SEC Filing | Abbott Laboratories

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abt-20230630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)


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

For the quarterly period ended June 30, 2023


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

For the transition period from to

Commission File No. 1-2189

ABBOTT LABORATORIES


An Illinois Corporation			I.R.S. Employer Identification No.
			36-0698440

100 Abbott Park Road

Abbott Park, Illinois 60064-6400

Telephone: (224) 667-6100

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



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 x No o

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

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


Large Accelerated Filer x			Accelerated Filer o

Non-Accelerated Filer o			Smaller reporting company o

			Emerging growth company o

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

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

As of June 30, 2023, Abbott Laboratories had 1,735,357,980 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			8
Notes to the Condensed Consolidated Financial Statements			9

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			23

Item 4. Controls and Procedures			29

Part II - Other Information			29

Item 1. Legal Proceedings			29

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			29

Item 5. Other Information			30

Item 6. Exhibits			30

Signature			31

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				Six Months Ended
	June 30				June 30
	2023		2022		2023		2022
Net sales	$	9,978	$	11,257	$	19,725	$	23,152

Cost of products sold, excluding amortization of intangible assets	4,483		4,933		8,814		9,920
Amortization of intangible assets	498		507		989		1,019
Research and development	715		684		1,369		1,381
Selling, general and administrative	2,740		2,757		5,502		5,544
Total operating cost and expenses	8,436		8,881		16,674		17,864

Operating earnings	1,542		2,376		3,051		5,288

Interest expense	159		132		312		263
Interest (income)	(98)		(26)		(199)		(40)
Net foreign exchange (gain) loss	21		—		27		(3)
Other (income) expense, net	(176)		(82)		(287)		(160)
Earnings before taxes	1,636		2,352		3,198		5,228
Taxes on earnings	261		334		505		763
Net Earnings	$	1,375	$	2,018	$	2,693	$	4,465

Basic Earnings Per Common Share	$	0.79	$	1.15	$	1.54	$	2.53

Diluted Earnings Per Common Share	$	0.78	$	1.14	$	1.53	$	2.51

Average Number of Common Shares Outstanding Used for Basic Earnings Per Common Share	1,740,359		1,753,865		1,741,051		1,757,858
Dilutive Common Stock Options	9,889		11,598		9,933		12,115
Average Number of Common Shares Outstanding Plus Dilutive Common Stock Options	1,750,248		1,765,463		1,750,984		1,769,973

Outstanding Common Stock Options Having No Dilutive Effect	5,474		5,419		5,474		2,655

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

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Abbott Laboratories and Subsidiaries

Condensed Consolidated Statement of Comprehensive Income

(Unaudited)

(dollars in millions)


	Three Months Ended				Six Months Ended
	June 30				June 30
	2023		2022		2023		2022
Net Earnings	$	1,375	$	2,018	$	2,693	$	4,465
Foreign currency translation gain (loss) adjustments	(52)		(315)		87		(421)
Net actuarial gains (losses) and amortization of net actuarial losses and prior service costs and credits, net of taxes of $(3) and $(3) in 2023 and $12 and $25 in 2022	(6)		54		(4)		116
Net gains (losses) for derivative instruments designated as cash flow hedges and other, net of taxes of $4 and $(54) in 2023 and $61 and $46 in 2022	26		29		(103)		(27)
Other comprehensive income (loss)	(32)		(232)		(20)		(332)
Comprehensive Income	$	1,343	$	1,786	$	2,673	$	4,133


	June 30, 2023		December 31, 2022
Supplemental Accumulated Other Comprehensive Income (Loss) Information, net of tax:
Cumulative foreign currency translation (loss) adjustments	$	(6,646)	$	(6,733)
Net actuarial (losses) and prior service (costs) and credits	(1,497)		(1,493)
Cumulative gains (losses) on derivative instruments designated as cash flow hedges and other	72		175
Accumulated other comprehensive income (loss)	$	(8,071)	$	(8,051)

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

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Abbott Laboratories and Subsidiaries

Condensed Consolidated Balance Sheet

(Unaudited)

(dollars in millions)


	June 30, 2023		December 31, 2022
Assets
Current Assets:
Cash and cash equivalents	$	7,835	$	9,882
Short-term investments	320		288
Trade receivables, less allowances of $485 in 2023 and $500 in 2022	6,172		6,218
Inventories:
Finished products	4,004		3,805
Work in process	845		680
Materials	2,022		1,688
Total inventories	6,871		6,173
Prepaid expenses and other receivables	2,307		2,663
Total Current Assets	23,505		25,224
Investments	799		766
Property and equipment, at cost	20,926		20,212
Less: accumulated depreciation and amortization	11,477		11,050
Net property and equipment	9,449		9,162
Intangible assets, net of amortization	9,834		10,454
Goodwill	23,258		22,799
Deferred income taxes and other assets	6,509		6,033
	$	73,354	$	74,438
Liabilities and Shareholders’ Investment
Current Liabilities:
Trade accounts payable	$	4,211	$	4,607
Salaries, wages and commissions	1,362		1,556
Other accrued liabilities	5,334		5,845
Dividends payable	886		887
Income taxes payable	273		343
Current portion of long-term debt	2,284		2,251
Total Current Liabilities	14,350		15,489
Long-term debt	14,562		14,522
Post-employment obligations, deferred income taxes and other long-term liabilities	7,038		7,522
Commitments and Contingencies
Shareholders’ Investment:
Preferred shares, one dollar par value Authorized — 1,000,000 shares, none issued	—		—
Common shares, without par value Authorized — 2,400,000,000 shares Issued at stated capital amount — Shares: 2023: 1,987,181,491; 2022: 1,986,519,278	24,612		24,709
Common shares held in treasury, at cost — Shares: 2023: 251,823,511; 2022: 248,724,257	(15,722)		(15,229)
Earnings employed in the business	36,355		35,257
Accumulated other comprehensive income (loss)	(8,071)		(8,051)
Total Abbott Shareholders’ Investment	37,174		36,686
Noncontrolling Interests in Subsidiaries	230		219
Total Shareholders’ Investment	37,404		36,905
	$	73,354	$	74,438

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

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Abbott Laboratories and Subsidiaries

Condensed Consolidated Statement of Shareholders’ Investment

(Unaudited)

(in millions except shares and per share data)


	Three Months Ended June 30
	2023		2022
Common Shares:
Balance at March 31
Shares: 2023: 1,986,904,170; 2022: 1,985,525,053	$	24,488	$	24,304
Issued under incentive stock programs
Shares: 2023: 277,321; 2022: 151,682	14		10
Share-based compensation	119		125
Issuance of restricted stock awards	(9)		(10)
Balance at June 30
Shares: 2023: 1,987,181,491; 2022: 1,985,676,735	$	24,612	$	24,429

Common Shares Held in Treasury:
Balance at March 31
Shares: 2023: 247,957,371; 2022: 234,582,764	$	(15,307)	$	(13,726)
Issued under incentive stock programs
Shares: 2023: 157,305; 2022: 135,663	10		7
Purchased
Shares: 2023: 4,023,445; 2022: 9,891	(425)		(1)
Balance at June 30
Shares: 2023: 251,823,511; 2022: 234,456,992	$	(15,722)	$	(13,720)

Earnings Employed in the Business:
Balance at March 31	$	35,868	$	33,295
Net earnings	1,375		2,018
Cash dividends declared on common shares (per share — 2023: $0.51; 2022: $0.47)	(889)		(827)
Effect of common and treasury share transactions	1		1
Balance at June 30	$	36,355	$	34,487

Accumulated Other Comprehensive Income (Loss):
Balance at March 31	$	(8,039)	$	(8,474)
Other comprehensive income (loss)	(32)		(232)
Balance at June 30	$	(8,071)	$	(8,706)

Noncontrolling Interests in Subsidiaries:
Balance at March 31	$	222	$	230
Noncontrolling Interests’ share of income, business combinations, net of distributions and share repurchases	8		(4)
Balance at June 30	$	230	$	226

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

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Abbott Laboratories and Subsidiaries

Condensed Consolidated Statement of Shareholders’ Investment

(Unaudited)

(in millions except shares and per share data)


	Six Months Ended June 30
	2023		2022
Common Shares:
Balance at January 1
Shares: 2023: 1,986,519,278; 2022: 1,985,273,421	$	24,709	$	24,470
Issued under incentive stock programs
Shares: 2023: 662,213; 2022: 403,314	30		24
Share-based compensation	415		449
Issuance of restricted stock awards	(542)		(514)
Balance at June 30
Shares: 2023: 1,987,181,491; 2022: 1,985,676,735	$	24,612	$	24,429

Common Shares Held in Treasury:
Balance at January 1
Shares: 2023: 248,724,257; 2022: 221,191,228	$	(15,229)	$	(11,822)
Issued under incentive stock programs
Shares: 2023: 4,090,470; 2022: 4,280,139	252		230
Purchased
Shares: 2023: 7,189,724; 2022: 17,545,903	(745)		(2,128)
Balance at June 30
Shares: 2023: 251,823,511; 2022: 234,456,992	$	(15,722)	$	(13,720)

Earnings Employed in the Business:
Balance at January 1	$	35,257	$	31,528
Net earnings	2,693		4,465
Cash dividends declared on common shares (per share — 2023: $1.02; 2022: $0.94)	(1,779)		(1,653)
Effect of common and treasury share transactions	184		147
Balance at June 30	$	36,355	$	34,487

Accumulated Other Comprehensive Income (Loss):
Balance at January 1	$	(8,051)	$	(8,374)
Other comprehensive income (loss)	(20)		(332)
Balance at June 30	$	(8,071)	$	(8,706)

Noncontrolling Interests in Subsidiaries:
Balance at January 1	$	219	$	222
Noncontrolling Interests’ share of income, business combinations, net of distributions and share repurchases	11		4
Balance at June 30	$	230	$	226

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

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Abbott Laboratories and Subsidiaries

Condensed Consolidated Statement of Cash Flows

(Unaudited)

(dollars in millions)


	Six Months Ended June 30
	2023		2022
Cash Flow From (Used in) Operating Activities:
Net earnings	$	2,693	$	4,465
Adjustments to reconcile net earnings to net cash from operating activities —
Depreciation	617		626
Amortization of intangible assets	989		1,019
Share-based compensation	413		447
Trade receivables	37		(939)
Inventories	(667)		(1,030)
Other, net	(1,736)		(113)
Net Cash From Operating Activities	2,346		4,475

Cash Flow From (Used in) Investing Activities:
Acquisitions of property and equipment	(887)		(700)
Acquisitions of businesses and technologies, net of cash acquired	(826)		—
Proceeds from business dispositions	40		48
Sales (purchases) of other investment securities, net	(7)		18
Other	5		10
Net Cash From (Used in) Investing Activities	(1,675)		(624)

Cash Flow From (Used in) Financing Activities:
Net borrowings (repayments) of short-term debt and other	(29)		13
Proceeds from issuance of long-term debt	1		6
Repayments of long-term debt	(2)		(752)
Purchases of common shares	(966)		(2,312)
Proceeds from stock options exercised	77		69
Dividends paid	(1,780)		(1,660)
Net Cash From (Used in) Financing Activities	(2,699)		(4,636)

Effect of exchange rate changes on cash and cash equivalents	(19)		(77)

Net Increase (Decrease) in Cash and Cash Equivalents	(2,047)		(862)
Cash and Cash Equivalents, Beginning of Year	9,882		9,799
Cash and Cash Equivalents, End of Period	$	7,835	$	8,937

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

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Abbott Laboratories and Subsidiaries

Notes to the Condensed Consolidated Financial Statements

June 30, 2023

(Unaudited)

Note 1 — Basis of Presentation

The accompanying unaudited, condensed consolidated financial statements have been prepared pursuant to rules and regulations of the Securities and Exchange Commission and, therefore, do not include all information and footnote disclosures normally included in audited financial statements. However, in the opinion of management, all adjustments (which include only normal adjustments) necessary to present fairly the results of operations, financial position and cash flows have been made. It is suggested that these statements be read in conjunction with the financial statements included in Abbott’s Annual Report on Form 10-K for the year ended December 31, 2022. The condensed consolidated financial statements include the accounts of the parent company and subsidiaries, after elimination of intercompany transactions.

Note 2 — New Accounting Standards

Recently Adopted Accounting Standards

In September 2022, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update 2022-04, Disclosure of Supplier Finance Program Obligations, which requires an entity to report information about its supplier finance program. Abbott adopted the standard on January 1, 2023. The new standard did not have an impact on Abbott's condensed consolidated financial statements.

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Abbott Laboratories and Subsidiaries

Notes to the Condensed Consolidated Financial Statements

June 30, 2023

(Unaudited)

Note 3 — Revenue

Abbott’s revenues are derived primarily from the sale of a broad line of health care products under short-term receivable arrangements. Abbott has four reportable segments: Established Pharmaceutical Products, Diagnostic Products, Nutritional Products, and Medical Devices.

The following tables provide detail by sales category:


	Three Months Ended June 30, 2023						Three Months Ended June 30, 2022
(in millions)	U.S.		Int’l		Total		U.S.		Int’l		Total
Established Pharmaceutical Products —
Key Emerging Markets	$	—	$	990	$	990	$	—	$	946	$	946
Other	—		297		297		—		277		277
Total	—		1,287		1,287		—		1,223		1,223
Nutritionals —
Pediatric Nutritionals	507		517		1,024		413		512		925
Adult Nutritionals	374		678		1,052		348		680		1,028
Total	881		1,195		2,076		761		1,192		1,953
Diagnostics —
Core Laboratory	311		982		1,293		287		934		1,221
Molecular	43		98		141		71		141		212
Point of Care	99		43		142		101		38		139
Rapid Diagnostics	508		233		741		1,982		740		2,722
Total	961		1,356		2,317		2,441		1,853		4,294
Medical Devices —
Rhythm Management	269		314		583		264		284		548
Electrophysiology	245		308		553		226		260		486
Heart Failure	226		69		295		207		62		269
Vascular	264		451		715		228		425		653
Structural Heart	219		279		498		207		233		440
Neuromodulation	185		42		227		157		40		197
Diabetes Care	505		919		1,424		399		793		1,192
Total	1,913		2,382		4,295		1,688		2,097		3,785

Other	3		—		3		2		—		2

Total	$	3,758	$	6,220	$	9,978	$	4,892	$	6,365	$	11,257

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Abbott Laboratories and Subsidiaries

Notes to the Condensed Consolidated Financial Statements

June 30, 2023

(Unaudited)

Note 3 — Revenue (Continued)


	Six Months Ended June 30, 2023						Six Months Ended June 30, 2022
(in millions)	U.S.		Int’l		Total		U.S.		Int’l		Total
Established Pharmaceutical Products —
Key Emerging Markets	$	—	$	1,902	$	1,902	$	—	$	1,852	$	1,852
Other	—		574		574		—		518		518
Total	—		2,476		2,476		—		2,370		2,370
Nutritionals —
Pediatric Nutritionals	966		982		1,948		751		1,021		1,772
Adult Nutritionals	727		1,368		2,095		687		1,388		2,075
Total	1,693		2,350		4,043		1,438		2,409		3,847
Diagnostics —
Core Laboratory	600		1,875		2,475		555		1,850		2,405
Molecular	90		198		288		243		389		632
Point of Care	192		84		276		192		75		267
Rapid Diagnostics	1,414		552		1,966		4,163		2,084		6,247
Total	2,296		2,709		5,005		5,153		4,398		9,551
Medical Devices —
Rhythm Management	529		581		1,110		512		560		1,072
Electrophysiology	483		575		1,058		442		529		971
Heart Failure	444		132		576		403		116		519
Vascular	482		850		1,332		437		835		1,272
Structural Heart	429		530		959		397		454		851
Neuromodulation	340		83		423		300		76		376
Diabetes Care	984		1,753		2,737		742		1,576		2,318
Total	3,691		4,504		8,195		3,233		4,146		7,379

Other	6		—		6		5		—		5

Total	$	7,686	$	12,039	$	19,725	$	9,829	$	13,323	$	23,152

Note: The Acelis Connected Health business was internally transferred from Rapid Diagnostics to Heart Failure on January 1, 2023. As a result, $28 million of sales in the second quarter of 2022 and $57 million in the first six months of 2022 were moved from Rapid Diagnostics to Heart Failure.

Remaining Performance Obligations

As of June 30, 2023, the estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) was approximately $4.2 billion in the Diagnostics segment and approximately $475 million in the Medical Devices segment. Abbott expects to recognize revenue on approximately 59 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 FASB Accounting Standards Codification (ASC) 606-10-50-14 and has not included remaining performance obligations related to contracts with original expected durations of one year or less in the amounts above.

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Abbott Laboratories and Subsidiaries

Notes to the Condensed Consolidated Financial Statements

June 30, 2023

(Unaudited)

Note 3 — Revenue (Continued)

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 the end of the period, as well as the changes in the balance, were not significant.

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

Changes in the contract liabilities during the period are as follows:


(in millions)
Contract Liabilities:
Balance at December 31, 2022	$	500
Unearned revenue from cash received during the period	243
Revenue recognized related to contract liability balance	(192)
Balance at June 30, 2023	$	551

Note 4 — Supplemental Financial Information

Shares of unvested restricted stock that contain non-forfeitable rights to dividends are treated as participating securities and are included in the computation of earnings per share under the two-class method. Under the two-class method, net earnings are allocated between common shares and participating securities. Net earnings allocated to common shares for the three months ended June 30, 2023 and 2022 were $1.370 billion and $2.009 billion, respectively, and for the six months ended June 30, 2023 and 2022 were $2.682 billion and $4.447 billion, respectively.

Other, net in Net cash from operating activities in the Condensed Consolidated Statement of Cash Flows for the first six months of 2023 includes $290 million of pension contributions and the payment of cash taxes of approximately $837 million. The first six months of 2022 includes $348 million of pension contributions and the payment of cash taxes of approximately $657 million.

The following summarizes the activity for the first six months of 2023 related to the allowance for doubtful accounts as of June 30, 2023:


(in millions)
Allowance for Doubtful Accounts:
Balance at December 31, 2022	$	262
Provisions/charges to income	16
Amounts charged off and other deductions	(12)
Balance at June 30, 2023	$	266

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.

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Abbott Laboratories and Subsidiaries

Notes to the Condensed Consolidated Financial Statements

June 30, 2023

(Unaudited)

Note 4 — Supplemental Financial Information (Continued)

The components of long-term investments as of June 30, 2023 and December 31, 2022 are as follows:


(in millions)	June 30, 2023		December 31, 2022
Long-term Investments:
Equity securities	$	574	$	558
Other	225		208
Total	$	799	$	766

The increase in Abbott’s long-term investments as of June 30, 2023 versus the balance as of December 31, 2022 is primarily due to investments acquired as part of a business acquisition and other additional investments, partially offset by the impact of equity method investment losses.

Abbott’s equity securities as of June 30, 2023 include $305 million of investments in mutual funds that are held in a rabbi trust and were acquired as part of the St. Jude Medical, Inc. 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 June 30, 2023 with a carrying value of $164 million that are accounted for under the equity method of accounting and other equity investments with a carrying value of approximately $95 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 June 30
	Cumulative Foreign Currency Translation (Loss) Adjustments				Net Actuarial (Losses) and Prior Service (Costs) and Credits				Cumulative Gains (Losses) on Derivative Instruments Designated as Cash Flow Hedges and Other
(in millions)	2023		2022		2023		2022		2023		2022
Balance at March 31	$	(6,594)	$	(5,945)	$	(1,491)	$	(2,608)	$	46	$	79
Other comprehensive income (loss) before reclassifications	(52)		(315)		1		13		80		45
Amounts reclassified from accumulated other comprehensive income	—		—		(7)		41		(54)		(16)
Net current period comprehensive income (loss)	(52)		(315)		(6)		54		26		29
Balance at June 30	$	(6,646)	$	(6,260)	$	(1,497)	$	(2,554)	$	72	$	108

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Abbott Laboratories and Subsidiaries

Notes to the Condensed Consolidated Financial Statements

June 30, 2023

(Unaudited)

Note 5 — Changes In Accumulated Other Comprehensive Income (Loss) (Continued)


	Six Months Ended June 30
	Cumulative Foreign Currency Translation (Loss) Adjustments				Net Actuarial (Losses) and Prior Service (Costs) and Credits				Cumulative Gains (Losses) on Derivative Instruments Designated as Cash Flow Hedges and Other
(in millions)	2023		2022		2023		2022		2023		2022
Balance at January 1	$	(6,733)	$	(5,839)	$	(1,493)	$	(2,670)	$	175	$	135
Other comprehensive income (loss) before reclassifications	87		(421)		3		30		38		11
Amounts reclassified from accumulated other comprehensive income	—		—		(7)		86		(141)		(38)
Net current period comprehensive income (loss)	87		(421)		(4)		116		(103)		(27)
Balance at June 30	$	(6,646)	$	(6,260)	$	(1,497)	$	(2,554)	$	72	$	108

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 13 for additional details.

Note 6 — Business Acquisition

On April 27, 2023, Abbott completed the acquisition of Cardiovascular Systems, Inc (CSI) for $20 per common share, which equated to a purchase price of $851 million. The transaction was funded with cash on hand and accounted for as a business combination. CSI's atherectomy system, which is used in treating peripheral and coronary artery disease, adds complimentary technologies to Abbott's portfolio of vascular device offerings.

The preliminary allocation of the purchase price of the acquisition resulted in the recording of a non-deductible developed technology intangible asset of $290 million; non-deductible in-process research and development of $60 million, which will be accounted for as an indefinite-lived intangible asset until regulatory approval or discontinuation; non-deductible goodwill of approximately $340 million; net deferred tax assets of approximately $18 million and other net assets of approximately $143 million. The goodwill is identifiable to the Medical Devices reportable segment and is attributable to expected synergies from combining operations, as well as intangible assets that do not qualify for separate recognition. Allocation of the purchase price of the acquisition will be finalized when the valuation of assets and liabilities is completed. Revenues and earnings of CSI included in Abbott's consolidated financial statements since the acquisition date are not material to Abbott's consolidated revenue and earnings. If the acquisition of CSI had taken place as of the beginning of 2022, consolidated net sales and earnings would not have been significantly different from reported amounts.

Note 7 — Goodwill and Intangible Assets

The total amount of goodwill reported was $23.3 billion at June 30, 2023 and $22.8 billion at December 31, 2022. The acquisition of CSI increased goodwill by approximately $340 million and foreign currency translation adjustments increased goodwill by approximately $120 million in the first six months of 2023. The amount of goodwill related to reportable segments at June 30, 2023 was $2.7 billion for the Established Pharmaceutical Products segment, $286 million for the Nutritional Products segment, $3.5 billion for the Diagnostic Products segment, and $16.7 billion for the Medical Devices segment. There was no reduction of goodwill relating to impairments in the first six months of 2023.

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Abbott Laboratories and Subsidiaries

Notes to the Condensed Consolidated Financial Statements

June 30, 2023

(Unaudited)

Note 7 — Goodwill and Intangible Assets (continued)

The gross amount of amortizable intangible assets, primarily product rights and technology, was $27.7 billion and $27.2 billion as of June 30, 2023 and December 31, 2022, respectively. The gross amount of amortizable intangible assets increased by $290 million due to the CSI acquisition. Accumulated amortization was $18.7 billion and $17.6 billion as of June 30, 2023 and December 31, 2022, respectively. Foreign currency translation adjustments increased intangible assets by $47 million in the first six months of 2023. Abbott’s estimated annual amortization expense for intangible assets is approximately $2.0 billion in 2023, $1.9 billion in 2024, $1.7 billion in 2025, $1.6 billion in 2026 and $1.3 billion in 2027.

Indefinite-lived intangible assets, which relate to in-process research and development (IPR&D) acquired in a business combination, were approximately $822 million as of June 30, 2023 and $807 million as of December 31, 2022. In the second quarter of 2023, the acquisition of CSI increased IPR&D by $60 million. This increase was partially offset by $45 million of charges recorded on the Research and development line of the Condensed Consolidated Statement of Earnings for the impairment of certain indefinite-lived intangible assets related to the Medical Devices reportable segment.

Note 8 — Restructuring Plans

In 2022 and 2023, Abbott management approved various plans to streamline operations in order to reduce costs and improve efficiencies in its medical devices, nutritional, diagnostic, and established pharmaceutical businesses. In the six months ended June 30, 2023, Abbott recorded employee related severance and other charges of approximately $49 million, of which approximately $17 million was recorded in Cost of products sold, approximately $5 million was recorded in Research and development, and approximately $27 million was recorded in Selling, general and administrative expenses. In addition, Abbott recognized fixed asset impairment charges of approximately $17 million related to these restructuring plans.

The following summarizes the activity related to these restructuring actions and the status of the related accruals as of June 30, 2023:


(in millions)	Total
Accrued balance at December 31, 2022	$	228
Restructuring charges in 2023	49
Payments and other adjustments	(120)
Accrued balance at June 30, 2023	$	157

Note 9 — Incentive Stock Programs

In the first six months of 2023, Abbott granted 1,973,371 stock options, 460,447 restricted stock awards and 4,854,027 restricted stock units under its incentive stock program. At June 30, 2023, approximately 74 million shares were reserved for future grants. Information regarding the number of options outstanding and exercisable at June 30, 2023 is as follows:


	Outstanding		Exercisable
Number of shares	29,508,026		24,819,977
Weighted average remaining life (years)	5.2		4.5
Weighted average exercise price	$	73.66	$	66.04
Aggregate intrinsic value (in millions)	$	1,107	$	1,101

The total unrecognized share-based compensation cost at June 30, 2023 amounted to approximately $660 million which is expected to be recognized over the next three years.

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Abbott Laboratories and Subsidiaries

Notes to the Condensed Consolidated Financial Statements

June 30, 2023

(Unaudited)

Note 10 — Debt and Lines of Credit

On March 15, 2022, Abbott repaid the $750 million outstanding principal amount of its 2.55% Notes upon maturity.

Note 11 — Financial Instruments, Derivatives and Fair Value Measures

Certain Abbott foreign subsidiaries enter into foreign currency forward exchange contracts to manage exposures to changes in foreign exchange rates primarily for anticipated intercompany purchases by those subsidiaries whose functional currencies are not the U.S. dollar. These contracts, with gross notional amounts totaling $7.1 billion at June 30, 2023 and $7.7 billion at December 31, 2022, are designated as cash flow hedges of the variability of the cash flows due to changes in foreign exchange rates and are recorded at fair value. Accumulated gains and losses as of June 30, 2023 will be included in Cost of products sold at the time the products are sold, generally through the next twelve to eighteen months.

Abbott enters into foreign currency forward exchange contracts to manage currency exposures for foreign currency denominated third-party trade payables and receivables, and for intercompany loans and trade accounts payable where the receivable or payable is denominated in a currency other than the functional currency of the entity. For intercompany loans, the contracts require Abbott to sell or buy foreign currencies, primarily European currencies, in exchange for primarily U.S. dollars and other European currencies. For intercompany and trade payables and receivables, the currency exposures are primarily the U.S. dollar and European currencies. At June 30, 2023 and December 31, 2022, Abbott held the gross notional amounts of $12.3 billion and $12.0 billion, respectively, of such foreign currency forward exchange contracts.

Abbott has designated a yen-denominated, 5-year term loan of approximately $413 million and $446 million as of June 30, 2023 and December 31, 2022, respectively, as a hedge of the net investment in certain foreign subsidiaries. The change in the value of the debt, which is due to changes in foreign exchange rates, is recorded in Accumulated other comprehensive income (loss), net of tax.

Abbott is a party to interest rate hedge contracts with a notional amount totaling approximately $2.9 billion at June 30, 2023 and December 31, 2022 to manage its exposure to changes in the fair value of fixed-rate debt. These contracts are designated as fair value hedges of the variability of the fair value of fixed-rate debt due to changes in the long-term benchmark interest rates. The effect of the hedge is to change a fixed-rate interest obligation to a variable rate for that portion of the debt. Abbott records the contracts at fair value and adjusts the carrying amount of the fixed-rate debt by an offsetting amount.

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Abbott Laboratories and Subsidiaries

Notes to the Condensed Consolidated Financial Statements

June 30, 2023

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

The following table summarizes the amounts and location of certain derivative and non-derivative financial instruments as of June 30, 2023 and December 31, 2022:


	Fair Value - Assets					Fair Value - Liabilities
(in millions)	June 30, 2023		December 31, 2022		Balance Sheet Caption	June 30, 2023		December 31, 2022		Balance Sheet Caption
Interest rate swaps designated as fair value hedges:
Non-current	$	—	$	—	Deferred income taxes and other assets	$	142	$	136	Post-employment obligations, deferred income taxes and other long-term liabilities
Current	—		—		Prepaid expenses and other receivables	11		20		Other accrued liabilities
Foreign currency forward exchange contracts:
Hedging instruments	147		304		Prepaid expenses and other receivables	129		96		Other accrued liabilities
Others not designated as hedges	78		108		Prepaid expenses and other receivables	62		130		Other accrued liabilities
Debt designated as a hedge of net investment in a foreign subsidiary	—		—		n/a	413		446		Long-term debt
	$	225	$	412		$	757	$	828

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Abbott Laboratories and Subsidiaries

Notes to the Condensed Consolidated Financial Statements

June 30, 2023

(Unaudited)

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

The following table summarizes the activity for foreign currency forward exchange contracts designated as cash flow hedges and certain other derivative financial instruments, as well as the amounts and location of income (expense) and gain (loss) reclassified into income for the three and six months ended June 30, 2023 and 2022.


	Gain (loss) Recognized in Other Comprehensive Income (loss)								Income (expense) and Gain (loss) Reclassified into Income
	Three Months Ended June 30				Six Months Ended June 30				Three Months Ended June 30				Six Months Ended June 30
(in millions)	2023		2022		2023		2022		2023		2022		2023		2022		Income Statement Caption
Foreign currency forward exchange contracts designated as cash flow hedges	$	90	$	141	$	27	$	92	$	63	$	43	$	189	$	70	Cost of products sold
Debt designated as a hedge of net investment in a foreign subsidiary	38		54		33		84		—		—		—		—		n/a
Interest rate swaps designated as fair value hedges	n/a		n/a		n/a		n/a		(6)		(47)		3		(168)		Interest expense

Gains of $39 million and $303 million were recognized in the three months ended June 30, 2023 and 2022, respectively, related to foreign currency forward exchange contracts not designated as a hedge. A loss of $64 million and a gain of $252 million were recognized in the first six months ended June 30, 2023 and 2022, respectively, related to foreign currency forward exchange contracts not designated as a hedge. These amounts are reported in the Condensed Consolidated Statement of Earnings on the Net foreign exchange (gain) loss line.

The carrying values and fair values of certain financial instruments as of June 30, 2023 and December 31, 2022 are shown in the following table. The carrying values of all other financial instruments approximate their estimated fair values. The counterparties to financial instruments consist of select major international financial institutions. Abbott does not expect any losses from non-performance by these counterparties.


	June 30, 2023				December 31, 2022
(in millions)	Carrying Value		Fair Value		Carrying Value		Fair Value
Long-term Investment Securities:
Equity securities	$	574	$	574	$	558	$	558
Other	225		225		208		208
Total Long-term Debt	(16,846)		(16,555)		(16,773)		(16,313)
Foreign Currency Forward Exchange Contracts:
Receivable position	225		225		412		412
(Payable) position	(191)		(191)		(226)		(226)
Interest Rate Hedge Contracts:
Receivable position	—		—		—		—
(Payable) position	(153)		(153)		(156)		(156)

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

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Abbott Laboratories and Subsidiaries

Notes to the Condensed Consolidated Financial Statements

June 30, 2023

(Unaudited)

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

The following table summarizes the bases used to measure certain assets and liabilities at fair value on a recurring basis in the balance sheet:


			Basis of Fair Value Measurement
(in millions)	Outstanding Balances		Quoted Prices in Active Markets		Significant Other Observable Inputs		Significant Unobservable Inputs
June 30, 2023:
Equity securities	$	315	$	315	$	—	$	—
Foreign currency forward exchange contracts	225		—