Abbott Laboratories 10-Q for FY2020 Q3

Abbott Laboratories (ABT)

10-Q 2020-11-04 For: 2020-09-30

Added on April 11, 2026

About this 10-Q

Abbott Laboratories filed this 10-Q on November 4, 2020, covering the quarter ended September 30, 2020 (FY2020 Q3).

Headline figures

Quarter ended September 30, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $8.85B; up 9.6% from $8.08B a year earlier
Net income: $1.23B; up 28.3% from net income of $960M a year earlier
Diluted EPS: $0.69; up 30.2% from $0.53 a year earlier

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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.


Large Accelerated Filer	☒	Accelerated Filer	☐
Non-Accelerated Filer	☐	Smaller reporting company	☐
		Emerging growth company	☐


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	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


	Three Months Ended September 30				Nine Months Ended September 30
	2020		2019		2020		2019
Net sales	$	8,853	$	8,076	$	23,907	$	23,590
Cost of products sold, excluding amortization of intangible assets		3,966		3,358		10,510		9,797
Amortization of intangible assets		510		484		1,624		1,453
Research and development		580		596		1,722		1,845
Selling, general and administrative		2,302		2,440		7,126		7,352
Total operating cost and expenses		7,358		6,878		20,982		20,447
Operating earnings		1,495		1,198		2,925		3,143
Interest expense		137		167		410		506
Interest (income)		(10)		(24)		(37)		(69)
Net foreign exchange (gain) loss		(7)		7		(3)		9
Other (income) expense, net		(46)		(55)		(25)		(140)
Earnings from continuing operations before taxes		1,421		1,103		2,580		2,837
Tax expense on earnings from continuing operations		189		143		267		199
Earnings from continuing operations		1,232		960		2,313		2,638

Earnings from discontinued operations, net of tax		—		—		20		—

Net Earnings	$	1,232	$	960	$	2,333	$	2,638

Basic Earnings Per Common Share —
Continuing operations	$	0.69	$	0.54	$	1.30	$	1.48
Discontinued operations		—		—		0.01		—
Net earnings	$	0.69	$	0.54	$	1.31	$	1.48

Diluted Earnings Per Common Share —
Continuing operations	$	0.69	$	0.53	$	1.29	$	1.47
Discontinued operations		—		—		0.01		—
Net earnings	$	0.69	$	0.53	$	1.30	$	1.47

Average Number of Common Shares Outstanding Used for Basic Earnings Per Common Share		1,774,475		1,771,521		1,772,166		1,767,985
Dilutive Common Stock Options		13,378		12,646		12,381		12,818
Average Number of Common Shares Outstanding Plus Dilutive Common Stock Options		1,787,853		1,784,167		1,784,547		1,780,803
Outstanding Common Stock Options Having No Dilutive Effect		—		61		—		61


	Three Months Ended September 30				Nine Months Ended September 30
	2020		2019		2020		2019
Net Earnings	$	1,232	$	960	$	2,333	$	2,638
Foreign currency translation gain (loss) adjustments		112		(478)		(677)		(265)
Net actuarial gains (losses) and amortization of net actuarial losses and prior service costs and credits, net of taxes of $14 and $42 in 2020 and $7 and $21 in 2019		28		31		122		80
Net gains (losses) for derivative instruments designated as cash flow hedges and other, net of taxes of $(43) and $(24) in 2020 and $23 and $8 in 2019		(104)		49		(24)		8
Other comprehensive income (loss)		36		(398)		(579)		(177)
Comprehensive Income	$	1,268	$	562	$	1,754	$	2,461

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


	September 30,		December 31,
	2020		2019
Supplemental Accumulated Other Comprehensive Income (Loss) Information, net of tax:
Cumulative foreign currency translation (loss) adjustments	$	(5,601)	$	(4,924)
Net actuarial (losses) and prior service (costs) and credits		(3,418)		(3,540)
Cumulative gains (losses) on derivative instruments designated as cash flow hedges and other		(25)		(1)
Accumulated other comprehensive income (loss)	$	(9,044)	$	(8,465)



Liabilities and Shareholders’ Investment
Current Liabilities:
Short-term borrowings	$	208	$	201
Trade accounts payable		3,189		3,252
Salaries, wages and commissions		1,439		1,237
Other accrued liabilities		4,659		4,035
Dividends payable		639		635
Income taxes payable		117		226
Current portion of long-term debt		6		1,277
Total Current Liabilities		10,257		10,863
Long-term debt		18,349		16,661
Post-employment obligations, deferred income taxes and other long-term liabilities		8,842		9,062
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: 2020: 1,980,767,223; 2019: 1,976,855,085		24,037		23,853
Common shares held in treasury, at cost — Shares: 2020: 208,405,642; 2019: 214,351,838		(9,873)		(10,147)
Earnings employed in the business		26,266		25,847
Accumulated other comprehensive income (loss)		(9,044)		(8,465)
Total Abbott Shareholders’ Investment		31,386		31,088
Noncontrolling Interests in Subsidiaries		209		213
Total Shareholders’ Investment		31,595		31,301
	$	69,043	$	67,887


	Three Months Ended September 30, 2020						Three Months Ended September 30, 2019
(in millions)	U.S.		Int’l		Total		U.S.		Int’l		Total
Established Pharmaceutical Products —
Key Emerging Markets	$	—	$	799	$	799	$	—	$	891	$	891
Other		—		300		300		—		321		321
Total		—		1,099		1,099		—		1,212		1,212

Nutritionals —
Pediatric Nutritionals		488		518		1,006		478		566		1,044
Adult Nutritionals		330		588		918		310		520		830
Total		818		1,106		1,924		788		1,086		1,874

Diagnostics —
Core Laboratory		284		892		1,176		272		905		1,177
Molecular		220		238		458		35		76		111
Point of Care		96		35		131		112		32		144
Rapid Diagnostics		533		342		875		283		194		477
Total		1,133		1,507		2,640		702		1,207		1,909

Medical Devices —
Rhythm Management		242		265		507		265		273		538
Electrophysiology		192		249		441		185		242		427
Heart Failure		144		46		190		136		50		186
Vascular		230		400		630		251		446		697
Structural Heart		159		194		353		158		190		348
Neuromodulation		170		36		206		165		39		204
Diabetes Care		226		617		843		175		490		665
Total		1,363		1,807		3,170		1,335		1,730		3,065

Other		15		5		20		9		7		16

Total	$	3,329	$	5,524	$	8,853	$	2,834	$	5,242	$	8,076


	Nine Months Ended September 30, 2020						Nine Months Ended September 30, 2019
(in millions)	U.S.		Int’l		Total		U.S.		Int’l		Total
Established Pharmaceutical Products —
Key Emerging Markets	$	—	$	2,376	$	2,376	$	—	$	2,496	$	2,496
Other		—		780		780		—		816		816
Total		—		3,156		3,156		—		3,312		3,312

Nutritionals —
Pediatric Nutritionals		1,490		1,629		3,119		1,406		1,718		3,124
Adult Nutritionals		948		1,644		2,592		915		1,502		2,417
Total		2,438		3,273		5,711		2,321		3,220		5,541

Diagnostics —
Core Laboratory		840		2,312		3,152		793		2,614		3,407
Molecular		429		527		956		113		213		326
Point of Care		278		109		387		334		90		424
Rapid Diagnostics		1,246		719		1,965		881		617		1,498
Total		2,793		3,667		6,460		2,121		3,534		5,655

Medical Devices —
Rhythm Management		655		727		1,382		790		810		1,600
Electrophysiology		476		652		1,128		549		713		1,262
Heart Failure		411		140		551		428		143		571
Vascular		628		1,108		1,736		787		1,349		2,136
Structural Heart		386		508		894		446		578		1,024
Neuromodulation		392		97		489		485		124		609
Diabetes Care		614		1,736		2,350		485		1,348		1,833
Total		3,562		4,968		8,530		3,970		5,065		9,035

Other		30		20		50		26		21		47

Total	$	8,823	$	15,084	$	23,907	$	8,438	$	15,152	$	23,590


(in millions)
Contract Liabilities
Balance at December 31, 2019	$	294
Unearned revenue from cash received during the period		350
Revenue recognized related to contract liability balance		(293)
Balance at September 30, 2020	$	351


(in millions)
Allowance for Doubtful Accounts
Balance at December 31, 2019	$	228
Impact of adopting ASU 2016-13		7
Provisions/charges to income		63
Amounts charged off and other deductions		(14)
Balance at September 30, 2020	$	284


	Three Months Ended September 30
									Cumulative Gains
									(Losses) on
					Net Actuarial				Derivative
	Cumulative Foreign				(Losses) and Prior				Instruments
	Currency Translation				Service (Costs)				Designated as
	Adjustments				and Credits				Cash Flow Hedges
(in millions)	2020		2019		2020		2019		2020		2019
Balance at June 30	$	(5,713)	$	(4,699)	$	(3,446)	$	(2,677)	$	79	$	11
Other comprehensive income (loss) before reclassifications		112		(478)		(21)		7		(74)		67
Amounts reclassified from accumulated other comprehensive income		—		—		49		24		(30)		(18)
Net current period comprehensive income (loss)		112		(478)		28		31		(104)		49
Balance at September 30	$	(5,601)	$	(5,177)	$	(3,418)	$	(2,646)	$	(25)	$	60


(in millions)
Accrued balance at December 31, 2019	$	46
Restructuring charges recorded in 2020		13
Payments and other adjustments		(24)
Accrued balance at September 30, 2020	$	35


	Outstanding		Exercisable
Number of shares		29,352,400		20,764,950
Weighted average remaining life (years)		6.2		5.2
Weighted average exercise price	$	55.34	$	45.92
Aggregate intrinsic value (in millions)	$	1,570	$	1,306


		September 30,		December 31,
	2020		2019
Assets
Current Assets:
Cash and cash equivalents	$	4,480	$	3,860
Short-term investments		251		280
Trade receivables, less allowances of $446 in 2020 and $384 in 2019		5,649		5,425
Inventories:
Finished products		3,173		2,784
Work in process		721		560
Materials		1,258		972
Total inventories		5,152		4,316
Prepaid expenses and other receivables		1,858		1,786
Total Current Assets		17,390		15,667
Investments		803		883
Property and equipment, at cost		17,972		16,799
Less: accumulated depreciation and amortization		9,352		8,761
Net property and equipment		8,620		8,038
Intangible assets, net of amortization		15,208		17,025
Goodwill		23,338		23,195
Deferred income taxes and other assets		3,684		3,079
	$	69,043	$	67,887


	Nine Months Ended September 30
	2020		2019
Cash Flow From (Used in) Operating Activities:
Net earnings	$	2,333	$	2,638
Adjustments to reconcile net earnings to net cash from operating activities -
Depreciation		837		805
Amortization of intangible assets		1,624		1,453
Share-based compensation		448		434
Trade receivables		(343)		(357)
Inventories		(838)		(730)
Other, net		42		(523)
Net Cash From Operating Activities		4,103		3,720

Cash Flow From (Used in) Investing Activities:
Acquisitions of property and equipment		(1,498)		(1,204)
Acquisitions of businesses and technologies, net of cash acquired		(32)		(171)
Proceeds from business dispositions		48		48
Sales (purchases) of other investment securities, net		(15)		(22)
Other		13		23
Net Cash (Used in) Investing Activities		(1,484)		(1,326)

Cash Flow From (Used in) Financing Activities:
Net borrowings (repayments) of short-term debt and other		3		52
Proceeds from issuance of long-term debt		1,280		—
Repayments of long-term debt		(1,332)		(523)
Purchases of common shares		(242)		(222)
Proceeds from stock options exercised		229		291
Dividends paid		(1,919)		(1,702)
Other		(11)		—
Net Cash (Used in) Financing Activities		(1,992)		(2,104)

Effect of exchange rate changes on cash and cash equivalents		(7)		(43)

Net Increase in Cash and Cash Equivalents		620		247
Cash and Cash Equivalents, Beginning of Year		3,860		3,844
Cash and Cash Equivalents, End of Period	$	4,480	$	4,091


	Gain (loss) Recognized in Other								Income (expense) and Gain (loss)
	Comprehensive Income (loss)								Reclassified into Income
	Three Months				Nine Months				Three Months				Nine Months
	Ended Sept. 30				Ended Sept. 30				Ended Sept. 30				Ended Sept. 30
(in millions)	2020		2019		2020		2019		2020		2019		2020		2019		Income Statement Caption
Foreign currency forward exchange contracts designated as cash flow hedges	$	103	$	99	$	(35)	$	78	$	48	$	26	$	90	$	58	Cost of products sold
Debt designated as a hedge of net investment in a foreign subsidiary		(10)		—		(20)		—		—		—		—		—	n/a
Interest rate swaps designated as fair value hedges		n/a		n/a		n/a		n/a		(11)		35		184		174	Interest expense


	September 30, 2020				December 31, 2019
	Carrying		Fair		Carrying		Fair
(in millions)	Value		Value		Value		Value
Long-term Investment Securities:
Equity securities	$	755	$	755	$	836	$	836
Other		48		48		47		47
Total Long-term Debt		(18,355)		(22,224)		(17,938)		(20,772)
Foreign Currency Forward Exchange Contracts:
Receivable position		126		126		148		148
(Payable) position		(303)		(303)		(89)		(89)
Interest Rate Hedge Contracts:
Receivable position		232		232		48		48


	Fair Value - Assets					Fair Value - Liabilities
	Sept. 30,		Dec. 31,			Sept. 30,		Dec. 31,
(in millions)	2020		2019		Balance Sheet Caption	2020		2019		Balance Sheet Caption
Interest rate swaps designated as fair value hedges	$	232	$	48	Deferred income taxes and other assets	$	—	$	—	Post-employment obligations, deferred income taxes and other long-term liabilities
Foreign currency forward exchange contracts:
Hedging instruments		89		110	Prepaid expenses and other receivables		241		56	Other accrued liabilities
Others not designated as hedges		37		38	Prepaid expenses and other receivables		62		33	Other accrued liabilities
Debt designated as a hedge of net investment in a foreign subsidiary		—		—	n/a		566		546	Long-term debt
	$	358	$	196		$	869	$	635


			Basis of Fair Value Measurement
			Quoted		Significant
			Prices in		Other		Significant
	Outstanding		Active		Observable		Unobservable
(in millions)	Balances		Markets		Inputs		Inputs
September 30, 2020:
Equity securities	$	351	$	351	$	—	$	—
Interest rate swap derivative financial instruments		232		—		232		—
Foreign currency forward exchange contracts		126		—		126		—
Total Assets	$	709	$	351	$	358	$	—

Fair value of hedged long-term debt	$	3,070	$	—	$	3,070	$	—
Foreign currency forward exchange contracts		303		—		303		—
Contingent consideration related to business combinations		68		—		—		68
Total Liabilities	$	3,441	$	—	$	3,373	$	68

December 31, 2019:
Equity securities	$	357	$	357	$	—	$	—
Interest rate swap derivative financial instruments		48		—		48		—
Foreign currency forward exchange contracts		148		—		148		—
Total Assets	$	553	$	357	$	196	$	—

Fair value of hedged long-term debt	$	2,890	$	—	$	2,890	$	—
Foreign currency forward exchange contracts		89		—		89		—
Contingent consideration related to business combinations		68		—		—		68
Total Liabilities	$	3,047	$	—	$	2,979	$	68


	Defined Benefit Plans								Medical and Dental Plans
	Three Months				Nine Months				Three Months				Nine Months
	Ended September 30				Ended September 30				Ended September 30				Ended September 30
(in millions)	2020		2019		2020		2019		2020		2019		2020		2019
Service cost — benefits earned during the period	$	85	$	63	$	251	$	188	$	12	$	5	$	35	$	17
Interest cost on projected benefit obligations		75		84		224		253		11		13		32		39
Expected return on plan assets		(193)		(177)		(576)		(533)		(7)		(6)		(21)		(20)
Net amortization of:
Actuarial loss, net		64		33		191		99		5		6		15		17
Prior service cost (credit)		—		—		1		1		(7)		(8)		(21)		(24)
Net cost - continuing operations	$	31	$	3	$	91	$	8	$	14	$	10	$	40	$	29


	Net Sales to External Customers								Operating Earnings
	Three Months				Nine Months				Three Months				Nine Months
	Ended September 30				Ended September 30				Ended September 30				Ended September 30
(in millions)	2020		2019		2020		2019		2020		2019		2020		2019
Established Pharmaceutical Products	$	1,099	$	1,212	$	3,156	$	3,312	$	201	$	281	$	588	$	654
Nutritional Products		1,924		1,874		5,711		5,541		394		414		1,327		1,241
Diagnostic Products		2,640		1,909		6,460		5,655		875		456		1,802		1,356
Medical Devices		3,170		3,065		8,530		9,035		928		958		2,122		2,722
Total Reportable Segments		8,833		8,060		23,857		23,543		2,398		2,109		5,839		5,973
Other		20		16		50		47
Net sales	$	8,853	$	8,076	$	23,907	$	23,590
Corporate functions and benefit plan costs										(129)		(131)		(367)		(332)
Net interest expense										(127)		(143)		(373)		(437)
Share-based compensation (a)										(100)		(94)		(448)		(434)
Amortization of intangible assets										(510)		(484)		(1,624)		(1,453)
Other, net (b)										(111)		(154)		(447)		(480)
Earnings from continuing operations before taxes									$	1,421	$	1,103	$	2,580	$	2,837


							Impact of		Total Change
	September 30,		September 30,		Total		Foreign		Excl. Foreign
(in millions)	2020		2019		Change		Exchange		Exchange
Established Pharmaceutical Products —
Key Emerging Markets	$	2,376	$	2,496	(4.8)	%	(8.0)	%	3.2	%
Other Emerging Markets		780		816	(4.4)		(0.1)		(4.3)

Nutritionals —
International Pediatric Nutritionals		1,629		1,718	(5.2)		(2.5)		(2.7)
U.S. Pediatric Nutritionals		1,490		1,406	5.9		—		5.9
International Adult Nutritionals		1,644		1,502	9.5		(3.5)		13.0
U.S. Adult Nutritionals		948		915	3.7		—		3.7

Diagnostics —
Core Laboratory		3,152		3,407	(7.5)		(1.8)		(5.7)
Molecular		956		326	193.0		(3.2)		196.2
Point of Care		387		424	(8.8)		(0.3)		(8.5)
Rapid Diagnostics		1,965		1,498	31.1		(0.8)		31.9

Medical Devices —
Rhythm Management		1,382		1,600	(13.6)		(0.6)		(13.0)
Electrophysiology		1,128		1,262	(10.6)		(0.3)		(10.3)
Heart Failure		551		571	(3.5)		(0.2)		(3.3)
Vascular (a)		1,736		2,136	(18.7)		(0.6)		(18.1)
Structural Heart		894		1,024	(12.7)		(0.4)		(12.3)
Neuromodulation		489		609	(19.7)		(0.2)		(19.5)
Diabetes Care		2,350		1,833	28.2		(1.2)		29.4

(a) Vascular Product Lines:
Coronary and Endovascular		1,676		2,049	(18.2)		(0.7)		(17.5)


						(d) Maximum
						Number (or
					(c) Total Number	Approximate
					of Shares (or	Dollar Value) of
	(a) Total				Units) Purchased	Shares (or Units)
	Number of		(b) Average		as Part of	that May Yet Be
	Shares (or		Price Paid per		Publicly	Purchased Under
	Units)		Share (or		Announced Plans	the Plans or
Period	Purchased		Unit)		or Programs	Programs
July 1, 2020 - July 31, 2020	0	⁽¹⁾	$	0	0	$	3,270,234,923	⁽²⁾
August 1, 2020 - August 31, 2020	0	⁽¹⁾		0	0		3,270,234,923	⁽²⁾
September 1, 2020 - September 30, 2020	28,423	⁽¹⁾		109.47	0		3,270,234,923	⁽²⁾
Total	28,423	⁽¹⁾	$	109.47	0	$	3,270,234,923	⁽²⁾


Exhibit No.		Exhibit

31.1		Certification of Chief Executive Officer Required by Rule 13a-14(a) (17 CFR 240.13a-14(a)).

31.2		Certification of Chief Financial Officer Required by Rule 13a-14(a) (17 CFR 240.13a-14(a)).

Exhibits 32.1 and 32.2 are furnished herewith and should not be deemed to be “filed” under the Securities Exchange Act of 1934.

32.1		Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101		The following financial statements and notes from the Abbott Laboratories Quarterly Report on Form 10-Q for the quarter and nine months ended September 30, 2020, formatted in Inline XBRL: (i) Condensed Consolidated Statement of Earnings; (ii) Condensed Consolidated Statement of Comprehensive Income; (iii) Condensed Consolidated Balance Sheet; (iv) Condensed Consolidated Statement of Shareholders’ Investment; (v) Condensed Consolidated Statement of Cash Flows; and (vi) Notes to the Condensed Consolidated Financial Statements.

104		Cover Page Interactive Data File (the cover page XBRL tags are embedded in the Inline XBRL document and included in Exhibit 101).


ABBOTT LABORATORIES


By:	/s/ Robert E. Funck, Jr.
	Robert E. Funck, Jr.
	Executive Vice President, Finance and Chief Financial Officer

	Date: November 4, 2020