Noncontrolling Interests in Subsidiaries |
| |
| | ||
Total Shareholders’ Investment |
| |
| | ||
$ | | $ | |
The accompanying notes to the condensed consolidated financial statements are an integral part of this statement.
5
Abbott Laboratories and Subsidiaries
Condensed Consolidated Statement of Shareholders’ Investment
(Unaudited)
(in millions except shares and per share data)
Three Months Ended March 31 | ||||||
| 2021 |
| 2020 | |||
Common Shares: |
|
| ||||
Balance at January 1 |
|
| ||||
Shares: 2021: | $ | | $ | | ||
Issued under incentive stock programs |
|
| ||||
Shares: 2021: |
| |
| | ||
Share-based compensation | | | ||||
Issuance of restricted stock awards | ( | ( | ||||
Balance at March 31 | ||||||
Shares: 2021: | $ | | $ | |||
Common Shares Held in Treasury: | ||||||
Balance at January 1 | ||||||
Shares: 2021: | $ | ( | $ | ( | ||
Issued under incentive stock programs | ||||||
Shares: 2021: |
| |
| | ||
Purchased | ||||||
Shares: 2021: | ( | ( | ||||
Balance at March 31 | ||||||
Shares: 2021: | $ | ( | $ | ( | ||
Earnings Employed in the Business: | ||||||
Balance at January 1 | $ | | $ | | ||
Impact of adoption of new accounting standard | — | ( | ||||
Net earnings | | | ||||
Cash dividends declared on common shares (per share — 2021: $ |
| ( |
| ( | ||
Effect of common and treasury share transactions |
| |
| | ||
Balance at March 31 | $ | | $ | |||
Accumulated Other Comprehensive Income (Loss): | ||||||
Balance at January 1 | $ | ( | $ | ( | ||
Other comprehensive income (loss) |
| ( |
| ( | ||
Balance at March 31 | $ | ( | $ | ( | ||
Noncontrolling Interests in Subsidiaries: | ||||||
Balance at January 1 | $ | | $ | | ||
Noncontrolling Interests’ share of income, business combinations, net of distributions and share repurchases |
| |
| ( | ||
Balance at March 31 | $ | | $ | | ||
The accompanying notes to condensed consolidated financial statements are an integral part of this statement.
6
Abbott Laboratories and Subsidiaries
Condensed Consolidated Statement of Cash Flows
(Unaudited)
(dollars in millions)
Three Months Ended March 31 | ||||||
| 2021 |
| 2020 | |||
Cash Flow From (Used in) Operating Activities: | ||||||
Net earnings | $ | | $ | | ||
Adjustments to reconcile net earnings to net cash from operating activities- | ||||||
Depreciation |
| |
| | ||
Amortization of intangible assets |
| |
| | ||
Share-based compensation |
| |
| | ||
Trade receivables |
| |
| ( | ||
Inventories |
| ( |
| ( | ||
Other, net | ( | ( | ||||
Net Cash From Operating Activities | | | ||||
Cash Flow From (Used in) Investing Activities: | ||||||
Acquisitions of property and equipment |
| ( |
| ( | ||
Acquisitions of businesses and technologies, net of cash acquired |
| ( |
| — | ||
Sales (purchases) of other investment securities, net | ( | ( | ||||
Other |
| |
| | ||
Net Cash (Used in) Investing Activities |
| ( |
| ( | ||
Cash Flow From (Used in) Financing Activities: | ||||||
Net borrowings (repayments) of short-term debt and other | | | ||||
Repayments of long-term debt |
| ( |
| ( | ||
Purchases of common shares |
| ( |
| ( | ||
Proceeds from stock options exercised |
| |
| | ||
Dividends paid |
| ( |
| ( | ||
Net Cash (Used in) Financing Activities |
| ( |
| ( | ||
Effect of exchange rate changes on cash and cash equivalents |
| ( |
| ( | ||
Net Increase (Decrease) in Cash and Cash Equivalents |
| |
| ( | ||
Cash and Cash Equivalents, Beginning of Year |
| |
| | ||
Cash and Cash Equivalents, End of Period | $ | | $ | | ||
The accompanying notes to the condensed consolidated financial statements are an integral part of this statement.
7
Abbott Laboratories and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
March 31, 2021
(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, 2020. The condensed consolidated financial statements include the accounts of the parent company and subsidiaries, after elimination of intercompany transactions.
Note 2 — New Accounting Standards
Recently Adopted Accounting Standards
In December 2019, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update 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. Abbott adopted the standard on January 1, 2021. The new standard did not have an impact on its condensed consolidated financial statements.
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
8
Abbott Laboratories and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
March 31, 2021
(Unaudited)
The following table provides revenues by sales category:
Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | |||||||||||||||||
(in millions) |
| U.S. |
| Int’l |
| Total |
| U.S. |
| Int’l |
| Total | ||||||
Established Pharmaceutical Products — |
|
|
|
|
|
|
|
|
|
|
| |||||||
Key Emerging Markets | $ | — | $ | | $ | | $ | — | $ | | $ | | ||||||
Other |
| — |
| |
| |
| — |
| | | |||||||
Total |
| — |
| |
| |
| — |
| |
| | ||||||
Nutritionals — |
|
|
|
|
|
| ||||||||||||
Pediatric Nutritionals |
| |
| |
| |
| |
| |
| | ||||||
Adult Nutritionals |
| |
| |
| |
| |
| |
| | ||||||
Total |
| |
| |
| |
| |
| |
| | ||||||
Diagnostics — |
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|
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|
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Core Laboratory |
| |
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Molecular |
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| |
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Point of Care |
| |
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| |
| |
| |
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Rapid Diagnostics |
| |
| |
| |
| |
| |
| | ||||||
Total |
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| |
| |
| |
| |
| | ||||||
Medical Devices — |
|
|
|
|
|
| ||||||||||||
Rhythm Management |
| |
| |
| |
| |
| |
| | ||||||
Electrophysiology |
| |
| |
| |
| |
| |
| | ||||||
Heart Failure |
| |
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| |
| |
| |
| | ||||||
Vascular |
| |
| |
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| |
| | ||||||
Structural Heart |
| |
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Neuromodulation |
| |
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| |
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| | ||||||
Diabetes Care | | | | | | | ||||||||||||
Total |
| |
| |
| |
| |
| |
| | ||||||
Other |
| |
| |
| |
| |
| |
| | ||||||
Total | $ | | $ | | $ | | $ | | $ | | $ | | ||||||
Remaining Performance Obligations
As of March 31, 2021, the estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) was approximately $
These performance obligations primarily reflect the future sale of reagents/consumables in contracts with minimum purchase obligations, extended warranty or service obligations related to previously sold equipment, and remote monitoring services related to previously implanted devices. Abbott has applied the practical expedient described in Accounting Standards Codification (ASC) 606-10-50-14 and has not included remaining performance obligations related to contracts with original expected durations of
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.
9
Abbott Laboratories and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
March 31, 2021
(Unaudited)
Changes in the contract liabilities during the period are as follows:
(in millions) |
| ||
Contract Liabilities: | |||
Balance at December 31, 2020 | $ | | |
Unearned revenue from cash received during the period | | ||
Revenue recognized related to contract liability balance | ( | ||
Balance at March 31, 2021 | $ | |
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. Earnings from Continuing Operations allocated to common shares for the three months ended March 31, 2021 and 2020 were $
Earnings from discontinued operations, net of tax, in the first quarter of 2020 include the recognition of $
Other, net in Net cash from operating activities in the Condensed Consolidated Statement of Cash Flows for the first three months of 2021 includes $
The following summarizes the activity for the first three months of 2021 related to the allowance for doubtful accounts as of March 31, 2021:
(in millions) |
| ||
Allowance for Doubtful Accounts: | |||
Balance at December 31, 2020 | $ | | |
Provisions/charges to income | | ||
Amounts charged off and other deductions |
| ( | |
Balance at March 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. 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, 2021 and December 31, 2020 are as follows:
March 31, | December 31, | |||||
(in millions) |
| 2021 |
| 2020 | ||
Long-term Investments: | ||||||
Equity securities | $ | | $ | | ||
Other |
| |
| | ||
Total | $ | | $ | | ||
10
Abbott Laboratories and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
March 31, 2021
(Unaudited)
Abbott’s equity securities as of March 31, 2021, include $
Abbott also holds certain investments as of March 31, 2021 with a carrying value of $
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 Gains (Losses) | ||||||||||||||||||
Cumulative Foreign | Net Actuarial (Losses) and | on Derivative Instruments | ||||||||||||||||
Currency Translation | Prior Service (Costs) and | Designated as Cash Flow | ||||||||||||||||
Adjustments |
| Credits |
| Hedges | ||||||||||||||
(in millions) |
| 2021 |
| 2020 |
| 2021 |
| 2020 |
| 2021 |
| 2020 | ||||||
Balance at January 1 | $ | ( | $ | ( | $ | ( | $ | ( | $ | ( | $ | ( | ||||||
Other comprehensive income (loss) before reclassifications |
| ( |
| ( |
|
|
| |||||||||||
Amounts reclassified from accumulated other |
| — | — |
| |
| |
| |
| ( | |||||||
Net current period comprehensive income (loss) |
| ( |
| ( |
| |
| |
| |
| | ||||||
Balance at March 31 | $ | ( | $ | ( | $ | ( | $ | ( | $ | ( | $ | | ||||||
Reclassified amounts for cash flow hedges are recorded as Cost of products sold. Net actuarial losses and prior service cost are included as a component of net periodic benefit costs; see Note 11 for additional details.
Note 6 — Goodwill and Intangible Assets
The total amount of goodwill reported was $
The gross amount of amortizable intangible assets, primarily product rights and technology was $
Indefinite-lived intangible assets, which relate to in-process R&D acquired in a business combination, were approximately $
11
Abbott Laboratories and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
March 31, 2021
(Unaudited)
Note 7 — Restructuring Plans
From 2017 to 2020, Abbott management approved restructuring plans as part of the integration of the acquisitions of St. Jude Medical into the Medical Devices segment, and Alere Inc. (Alere) into the Diagnostic Products segment, in order to leverage economies of scale and reduce costs. As of December 31, 2020, the accrued balance associated with these actions was $
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. In the first three months of 2021, charges of $
(in millions) |
| ||
Accrued balance at December 31, 2020 | $ | | |
Restructuring charges recorded in 2021 | | ||
Payments and other adjustments | ( | ||
Accrued balance at March 31, 2021 | $ | |
Note 8 — Incentive Stock Program
In the first three months of 2021, Abbott granted
| Outstanding |
| Exercisable | |||
Number of shares |
|
| |
| | |
Weighted average remaining life (years) |
|
|
| |||
Weighted average exercise price |
| $ | | $ | | |
Aggregate intrinsic value (in millions) |
| $ | | $ | | |
The total unrecognized share-based compensation cost at March 31, 2021 amounted to approximately $
Note 9 — Financial Instruments, Derivatives and Fair Value Measures
Certain Abbott foreign subsidiaries enter into foreign currency forward exchange contracts to manage exposures to changes in foreign exchange rates primarily for anticipated intercompany purchases by those subsidiaries whose functional currencies are not the U.S. dollar. These contracts, with gross notional amounts totaling $
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, 2021 and December 31, 2020, Abbott held the gross notional amount of $
12
Abbott Laboratories and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
March 31, 2021
(Unaudited)
Abbott has designated a yen-denominated,
Abbott is a party to interest rate hedge contracts totaling approximately $
The following table summarizes the amounts and location of certain derivative financial instruments as of March 31, 2021 and December 31, 2020:
Fair Value - Assets | Fair Value - Liabilities | |||||||||||||||
March 31, | Dec. 31, | March 31, | Dec. 31, |
| ||||||||||||
(in millions) |
| 2021 |
| 2020 |
| Balance Sheet Caption |
| 2021 |
| 2020 |
| Balance Sheet Caption | ||||
Interest rate swaps designated as fair value hedges | $ | |
| $ | |
| Deferred income taxes and other assets |
| $ | — |
| $ | — |
| Post-employment obligations, deferred income taxes and other long-term liabilities | |
Foreign currency forward exchange contracts: | ||||||||||||||||
Hedging instruments |
| |
| |
| Prepaid expenses and other receivables |
| |
| |
| Other accrued liabilities | ||||
Others not designated as hedges |
| |
| |
| Prepaid expenses and other receivables |
| |
| |
| Other accrued liabilities | ||||
Debt designated as a hedge of net investment in a foreign subsidiary | — | — | n/a | | | Long-term debt | ||||||||||
$ | |
| $ | |
| $ | |
| $ | | ||||||
The following table summarizes the activity for foreign currency forward exchange contracts designated as cash flow hedges, debt designated as a hedge of net investment in a foreign subsidiary 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, 2021 and 2020.
Gain (loss) Recognized in | Income (expense) and | |||||||||||||
Other Comprehensive | Gain (loss) Reclassified | |||||||||||||
Income (loss) | into Income | |||||||||||||
(in millions) |
| 2021 |
| 2020 |
| 2021 |
| 2020 |
| Income Statement Caption | ||||
Foreign currency forward exchange contracts designated as cash flow hedges | $ | | $ | | $ | ( | $ | | Cost of products sold | |||||
Debt designated as a hedge of net investment in a |
| |
| ( |
| — |
| — |
| n/a | ||||
Interest rate swaps designated as fair value hedges |
| n/a |
| n/a |
| ( |
| |
| Interest expense | ||||
Gains of $
13
Abbott Laboratories and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
March 31, 2021
(Unaudited)
The carrying values and fair values of certain financial instruments as of March 31, 2021 and December 31, 2020 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, 2021 | December 31, 2020 | |||||||||||
| Carrying |
| Fair |
| Carrying |
| Fair | |||||
(in millions) | Value | Value | Value | Value | ||||||||
Long-term Investment Securities: |
|
| ||||||||||
Equity securities | $ | | $ | | $ | | $ | | ||||
Other |
| |
| |
| |
| | ||||
Total Long-term Debt | ( | ( | ( | ( | ||||||||
Foreign Currency Forward Exchange Contracts: |
|
|
| |||||||||
Receivable position |
| |
| |
| |
| | ||||
(Payable) position | ( | ( | ( | ( | ||||||||
Interest Rate Hedge Contracts: |
|
|
|
| ||||||||
Receivable position | | | | | ||||||||
The fair value of the debt was determined based on significant other observable inputs, including current interest rates.
The following table summarizes the bases used to measure certain assets and liabilities at fair value on a recurring basis in the balance sheet:
Basis of Fair Value Measurement | ||||||||||||
Quoted | Significant | |||||||||||
Prices in | Other | Significant | ||||||||||
Outstanding | Active | Observable | Unobservable | |||||||||
(in millions) |
| Balances |
| Markets |
| Inputs |
| Inputs | ||||
March 31, 2021: | ||||||||||||
Equity securities | $ | | $ | |
| $ | — |
| $ | — | ||
Interest rate swap derivative financial instruments |
| |
| — |
| |
| — | ||||
Foreign currency forward exchange contracts |
| |
| — |
| |
| — | ||||
Total Assets | $ | |
| $ | |
| $ | |
| $ | — | |
Fair value of hedged long-term debt | $ | | $ | — |
| $ | |
| $ | — | ||
Foreign currency forward exchange contracts | | — | | — | ||||||||
Contingent consideration related to business combinations |
| |
| — |
| — |
| | ||||
Total Liabilities | $ | |
| $ | — |
| $ | | $ | | ||
December 31, 2020: | ||||||||||||
Equity securities | $ | |
| $ | |
| $ | — |
| $ | — | |
Interest rate swap derivative financial instruments |
| |
| — |
| |
| — | ||||
Foreign currency forward exchange contracts |
| |
| — |
| |
| — | ||||
Total Assets | $ | |
| $ | |
| $ | |
| $ | — | |
Fair value of hedged long-term debt | $ | |
| $ | — |
| $ | |
| $ | — | |
Foreign currency forward exchange contracts |
| |
| — |
| |
| — | ||||
Contingent consideration related to business combinations |
| |
| — |
| — |
| | ||||
Total Liabilities | $ | |
| $ | — |
| $ | |
| $ | | |
14
Abbott Laboratories and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
March 31, 2021
(Unaudited)
The fair value of foreign currency forward exchange contracts is determined using a market approach, which utilizes values for comparable derivative instruments. The fair value of debt was determined based on the face value of the debt adjusted for the fair value of the interest rate swaps, which is based on a discounted cash flow analysis using significant other observable inputs. The fair value of the contingent consideration was determined based on independent appraisals at the time of acquisition, adjusted for the time value of money and other changes in fair value.
Note 10 — Litigation and Environmental Matters
Abbott has been identified as a potentially responsible party for investigation and cleanup costs at a number of locations in the United States and Puerto Rico under federal and state remediation laws and is investigating potential contamination at a number of company-owned locations. Abbott has recorded an estimated cleanup cost for each site for which management believes Abbott has a probable loss exposure. No individual site cleanup exposure is expected to exceed $
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 $
Note 11 — Post-Employment Benefits
Retirement plans consist of defined benefit, defined contribution, and medical and dental plans. Net periodic benefit costs, other than service costs, are recognized in the Other (income) expense, net line of the Condensed Consolidated Statement of Earnings. Net cost recognized in continuing operations 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 | |||||||||||
March 31, | March 31, | March 31, | March 31, | |||||||||
(in millions) |
| 2021 |
| 2020 |
| 2021 |
| 2020 | ||||
Service cost — benefits earned during the period | $ | | $ | | $ | | $ | | ||||
Interest cost on projected benefit obligations |
| |
| |
|
| |
| | |||
Expected return on plan assets |
| ( |
| ( |
| ( |
| ( | ||||
Net amortization of: | ||||||||||||
Actuarial loss, net |
| |
| |
| |
| | ||||
Prior service cost (credit) |
| — |
| — |
| ( |
| ( | ||||
Net cost — continuing operations | $ | | $ | | $ | | $ | | ||||
Abbott funds its domestic defined benefit plans according to IRS funding limitations. International pension plans are funded according to similar regulations. In the first three months of 2021 and 2020, $
15
Abbott Laboratories and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
March 31, 2021
(Unaudited)
Note 12 — Taxes on Earnings
Taxes on earnings from continuing operations reflect the estimated annual effective rates and include charges for interest and penalties. In the first three months of 2021 and 2020, taxes on earnings from continuing operations include approximately $
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 $
Note 13 — Segment Information
Abbott’s principal business is the discovery, development, manufacture and sale of a broad line of health care products. Abbott’s products are generally sold directly to retailers, wholesalers, hospitals, health care facilities, laboratories, physicians’ offices and government agencies throughout the world.
Abbott’s reportable segments are as follows:
Established Pharmaceutical Products — International sales of a broad line of branded generic pharmaceutical products.
Nutritional Products — Worldwide sales of a broad line of adult and pediatric nutritional products.
Diagnostic Products — Worldwide sales of diagnostic systems and tests for blood banks, hospitals, commercial laboratories and alternate-care testing sites. For segment reporting purposes, the Core Laboratories Diagnostics, Rapid Diagnostics, Molecular Diagnostics and Point of Care 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 and Heart Failure, Vascular, Neuromodulation, Structural Heart 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. 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.
16
Abbott Laboratories and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
March 31, 2021
(Unaudited)
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.
| Three Months Ended March 31 | |||||||||||
Net Sales to | Operating | |||||||||||
(in millions) |
| 2021 |
| 2020 |
| 2021 |
| 2020 | ||||
Established Pharmaceutical Products | $ | | $ | | $ | | $ | | ||||
Nutritional Products |
| |
| |
| |
| | ||||
Diagnostic Products |
| |
| |
| |
| | ||||
Medical Devices |
| |
| |
| |
| | ||||
Total Reportable Segments |
| |
| |
| |
| | ||||
Other |
| |
| | ||||||||
Net sales | $ | | $ | | ||||||||
Corporate functions and benefit plans costs | ( | ( | ||||||||||
Net interest expense | ( | ( | ||||||||||
Share-based compensation (a) | ( | ( | ||||||||||
Amortization of intangible assets | ( | ( | ||||||||||
Other, net (b) | ( | ( | ||||||||||
Earnings from continuing operations before taxes | $ | | $ | | ||||||||
| (a) | Approximately |
| (b) | Other, net includes integration costs associated with the acquisition of St. Jude Medical and Alere, and restructuring charges. Other, net for the three months ended March 31, 2021 also includes costs related to certain litigation. |
17
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 table details sales by reportable segment for the three months ended March 31. Percent changes are versus the prior year and are based on unrounded numbers.
Net Sales to External Customers |
| ||||||||||||
| Three Months |
| Three Months |
|
|
|
| ||||||
Ended | Ended | Impact of | Total Change |
| |||||||||
March 31, | March 31, | Total | Foreign | Excl. Foreign |
| ||||||||
(in millions) | 2021 | 2020 | Change | Exchange | Exchange |
| |||||||
Established Pharmaceutical Products | $ | 1,070 | $ | 1,044 | 2.5 | % | (3.7) | % | 6.2 | % | |||
Nutritional Products |
| 2,036 |
| 1,904 | 6.9 |
| 0.5 |
| 6.4 | ||||
Diagnostic Products |
| 4,014 |
| 1,826 | 119.8 |
| 5.0 |
| 114.8 | ||||
Medical Devices |
| 3,320 |
| 2,937 | 13.1 |
| 4.3 |
| 8.8 | ||||
Total Reportable Segments |
| 10,440 |
| 7,711 | 35.3 |
| 2.4 |
| 32.9 | ||||
Other |
| 16 |
| 15 | 7.8 |
| 3.6 |
| 4.2 | ||||
Net sales | $ | 10,456 | $ | 7,726 | 35.3 |
| 2.4 |
| 32.9 | ||||
Total U.S. | $ | 3,838 | $ | 2,856 | 34.4 |
| — |
| 34.4 | ||||
Total International | $ | 6,618 | $ | 4,870 | 35.9 |
| 3.9 |
| 32.0 | ||||
Note: In order to compute results excluding the impact of foreign 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.
The 32.9 percent increase in total net sales during the first three months of 2021, excluding the impact of foreign exchange, reflected strong demand for Abbott’s tests to detect COVID-19 as well as other growth across Abbott’s reportable segments. During the first quarter of 2021, Abbott’s COVID-19 testing-related sales totaled approximately $2.2 billion led by combined sales of approximately $1.8 billion related to Abbott’s BinaxNOW, Panbio, and ID NOW rapid-testing platforms. Excluding the impact of COVID-19 testing-related sales, Abbott’s total net sales increased 7.6 percent. Excluding the impacts of COVID-19 testing-related sales and foreign exchange, Abbott’s total net sales increased 5.7 percent. Abbott’s net sales were favorably impacted by changes in foreign exchange rates in the first quarter as the relatively weaker U.S. dollar increased total international sales by 3.9 percent and total sales by 2.4 percent.
Due to the unpredictability of the duration and impact of the current COVID-19 pandemic, the extent to which the COVID-19 pandemic will have a material effect on Abbott’s business, financial condition or results of operations is uncertain.
18
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.
|
|
|
| Impact of |
| Total Change |
| ||||||
March 31, | March 31, | Total | Foreign | Excl. Foreign |
| ||||||||
(in millions) | 2021 | 2020 | Change | Exchange | Exchange |
| |||||||
Established Pharmaceutical Products — |
|
|
|
|
|
|
|
|
|
| |||
Key Emerging Markets | $ | 821 | $ | 813 | 1.0 | % | (5.7) | % | 6.7 | % | |||
Other Emerging Markets |
| 249 |
| 231 | 7.8 |
| 3.6 |
| 4.2 | ||||
Nutritionals — |
|
|
|
| |||||||||
International Pediatric Nutritionals |
| 558 |
| 571 | (2.3) |
| 0.8 |
| (3.1) | ||||
U.S. Pediatric Nutritionals |
| 508 |
| 518 | (1.8) |
| — |
| (1.8) | ||||
International Adult Nutritionals |
| 642 |
| 521 | 23.1 |
| 1.0 |
| 22.1 | ||||
U.S. Adult Nutritionals |
| 328 |
| 294 | 11.4 |
| — |
| 11.4 | ||||
Diagnostics — |
|
|
|
| |||||||||
Core Laboratory |
| 1,182 |
| 989 | 19.6 |
| 3.5 |
| 16.1 | ||||
Molecular |
| 447 |
| 139 | 220.9 |
| 8.9 |
| 212.0 | ||||
Point of Care |
| 129 |
| 138 | (6.6) |
| 1.0 |
| (7.6) | ||||
Rapid Diagnostics |
| 2,256 |
| 560 | 302.8 |
| 7.8 |
| 295.0 | ||||
Medical Devices — |
|
|
|
| |||||||||
Rhythm Management |
| 519 |
| 474 | 9.6 |
| 3.8 |
| 5.8 | ||||
Electrophysiology |
| 431 |
| 388 | 11.0 |
| 3.9 |
| 7.1 | ||||
Heart Failure |
| 194 |
| 203 | (4.6) |
| 1.6 |
| (6.2) | ||||
Vascular |
| 635 |
| 625 | 1.7 |
| 3.7 |
| (2.0) | ||||
Structural Heart |
| 377 |
| 318 | 18.6 |
| 4.4 |
| 14.2 | ||||
Neuromodulation |
| 184 |
| 177 | 4.4 |
| 1.6 |
| 2.8 | ||||
Diabetes Care | 980 | 752 | 30.2 | 6.6 | 23.6 | ||||||||
Key Emerging Markets for the Established Pharmaceutical Products business include India, Russia, Brazil and China, along with several other markets that represent the most attractive long-term growth opportunities for Abbott’s branded generics product portfolio. Excluding the unfavorable effect of foreign exchange, sales in the Key Emerging Markets increased 6.7 percent compared to the first three months of 2020 led by growth across several geographies including China, India and Brazil. Other Emerging Markets, excluding the effect of foreign exchange, increased by 4.2 percent in the first three months of 2021.
International Pediatric Nutritional sales, excluding the effect of foreign exchange, decreased 3.1 percent in the first three months of 2021 versus the comparable 2020 period. U.S. Pediatric Nutritional sales decreased 1.8 percent. The decrease in Abbott’s Pediatric Nutritional sales was primarily due to higher consumer purchases in 2020 in several countries, including the U.S., in advance of shelter-in-place restrictions related to the COVID-19 pandemic, partially offset by higher sales in the Greater China infant category in 2021. International Adult Nutritional sales, excluding the effect of foreign exchange, increased 22.1 percent, and U.S. Adult Nutritional sales increased 11.4 percent, reflecting continued growth of the Ensure® and Glucerna® brands in several countries including the U.S.
The 114.8 percent increase in Diagnostic Products sales, excluding the impact of foreign exchange, was driven by strong demand for Abbott’s portfolio of COVID-19 tests as described above as well as improvements in the base Core Laboratory and Molecular businesses. In Core Laboratory, sales increased 16.1 percent, excluding the effect of foreign exchange, due to the increased volume of routine diagnostic testing performed in hospitals and other laboratories as well as sales of Abbott’s laboratory-based tests for the detection of the IgG and IgM antibodies, which determine if someone was previously infected with the COVID-19 virus. Core Laboratory IgG and IgM antibody testing-related sales on Abbott’s ARCHITECT and Alinity i platforms were approximately $50 million in the first three months of 2021. In March 2021, Abbott received an Emergency Use Authorization (EUA) in the U.S. for its AdviseDX SARS-CoV-2 IgG II test for the semi-quantitative detection of IgG antibodies to COVID-19 on its ARCHITECT and Alinity i platforms. In the first three months of 2021, Core Laboratory sales increased 14.1 percent, excluding COVID-19 testing-related sales, and increased 10.7 percent excluding the impact of foreign exchange and COVID-19 testing-related sales.
19
The 212.0 percent increase in Molecular Diagnostics sales, excluding the effect of foreign exchange, was driven by demand for Abbott’s laboratory-based molecular tests for COVID-19 on its m2000 and Alinity m platforms as well as growth in the base business from the continued roll-out of the Alinity m platform. Molecular Diagnostics COVID-19 testing-related sales were approximately $310 million in the first three months of 2021. In March 2021, Abbott received an EUA in the U.S. for its multiplex molecular test on its Alinity m system to detect COVID-19, influenza A, influenza B, and respiratory syncytial virus (RSV) in one test. In the first three months of 2021, Molecular Diagnostics sales increased 33.9 percent, excluding COVID-19 testing-related sales, and increased 31.5 percent excluding the impact of foreign exchange and COVID-19 testing-related sales.
In Rapid Diagnostics, sales increased 295.0 percent, excluding the effect of foreign exchange, due to strong demand for Abbott’s COVID-19 tests on its rapid testing platforms including the Panbio system, the ID NOW platform, and the BinaxNOW COVID-19 Ag Card test. Rapid Diagnostics COVID-19 testing-related sales were approximately $1.8 billion in the first three months of 2021. In January 2021, Abbott received CE Mark for two new uses of its Panbio rapid antigen test: asymptomatic testing and self-swabbing under the supervision of a healthcare worker. On March 31, 2021, Abbott announced that it had received an EUA in the U.S. for its over-the-counter, non-prescription BinaxNOW COVID-19 Ag Self Test for individuals with or without symptoms. In the first quarter of 2021, Abbott also received EUAs that allow the non-prescription use of the BinaxNOW COVID-19 Ag Card Home Test and the BinaxNOW COVID-19 Ag Card test for professional use for individuals with or without symptoms.
Excluding the effect of foreign exchange, total Medical Devices sales grew 8.8 percent driven by double-digit growth in Diabetes Care and Structural Heart as well as growth in Electrophysiology and Rhythm Management. Growth in Diabetes Care sales was driven by continued growth of FreeStyle Libre®, Abbott’s continuous glucose monitoring system, internationally and in the U.S. FreeStyle Libre and Libre Sense™ sales totaled $829 million in the first quarter of 2021, which reflected a 29.8 percent increase, excluding the effect of foreign exchange, over the first three months of 2020 when Libre sales totaled $604 million. Libre Sense, which received CE Mark in the third quarter of 2020, is Abbott’s glucose sport biosensor specifically designed for athletes.
While procedure volumes across Abbott’s cardiovascular and neuromodulation businesses were negatively impacted early in 2021 by elevated COVID-19 case rates in certain countries, including the U.S., volumes improved over the course of the quarter for many products. Growth in Structural Heart was broad-based across several areas of the business, including TriClip®, the world’s first minimally invasive, clip-based device for repair of a leaky tricuspid heart valve which was launched in Europe in May 2020, and MitraClip®, Abbott’s market-leading device for the minimally invasive treatment of mitral regurgitation (MR), a leaky heart valve. In January 2021, the U.S. Centers for Medicare & Medicaid Services expanded reimbursement coverage eligibility for MitraClip.
Excluding the effect of foreign exchange, the 6.2 percent decline in Heart Failure sales reflects fewer left ventricular assist device (LVAD) procedures as such procedures, which require a stay in the hospital’s intensive care unit, continued to be negatively impacted by the COVID-19 pandemic during the first quarter of 2021. The sales decline also reflects the initial spread of the pandemic driving higher demand in the first quarter of 2020 for Abbott’s CentriMag™ circulatory support systems which are used in acute hospital care. Excluding the effect of foreign exchange, the 2.0 percent decline in Vascular sales reflects price reductions on drug-eluting stents across various geographies and lower sales in China due to a new national tender program instituted in the fourth quarter of 2020, partially offset by the improvement in procedure volume trends in various countries.
The gross profit margin percentage was 53.0 percent for the first quarter of 2021 compared to 50.3 percent for the first quarter of 2020. The increase primarily reflects higher sales volume in various businesses, higher utilization at various manufacturing sites, and a decrease in intangible amortization expense in 2021.
Research and development expenses increased $76 million, or 13.3 percent, in the first quarter of 2021. The 2021 increase in R&D expense was primarily driven by higher spending on various projects to advance products in development. For the three months ended March 31, 2021, research and development expenditures totaled $317 million for the Medical Devices segment, $168 million for the Diagnostic Products segment, $45 million for the Nutritional Products segment and $50 million for the Established Pharmaceutical Products segment.
Selling, general and administrative (SG&A) expenses for the first quarter of 2021 increased $235 million, or 9.2 percent, due primarily to charges related to certain litigation and higher selling and marketing spending to drive growth across various businesses.
20
Other (Income) Expense, net
Other income, net increased from $1 million in the first quarter of 2020 to $61 million in the first quarter of 2021. The increase was primarily due to an impairment of an equity investment of approximately $50 million in 2020 as well as higher income in the first quarter of 2021 related to the non-service cost components of net pension and post-retirement medical benefit costs.
Interest Expense, net
Interest expense, net increased $3 million in the first quarter of 2021 as lower interest rates resulted in a decline in interest income that exceeded the reduction in interest expense. The net impact of lower interest rates was partially offset by the effect of higher cash and short-term investment balances on interest income.
Taxes on Earnings
Taxes on earnings from continuing operations reflect the estimated annual effective rates and include charges for interest and penalties. In the first three months of 2021 and 2020, taxes on earnings from continuing operations include approximately $80 million and $47 million, respectively, in excess tax benefits associated with share-based compensation. Earnings from discontinued operations, net of tax, in the first three months of 2020 reflect the recognition of $20 million of net tax benefits primarily as a 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 $50 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, 2021 Compared with December 31, 2020
The increase in cash and cash equivalents from $6.8 billion at December 31, 2020 to $8.1 billion at March 31, 2021 primarily reflects the cash generated from operations in the first three months of 2021, partially offset by the payment of dividends and capital expenditures. Working capital was $9.4 billion at March 31, 2021 and $8.5 billion at December 31, 2020. The increase in working capital in 2021 primarily reflects the increase in cash and cash equivalents partially offset by an increase in the current portion of long-term debt.
In the Condensed Consolidated Statement of Cash Flows, Net cash from operating activities for the first three months of 2021 totaled $2.6 billion, an increase of $1.9 billion over the prior year primarily due to higher operating earnings, higher collections of accounts receivable and the timing of pension contributions partially offset by higher cash taxes paid. Other, net in Net cash from operating activities was a use of $6 million for the first three months of 2021 and a use of $369 million for the first three months of 2020. The year-over-year change in Other, net in Net cash from operating activities is primarily due to the timing of pension contributions as pension contributions were $16 million in 2021 and $320 million in 2020. Cash taxes paid were approximately $270 million in 2021 and $125 million in 2020.
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, 2021, $2.15 billion of the $5 billion authorization remains available.
At March 31, 2021, Abbott’s long-term debt rating was A by Standard & Poor’s Corporation and A3 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 October 2019, the board of directors authorized the repurchase of up to $3 billion of Abbott’s common shares from time to time. The 2019 authorization is in addition to the approximately $100 million unused portion of the share repurchase program authorized in 2014.
On April 27, 2016, the board of directors authorized the issuance and sale for general corporate purposes of up to 75 million common shares that would result in proceeds of up to $3 billion. No shares have been issued under this authorization.
In the first quarter of 2021, Abbott declared a quarterly dividend of $0.45 per share on its common shares, which represents an increase of 25 percent over the $0.36 per share dividend declared in the first quarter of 2020.
21
Recently Adopted Accounting Standards
In December 2019, the Financial Accounting Standards Board issued Accounting Standards Update 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. Abbott adopted the standard on January 1, 2021. The new standard did not have an impact on its condensed consolidated financial statements.
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 2020 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, 2020, 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.
22
PART I. FINANCIAL INFORMATION
Item 4. Controls and Procedures
(a) | Evaluation of disclosure controls and procedures. The President and 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, 2021, 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, 2020.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
(c) Issuer Purchases of Equity Securities
|
|
|
| (d) Maximum |
| ||||||
Number (or |
| ||||||||||
(c) Total Number | Approximate |
| |||||||||
of Shares (or | Dollar Value) of |
| |||||||||
(a) Total | Units) Purchased | Shares (or Units) |
| ||||||||
Number of | (b) Average | as Part of | that May Yet Be |
| |||||||
Shares (or | Price Paid per | Publicly | Purchased Under |
| |||||||
Units) | Share (or | Announced Plans | the Plans or |
| |||||||
Period | Purchased | Unit) | or Programs | Programs |
| ||||||
January 1, 2021 – January 31, 2021 | 1,785 | (1) | $ | 109.110 |
| 0 | $ | 3,097,391,913 | (2) | ||
February 1, 2021 – February 28, 2021 | 10,000 | (1) | 122.543 |
| 0 | 3,097,391,913 | (2) | ||||
March 1, 2021 – March 31, 2021 | 0 | (1) | 0 |
| 0 | 3,097,391,913 | (2) | ||||
Total | 11,785 | (1) | $ | 120.509 |
| 0 | $ | 3,097,391,913 | (2) | ||
| 1. | These shares include the shares deemed surrendered to Abbott to pay the exercise price in connection with the exercise of employee stock options – 1,785 in January, 10,000 in February, and 0 in March; and |
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 September 11, 2014, the board of directors authorized the repurchase of up to $3 billion of Abbott common shares, from time to time (the “2014 Plan”). On October 11, 2019, the board of directors authorized the repurchase of up to $3 billion of Abbott common shares, from time to time (the “2019 Plan”). The 2019 Plan is in addition to the unused portion of the 2014 Plan. |
23
Item 6. Exhibits
Exhibit No. |
| Exhibit |
3.1 | ||
3.2 | ||
31.1 | Certification of Chief Executive Officer Required by Rule 13a-14(a) (17 CFR 240.13a-14(a)). | |
31.2 | Certification of Chief Financial Officer Required by Rule 13a-14(a) (17 CFR 240.13a-14(a)). | |
Exhibits 32.1 and 32.2 are furnished herewith and should not be deemed to be “filed” under the Securities Exchange Act of 1934. | ||
32.1 | ||
32.2 | ||
101 | The following financial statements and notes from the Abbott Laboratories Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, formatted in Inline XBRL: (i) Condensed Consolidated Statement of Earnings; (ii) Condensed Consolidated Statement of Comprehensive Income; (iii) Condensed Consolidated Balance Sheet; (iv) Condensed Consolidated Statement of Shareholders’ Investment; (v) Condensed Consolidated Statement of Cash Flows; and (vi) Notes to the Condensed Consolidated Financial Statements. | |
104 | Cover Page Interactive Data File (the cover page XBRL tags are embedded in the Inline XBRL document and included in Exhibit 101). | |
24
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
ABBOTT LABORATORIES | ||
By: | /s/ Robert E. Funck, Jr. | |
Robert E. Funck, Jr. | ||
Executive Vice President, Finance | ||
Date: May 5, 2021 | ||
25
Exhibit 31.1
Certification of Chief Executive Officer
Required by Rule 13a-14(a) (17 CFR 240.13a-14(a))
I, Robert B. Ford, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of Abbott Laboratories; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of Abbott as of, and for, the periods presented in this report; |
| 4. | Abbott’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for Abbott and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to Abbott, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c) | Evaluated the effectiveness of Abbott’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d) | Disclosed in this report any change in Abbott’s internal control over financial reporting that occurred during Abbott’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, Abbott’s internal control over financial reporting; and |
| 5. | Abbott’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to Abbott’s auditors and the audit committee of Abbott’s board of directors: |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect Abbott’s ability to record, process, summarize and report financial information; and |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in Abbott’s internal control over financial reporting. |
Date: May 5, 2021 | /s/ Robert B. Ford |
| Robert B. Ford |
| President and Chief Executive Officer |
Exhibit 31.2
Certification of Chief Financial Officer
Required by Rule 13a-14(a) (17 CFR 240.13a-14(a))
I, Robert E. Funck, Jr., certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of Abbott Laboratories; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of Abbott as of, and for, the periods presented in this report; |
| 4. | Abbott’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for Abbott and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to Abbott, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c) | Evaluated the effectiveness of Abbott’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d) | Disclosed in this report any change in Abbott’s internal control over financial reporting that occurred during Abbott’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, Abbott’s internal control over financial reporting; and |
| 5. | Abbott’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to Abbott’s auditors and the audit committee of Abbott’s board of directors: |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect Abbott’s ability to record, process, summarize and report financial information; and |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in Abbott’s internal control over financial reporting. |
Date: May 5, 2021 | /s/ Robert E. Funck, Jr. |
| Robert E. Funck, Jr. |
| Executive Vice President, Finance |
Exhibit 32.1
Certification Pursuant To
18 U.S.C. Section 1350
As Adopted Pursuant To
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report of Abbott Laboratories (the “Company”) on Form 10-Q for the period ended March 31, 2021 as filed with the Securities and Exchange Commission (the “Report”), I, Robert B. Ford, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
| (1) | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ Robert B. Ford | |
Robert B. Ford | |
President and Chief Executive Officer | |
May 5, 2021 | |
A signed original of this written statement required by Section 906 has been provided to Abbott Laboratories and will be retained by Abbott Laboratories and furnished to the Securities and Exchange Commission or its staff upon request.
Exhibit 32.2
Certification Pursuant To
18 U.S.C. Section 1350
As Adopted Pursuant To
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report of Abbott Laboratories (the “Company”) on Form 10-Q for the period ended March 31, 2021 as filed with the Securities and Exchange Commission (the “Report”), I, Robert E. Funck, Jr., Executive Vice President, Finance and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
| (1) | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ Robert E. Funck, Jr. | |
Robert E. Funck, Jr. | |
Executive Vice President, Finance | |
May 5, 2021 | |
A signed original of this written statement required by Section 906 has been provided to Abbott Laboratories and will be retained by Abbott Laboratories and furnished to the Securities and Exchange Commission or its staff upon request.