UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
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.
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, 2022, 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 | 19 |
24 | |
24 | |
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds | 25 |
26 | |
27 |
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 | ||||||
| 2022 |
| 2021 | |||
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 before taxes |
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Taxes on earnings |
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Net Earnings | $ | | $ | | ||
Basic Earnings Per Common Share | $ | $ | ||||
Diluted Earnings Per Common Share | $ | $ | ||||
Average Number of Common Shares Outstanding Used for Basic Earnings Per Common Share |
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Dilutive Common Stock Options |
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Average Number of Common Shares Outstanding Plus Dilutive Common Stock Options |
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Outstanding Common Stock Options Having No Dilutive Effect | |
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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 | ||||||
| 2022 |
| 2021 | |||
Net Earnings | $ | | $ | | ||
Foreign currency translation gain (loss) adjustments |
| ( |
| ( | ||
Net actuarial gains (losses) and amortization of net actuarial (losses) and prior service (costs) and credits, net of taxes of $ |
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Net gains (losses) for derivative instruments designated as cash flow hedges, net of taxes of $( |
| ( |
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Other comprehensive income (loss) | ( | ( | ||||
Comprehensive Income (Loss) | $ | | $ | | ||
March 31, | December 31, | |||||
2022 | 2021 | |||||
Supplemental Accumulated Other Comprehensive Income (Loss) Information, net of tax: | ||||||
Cumulative foreign currency translation (loss) adjustments | $ | ( | $ | ( | ||
Net actuarial (losses) and prior service (costs) and credits |
| ( |
| ( | ||
Cumulative gains (losses) on derivative instruments designated as cash flow hedges |
| |
| | ||
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, | |||||
| 2022 |
| 2021 | |||
Assets | ||||||
Current Assets: | ||||||
Cash and cash equivalents | $ | | $ | | ||
Short-term investments | | | ||||
Trade receivables, less allowances of $ |
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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 |
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Goodwill |
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Deferred income taxes and other assets |
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$ | | $ | | |||
Liabilities and Shareholders’ Investment | ||||||
Current Liabilities: |
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Trade accounts payable | $ | | $ | | ||
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, |
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Common shares, without par value Authorized — |
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Common shares held in treasury, at cost — Shares: 2022: |
| ( |
| ( | ||
Earnings employed in the business |
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Accumulated other comprehensive income (loss) |
| ( |
| ( | ||
Total Abbott Shareholders’ Investment |
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Noncontrolling Interests in Subsidiaries |
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Total Shareholders’ Investment |
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$ | | $ | |
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 | ||||||
| 2022 |
| 2021 | |||
Common Shares: | ||||||
Balance at January 1 | ||||||
Shares: 2022: | $ | | $ | | ||
Issued under incentive stock programs |
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Shares: 2022: |
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Share-based compensation |
| |
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Issuance of restricted stock awards |
| ( |
| ( | ||
Balance at March 31 |
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Shares: 2022: | $ | | $ | | ||
Common Shares Held in Treasury: | ||||||
Balance at January 1 | ||||||
Shares: 2022: | $ | ( | $ | ( | ||
Issued under incentive stock programs |
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Shares: 2022: | |
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Purchased |
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Shares: 2022: |
| ( |
| ( | ||
Balance at March 31 |
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Shares: 2022: | $ | ( | $ | ( | ||
Earnings Employed in the Business: | ||||||
Balance at January 1 | $ | | $ | | ||
Net earnings |
| |
| | ||
Cash dividends declared on common shares (per share — 2022: $ |
| ( |
| ( | ||
Effect of common and treasury share transactions |
| |
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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 | ||||||
| 2022 |
| 2021 | |||
Cash Flow From (Used in) Operating Activities: | ||||||
Net earnings | $ | | $ | | ||
Adjustments to reconcile net earnings to net cash from operating activities — | ||||||
Depreciation |
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Amortization of intangible assets |
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Share-based compensation |
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Trade receivables |
| ( |
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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 |
| |
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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 |
| |
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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 |
| ( |
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Cash and Cash Equivalents, Beginning of Year |
| |
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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, 2022
(Unaudited)
Note 1 — Basis of Presentation
The accompanying unaudited, condensed consolidated financial statements have been prepared pursuant to rules and regulations of the Securities and Exchange Commission and, therefore, do not include all information and footnote disclosures normally included in audited financial statements. However, in the opinion of management, all adjustments (which include only normal adjustments) necessary to present fairly the results of operations, financial position and cash flows have been made. It is suggested that these statements be read in conjunction with the financial statements included in Abbott’s Annual Report on Form 10-K for the year ended December 31, 2021. The condensed consolidated financial statements include the accounts of the parent company and subsidiaries, after elimination of intercompany transactions.
Note 2 — Revenue
Abbott’s revenues are derived primarily from the sale of a broad line of health care products under short-term receivable arrangements. Abbott has
The following table provides detail by sales category:
Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | |||||||||||||||||
(in millions) |
| U.S. |
| Int’l |
| Total |
| U.S. |
| Int’l |
| Total | ||||||
Established Pharmaceutical Products — |
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Key Emerging Markets | $ | — | $ | | $ | | $ | — | $ | | $ | | ||||||
Other |
| — |
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| — |
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Total |
| — |
| |
| |
| — |
| | | |||||||
Nutritionals — |
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Pediatric Nutritionals |
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Adult Nutritionals |
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Total |
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Diagnostics — |
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Core Laboratory |
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Molecular |
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Point of Care |
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Rapid Diagnostics |
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Total |
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Medical Devices — |
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Rhythm Management |
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Electrophysiology |
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Heart Failure |
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Vascular |
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Structural Heart |
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Neuromodulation |
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Diabetes Care | | | | | | | ||||||||||||
Total |
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Other |
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| — |
| |
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Total | $ | | $ | | $ | | $ | | $ | | $ | | ||||||
8
Note 2 — Revenue (Continued)
Remaining Performance Obligations
As of March 31, 2022, 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.
Changes in the contract liabilities during the period are as follows:
(in millions) |
| ||
Contract Liabilities: | |||
Balance at December 31, 2021 | $ | ||
Unearned revenue from cash received during the period | |||
Revenue recognized related to contract liability balance | ( | ||
Balance at March 31, 2022 | $ | |
Note 3 — Supplemental Financial Information
Shares of unvested restricted stock that contain non-forfeitable rights to dividends are treated as participating securities and are included in the computation of earnings per share under the two-class method. Under the two-class method, net earnings are allocated between common shares and participating securities. Net earnings allocated to common shares for the three months ended March 31, 2022 and 2021 were $
Other, net in Net cash from operating activities in the Condensed Consolidated Statement of Cash Flows for the first three months of 2022 includes $
9
Note 3 — Supplemental Financial Information (Continued)
The following summarizes the activity for the first three months of 2022 related to the allowance for doubtful accounts as of March 31, 2022:
(in millions) |
| ||
Allowance for Doubtful Accounts: | |||
Balance at December 31, 2021 | $ | | |
Provisions/charges to income | | ||
Amounts charged off and other deductions |
| ( | |
Balance at March 31, 2022 | $ | |
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, 2022 and December 31, 2021 are as follows:
March 31, | December 31, | |||||
(in millions) |
| 2022 |
| 2021 | ||
Long-term Investments: | ||||||
Equity securities | $ | | $ | | ||
Other |
| |
| | ||
Total | $ | | $ | | ||
The decrease in Abbott’s long-term investments as of March 31, 2022 versus the balance as of December 31, 2021 primarily relates to a decrease in the value of investments held in a rabbi trust.
Abbott’s equity securities as of March 31, 2022, include $
Abbott also holds certain investments as of March 31, 2022 with a carrying value of $
10
Note 4 — Changes in Accumulated Other Comprehensive Income (Loss)
The changes in accumulated other comprehensive income (loss), net of income taxes, are as follows:
Three Months Ended 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) |
| 2022 |
| 2021 |
| 2022 |
| 2021 |
| 2022 |
| 2021 | ||||||
Balance at January 1 | $ | ( | $ | ( | $ | ( | $ | ( | $ | | $ | ( | ||||||
Other comprehensive income (loss) before reclassifications |
| ( |
| ( | |
| |
| ( |
| | |||||||
Amounts reclassified from accumulated other comprehensive income |
| — |
| — |
| |
| |
| ( |
| | ||||||
Net current period comprehensive income (loss) |
| ( |
| ( |
| |
| |
| ( |
| | ||||||
Balance at March 31 | $ | ( | $ | ( | $ | ( | $ | ( | $ | | $ | ( | ||||||
(Income) loss amounts reclassified from accumulated other comprehensive income related to cash flow hedges are recorded as Cost of products sold. Net actuarial losses and prior service cost are included as a component of net periodic benefit costs; see Note 11 for additional details.
Note 5 — Goodwill and Intangible Assets
The total amount of goodwill reported was $
The gross amount of amortizable intangible assets, primarily product rights and technology, was $
Indefinite-lived intangible assets, which relate to in-process R&D (IPR&D) acquired in a business combination, were approximately $
11
Note 6 — Restructuring Plans
On May 27, 2021, Abbott management approved a restructuring plan related to its Diagnostic Products segment to align its manufacturing network for COVID-19 diagnostic tests with changes in the second quarter in projected testing demand driven by several factors, including significant reductions in cases in the U.S. and other major developed countries, the accelerated rollout of COVID-19 vaccines globally and the U.S. health authority’s updated guidance on testing for fully vaccinated individuals. In the second quarter of 2021, Abbott recorded charges of $
In the second half of 2021, as the Delta and Omicron variants of COVID-19 spread and the number of new COVID-19 cases increased significantly, particularly in the U.S., demand for rapid COVID-19 tests increased significantly. As a result, in the second half of 2021, Abbott sold approximately $
The following summarizes the activity related to this restructuring action and the status of the related accruals as of March 31, 2022:
Inventory- | ||||||||||||
Related | Fixed Asset | Other Exit | ||||||||||
(in millions) |
| Charges |
| Write-Downs |
| Costs |
| Total | ||||
Restructuring charges recorded in 2021 | $ | | $ | | $ | | $ | | ||||
Payments |
| — |
| — |
| ( |
| ( | ||||
Other non-cash |
| ( |
| ( |
| — |
| ( | ||||
Accrued balance at December 31, 2021 | — | — | | | ||||||||
Payments and other adjustments | — | — | ( | ( | ||||||||
Accrued balance at March 31, 2022 | $ | — | $ | — | $ | | $ | | ||||
In 2021, Abbott management approved plans to streamline operations in order to reduce costs and improve efficiencies in Abbott’s diagnostics, established pharmaceuticals, nutritional, and medical devices businesses. Abbott recorded employee-related severance and other charges of approximately $
The following summarizes the activity for these restructurings:
(in millions) |
| ||
Restructuring charges | $ | | |
Payments and other adjustments | ( | ||
Accrued balance at December 31, 2021 | | ||
Payments and other adjustments | ( | ||
Accrued balance at March 31, 2022 | $ | |
12
Note 7 — Incentive Stock Programs
In the first three months of 2022, 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, 2022 amounted to approximately $
Note 8 — Debt and Lines of Credit
On March 15, 2022, Abbott repaid the $
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, 2022 and December 31, 2021, Abbott held the gross notional amount of $