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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2021

OR

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

For the transition period from                   to                  

Commission File No. 1-2189

ABBOTT LABORATORIES

An Illinois Corporation

    

I.R.S. Employer Identification No.

36-0698440

100 Abbott Park Road

Abbott ParkIllinois 60064-6400

Telephone:  (224) 667-6100

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

Title of Each Class

    

Trading Symbol(s)

    

Name of Each Exchange on Which Registered

Common Shares, Without Par Value

ABT

New York Stock Exchange
Chicago Stock Exchange, Inc.

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

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

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

Large Accelerated Filer

Accelerated Filer

Non-Accelerated Filer

Smaller reporting company

Emerging growth company

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

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

As of March 31, 2021, Abbott Laboratories had 1,776,820,148 common shares without par value outstanding.

Table of Contents

Abbott Laboratories

Table of Contents

Part I - Financial Information

Page

Item 1. Financial Statements and Supplementary Data

Condensed Consolidated Statement of Earnings

3

Condensed Consolidated Statement of Comprehensive Income

4

Condensed Consolidated Balance Sheet

5

Condensed Consolidated Statement of Shareholders’ Investment

6

Condensed Consolidated Statement of Cash Flows

7

Notes to the Condensed Consolidated Financial Statements

8

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

18

Item 4. Controls and Procedures

23

Part II - Other Information

Item 1. Legal Proceedings

23

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

23

Item 6. Exhibits

24

Signature

25

2

Table of Contents

Abbott Laboratories and Subsidiaries

Condensed Consolidated Statement of Earnings

(Unaudited)

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

Three Months Ended March 31 

    

2021

    

2020

Net sales

$

10,456

$

7,726

Cost of products sold, excluding amortization of intangible assets

 

4,401

 

3,281

Amortization of intangible assets

 

509

 

561

Research and development

 

654

 

578

Selling, general and administrative

 

2,783

 

2,548

Total operating cost and expenses

 

8,347

 

6,968

Operating earnings

 

2,109

 

758

Interest expense

 

135

 

139

Interest (income)

 

(11)

 

(18)

Net foreign exchange (gain) loss

 

3

 

5

Other (income) expense, net

 

(61)

 

(1)

Earnings from continuing operations before tax

 

2,043

 

633

Tax expense on earnings from continuing operations

 

250

 

89

Earnings from continuing operations

 

1,793

 

544

Earnings from discontinued operations, net of tax

20

Net Earnings

$

1,793

$

564

Basic Earnings Per Common Share —

Continuing operations

$

1.00

$

0.31

Discontinued operations

 

 

0.01

Net earnings

$

1.00

$

0.32

Diluted Earnings Per Common Share —

Continuing operations

$

1.00

$

0.30

Discontinued operations

 

 

0.01

Net earnings

$

1.00

$

0.31

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

 

1,776,842

 

1,768,901

Dilutive Common Stock Options

 

14,661

 

11,677

Average Number of Common Shares Outstanding Plus Dilutive Common Stock Options

 

1,791,503

 

1,780,578

Outstanding Common Stock Options Having No Dilutive Effect

2,694

 

4,035

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

3

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Abbott Laboratories and Subsidiaries

Condensed Consolidated Statement of Comprehensive Income

(Unaudited)

(dollars in millions)

Three Months Ended March 31 

    

2021

    

2020

Net Earnings

$

1,793

$

564

Foreign currency translation gain (loss) adjustments

 

(536)

 

(1,144)

Net actuarial gains (losses) and amortization of net actuarial (losses) and prior service (cost) and credits,
net of taxes of $18 in 2021 and $15 in 2020

 

85

 

57

Net gains (losses) for derivative instruments designated as cash flow hedges,
net of taxes of $46 in 2021 and $48 in 2020

 

112

 

166

Other comprehensive income (loss)

(339)

(921)

Comprehensive Income (Loss)

$

1,454

$

(357)

March 31, 

December 31, 

    

2021

    

2020

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

Cumulative foreign currency translation (loss) adjustments

$

(5,395)

$

(4,859)

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

 

(3,786)

 

(3,871)

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

 

(104)

 

(216)

Accumulated Other Comprehensive Income (Loss)

$

(9,285)

$

(8,946)

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

4

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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

$

8,054

$

6,838

Short-term investments

 

318

 

310

Trade receivables, less allowances of $475 in 2021 and $460 in 2020

 

6,096

 

6,414

Inventories:

Finished products

 

3,219

 

3,030

Work in process

 

773

 

712

Materials

 

1,395

 

1,270

Total inventories

 

5,387

 

5,012

Prepaid expenses and other receivables

 

1,962

 

1,867

Total Current Assets

 

21,817

 

20,441

Investments

 

832

 

821

Property and equipment, at cost

18,697

18,793

Less: accumulated depreciation and amortization

 

9,865

 

9,764

Net property and equipment

 

8,832

 

9,029

Intangible assets, net of amortization

 

14,181

 

14,784

Goodwill

 

23,384

 

23,744

Deferred income taxes and other assets

 

3,739

 

3,729

$

72,785

$

72,548

Liabilities and Shareholders’ Investment

Current Liabilities:

    

    

Short-term borrowings

$

199

$

213

Trade accounts payable

 

4,066

 

3,946

Salaries, wages and commissions

 

1,117

 

1,416

Other accrued liabilities

 

5,247

 

5,165

Dividends payable

 

801

 

798

Income taxes payable

 

276

 

362

Current portion of long-term debt

 

756

 

7

Total Current Liabilities

 

12,462

 

11,907

Long-term debt

 

17,489

 

18,527

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

 

9,046

 

9,111

Commitments and Contingencies

Shareholders’ Investment:

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

 

 

Common shares, without par value Authorized — 2,400,000,000 shares
Issued at stated capital amount — Shares: 2021: 1,982,205,491; 2020: 1,981,156,896

 

24,023

 

24,145

Common shares held in treasury, at cost — Shares: 2021: 205,385,343; 2020: 209,926,622

 

(9,845)

 

(10,042)

Earnings employed in the business

 

28,669

 

27,627

Accumulated other comprehensive income (loss)

 

(9,285)

 

(8,946)

Total Abbott Shareholders’ Investment

 

33,562

 

32,784

Noncontrolling Interests in Subsidiaries

 

226

 

219

Total Shareholders’ Investment

 

33,788

 

33,003

$

72,785

$

72,548

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

5

Table of Contents

Abbott Laboratories and Subsidiaries

Condensed Consolidated Statement of Shareholders’ Investment

(Unaudited)

(in millions except shares and per share data)

Three Months Ended March 31 

    

2021

    

2020

Common Shares:

Balance at January 1

Shares: 2021: 1,981,156,896; 2020: 1,976,855,085

$

24,145

$

23,853

Issued under incentive stock programs

Shares: 2021: 1,048,595; 2020: 1,257,416

 

47

 

53

Share-based compensation

304

245

Issuance of restricted stock awards

(473)

(420)

Balance at March 31

Shares: 2021: 1,982,205,491; 2020: 1,978,112,501

$

24,023

$

23,731

Common Shares Held in Treasury:

Balance at January 1

Shares: 2021: 209,926,622; 2020: 214,351,838

$

(10,042)

$

(10,147)

Issued under incentive stock programs

Shares: 2021: 4,818,787; 2020: 5,333,626

 

231

 

253

Purchased

Shares: 2021: 277,508; 2020: 248,963

(34)

(19)

Balance at March 31

Shares: 2021: 205,385,343; 2020: 209,267,175

$

(9,845)

$

(9,913)

Earnings Employed in the Business:

Balance at January 1

$

27,627

$

25,847

Impact of adoption of new accounting standard

(5)

Net earnings

1,793

564

Cash dividends declared on common shares (per share — 2021: $0.45; 2020: $0.36)

 

(803)

 

(641)

Effect of common and treasury share transactions

 

52

 

21

Balance at March 31

$

28,669

$

25,786

Accumulated Other Comprehensive Income (Loss):

Balance at January 1

$

(8,946)

$

(8,465)

Other comprehensive income (loss)

 

(339)

 

(921)

Balance at March 31

$

(9,285)

$

(9,386)

Noncontrolling Interests in Subsidiaries:

Balance at January 1

$

219

$

213

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

 

7

 

(4)

Balance at March 31

$

226

$

209

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

6

Table of Contents

Abbott Laboratories and Subsidiaries

Condensed Consolidated Statement of Cash Flows

(Unaudited)

(dollars in millions)

Three Months Ended March 31 

    

2021

    

2020

Cash Flow From (Used in) Operating Activities:

Net earnings

$

1,793

$

564

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

Depreciation

 

425

 

267

Amortization of intangible assets

 

509

 

561

Share-based compensation

 

288

 

233

Trade receivables

 

165

 

(104)

Inventories

 

(537)

 

(437)

Other, net

(6)

(369)

Net Cash From Operating Activities

2,637

715

Cash Flow From (Used in) Investing Activities:

Acquisitions of property and equipment

 

(397)

 

(360)

Acquisitions of businesses and technologies, net of cash acquired

 

(15)

 

Sales (purchases) of other investment securities, net

(14)

(36)

Other

 

4

 

3

Net Cash (Used in) Investing Activities

 

(422)

 

(393)

Cash Flow From (Used in) Financing Activities:

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

24

51

Repayments of long-term debt

 

(2)

 

(1)

Purchases of common shares

 

(275)

 

(236)

Proceeds from stock options exercised

 

86

 

89

Dividends paid

 

(800)

 

(638)

Net Cash (Used in) Financing Activities

 

(967)

 

(735)

Effect of exchange rate changes on cash and cash equivalents

 

(32)

 

(70)

Net Increase (Decrease) in Cash and Cash Equivalents

 

1,216

 

(483)

Cash and Cash Equivalents, Beginning of Year

 

6,838

 

3,860

Cash and Cash Equivalents, End of Period

$

8,054

$

3,377

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

7

Table of Contents

Abbott Laboratories and Subsidiaries

Notes to the Condensed Consolidated Financial Statements

March 31, 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 four reportable segments: Established Pharmaceutical Products, Diagnostic Products, Nutritional Products, and Medical Devices.

8

Table of Contents

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

$

$

821

$

821

$

$

813

$

813

Other

 

 

249

 

249

 

 

231

231

Total

 

 

1,070

 

1,070

 

 

1,044

 

1,044

Nutritionals —

 

 

 

 

 

 

Pediatric Nutritionals

 

508

 

558

 

1,066

 

518

 

571

 

1,089

Adult Nutritionals

 

328

 

642

 

970

 

294

 

521

 

815

Total

 

836

 

1,200

 

2,036

 

812

 

1,092

 

1,904

Diagnostics —

 

 

 

 

 

 

Core Laboratory

 

271

 

911

 

1,182

 

267

 

722

 

989

Molecular

 

175

 

272

 

447

 

65

 

74

 

139

Point of Care

 

92

 

37

 

129

 

103

 

35

 

138

Rapid Diagnostics

 

1,103

 

1,153

 

2,256

 

368

 

192

 

560

Total

 

1,641

 

2,373

 

4,014

 

803

 

1,023

 

1,826

Medical Devices —

 

 

 

 

 

 

Rhythm Management

 

241

 

278

 

519

 

228

 

246

 

474

Electrophysiology

 

179

 

252

 

431

 

164

 

224

 

388

Heart Failure

 

145

 

49

 

194

 

152

 

51

 

203

Vascular

 

219

 

416

 

635

 

230

 

395

 

625

Structural Heart

 

169

 

208

 

377

 

136

 

182

 

318

Neuromodulation

 

145

 

39

 

184

 

137

 

40

 

177

Diabetes Care

253

727

980

186

566

752

Total

 

1,351

 

1,969

 

3,320

 

1,233

 

1,704

 

2,937

Other

 

10

 

6

 

16

 

8

 

7

 

15

Total

$

3,838

$

6,618

$

10,456

$

2,856

$

4,870

$

7,726

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 $3.8 billion in the Diagnostics segment and approximately $400 million in the Medical Devices segment. Abbott expects to recognize revenue on approximately 60 percent of these remaining performance obligations over the next 24 months, approximately 17 percent over the subsequent 12 months and the remainder thereafter.

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

Other Contract Assets and Liabilities

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

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

9

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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

$

405

Unearned revenue from cash received during the period

174

Revenue recognized related to contract liability balance

(163)

Balance at March 31, 2021

$

416

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 $1.785 billion and $541 million, respectively. Net earnings allocated to common shares for the three months ended March 31, 2021 and 2020 were $1.785 billion and $561 million, respectively.

Earnings from discontinued operations, net of tax, in the first quarter of 2020 include the recognition of $20 million of tax benefits as a result of the resolution of various tax positions related to the previous sale of a business that was reported as a discontinued operation.

Other, net in Net cash from operating activities in the Condensed Consolidated Statement of Cash Flows for the first three months of 2021 includes $16 million of pension contributions and the payment of cash taxes of approximately $270 million.  The first three months of 2020 includes $320 million of pension contributions and the payment of cash taxes of approximately $125 million.

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

$

288

Provisions/charges to income

15

Amounts charged off and other deductions

 

(8)

Balance at March 31, 2021

$

295

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

$

785

$

776

Other

 

47

 

45

Total

$

832

$

821

10

Table of Contents

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 $375 million of investments in mutual funds that are held in a rabbi trust and were acquired as part of the St. Jude Medical, Inc. (St. Jude Medical) business acquisition. These investments, which are specifically designated as available for the purpose of paying benefits under a deferred compensation plan, are not available for general corporate purposes and are subject to creditor claims in the event of insolvency.

Abbott also holds certain investments as of March 31, 2021 with a carrying value of $289 million that are accounted for under the equity method of accounting and other equity investments with a carrying value of approximately $105 million that do not have a readily determinable fair value.

Note 5 — Changes in Accumulated Other Comprehensive Income (Loss)

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

Three Months Ended March 31 

Cumulative 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

$

(4,859)

$

(4,924)

$

(3,871)

$

(3,540)

$

(216)

$

(1)

Other comprehensive income (loss) before reclassifications

 

(536)

 

(1,144)

22

 

7

 

96

 

176

Amounts reclassified from accumulated other
comprehensive income

 

 

63

 

50

 

16

 

(10)

Net current period comprehensive income (loss)

 

(536)

 

(1,144)

 

85

 

57

 

112

 

166

Balance at March 31 

$

(5,395)

$

(6,068)

$

(3,786)

$

(3,483)

$

(104)

$

165

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 $23.4 billion at March 31, 2021 and $23.7 billion at December 31, 2020. Foreign currency translation adjustments decreased goodwill by approximately $360 million in the first three months of 2021. The amount of goodwill related to reportable segments at March 31, 2021 was $2.9 billion for the Established Pharmaceutical Products segment, $286 million for the Nutritional Products segment, $3.8 billion for the Diagnostic Products segment, and $16.3 billion for the Medical Devices segment. There was no reduction of goodwill relating to impairments in the first three months of 2021.

The gross amount of amortizable intangible assets, primarily product rights and technology was $27.5 billion as of March 31, 2021 and $27.8 billion as of December 31, 2020, and accumulated amortization was $14.5 billion as of March 31, 2021 and $14.2 billion as of December 31, 2020. Foreign currency translation adjustments decreased intangible assets by $94 million in the first three months of 2021. Abbott’s estimated annual amortization expense for intangible assets is approximately $2.0 billion in 2021 and 2022, and $1.9 billion in 2023, 2024, and 2025.

Indefinite-lived intangible assets, which relate to in-process R&D acquired in a business combination, were approximately $1.2 billion as of March 31, 2021 and December 31, 2020.

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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 $25 million. No additional charges were recognized in the first three months of 2021. As of March 31, 2021, the accrued liabilities remaining in the Consolidated Balance Sheet related to these actions total $13 million and primarily represent severance obligations.

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 $1 million were recognized as Cost of products sold.  The following summarizes the activity for the first three months of 2021 related to these restructuring actions and the status of the related accrual as of March 31, 2021:

(in millions)

    

Accrued balance at December 31, 2020

$

70

Restructuring charges recorded in 2021

1

Payments and other adjustments

(13)

Accrued balance at March 31, 2021

$

58

Note 8 — Incentive Stock Program

In the first three months of 2021, Abbott granted 2,693,918 stock options, 478,490 restricted stock awards and 4,511,126 restricted stock units under its incentive stock program. At March 31, 2021, approximately 101 million shares were reserved for future grants. Information regarding the number of options outstanding and exercisable at March 31, 2021 is as follows:

    

Outstanding

    

Exercisable

Number of shares

 

 

30,484,541

 

23,519,084

Weighted average remaining life (years)

 

 

6.2

 

5.4

Weighted average exercise price

 

$

62.17

$

51.23

Aggregate intrinsic value (in millions)

 

$

1,769

$

1,614

The total unrecognized share-based compensation cost at March 31, 2021 amounted to approximately $744 million which is expected to be recognized over the next three years.

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 $8.6 billion at March 31, 2021 and $8.1 billion at December 31, 2020 are designated as cash flow hedges of the variability of the cash flows due to changes in foreign exchange rates and are recorded at fair value. Accumulated gains and losses as of March 31, 2021 will be included in Cost of products sold at the time the products are sold, generally through the next twelve to eighteen months.

Abbott enters into foreign currency forward exchange contracts to manage currency exposures for foreign currency denominated third-party trade payables and receivables, and for intercompany loans and trade accounts payable where the receivable or payable is denominated in a currency other than the functional currency of the entity.  For intercompany loans, the contracts require Abbott to sell or buy foreign currencies, primarily European currencies, in exchange for primarily U.S. dollars and other European currencies. For intercompany and trade payables and receivables, the currency exposures are primarily the U.S. dollar and European currencies. At March 31, 2021 and December 31, 2020, Abbott held the gross notional amount of $10.2 billion and $11.0 billion, respectively, of such foreign currency forward exchange contracts.

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Table of Contents

Abbott Laboratories and Subsidiaries

Notes to the Condensed Consolidated Financial Statements

March 31, 2021

(Unaudited)

Abbott has designated a yen-denominated, 5-year term loan of approximately $542 million and $577 million as of March 31, 2021 and December 31, 2020, respectively, as a hedge of the net investment in certain foreign subsidiaries. The change in the value of the debt, which is due to changes in foreign exchange rates, is recorded in Accumulated other comprehensive income (loss), net of tax.

Abbott is a party to interest rate hedge contracts totaling approximately $2.9 billion at March 31, 2021 and December 31, 2020 to manage its exposure to changes in the fair value of fixed-rate debt. These contracts are designated as fair value hedges of the variability of the fair value of fixed-rate debt due to changes in the long-term benchmark interest rates. The effect of the hedge is to change a fixed-rate interest obligation to a variable rate for that portion of the debt. Abbott records the contracts at fair value and adjusts the carrying amount of the fixed-rate debt by an offsetting amount.

The following table summarizes the amounts and location of certain derivative financial instruments as of March 31, 2021 and December 31, 2020: