Document and Entity Information
Document and Entity Information | 9 Months Ended |
Sep. 30, 2015shares | |
Document and Entity Information | |
Entity Registrant Name | ABBOTT LABORATORIES |
Entity Central Index Key | 1,800 |
Document Type | 10-Q |
Document Period End Date | Sep. 30, 2015 |
Amendment Flag | false |
Current Fiscal Year End Date | --12-31 |
Entity Current Reporting Status | Yes |
Entity Filer Category | Large Accelerated Filer |
Entity Common Stock, Shares Outstanding | 1,491,719,891 |
Document Fiscal Year Focus | 2,015 |
Document Fiscal Period Focus | Q3 |
Condensed Consolidated Statemen
Condensed Consolidated Statement of Earnings - USD ($) shares in Thousands, $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Condensed Consolidated Statement of Earnings | ||||
Net Sales | $ 5,150 | $ 5,079 | $ 15,217 | $ 14,891 |
Cost of products sold, excluding amortization of intangible assets | 2,242 | 2,319 | 6,541 | 6,881 |
Amortization of intangible assets | 151 | 132 | 458 | 392 |
Research and development | 378 | 305 | 1,036 | 984 |
Selling, general and administrative | 1,666 | 1,595 | 5,130 | 4,864 |
Total operating cost and expenses | 4,437 | 4,351 | 13,165 | 13,121 |
Operating earnings | 713 | 728 | 2,052 | 1,770 |
Interest expense | 41 | 35 | 122 | 107 |
Interest (income) | (25) | (18) | (73) | (53) |
Net foreign exchange (gain) loss | (14) | (1) | (63) | |
Other (income) expense, net | (3) | (3) | (287) | 2 |
Earnings from continuing operations before taxes | 714 | 715 | 2,353 | 1,714 |
Taxes on earnings from continuing operations | 118 | 277 | 442 | 627 |
Earnings from continuing operations | 596 | 438 | 1,911 | 1,087 |
Earnings (loss) from discontinued operations, net of taxes | (32) | 100 | (7) | 293 |
Gain (loss) on sale of discontinued operations, net of tax | 16 | 1,752 | ||
Net earnings (loss) from discontinued operations, net of tax | (16) | 100 | 1,745 | 293 |
Net Earnings | $ 580 | $ 538 | $ 3,656 | $ 1,380 |
Basic Earnings (Loss) Per Common Share | ||||
Continuing operations (in dollars per share) | $ 0.40 | $ 0.29 | $ 1.27 | $ 0.71 |
Discontinued operations (in dollars per share) | (0.01) | 0.07 | 1.16 | 0.19 |
Net earnings (in dollars per share) | 0.39 | 0.36 | 2.43 | 0.90 |
Diluted Earnings (Loss) Per Common Share | ||||
Continuing operations (in dollars per share) | 0.39 | 0.29 | 1.26 | 0.71 |
Discontinued operations (in dollars per share) | (0.01) | 0.07 | 1.15 | 0.19 |
Net earnings (in dollars per share) | 0.38 | 0.36 | 2.41 | 0.90 |
Cash Dividends Declared Per Common Share (in dollars per share) | $ 0.24 | $ 0.22 | $ 0.72 | $ 0.66 |
Average Number of Common Shares Outstanding Used for Basic Earnings Per Common Share (in shares) | 1,495,465 | 1,508,596 | 1,498,914 | 1,517,834 |
Dilutive Common Stock Options (in shares) | 9,702 | 11,184 | 10,230 | 10,798 |
Average Number of Common Shares Outstanding Plus Dilutive Common Stock Options (in shares) | 1,505,167 | 1,519,780 | 1,509,144 | 1,528,632 |
Outstanding Common Stock Options Having No Dilutive Effect (in shares) | 717 | 535 | 658 | 535 |
Condensed Consolidated Stateme3
Condensed Consolidated Statement of Comprehensive Income - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | Dec. 31, 2014 | |
Condensed Consolidated Statement of Comprehensive Income | |||||
Net Earnings | $ 580 | $ 538 | $ 3,656 | $ 1,380 | |
Foreign currency translation (loss) gain adjustments | (645) | (1,096) | (1,472) | (1,053) | |
Net actuarial gains (losses) and amortization of net actuarial (losses) and prior service (cost) and credits, net of taxes of $14 and $39 in 2015 and $7 and $22 in 2014 | 26 | 16 | 79 | 44 | |
Unrealized gains (losses) on marketable equity securities, net of tax expense (benefit) of $(240) and $104 in 2015 and $(5) and $(7) in 2014 | (1,596) | (8) | (901) | (12) | |
Net adjustments for derivative instruments designated as cash flow hedges and other, net of taxes of $2 and $2 in 2015 and $14 and $12 in 2014 | 8 | 65 | 9 | 58 | |
Other comprehensive income (loss) | (2,207) | (1,023) | (2,285) | (963) | |
Comprehensive Income (Loss) | (1,627) | $ (485) | 1,371 | $ 417 | |
Supplemental Accumulated Other Comprehensive Income (Loss) Information, net of tax | |||||
Cumulative foreign currency translation (loss) adjustments | (4,288) | (4,288) | $ (2,924) | ||
Net actuarial (losses) and prior service cost and credits | (2,131) | (2,131) | (2,229) | ||
Cumulative unrealized gains (losses) on marketable equity securities | (900) | (900) | 1 | ||
Cumulative gains (losses) on derivative instruments designated as cash flow hedges and other | $ 108 | $ 108 | $ 99 |
Condensed Consolidated Stateme4
Condensed Consolidated Statement of Comprehensive Income (Parenthetical) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Condensed Consolidated Statement of Comprehensive Income | ||||
Net actuarial gains (losses) and amortization of net actuarial (losses) and prior service (cost) and credits, taxes | $ 14 | $ 7 | $ 39 | $ 22 |
Unrealized gains (losses) on marketable equity securities, taxes | (240) | (5) | 104 | (7) |
Net adjustments for derivative instruments designated as cash flow hedges and other, taxes | $ 2 | $ 14 | $ 2 | $ 12 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheet - USD ($) $ in Millions | Sep. 30, 2015 | Dec. 31, 2014 |
Current Assets: | ||
Cash and cash equivalents | $ 3,132 | $ 4,063 |
Short-term investments | 3,007 | 397 |
Trade receivables, less allowances of $358 in 2015 and $310 in 2014 | 3,460 | 3,586 |
Inventories: | ||
Finished products | 1,810 | 1,807 |
Work in process | 289 | 278 |
Materials | 534 | 558 |
Total inventories | 2,633 | 2,643 |
Prepaid expenses, deferred income taxes, and other receivables | 3,523 | 3,680 |
Current assets held for disposition | 139 | 892 |
Total Current Assets | 15,894 | 15,261 |
Investments | 3,055 | 229 |
Property and equipment, at cost | 12,528 | 12,632 |
Less: accumulated depreciation and amortization | 6,731 | 6,697 |
Net property and equipment | 5,797 | 5,935 |
Intangible assets, net of amortization | 5,844 | 6,198 |
Goodwill | 9,750 | 10,067 |
Deferred income taxes and other assets | 1,383 | 1,651 |
Non-current assets held for disposition | 2 | 1,934 |
Total Assets | 41,725 | 41,275 |
Current Liabilities: | ||
Short-term borrowings | 2,370 | 4,382 |
Trade accounts payable | 1,007 | 1,064 |
Salaries, wages and commissions | 854 | 776 |
Other accrued liabilities | 3,294 | 2,943 |
Dividends payable | 359 | 362 |
Income taxes payable | 483 | 270 |
Current portion of long-term debt | 32 | 55 |
Current liabilities held for disposition | 356 | 680 |
Total Current Liabilities | 8,755 | 10,532 |
Long-term debt | 5,953 | 3,408 |
Post-employment Obligations, deferred income taxes and other long - term Liabilities | $ 5,798 | 5,588 |
Non-current liabilities held for disposition | $ 108 | |
Commitments and Contingencies | ||
Shareholders' Investment: | ||
Common shares, without par value Authorized - 2,400,000,000 shares Issued at stated capital amount - Shares: 2015: 1,700,525,346; 2014: 1,694,929,949 | $ 12,641 | $ 12,383 |
Common shares held in treasury, at cost - Shares: 2015: 208,805,455; 2014: 186,894,515 | (9,694) | (8,678) |
Earnings employed in the business | 25,375 | 22,874 |
Accumulated other comprehensive income (loss) | (7,211) | (5,053) |
Total Abbott Shareholders' Investment | 21,111 | 21,526 |
Noncontrolling Interests in Subsidiaries | 108 | 113 |
Total Shareholders' Investment | 21,219 | 21,639 |
Total Liabilities and Shareholders' Investment | $ 41,725 | $ 41,275 |
Condensed Consolidated Balance6
Condensed Consolidated Balance Sheet (Parenthetical) - USD ($) $ in Millions | Sep. 30, 2015 | Dec. 31, 2014 |
Condensed Consolidated Balance Sheet | ||
Trade receivables, allowances (in dollars) | $ 358 | $ 310 |
Preferred shares, par value (in dollars per share) | $ 1 | $ 1 |
Preferred shares, Authorized shares | 1,000,000 | 1,000,000 |
Preferred shares, issued shares | 0 | 0 |
Common shares, Authorized shares | 2,400,000,000 | 2,400,000,000 |
Common shares, Issued shares | 1,700,525,346 | 1,694,929,949 |
Common shares held in treasury, shares | 208,805,455 | 186,894,515 |
Condensed Consolidated Stateme7
Condensed Consolidated Statement of Cash Flows - USD ($) $ in Millions | 9 Months Ended | |
Sep. 30, 2015 | Sep. 30, 2014 | |
Cash Flow From (Used in) Operating Activities: | ||
Net earnings | $ 3,656 | $ 1,380 |
Adjustments to reconcile net earnings to net cash from operating activities - | ||
Depreciation | 648 | 689 |
Amortization of intangibles | 458 | 464 |
Share-based compensation | 249 | 208 |
Gain on sale of discontinued operations | (2,837) | |
Gain on sale of Mylan N.V. shares | (207) | |
Trade receivables | (151) | (173) |
Inventories | (213) | (203) |
Other, net | 535 | 72 |
Net Cash From Operating Activities | 2,138 | 2,437 |
Cash Flow From (Used in) Investing Activities: | ||
Acquisitions of property and equipment | (862) | (790) |
Proceeds from business disposition | 230 | |
Acquisitions of businesses and technologies, net of cash acquired | (235) | (2,822) |
Proceeds from the sale of Mylan N.V. shares | 2,290 | |
(Purchases) Sales of other investment securities, net | (2,626) | 3,358 |
Other | 43 | 62 |
Net Cash (Used In) Investing Activities | (1,160) | (192) |
Cash Flow From (Used in) Financing Activities: | ||
Net (repayments of) proceeds from issuance of short-term debt and other | (2,019) | 1,269 |
Proceeds from the issuance of long-term debt | 2,485 | |
Repayments of long-term debt | (36) | |
Contingent and other consideration payments related to business acquisitions | (400) | |
Purchases of common shares | (1,349) | (2,194) |
Proceeds from stock options exercised, including income tax benefit | 263 | 290 |
Dividends paid | (1,083) | (1,007) |
Net Cash (Used in) Financing Activities | (1,739) | (2,042) |
Effect of exchange rate changes on cash and cash equivalents | (170) | (65) |
Net Increase (Decrease) in Cash and Cash Equivalents | (931) | 138 |
Cash and Cash Equivalents, Beginning of Year | 4,063 | 3,475 |
Cash and Cash Equivalents, End of Period | $ 3,132 | $ 3,613 |
Basis of Presentation
Basis of Presentation | 9 Months Ended |
Sep. 30, 2015 | |
Basis of Presentation | |
Basis of Presentation | 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, 2014. The consolidated financial statements include the accounts of the parent company and subsidiaries, after elimination of intercompany transactions. |
Discontinued Operations
Discontinued Operations | 9 Months Ended |
Sep. 30, 2015 | |
Discontinued Operations. | |
Discontinued Operations | Note 2 — Discontinued Operations On February 27, 2015, Abbott completed the sale of its developed markets branded generics pharmaceuticals business to Mylan Inc. (Mylan) for 110 million shares (or approximately 22%) of a newly formed entity (Mylan N.V.) that combined Mylan’s existing business and Abbott’s developed markets branded generics pharmaceuticals business. Mylan N.V. is publicly traded. Historically, this business was included in Abbott’s Established Pharmaceutical Products segment. Abbott retained its branded generics pharmaceuticals business in emerging markets. At the date of closing, the 110 million Mylan N.V. shares that Abbott received were valued at $5.77 billion and Abbott recorded an after-tax gain on the sale of the business of approximately $1.6 billion. The shareholder agreement with Mylan N.V. includes voting and other restrictions that prevent Abbott from exercising significant influence over the operating and financial policies of Mylan N.V. At the close of this transaction, Abbott and Mylan entered into transition services agreements pursuant to which Abbott and Mylan are providing various back office support services to each other on an interim transitional basis. Transition services may be provided for up to 2 years. Charges by Abbott under these transition services agreements are recorded as a reduction of the costs to provide the respective service in the applicable expense category in the Condensed Consolidated Statement of Earnings. This transition support does not constitute significant continuing involvement in Mylan’s operations. Abbott also entered into manufacturing supply agreements with Mylan related to certain products, with the supply term ranging from 3 to 10 years and requiring a 2 year notice prior to termination. The cash flows associated with these transition service and manufacturing supply agreements are not expected to be significant and therefore, these cash flows are not direct cash flows of the disposed component under Accounting Standards Codification 205. In April 2015, Abbott sold 40.3 million of the 110 million ordinary shares of Mylan N.V. received in the sale of the developed markets branded generics pharmaceuticals business to Mylan. In the first nine months of 2015, Abbott recorded a pretax gain of $207 million on $2.29 billion in net proceeds from the sale of these shares. The gain is recognized in the Other (income) expense line of the Condensed Consolidated Statement of Earnings. The proceeds from the sale were invested in short-term investments. On February 10, 2015, Abbott completed the sale of its animal health business to Zoetis Inc. Abbott received cash proceeds of $230 million and reported an after tax gain on the sale of approximately $130 million. As a result of the disposition of the above businesses, the current and prior year operating results of these businesses up to the date of sale are reported as part of discontinued operations on the Earnings from Discontinued Operations, net of tax line in the Condensed Consolidated Statement of Earnings. Discontinued operations include an allocation of interest expense assuming a uniform ratio of consolidated debt to equity for all of Abbott’s historical operations. On January 1, 2013, Abbott completed the separation of AbbVie Inc. (AbbVie), which was formed to hold Abbott’s research-based proprietary pharmaceuticals business. For a small portion of AbbVie’s operations, the legal transfer of AbbVie’s assets (net of liabilities) did not occur with the separation of AbbVie on January 1, 2013 due to the time required to transfer marketing authorizations and other regulatory requirements in each of these countries. Under the terms of the separation agreement with Abbott, AbbVie is subject to the risks and entitled to the benefits generated by these operations and assets. The majority of these operations were transferred to AbbVie in 2013 and 2014. These assets and liabilities have been presented as held for disposition in the Condensed Consolidated Balance Sheet. Abbott has recorded a prepaid asset of $216 million for its obligation to transfer these net liabilities held for disposition to AbbVie. Abbott has retained all liabilities for all U.S. federal and foreign income taxes on income prior to the separation, as well as certain non-income taxes attributable to AbbVie’s business prior to the separation. AbbVie generally will be liable for all other taxes attributable to its business. Earnings from discontinued operations in the first nine months of 2015 and 2014 reflect the recognition of $10 million of tax expense and $37 million of tax benefit, respectively, primarily as a result of the resolution of various tax positions related to AbbVie’s operations for years prior to the separation. The following table summarizes the components of discontinued operations: Three Months Ended Sept. 30 Nine Months Ended Sept. 30 (in millions) 2015 2014 2015 2014 Net Sales Developed markets generics pharmaceuticals and animal health businesses $ — $ $ $ AbbVie — — — — Total $ — $ $ $ Earnings (Loss) Before Tax Developed markets generics pharmaceuticals and animal health businesses $ ) $ $ $ AbbVie — — — — Total $ ) $ $ $ Income Tax Expense (Benefit) Developed markets generics pharmaceuticals and animal health businesses $ ) $ $ $ AbbVie ) Total $ $ $ $ Net Earnings (Loss) Developed markets generics pharmaceuticals and animal health businesses $ ) $ $ $ AbbVie ) ) ) Total $ ) $ $ ) $ The sale of the developed markets branded generics pharmaceuticals and animal health businesses in the first nine months of 2015 resulted in the recognition of a pretax gain of $2.837 billion, tax expense of $1.085 billion and an after tax gain of $1.752 billion. The assets of the operations held for disposition and the liabilities to be assumed in the disposition related to the businesses noted above, as well as the AbbVie assets and liabilities are classified as held for disposition in the Condensed Consolidated Balance Sheet as of September 30, 2015 and December 31, 2014. The cash flows associated with the developed markets branded generics pharmaceuticals and animal health businesses are included in Abbott’s Condensed Consolidated Statement of Cash Flows up to the date of disposition. The following is a summary of the assets and liabilities held for disposition: (in millions) September 30, 2015 December 31, 2014 Trade receivables, net $ $ Total inventories Prepaid expenses, deferred income taxes, and other receivables Current assets held for disposition Net property and equipment Intangible assets, net of amortization — Goodwill — Deferred income taxes and other assets — Non-current assets held for disposition Total assets held for disposition $ $ Trade accounts payable $ $ Salaries, wages, commissions and other accrued liabilities Current liabilities held for disposition Post-employment obligations, deferred income taxes and other long-term liabilities — Total liabilities held for disposition $ $ |
Supplemental Financial Informat
Supplemental Financial Information | 9 Months Ended |
Sep. 30, 2015 | |
Supplemental Financial Information | |
Supplemental Financial Information | 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. Earnings from Continuing Operations allocated to common shares for the three months ended September 30, 2015 and 2014 were $593 million and $437 million, respectively and for the nine months ended September 30, 2015 and 2014 were $1.902 billion and $1.083 billion, respectively. Net earnings allocated to common shares for the three months ended September 30, 2015 and 2014 were $577 million and $536 million, respectively, and for the nine months ended September 30, 2015 and 2014 were $3.638 billion and $1.373 billion, respectively. Other (income) expense, net in the first nine months of 2015 primarily relates to a $207 million gain on the sale of a portion of Abbott’s position in Mylan N.V. stock and $79 million of income resulting from a decrease in the fair value of contingent consideration related to a business acquisition. In the first nine months of 2015, Abbott sold 40.3 million of the 110 million ordinary shares of Mylan N.V. received in the sale of the developed markets branded generics pharmaceuticals business to Mylan. Abbott received $2.29 billion in net proceeds from the sale of these shares. As a result of this sale, Abbott’s ownership interest in Mylan N.V. decreased from approximately 22% to approximately 14%. Other, net in Net cash from operating activities in the Condensed Consolidated Statement of Cash Flows for the first nine months of 2015 and 2014 includes the effects of contributions to defined benefit plans of $551 million and $350 million, respectively, and to the post-employment medical and dental benefit plans of $24 million and $40 million in the nine month periods of 2015 and 2014, respectively. The first nine months of 2015 also includes the non-cash impact of approximately $1.1 billion of tax expense associated with the gain on the sale of businesses. The first nine months of 2014 includes approximately $165 million of cash refunded by taxing authorities, resulting from the resolution of various tax positions pertaining to prior years; and the timing of cash taxes. The components of short-term and long-term investments as of September 30, 2015 and December 31, 2014 are as follows: Short-term Investments September 30, December 31, (in millions) 2015 2014 Investments, primarily bank time deposits $ $ Long-term Investments (in millions) Equity securities $ $ Other Total $ $ The long-term investments in equity securities as of September 30, 2015 include 69.7 million of ordinary shares of Mylan N.V. with a market value of $2.808 billion. In March 2015, Abbott issued $2.5 billion of long-term debt consisting of $750 million of 2.00% Senior Notes due March 15, 2020; $750 million of 2.55% Senior Notes due March 15, 2022; and $1.0 billion of 2.95% Senior Notes due March 15, 2025. Abbott also entered into interest rate swap contracts totaling $2.5 billion. These contracts have the effect of changing Abbott’s obligation from a fixed interest rate to a variable interest rate obligation. |
Changes in Accumulated Other Co
Changes in Accumulated Other Comprehensive Income (Loss) | 9 Months Ended |
Sep. 30, 2015 | |
Changes in Accumulated Other Comprehensive Income (Loss) | |
Changes in Accumulated Other Comprehensive Income (Loss) | 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 September 30 Cumulative Foreign Currency Translation Adjustments Net Actuarial Losses and Prior Service Costs and Credits Cumulative Unrealized Gains (Losses) on Marketable Equity Securities Cumulative Gains on Derivative Instruments Designated as Cash Flow Hedges (in millions) 2015 2014 2015 2014 2015 2014 2015 2014 Balance at June 30 $ ) $ ) $ ) $ ) $ $ $ $ ) Other comprehensive income (loss) before reclassifications ) ) — — ) Amounts reclassified from accumulated other comprehensive income — — — ) ) ) Net current period comprehensive income ) ) ) ) Balance at September 30 $ ) $ ) $ ) $ ) $ ) $ $ $ Nine Months Ended September 30 Cumulative Foreign Currency Translation Adjustments Net Actuarial Losses and Prior Service Costs and Credits Cumulative Unrealized Gains (Losses) on Marketable Equity Securities Cumulative Gains on Derivative Instruments Designated as Cash Flow Hedges (in millions) 2015 2014 2015 2014 2015 2014 2015 2014 Balance at December 31, 2014 and 2013 $ ) $ ) $ ) $ ) $ $ $ $ Impact of business dispositions — — — — — — Other comprehensive income (loss) before reclassifications ) ) — — ) Amounts reclassified from accumulated other comprehensive income — — ) ) ) ) Net current period comprehensive income ) ) ) ) Balance at September 30 $ ) $ ) $ ) $ ) $ ) $ $ $ Reclassified amounts for foreign currency translation are recorded in the Condensed Consolidated Statement of Earnings as Net foreign exchange loss (gain); gains on marketable equity securities as Other (income) expense, net and cash flow hedges as Cost of products sold. Net actuarial losses and prior service cost are included as a component of net periodic benefit plan costs; see Note 11 for additional details. |
Business Acquisitions
Business Acquisitions | 9 Months Ended |
Sep. 30, 2015 | |
Business Acquisitions | |
Business Acquisitions | Note 5 — Business Acquisitions In September 2014, Abbott completed the acquisition of the controlling interest in CFR Pharmaceuticals S.A. (CFR) for approximately $2.9 billion in cash ($2.8 billion net of CFR cash on hand at closing). Including the assumption of approximately $570 million of debt, the total cost of the acquisition was $3.4 billion. The acquisition of CFR more than doubles Abbott’s branded generics pharmaceutical presence in Latin America and further expands its presence in emerging markets. CFR’s financial results are included in Abbott’s financial statements beginning on September 26, 2014, the date that Abbott acquired control of this business. Abbott currently owns 99.9% of the outstanding ordinary shares of CFR. The fair value of the non-controlling interest at the acquisition date was approximately $3 million. The acquisition was funded with cash and cash equivalents and short-term investments. The final allocation of the fair value of the acquisition is shown in the table below. (in billions) Acquired intangible assets, non-deductible $ Goodwill, non-deductible Acquired net tangible assets Deferred income taxes recorded at acquisition ) Total final allocation of fair value $ Acquired intangible assets consist primarily of product rights for currently marketed products and are amortized over 12 to 16 years (weighted average of 15 years). The goodwill is primarily attributable to intangible assets that do not qualify for separate recognition. The goodwill is identifiable to the Established Pharmaceutical Products segment. The acquired tangible assets consist primarily of cash and cash equivalents of approximately $94 million, trade accounts receivable of approximately $180 million, inventory of approximately $169 million, other current assets of approximately $51 million, property and equipment of approximately $210 million, and other long-term assets of approximately $145 million. Assumed liabilities consist of borrowings of approximately $570 million, trade accounts payable and other current liabilities of approximately $240 million and other noncurrent liabilities of approximately $14 million. Annualized net sales for CFR Pharmaceuticals are expected to total approximately $750 million at current exchange rates. Had the acquisition of CFR Pharmaceuticals taken place on January 1, 2013, the consolidated net sales and earnings of Abbott would not have been significantly different from the reported amounts. In December 2014, Abbott acquired control of Veropharm, a leading Russian pharmaceutical company for approximately $315 million, excluding assumed debt, plus a subsequent $5 million payment related to a working capital adjustment. Through this acquisition, Abbott establishes a manufacturing footprint in Russia and obtains a portfolio of medicines that is well aligned with Abbott’s current pharmaceutical therapeutic areas of focus. Abbott acquired control of Veropharm through its purchase of Limited Liability Company Garden Hills, the holding company that owns approximately 98 percent of Veropharm. Including the assumption of approximately $90 million of debt and a non-controlling interest with a fair value of $5 million, the total value of the acquired business was approximately $415 million. The preliminary allocation of the fair value of the acquisition resulted in definite-lived non-deductible intangible assets of approximately $105 million, non-deductible goodwill of approximately $110 million, and net deferred tax liabilities of approximately $25 million. Non-deductible goodwill is identifiable with the Established Pharmaceutical Products segment. Additionally, Abbott acquired property, plant, and equipment of approximately $165 million, accounts receivable of approximately $45 million, inventory of approximately $25 million, and net other liabilities of approximately $10 million. Acquired intangible assets consist of developed technology and are being amortized over 16 years. In 2015, Abbott acquired the remaining shares of Veropharm, increasing its ownership to 100 percent. In December 2014, Abbott completed the acquisition of Topera, Inc. for approximately $250 million in cash plus additional payments up to $300 million to be made upon completion of certain regulatory and sales milestones. The acquisition of Topera provides Abbott a foundational entry in the electrophysiology market. The preliminary allocation of the fair value of the acquisition resulted in non-deductible acquired in-process research and development of approximately $20 million, which is accounted for as an indefinite-lived intangible asset until regulatory approval or discontinuation, non-deductible definite-lived intangible assets of approximately $325 million, non-deductible goodwill of approximately $105 million, net deferred tax liabilities of approximately $105 million, and contingent consideration of approximately $95 million. The fair value of the contingent consideration was determined based on an independent appraisal. Acquired intangible assets consist of developed technology and trademarks, and are being amortized over 16 years. In August 2015, Abbott completed the acquisition of the equity of Tendyne Holdings, Inc. that Abbott did not already own for approximately $225 million in cash plus additional payments up to $135 million to be made upon completion of certain regulatory milestones. The acquisition of Tendyne, which is focused on developing minimally invasive mitral valve replacement therapies, allows Abbott to broaden its foundation in the treatment of mitral valve disease. The preliminary allocation of the fair value of the acquisition resulted in non-deductible acquired in-process research and development of approximately $240 million, which is accounted for as an indefinite-lived intangible asset until regulatory approval or discontinuation, non-deductible goodwill of approximately $155 million, net deferred tax liabilities of approximately $90 million, and contingent consideration of approximately $80 million. The preliminary allocations of fair value will be finalized when valuations are completed. Had the aggregate of the above acquisitions taken place as of the beginning of the comparable prior annual reporting period for each acquisition, consolidated net sales and earnings would not have been significantly different from reported amounts. |
Goodwill and Intangible Assets
Goodwill and Intangible Assets | 9 Months Ended |
Sep. 30, 2015 | |
Goodwill and Intangible Assets | |
Goodwill and Intangible Assets | Note 6 — Goodwill and Intangible Assets The total amount of goodwill reported was $9.750 billion at September 30, 2015 and $10.067 billion at December 31, 2014, which excluded goodwill classified as held for disposition. As part of the disposal of the developed markets branded generics pharmaceuticals business in the first nine months of 2015, $894 million of goodwill was included as part of the net assets sold. In the first nine months of 2015, foreign currency translation adjustments decreased goodwill by approximately $273 million, while purchase price allocation adjustments associated with recent acquisitions decreased goodwill by approximately $44 million. The amount of goodwill related to reportable segments at September 30, 2015 was $3.0 billion for the Established Pharmaceutical Products segment, $286 million for the Nutritional Products segment, $449 million for the Diagnostic Products segment, and $3.0 billion for the Vascular Products segment. There was no reduction of goodwill relating to impairments. The gross amount of amortizable intangible assets, primarily product rights and technology was $10.8 billion as of September 30, 2015 and $11.0 billion as of December 31, 2014, and accumulated amortization was $5.3 billion as of September 30, 2015 and $4.9 billion as of December 31, 2014. The December 31, 2014 amounts exclude the intangibles that were classified as held for disposition. Intangibles of $738 million were included in the net assets transferred as part of the disposal of the developed markets branded generics pharmaceuticals business in the first nine months of 2015. Indefinite-lived intangible assets, which relate to in-process research and development acquired in a business combination, was approximately $377 million at September 30, 2015 and $134 million at December 31, 2014. Abbott’s estimated annual amortization expense for intangible assets is approximately $680 million in 2015, $660 million in 2016, $650 million in 2017, $570 million in 2018 and $530 million in 2019. Amortizable intangible assets are amortized over 2 to 20 years (weighted average 12 years). |
Restructuring Plans
Restructuring Plans | 9 Months Ended |
Sep. 30, 2015 | |
Restructuring Plans | |
Restructuring Plans | Note 7 — Restructuring Plans In 2015 and 2014, 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 nine months of 2015, charges of approximately $80 million were recognized, of which approximately $25 million is recorded in Cost of products sold, approximately $38 million is recorded in Research and Development and approximately $17 million is recorded in Selling, general and administrative expense. Additional charges of approximately $34 million were recorded primarily for accelerated depreciation. The following summarizes the activity for the first nine months of 2015 related to these restructuring actions and the status of the related accrual as of September 30, 2015: (in millions) Accrued balance at December 31, 2014 $ Restructuring charges recorded in 2015 Payments and other adjustments ) Accrued balance at September 30, 2015 $ From 2013 to 2015, Abbott management approved various plans to reduce costs and improve efficiencies across various functional areas. In the first nine months of 2015, charges of approximately $38 million were recognized, of which approximately $9 million is recorded in Cost of products sold, approximately $2 million is recorded in Research and Development, and approximately $27 million is recorded in Selling, general and administrative expense. In 2013, Abbott management also approved plans to streamline certain manufacturing operations in order to reduce costs and improve efficiencies in Abbott’s established pharmaceuticals business. In 2012, Abbott management approved plans to streamline various commercial operations in order to reduce costs and improve efficiencies in Abbott’s core diagnostics, established pharmaceuticals and nutritionals businesses. The following summarizes the activity for the first nine months of 2015 related to these restructuring actions and the status of the related accrual as of September 30, 2015: (in millions) Accrued balance at December 31, 2014 $ Restructuring charges recorded in 2015 Payments and other adjustments ) Accrued balance at September 30, 2015 $ In 2013 and prior years, Abbott management approved plans to realign its vascular manufacturing operations and core diagnostics business in order to reduce costs. The following summarizes the activity for the first nine months of 2015 related to these restructuring actions and the status of the related accrual as of September 30, 2015: (in millions) Accrued balance at December 31, 2014 $ Payments and other adjustments ) Accrued balance at September 30, 2015 $ |
Incentive Stock Programs
Incentive Stock Programs | 9 Months Ended |
Sep. 30, 2015 | |
Incentive Stock Programs | |
Incentive Stock Programs | Note 8 — Incentive Stock Programs In the first nine months of 2015, Abbott granted 5,577,553 stock options, 662,553 restricted stock awards and 5,864,895 restricted stock units under its incentive stock programs. At September 30, 2015, approximately 87 million shares were reserved for future grants. Information regarding the number of stock options outstanding and exercisable at September 30, 2015 is as follows: 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 September 30, 2015 amounted to approximately $209 million which is expected to be recognized over the next three years. |
Financial Instruments, Derivati
Financial Instruments, Derivatives and Fair Value Measures | 9 Months Ended |
Sep. 30, 2015 | |
Financial Instruments, Derivatives and Fair Value Measures | |
Financial Instruments, Derivatives and Fair Value Measures | 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 for anticipated intercompany purchases by those subsidiaries whose functional currencies are not the U.S. dollar. These contracts, with notional amounts totaling $2.5 billion at September 30, 2015 and $1.5 billion at December 31, 2014 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 September 30, 2015 will be included in Cost of products sold at the time the products are sold, generally through the next twelve to eighteen months. The amount of hedge ineffectiveness was not significant in 2015 and 2014. 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 and Japanese yen, 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, European currencies and Japanese yen. At September 30, 2015 and December 31, 2014, Abbott held $13.2 billion and $14.1 billion, respectively, of such foreign currency forward exchange contracts. Abbott has designated foreign denominated short-term debt as a hedge of the net investment in a foreign subsidiary of approximately $442 million and approximately $445 million as of September 30, 2015 and December 31, 2014, respectively. Accordingly, changes in the reported value of this debt due to changes in exchange rates are recorded in Accumulated other comprehensive income (loss), net of tax. Abbott is a party to interest rate hedge contracts totaling approximately $4.0 billion at September 30, 2015 and $1.5 billion at December 31, 2014 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. No hedge ineffectiveness was recorded in income in 2015 or 2014 for these hedges. The following table summarizes the amounts and location of certain derivative financial instruments as of September 30, 2015 and December 31, 2014: Fair Value - Assets Fair Value - Liabilities (in millions) Sept. 30, 2015 Dec. 31, 2014 Balance Sheet Caption Sept. 30, 2015 Dec. 31, 2014 Balance Sheet Caption Interest rate swaps designated as fair value hedges $ $ Deferred income taxes and other assets $ — $ — Post-employment obligations, deferred income taxes and other long-term liabilities Foreign currency forward exchange contracts: Hedging instruments Prepaid expenses, deferred income taxes, and other receivables — Other accrued liabilities Others not designated as hedges Prepaid expenses, deferred income taxes, and other receivables Other accrued liabilities Debt designated as a hedge of net investment in a foreign subsidiary — — n/a Short-term borrowings $ $ $ $ The following table summarizes the activity for foreign currency forward exchange contracts designated as cash flow hedges, debt designated as a hedge of net investment in a foreign subsidiary and certain other derivative financial instruments, as well as the amounts and location of income (expense) and gain (loss) reclassified into income for the three months and nine months ended September 30, 2015 and 2014. The amount of hedge ineffectiveness was not significant in 2015 and 2014 for these hedges. Gain (loss) Recognized in Other Comprehensive Income (loss) Income (expense) and Gain (loss) Reclassified into Income Three Months Ended Sept. 30 Nine Months Ended Sept. 30 Three Months Ended Sept. 30 Nine Months Ended Sept. 30 Income Statement (in millions) 2015 2014 2015 2014 2015 2014 2015 2014 Caption Foreign currency forward exchange contracts designated as cash flow hedges $ $ $ $ $ $ $ $ Cost of products sold Debt designated as a hedge of net investment in a foreign subsidiary ) n/a n/a n/a n/a n/a Interest rate swaps designated as fair value hedges n/a n/a n/a n/a ) Interest expense Foreign currency forward exchange contracts not designated as hedges n/a n/a n/a n/a ) Net foreign exchange loss (gain) The interest rate swaps 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 hedged debt is marked to market, offsetting the effect of marking the interest rate swaps to market. The carrying values and fair values of certain financial instruments as of September 30, 2015 and December 31, 2014 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 nonperformance by these counterparties. September 30, 2015 December 31, 2014 (in millions) Carrying Value Fair Value Carrying Value Fair Value Investment Securities: Equity securities $ $ $ $ Other Total Long-term Debt ) ) ) ) Foreign Currency Forward Exchange Contracts: Receivable position (Payable) position ) ) ) ) Interest Rate Hedge Contracts: Receivable position The fair value of the debt was determined based on significant other observable inputs, including current interest rates. The following table summarizes the bases used to measure certain assets and liabilities at fair value on a recurring basis in the balance sheet: Basis of Fair Value Measurement (in millions) Outstanding Balances Quoted Prices in Active Markets Significant Other Observable Inputs Significant Unobservable Inputs September 30, 2015: Equity securities $ $ $ — $ — Interest rate swap derivative financial instruments — — Foreign currency forward exchange contracts — — Total Assets $ $ $ $ — Fair value of hedged long-term debt $ $ — $ $ — Foreign currency forward exchange contracts — — Contingent consideration related to business combinations — — Total Liabilities $ $ — $ $ December 31, 2014: Equity securities $ $ $ — $ — Interest rate swap derivative financial instruments — — Foreign currency forward exchange contracts — — Total Assets $ $ $ $ — Fair value of hedged long-term debt $ $ — $ $ — Foreign currency forward exchange contracts — — Contingent consideration related to business combinations — — Total Liabilities $ $ — $ $ Equity securities are principally comprised of Mylan N.V. ordinary shares. The fair value of the Mylan N.V. equity securities was determined based on the value of the publicly-traded ordinary shares. The fair value of debt was determined based on the face value of the debt adjusted for the fair value of the interest rate swaps, which is based on a discounted cash flow analysis. The fair value of foreign currency forward exchange contracts is determined using a market approach, which utilizes values for comparable derivative instruments. The fair value of the contingent consideration was determined based on an independent appraisal adjusted for the time value of money and other changes in fair value primarily resulting from changes in regulatory timelines. The following table summarizes the available-for-sale equity securities in an unrealized loss position: (in millions) September 30, 2015 December 31, 2014 Fair value of securities in an unrealized loss position $ $ Unrealized gross losses — Available-for-sale securities are periodically assessed for other-than-temporary impairment losses. Almost all of the unrealized losses relate to the holding of Mylan N.V. ordinary shares, which have been in an unrealized loss position for less than three months at September 30, 2015. Factors considered in assessing other-than-temporary impairment losses include the length of time and the extent to which the fair value has been less than cost, the financial condition and near term prospects of the issuer, Abbott’s intent and ability to retain the securities for a period of time sufficient to allow for recovery in fair value, overall market conditions, and industry and company specific factors. Based on that evaluation and Abbott’s ability and intent to hold these investments for a reasonable period of time sufficient for a forecasted recovery of fair value, Abbott does not consider these securities to be other-than-temporarily impaired at September 30, 2015. |
Litigation and Environmental Ma
Litigation and Environmental Matters | 9 Months Ended |
Sep. 30, 2015 | |
Litigation and Environmental Matters | |
Litigation and Environmental Matters | Note 10 — Litigation and Environmental Matters Abbott has been identified as a potentially responsible party for investigation and cleanup costs at a number of locations in the United States and Puerto Rico under federal and state remediation laws and is investigating potential contamination at a number of company-owned locations. Abbott has recorded an estimated cleanup cost for each site for which management believes Abbott has a probable loss exposure. No individual site cleanup exposure is expected to exceed $4 million, and the aggregate cleanup exposure is not expected to exceed $15 million. Abbott is involved in various claims and legal proceedings, and Abbott estimates the range of possible loss for its legal proceedings and environmental exposures to be from approximately $50 million to $65 million. The recorded accrual balance at September 30, 2015 for these proceedings and exposures was approximately $60 million. This accrual represents management’s best estimate of probable loss, as defined by FASB ASC No. 450, “Contingencies.” Within the next year, legal proceedings may occur that may result in a change in the estimated loss accrued by Abbott. While it is not feasible to predict the outcome of all such proceedings and exposures with certainty, management believes that their ultimate disposition should not have a material adverse effect on Abbott’s financial position, cash flows, or results of operations. |
Post-Employment Benefits
Post-Employment Benefits | 9 Months Ended |
Sep. 30, 2015 | |
Post-Employment Benefits | |
Post-Employment Benefits | Note 11 — Post-Employment Benefits Retirement plans consist of defined benefit, defined contribution, and medical and dental plans. Net cost recognized in continuing operations for the three months and nine months ended September 30 for Abbott’s major defined benefit plans and post-employment medical and dental benefit plans is as follows: Defined Benefit Plans Medical and Dental Plans Three Months Nine Months Three Months Nine Months Ended Sept. 30 Ended Sept. 30 Ended Sept. 30 Ended Sept. 30 (in millions) 2015 2014 2015 2014 2015 2014 2015 2014 Service cost — benefits earned during the period $ $ $ $ $ $ $ $ Interest cost on projected benefit obligations Expected return on plan assets ) ) ) ) ) ) ) ) Net amortization of: Actuarial loss, net Prior service cost (credit) — — ) ) ) ) Total Cost Less: Discontinued operations — — — — — Net cost - continuing operations $ $ $ $ $ $ $ $ Abbott funds its domestic defined benefit plans according to IRS funding limitations. International pension plans are funded according to similar regulations. In the first nine months of 2015 and 2014, $551 million and $350 million, respectively, were contributed to defined benefit plans and $24 million and $40 million were contributed to the post-employment medical and dental benefit plans in the first nine months of 2015 and 2014, respectively. |
Taxes on Earnings
Taxes on Earnings | 9 Months Ended |
Sep. 30, 2015 | |
Taxes on Earnings | |
Taxes on Earnings | Note 12 — Taxes on Earnings Taxes on earnings from continuing operations reflect the estimated annual effective rates and include charges for interest and penalties. In the first nine months of 2015, taxes on earnings from continuing operations include a tax cost of $71 million related to the disposal of shares of Mylan N.V. stock. Taxes on earnings from continuing operations were not affected by any adjustments as a result of the resolution of various tax positions pertaining to prior years. Tax expense related to discontinued operations includes $667 million of tax expense on certain current-year funds earned outside the U.S. that were not designated as permanently reinvested overseas. Earnings from discontinued operations, net of tax, in the first nine months of 2015 also reflects the recognition of $10 million of net tax expense primarily as a result of the resolution of various tax positions related to AbbVie’s operations for years prior to the separation. The conclusion of these tax matters decreased the gross amount of unrecognized tax benefits by approximately $16 million. Taxes on earnings from continuing operations, in the first nine months of 2014, reflect a tax cost of $37 million, primarily as a result of the resolution of various tax positions related to the branded generics pharmaceutical business and the impact of changes in the Chilean tax rate. Earnings from discontinued operations, net of tax, in the first nine months of 2014 reflects the recognition of $101 million of net tax benefits primarily as a result of the resolution of various tax positions related to the developed markets branded generics pharmaceuticals business , as well as AbbVie’s operations, for years prior to the separation. The conclusion of these tax matters decreased the gross amount of unrecognized tax benefits by approximately $134 million. Tax authorities in various jurisdictions regularly review Abbott’s income tax filings. Abbott believes that it is reasonably possible that the recorded amount of gross unrecognized tax benefits may decrease by $525 million to $635 million, including cash adjustments, within the next twelve months as a result of concluding various domestic and international tax matters. In the U.S., Abbott’s federal income tax returns through 2011 are settled except for two issues. |
Segment Information
Segment Information | 9 Months Ended |
Sep. 30, 2015 | |
Segment Information | |
Segment Information | Note 13 — Segment Information Abbott’s principal business is the discovery, development, manufacture and sale of a broad line of health care products. Abbott’s products are generally sold directly to retailers, wholesalers, hospitals, health care facilities, laboratories, physicians’ offices and government agencies throughout the world. Abbott’s reportable segments are as follows: Established Pharmaceutical Products — International sales of a broad line of branded generic pharmaceutical products. Nutritional Products — Worldwide sales of a broad line of adult and pediatric nutritional products. Diagnostic Products — Worldwide sales of diagnostic systems and tests for blood banks, hospitals, commercial laboratories and alternate-care testing sites. For segment reporting purposes, the Core Laboratories Diagnostics, Molecular Diagnostics, Point of Care and Ibis diagnostic divisions are aggregated and reported as the Diagnostic Products segment. Vascular Products — Worldwide sales of coronary, endovascular, structural heart, vessel closure and other medical device products. For segment reporting purposes, the Vascular and Electrophysiology Products divisions are aggregated and reported as the Vascular Products segment. Non-reportable segments include the Diabetes Care and Medical Optics segments. On February 27, 2015, Abbott completed the sale of its developed markets branded generics pharmaceuticals business to Mylan. This business was previously included in the Established Pharmaceutical Products segment for the first nine months of 2014; therefore, the 2014 segment information below has been adjusted to reflect the classification of the developed markets branded generics pharmaceuticals business as part of discontinued operations in the Condensed Consolidated Statement of Earnings. Abbott’s underlying accounting records are maintained on a legal entity basis for government and public reporting requirements. Segment disclosures are on a performance basis consistent with internal management reporting. Intersegment transfers of inventory are recorded at standard cost and are not a measure of segment operating earnings. The cost of some corporate functions and the cost of certain employee benefits are charged to segments at predetermined rates that approximate cost. Remaining costs, if any, are not allocated to segments. In addition, intangible asset amortization is not allocated to operating segments, and intangible assets and goodwill are not included in the measure of each segment’s assets. The following segment information has been prepared in accordance with the internal accounting policies of Abbott, as described above, and are not presented in accordance with generally accepted accounting principles applied to the consolidated financial statements. Net Sales to External Customers Operating Earnings Three Months Nine Months Three Months Nine Months Ended Sept. 30 Ended Sept. 30 Ended Sept. 30 Ended Sept. 30 (in millions) 2015 2014 2015 2014 2015 2014 2015 2014 Established Pharmaceutical Products $ $ $ $ $ $ $ $ Nutritional Products Diagnostic Products Vascular Products Total Reportable Segments Other Net Sales $ $ $ $ Corporate functions and benefit plans costs ) ) ) ) Non-reportable segments Net interest expense ) ) ) ) Share-based compensation (a) ) ) ) ) Amortization of intangible assets ) ) ) ) Other, net (b) ) ) ) ) Consolidated Earnings from Continuing Operations Before Taxes $ $ $ $ (a) Approximately 40 to 45 percent of the annual net cost of share-based awards will typically be recognized in the first quarter due to the timing of the granting of share-based awards. (b) Other, net for the nine months ended September 30, 2015 includes a gain on the sale of a portion of Abbott’s position in Mylan N.V. stock and a decrease in the fair value of contingent consideration related to a business acquisition, which was partially offset by charges associated with cost reduction initiatives. |
Discontinued Operations (Tables
Discontinued Operations (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Discontinued Operations. | |
Components of discontinued operations | Three Months Ended Sept. 30 Nine Months Ended Sept. 30 (in millions) 2015 2014 2015 2014 Net Sales Developed markets generics pharmaceuticals and animal health businesses $ — $ $ $ AbbVie — — — — Total $ — $ $ $ Earnings (Loss) Before Tax Developed markets generics pharmaceuticals and animal health businesses $ ) $ $ $ AbbVie — — — — Total $ ) $ $ $ Income Tax Expense (Benefit) Developed markets generics pharmaceuticals and animal health businesses $ ) $ $ $ AbbVie ) Total $ $ $ $ Net Earnings (Loss) Developed markets generics pharmaceuticals and animal health businesses $ ) $ $ $ AbbVie ) ) ) Total $ ) $ $ ) $ |
Summary of the assets and liabilities held for sale | (in millions) September 30, 2015 December 31, 2014 Trade receivables, net $ $ Total inventories Prepaid expenses, deferred income taxes, and other receivables Current assets held for disposition Net property and equipment Intangible assets, net of amortization — Goodwill — Deferred income taxes and other assets — Non-current assets held for disposition Total assets held for disposition $ $ Trade accounts payable $ $ Salaries, wages, commissions and other accrued liabilities Current liabilities held for disposition Post-employment obligations, deferred income taxes and other long-term liabilities — Total liabilities held for disposition $ $ |
Supplemental Financial Inform22
Supplemental Financial Information (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Supplemental Financial Information | |
Components of short-term and long-term investments | Short-term Investments September 30, December 31, (in millions) 2015 2014 Investments, primarily bank time deposits $ $ Long-term Investments (in millions) Equity securities $ $ Other Total $ $ |
Changes in Accumulated Other 23
Changes in Accumulated Other Comprehensive Income (Loss) (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Changes in Accumulated Other Comprehensive Income (Loss) | |
Schedule of the changes in accumulated other comprehensive income (loss), net of income taxes | Three Months Ended September 30 Cumulative Foreign Currency Translation Adjustments Net Actuarial Losses and Prior Service Costs and Credits Cumulative Unrealized Gains (Losses) on Marketable Equity Securities Cumulative Gains on Derivative Instruments Designated as Cash Flow Hedges (in millions) 2015 2014 2015 2014 2015 2014 2015 2014 Balance at June 30 $ ) $ ) $ ) $ ) $ $ $ $ ) Other comprehensive income (loss) before reclassifications ) ) — — ) Amounts reclassified from accumulated other comprehensive income — — — ) ) ) Net current period comprehensive income ) ) ) ) Balance at September 30 $ ) $ ) $ ) $ ) $ ) $ $ $ Nine Months Ended September 30 Cumulative Foreign Currency Translation Adjustments Net Actuarial Losses and Prior Service Costs and Credits Cumulative Unrealized Gains (Losses) on Marketable Equity Securities Cumulative Gains on Derivative Instruments Designated as Cash Flow Hedges (in millions) 2015 2014 2015 2014 2015 2014 2015 2014 Balance at December 31, 2014 and 2013 $ ) $ ) $ ) $ ) $ $ $ $ Impact of business dispositions — — — — — — Other comprehensive income (loss) before reclassifications ) ) — — ) Amounts reclassified from accumulated other comprehensive income — — ) ) ) ) Net current period comprehensive income ) ) ) ) Balance at September 30 $ ) $ ) $ ) $ ) $ ) $ $ $ |
Business Acquisitions (Tables)
Business Acquisitions (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Business Acquisitions | |
Schedule of the allocation of the fair value of the acquisition | (in billions) Acquired intangible assets, non-deductible $ Goodwill, non-deductible Acquired net tangible assets Deferred income taxes recorded at acquisition ) Total final allocation of fair value $ |
Restructuring Plans (Tables)
Restructuring Plans (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Restructuring Plan 2015 and 2014 | |
Restructuring costs | |
Schedule of restructuring activity | (in millions) Accrued balance at December 31, 2014 $ Restructuring charges recorded in 2015 Payments and other adjustments ) Accrued balance at September 30, 2015 $ |
Restructuring Plan 2013 to 2015 | |
Restructuring costs | |
Schedule of restructuring activity | (in millions) Accrued balance at December 31, 2014 $ Restructuring charges recorded in 2015 Payments and other adjustments ) Accrued balance at September 30, 2015 $ |
Restructuring Plan 2013 and Prior Years | |
Restructuring costs | |
Schedule of restructuring activity | (in millions) Accrued balance at December 31, 2014 $ Payments and other adjustments ) Accrued balance at September 30, 2015 $ |
Incentive Stock Programs (Table
Incentive Stock Programs (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Incentive Stock Programs | |
Stock options outstanding and exercisable | Outstanding Exercisable Number of shares Weighted average remaining life ( years ) Weighted average exercise price $ $ Aggregate intrinsic value ( in millions ) $ $ |
Financial Instruments, Deriva27
Financial Instruments, Derivatives and Fair Value Measures (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Financial Instruments, Derivatives and Fair Value Measures | |
Summary of the amounts and location of certain derivative financial instruments | Fair Value - Assets Fair Value - Liabilities (in millions) Sept. 30, 2015 Dec. 31, 2014 Balance Sheet Caption Sept. 30, 2015 Dec. 31, 2014 Balance Sheet Caption Interest rate swaps designated as fair value hedges $ $ Deferred income taxes and other assets $ — $ — Post-employment obligations, deferred income taxes and other long-term liabilities Foreign currency forward exchange contracts: Hedging instruments Prepaid expenses, deferred income taxes, and other receivables — Other accrued liabilities Others not designated as hedges Prepaid expenses, deferred income taxes, and other receivables Other accrued liabilities Debt designated as a hedge of net investment in a foreign subsidiary — — n/a Short-term borrowings $ $ $ $ |
Schedule of derivatives gain (loss) in OCI and earnings | Gain (loss) Recognized in Other Comprehensive Income (loss) Income (expense) and Gain (loss) Reclassified into Income Three Months Ended Sept. 30 Nine Months Ended Sept. 30 Three Months Ended Sept. 30 Nine Months Ended Sept. 30 Income Statement (in millions) 2015 2014 2015 2014 2015 2014 2015 2014 Caption Foreign currency forward exchange contracts designated as cash flow hedges $ $ $ $ $ $ $ $ Cost of products sold Debt designated as a hedge of net investment in a foreign subsidiary ) n/a n/a n/a n/a n/a Interest rate swaps designated as fair value hedges n/a n/a n/a n/a ) Interest expense Foreign currency forward exchange contracts not designated as hedges n/a n/a n/a n/a ) Net foreign exchange loss (gain) |
Schedule of carrying values and fair values of certain financial instruments | September 30, 2015 December 31, 2014 (in millions) Carrying Value Fair Value Carrying Value Fair Value Investment Securities: Equity securities $ $ $ $ Other Total Long-term Debt ) ) ) ) Foreign Currency Forward Exchange Contracts: Receivable position (Payable) position ) ) ) ) Interest Rate Hedge Contracts: Receivable position |
Schedule of assets and liabilities measured at fair value on a recurring basis | Basis of Fair Value Measurement (in millions) Outstanding Balances Quoted Prices in Active Markets Significant Other Observable Inputs Significant Unobservable Inputs September 30, 2015: Equity securities $ $ $ — $ — Interest rate swap derivative financial instruments — — Foreign currency forward exchange contracts — — Total Assets $ $ $ $ — Fair value of hedged long-term debt $ $ — $ $ — Foreign currency forward exchange contracts — — Contingent consideration related to business combinations — — Total Liabilities $ $ — $ $ December 31, 2014: Equity securities $ $ $ — $ — Interest rate swap derivative financial instruments — — Foreign currency forward exchange contracts — — Total Assets $ $ $ $ — Fair value of hedged long-term debt $ $ — $ $ — Foreign currency forward exchange contracts — — Contingent consideration related to business combinations — — Total Liabilities $ $ — $ $ |
Schedule summarizes the available-for-sale equity securities in an unrealized loss position | (in millions) September 30, 2015 December 31, 2014 Fair value of securities in an unrealized loss position $ $ Unrealized gross losses — |
Post-Employment Benefits (Table
Post-Employment Benefits (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Post-Employment Benefits | |
Net cost for the entity's major defined benefit plans and post-employment medical and dental benefit plans | Defined Benefit Plans Medical and Dental Plans Three Months Nine Months Three Months Nine Months Ended Sept. 30 Ended Sept. 30 Ended Sept. 30 Ended Sept. 30 (in millions) 2015 2014 2015 2014 2015 2014 2015 2014 Service cost — benefits earned during the period $ $ $ $ $ $ $ $ Interest cost on projected benefit obligations Expected return on plan assets ) ) ) ) ) ) ) ) Net amortization of: Actuarial loss, net Prior service cost (credit) — — ) ) ) ) Total Cost Less: Discontinued operations — — — — — Net cost - continuing operations $ $ $ $ $ $ $ $ |
Segment Information (Tables)
Segment Information (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Segment Information | |
Schedule of segment and geographic area information | Net Sales to External Customers Operating Earnings Three Months Nine Months Three Months Nine Months Ended Sept. 30 Ended Sept. 30 Ended Sept. 30 Ended Sept. 30 (in millions) 2015 2014 2015 2014 2015 2014 2015 2014 Established Pharmaceutical Products $ $ $ $ $ $ $ $ Nutritional Products Diagnostic Products Vascular Products Total Reportable Segments Other Net Sales $ $ $ $ Corporate functions and benefit plans costs ) ) ) ) Non-reportable segments Net interest expense ) ) ) ) Share-based compensation (a) ) ) ) ) Amortization of intangible assets ) ) ) ) Other, net (b) ) ) ) ) Consolidated Earnings from Continuing Operations Before Taxes $ $ $ $ (a) Approximately 40 to 45 percent of the annual net cost of share-based awards will typically be recognized in the first quarter due to the timing of the granting of share-based awards. (b) Other, net for the nine months ended September 30, 2015 includes a gain on the sale of a portion of Abbott’s position in Mylan N.V. stock and a decrease in the fair value of contingent consideration related to a business acquisition, which was partially offset by charges associated with cost reduction initiatives. |
Discontinued Operations (Detail
Discontinued Operations (Details) - USD ($) shares in Millions, $ in Millions | Feb. 27, 2015 | Feb. 27, 2015 | Feb. 10, 2015 | Apr. 30, 2015 | Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | Dec. 31, 2014 |
Proceeds from the disposition of business | $ 230 | ||||||||
Gain on sale of Mylan shares | 207 | ||||||||
Proceeds from the sale of Mylan N.V. shares | 2,290 | ||||||||
After Tax Gain | $ 16 | 1,752 | |||||||
Pretax gain on sale of discontinued operations | 2,837 | ||||||||
Trade receivables, net | 58 | 58 | $ 498 | ||||||
Total inventories | 48 | 48 | 254 | ||||||
Prepaid expenses, deferred income taxes, and other receivables | 33 | 33 | 140 | ||||||
Current assets held for disposition | 139 | 139 | 892 | ||||||
Net property and equipment | 2 | 2 | 125 | ||||||
Earnings from discontinued operations, net tax benefits | (16) | $ 100 | 1,745 | $ 293 | |||||
Intangible assets, net of amortization | 804 | ||||||||
Goodwill | 950 | ||||||||
Deferred income taxes and other assets | 55 | ||||||||
Non-current assets held for disposition | 2 | 2 | 1,934 | ||||||
Total assets held for disposition | 141 | 141 | 2,826 | ||||||
Trade accounts payable | 337 | 337 | 423 | ||||||
Salaries, wages, commissions and other accrued liabilities | 19 | 19 | 257 | ||||||
Current liabilities held for disposition | 356 | 356 | 680 | ||||||
Post-employment obligations, deferred income taxes and other long-term liabilities | 108 | ||||||||
Non-current liabilities held for disposition | 108 | ||||||||
Total liabilities held for disposition | 356 | $ 356 | $ 788 | ||||||
Developed markets branded generics pharmaceuticals business | |||||||||
Value of shares received for sale of generics pharmaceuticals business to Mylan Inc | $ 5,770 | $ 5,770 | |||||||
Period of notice require to terminate manufacturing supply of products | 2 years | ||||||||
After Tax Gain | $ 1,600 | ||||||||
Intangible assets, net of amortization | 738 | $ 738 | |||||||
Goodwill | 894 | $ 894 | |||||||
Developed markets branded generics pharmaceuticals business | Minimum | |||||||||
Period for providing manufacturing supply of products | 3 years | ||||||||
Developed markets branded generics pharmaceuticals business | Maximum | |||||||||
Period of transition services | 2 years | ||||||||
Period for providing manufacturing supply of products | 10 years | ||||||||
Animal Health Business | |||||||||
Proceeds from the disposition of business | $ 230 | ||||||||
After Tax Gain | $ 130 | ||||||||
AbbVie | Proprietary Pharmaceuticals Business Assets and Liabilities Held for Disposal | |||||||||
Prepaid assets | $ 216 | $ 216 | |||||||
AbbVie | Discontinued operations | |||||||||
Earnings from discontinued operations, net tax benefits | $ 10 | $ 37 | |||||||
Mylan | |||||||||
Number of shares received for sale of generics pharmaceuticals business to Mylan Inc | 110 | ||||||||
Number of shares in investment sold | 40.3 | ||||||||
Mylan | Developed markets branded generics pharmaceuticals business | |||||||||
Number of shares received for sale of generics pharmaceuticals business to Mylan Inc | 110 | 110 | |||||||
Gain on sale of Mylan shares | $ 207 | ||||||||
Number of shares in investment sold | 40.3 | ||||||||
Mylan NV | Developed markets branded generics pharmaceuticals business | |||||||||
Percentage of shares received for sale of generics pharmaceuticals business to Mylan Inc | 22.00% | 22.00% |
Discontinued Operations (Deta31
Discontinued Operations (Details 2) - USD ($) $ in Millions | Feb. 27, 2015 | Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 |
Disposal Group, Including Discontinued Operation, Income Statement Disclosures [Abstract] | |||||
Net sales | $ 544 | $ 256 | $ 1,527 | ||
Earnings (Loss) Before Tax | $ (6) | 163 | 14 | 324 | |
Income Tax Expense (Benefit) | 26 | 63 | 21 | 31 | |
Net Earnings (Loss) | (32) | 100 | (7) | 293 | |
Discontinued Operation, Gain (Loss) on Disposal of Discontinued Operation, Net of Tax [Abstract] | |||||
Pretax gain on sale of discontinued operations | 2,837 | ||||
Non-cash impact of tax expense associated with the gain on the sale of businesses | 1,100 | ||||
After Tax Gain | 16 | 1,752 | |||
Developed markets branded generics pharmaceuticals business | |||||
Discontinued Operation, Gain (Loss) on Disposal of Discontinued Operation, Net of Tax [Abstract] | |||||
After Tax Gain | $ 1,600 | ||||
Developed markets generics pharmaceuticals and animal health business | |||||
Disposal Group, Including Discontinued Operation, Income Statement Disclosures [Abstract] | |||||
Net sales | 544 | 256 | 1,527 | ||
Earnings (Loss) Before Tax | (6) | 163 | 14 | 324 | |
Income Tax Expense (Benefit) | (1) | 58 | 11 | 68 | |
Net Earnings (Loss) | (5) | 105 | 3 | 256 | |
Discontinued Operation, Gain (Loss) on Disposal of Discontinued Operation, Net of Tax [Abstract] | |||||
Pretax gain on sale of discontinued operations | 2,837 | ||||
Non-cash impact of tax expense associated with the gain on the sale of businesses | 1,085 | ||||
After Tax Gain | 1,752 | ||||
AbbVie | |||||
Disposal Group, Including Discontinued Operation, Income Statement Disclosures [Abstract] | |||||
Income Tax Expense (Benefit) | 27 | 5 | 10 | (37) | |
Net Earnings (Loss) | $ (27) | $ (5) | $ (10) | $ 37 |
Supplemental Financial Inform32
Supplemental Financial Information (Details) - USD ($) shares in Millions | Feb. 27, 2015 | Apr. 30, 2015 | Sep. 30, 2015 | Mar. 31, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | Dec. 31, 2014 |
Supplemental Financial Information | ||||||||
Earnings from continuing operations allocated to common shares | $ 593,000,000 | $ 437,000,000 | $ 1,902,000,000 | $ 1,083,000,000 | ||||
Net earnings allocated to common shares | 577,000,000 | $ 536,000,000 | 3,638,000,000 | 1,373,000,000 | ||||
Noncash impact of tax benefits from resolution of prior year tax positions included in other, net use of cash in Net cash from operating activities | 165,000,000 | |||||||
Component of investments | ||||||||
Investments, primarily bank time deposits | 3,007,000,000 | 3,007,000,000 | $ 397,000,000 | |||||
Investments | $ 3,055,000,000 | 3,055,000,000 | 229,000,000 | |||||
Gain on sale of Mylan shares | 207,000,000 | |||||||
Pretax gain on sale of discontinued operations | 2,837,000,000 | |||||||
Decrease in fair value of contingent consideration | 79,000,000 | |||||||
Proceeds from the sale of Mylan N.V. shares | 2,290,000,000 | |||||||
Debt and Lines of Credit | ||||||||
Long-term debt issued | $ 2,500,000,000 | |||||||
Post-employment Obligations and Other Long-term Liabilities: | ||||||||
Non-cash impact of tax expense associated with the gain on the sale of businesses | $ 1,100,000,000 | |||||||
Mylan NV | ||||||||
Component of investments | ||||||||
Number of shares owned | 69.7 | 69.7 | ||||||
Market value | $ 2,808,000,000 | $ 2,808,000,000 | ||||||
Percentage of shares held before sale of generics pharmaceuticals business to Mylan Inc | 22.00% | |||||||
Ownership interest (as a percent) | 14.00% | 14.00% | ||||||
Mylan | ||||||||
Component of investments | ||||||||
Number of shares in investment sold | 40.3 | |||||||
Number of shares received for sale of generics pharmaceuticals business to Mylan Inc | 110 | |||||||
Interest rate swaps | ||||||||
Debt and Lines of Credit | ||||||||
Notional amount of contracts entered during the period | 2,500,000,000 | |||||||
2.00% Senior Notes Due March 15, 2020 | ||||||||
Debt and Lines of Credit | ||||||||
Long-term debt issued | $ 750,000,000 | |||||||
Interest rate percentage | 2.00% | |||||||
2.55% Senior Notes Due March 15, 2022 | ||||||||
Debt and Lines of Credit | ||||||||
Long-term debt issued | $ 750,000,000 | |||||||
Interest rate percentage | 2.55% | |||||||
2.95% Senior Notes Due March 15, 2025 | ||||||||
Debt and Lines of Credit | ||||||||
Long-term debt issued | $ 1,000,000,000 | |||||||
Interest rate percentage | 2.95% | |||||||
Defined Benefit Plans | ||||||||
Post-employment Obligations and Other Long-term Liabilities: | ||||||||
Company contributions | $ 551,000,000 | 350,000,000 | ||||||
Medical and Dental Plans | ||||||||
Post-employment Obligations and Other Long-term Liabilities: | ||||||||
Company contributions | 24,000,000 | $ 40,000,000 | ||||||
Equity securities | ||||||||
Component of investments | ||||||||
Investments | $ 3,038,000,000 | 3,038,000,000 | 212,000,000 | |||||
Other | ||||||||
Component of investments | ||||||||
Investments | 17,000,000 | 17,000,000 | 17,000,000 | |||||
Other, Primarily Bank Time Deposits and Us Treasury Bills Member | ||||||||
Component of investments | ||||||||
Investments, primarily bank time deposits | $ 3,007,000,000 | 3,007,000,000 | $ 397,000,000 | |||||
Developed markets branded generics pharmaceuticals business | Mylan | ||||||||
Component of investments | ||||||||
Gain on sale of Mylan shares | $ 207,000,000 | |||||||
Number of shares in investment sold | 40.3 | |||||||
Number of shares received for sale of generics pharmaceuticals business to Mylan Inc | 110 | 110 |
Changes in Accumulated Other 33
Changes in Accumulated Other Comprehensive Income (Loss) (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Other comprehensive income from continuing operations, net of income taxes | ||||
Balance at the beginning of the period | $ (5,053) | |||
Balance at the end of the period | $ (7,211) | (7,211) | ||
Cumulative Foreign Currency Translation Adjustments | ||||
Other comprehensive income from continuing operations, net of income taxes | ||||
Balance at the beginning of the period | (3,643) | $ (675) | (2,924) | $ (718) |
Impact of business dispositions | 108 | |||
Other comprehensive income (loss) before reclassifications | (645) | (1,096) | (1,472) | (1,053) |
Net current period comprehensive income | (645) | (1,096) | (1,472) | (1,053) |
Balance at the end of the period | (4,288) | (1,771) | (4,288) | (1,771) |
Net Actuarial Losses and Prior Service Costs and Credits | ||||
Other comprehensive income from continuing operations, net of income taxes | ||||
Balance at the beginning of the period | (2,157) | (1,284) | (2,229) | (1,312) |
Impact of business dispositions | 19 | |||
Amounts reclassified from accumulated other comprehensive income | 26 | 16 | 79 | 44 |
Net current period comprehensive income | 26 | 16 | 79 | 44 |
Balance at the end of the period | (2,131) | (1,268) | (2,131) | (1,268) |
Cumulative Unrealized Gains (Losses) on Marketable Equity Securities | ||||
Other comprehensive income from continuing operations, net of income taxes | ||||
Balance at the beginning of the period | 696 | 9 | 1 | 13 |
Other comprehensive income (loss) before reclassifications | (1,596) | 2 | (763) | 4 |
Amounts reclassified from accumulated other comprehensive income | (10) | (138) | (16) | |
Net current period comprehensive income | (1,596) | (8) | (901) | (12) |
Balance at the end of the period | (900) | 1 | (900) | 1 |
Cumulative Gains on Derivative Instruments Designated as Cash Flow Hedges | ||||
Other comprehensive income from continuing operations, net of income taxes | ||||
Balance at the beginning of the period | 100 | (2) | 99 | 5 |
Other comprehensive income (loss) before reclassifications | 41 | 67 | 89 | 66 |
Amounts reclassified from accumulated other comprehensive income | (33) | (2) | (80) | (8) |
Net current period comprehensive income | 8 | 65 | 9 | 58 |
Balance at the end of the period | $ 108 | $ 63 | $ 108 | $ 63 |
Business Acquisitions (Details)
Business Acquisitions (Details) - USD ($) $ in Millions | Sep. 26, 2014 | Aug. 31, 2015 | Dec. 31, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | Dec. 31, 2014 |
Business acquisitions | ||||||
Subsequent payment related to working capital adjustment | $ 5 | |||||
Net cash paid, net of cash on hand of acquired company | $ 235 | $ 2,822 | ||||
Allocation of the fair value | ||||||
Goodwill | 10,067 | $ 9,750 | $ 10,067 | |||
Minimum | ||||||
Allocation of the fair value | ||||||
Amortization period of acquired intangible assets | 2 years | |||||
Maximum | ||||||
Allocation of the fair value | ||||||
Amortization period of acquired intangible assets | 20 years | |||||
Average | ||||||
Allocation of the fair value | ||||||
Amortization period of acquired intangible assets | 12 years | |||||
Established Pharmaceutical Products | ||||||
Allocation of the fair value | ||||||
Goodwill | $ 3,000 | |||||
Nutritional Products | ||||||
Allocation of the fair value | ||||||
Goodwill | 286 | |||||
Diagnostic Products | ||||||
Allocation of the fair value | ||||||
Goodwill | 449 | |||||
Vascular Products | ||||||
Allocation of the fair value | ||||||
Goodwill | $ 3,000 | |||||
CFR Pharmaceuticals SA | ||||||
Business acquisitions | ||||||
Cash paid for business acquisition | $ 2,900 | |||||
Net cash paid, net of cash on hand of acquired company | 2,800 | |||||
Assumed debt | 570 | |||||
Acquisition cost | $ 3,400 | |||||
Percentage of voting interest acquired | 99.90% | 99.90% | ||||
Fair value of the non-controlling interest at the acquisition date | $ 3 | |||||
Allocation of the fair value | ||||||
Acquired intangible assets, non-deductible | 1,870 | |||||
Goodwill | 1,420 | |||||
Acquired net tangible assets | 30 | |||||
Deferred income taxes recorded at acquisition | (400) | |||||
Total final allocation of fair value | 2,920 | |||||
Cash and cash equivalents | 94 | |||||
Trade accounts receivable | 180 | |||||
Inventory | 169 | |||||
Other current assets | 51 | |||||
Property and equipment | 210 | |||||
Other long-term assets | 145 | |||||
Borrowings | 570 | |||||
Trade accounts payable and other current liabilities | 240 | |||||
Other noncurrent liabilities | 14 | |||||
Pro forma financial information | ||||||
Annualized net sales expected | $ 750 | |||||
CFR Pharmaceuticals SA | Minimum | ||||||
Allocation of the fair value | ||||||
Amortization period of acquired intangible assets | 12 years | |||||
CFR Pharmaceuticals SA | Maximum | ||||||
Allocation of the fair value | ||||||
Amortization period of acquired intangible assets | 16 years | |||||
CFR Pharmaceuticals SA | Average | ||||||
Allocation of the fair value | ||||||
Amortization period of acquired intangible assets | 15 years | |||||
Veropharm | ||||||
Business acquisitions | ||||||
Cash paid for business acquisition | $ 315 | |||||
Acquisition cost | $ 415 | |||||
Percentage of voting interest acquired | 98.00% | 100.00% | 98.00% | |||
Fair value of the non-controlling interest at the acquisition date | $ 5 | $ 5 | ||||
Assumed debt | 90 | 90 | ||||
Allocation of the fair value | ||||||
Goodwill | 110 | 110 | ||||
Deferred income taxes recorded at acquisition | $ (25) | (25) | ||||
Amortization period of acquired intangible assets | 16 years | |||||
Trade accounts receivable | $ 45 | 45 | ||||
Inventory | 25 | 25 | ||||
Property and equipment | 165 | 165 | ||||
Other current liabilities | 10 | 10 | ||||
Non-deductible definite-lived intangible assets | 105 | 105 | ||||
Topera | ||||||
Business acquisitions | ||||||
Cash paid for business acquisition | 250 | |||||
Allocation of the fair value | ||||||
Goodwill | 105 | 105 | ||||
Deferred income taxes recorded at acquisition | $ (105) | (105) | ||||
Amortization period of acquired intangible assets | 16 years | |||||
Additional payments upon completion of certain development, regulatory and sales milestones | $ 300 | 300 | ||||
Non-deductible acquired in-process research and development | 20 | 20 | ||||
Non-deductible definite-lived intangible assets | 325 | 325 | ||||
Contingent consideration | $ 95 | $ 95 | ||||
Tendyne Holdings, Inc. | ||||||
Business acquisitions | ||||||
Cash paid for business acquisition | $ 225 | |||||
Allocation of the fair value | ||||||
Goodwill | 155 | |||||
Deferred income taxes recorded at acquisition | (90) | |||||
Additional payments upon completion of certain development, regulatory and sales milestones | 135 | |||||
Non-deductible acquired in-process research and development | 240 | |||||
Contingent consideration | $ 80 |
Goodwill and Intangible Assets
Goodwill and Intangible Assets (Details) - USD ($) $ in Millions | 9 Months Ended | |
Sep. 30, 2015 | Dec. 31, 2014 | |
Goodwill and intangible assets information | ||
Goodwill | $ 9,750 | $ 10,067 |
Foreign currency translation adjustments decreased goodwill | 273 | |
Goodwill as part of the disposal | 950 | |
Purchase price allocation adjustments associated with increased (decreased) goodwill | (44) | |
Amount of reduction of goodwill relating to impairments | 0 | |
Intangibles assets included in the net assets transferred as part of the disposal | $ 804 | |
Developed markets branded generics pharmaceuticals business | ||
Goodwill and intangible assets information | ||
Goodwill as part of the disposal | 894 | |
Intangibles assets included in the net assets transferred as part of the disposal | 738 | |
Established Pharmaceutical Products | ||
Goodwill and intangible assets information | ||
Goodwill | 3,000 | |
Nutritional Products | ||
Goodwill and intangible assets information | ||
Goodwill | 286 | |
Diagnostic Products | ||
Goodwill and intangible assets information | ||
Goodwill | 449 | |
Vascular Products | ||
Goodwill and intangible assets information | ||
Goodwill | $ 3,000 |
Goodwill and Intangible Asset36
Goodwill and Intangible Assets (Details 2) - USD ($) $ in Millions | 9 Months Ended | |
Sep. 30, 2015 | Dec. 31, 2014 | |
Goodwill and Intangible Assets | ||
Gross amount of amortizable intangible assets | $ 10,800 | $ 11,000 |
Accumulated amortization of intangible assets | 5,300 | 4,900 |
Indefinite-lived intangible assets related to in-process research and development acquired in a business combination | 377 | $ 134 |
Estimated annual amortization expense, intangible assets, 2015 | 680 | |
Estimated annual amortization expense, intangible assets, 2016 | 660 | |
Estimated annual amortization expense, intangible assets, 2017 | 650 | |
Estimated annual amortization expense, intangible assets, 2018 | 570 | |
Estimated annual amortization expense, intangible assets, 2019 | $ 530 | |
Minimum | ||
Goodwill and Intangible Assets | ||
Average amortization period, intangible assets | 2 years | |
Maximum | ||
Goodwill and Intangible Assets | ||
Average amortization period, intangible assets | 20 years | |
Average | ||
Goodwill and Intangible Assets | ||
Average amortization period, intangible assets | 12 years |
Restructuring Plans (Details)
Restructuring Plans (Details) $ in Millions | 9 Months Ended |
Sep. 30, 2015USD ($) | |
Restructuring Plan 2015 and 2014 | |
Restructuring reserve activity | |
Restructuring reserve, beginning balance of the period | $ 118 |
Restructuring charges | 80 |
Payments and other adjustments | (78) |
Restructuring reserve, ending balance of the period | 120 |
Additional charges for accelerated depreciation | 34 |
Restructuring Plan 2015 and 2014 | Research and development | |
Restructuring reserve activity | |
Restructuring charges | 38 |
Restructuring Plan 2015 and 2014 | Cost of products sold | |
Restructuring reserve activity | |
Restructuring charges | 25 |
Restructuring Plan 2015 and 2014 | Selling, general and administrative expense | |
Restructuring reserve activity | |
Restructuring charges | 17 |
Restructuring Plan 2013 to 2015 | |
Restructuring reserve activity | |
Restructuring reserve, beginning balance of the period | 135 |
Restructuring charges | 38 |
Payments and other adjustments | (64) |
Restructuring reserve, ending balance of the period | 109 |
Restructuring Plan 2013 to 2015 | Research and development | |
Restructuring reserve activity | |
Restructuring charges | 2 |
Restructuring Plan 2013 to 2015 | Cost of products sold | |
Restructuring reserve activity | |
Restructuring charges | 9 |
Restructuring Plan 2013 to 2015 | Selling, general and administrative expense | |
Restructuring reserve activity | |
Restructuring charges | 27 |
Restructuring Plan 2013 and Prior Years | |
Restructuring reserve activity | |
Restructuring reserve, beginning balance of the period | 39 |
Payments and other adjustments | (9) |
Restructuring reserve, ending balance of the period | $ 30 |
Incentive Stock Programs (Detai
Incentive Stock Programs (Details) $ / shares in Units, $ in Millions | 9 Months Ended |
Sep. 30, 2015USD ($)$ / sharesshares | |
Share-based Compensation Arrangement by Share-based Payment Award | |
Incentive stock programs, shares reserved for future grants | 87,000,000 |
Total unrecognized compensation cost | $ | $ 209 |
Stock options | |
Share-based Compensation Arrangement by Share-based Payment Award | |
Grants in period, stock options (in shares) | 5,577,553 |
Stock options outstanding, number of shares | 36,258,229 |
Exercisable options, number of shares | 26,691,599 |
Stock options outstanding, weighted-average remaining life | 4 years 8 months 12 days |
Exercisable options, weighted-average remaining life | 3 years 2 months 12 days |
Stock options outstanding, weighted-average exercise price (in dollars per share) | $ / shares | $ 31.23 |
Exercisable options, weighted-average exercise price (in dollars per share) | $ / shares | $ 26.94 |
Aggregate intrinsic value of options outstanding | $ | $ 367 |
Aggregate intrinsic value of options exercisable | $ | $ 357 |
Total unrecognized compensation cost, recognition period | 3 years |
Restricted stock awards | |
Share-based Compensation Arrangement by Share-based Payment Award | |
Grants in period, restricted stock (in shares) | 662,553 |
Restricted stock units | |
Share-based Compensation Arrangement by Share-based Payment Award | |
Grants in period, restricted stock (in shares) | 5,864,895 |
Financial Instruments, Deriva39
Financial Instruments, Derivatives and Fair Value Measures (Details) - USD ($) $ in Millions | 9 Months Ended | 12 Months Ended |
Sep. 30, 2015 | Dec. 31, 2014 | |
Derivative instruments, notional amount and fair value | ||
Fair Value - Assets | $ 379 | $ 358 |
Fair Value - Liabilities | 567 | 575 |
Designated as hedging instrument | Short-term borrowings | Net investment hedges | ||
Derivative instruments, notional amount and fair value | ||
Fair Value - Liabilities | 442 | 445 |
Designated as hedging instrument | Interest rate swaps | Fair value hedges | ||
Derivative instruments, notional amount and fair value | ||
Notional amount of cash flow hedge instruments | 4,000 | 1,500 |
Amount of hedge ineffectiveness recorded in income | 0 | 0 |
Designated as hedging instrument | Interest rate swaps | Deferred income taxes and other assets | Fair value hedges | ||
Derivative instruments, notional amount and fair value | ||
Fair Value - Assets | 172 | 101 |
Designated as hedging instrument | Foreign currency forward exchange contracts. | Cash flow hedges | ||
Derivative instruments, notional amount and fair value | ||
Notional amount of cash flow hedge instruments | $ 2,500 | 1,500 |
Minimum length of time over which accumulated gains and losses will be recognized in Cost of products sold | 12 months | |
Maximum length of time over which accumulated gains and losses will be recognized in Cost of products sold | 18 months | |
Designated as hedging instrument | Foreign currency forward exchange contracts. | Prepaid expenses, deferred income taxes, and other receivables | ||
Derivative instruments, notional amount and fair value | ||
Fair Value - Assets | $ 100 | 107 |
Designated as hedging instrument | Foreign currency forward exchange contracts. | Other accrued liabilities | ||
Derivative instruments, notional amount and fair value | ||
Fair Value - Liabilities | 20 | |
Not designated as hedging instrument | Foreign currency forward exchange contracts. | ||
Derivative instruments, notional amount and fair value | ||
Notional amount of cash flow hedge instruments | 13,200 | 14,100 |
Not designated as hedging instrument | Foreign currency forward exchange contracts. | Prepaid expenses, deferred income taxes, and other receivables | ||
Derivative instruments, notional amount and fair value | ||
Fair Value - Assets | 107 | 150 |
Not designated as hedging instrument | Foreign currency forward exchange contracts. | Other accrued liabilities | ||
Derivative instruments, notional amount and fair value | ||
Fair Value - Liabilities | $ 105 | $ 130 |
Financial Instruments, Deriva40
Financial Instruments, Derivatives and Fair Value Measures (Details 2) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Net investment hedges | Designated as hedging instrument | ||||
Gain (loss) on derivatives | ||||
Gain (loss) Recognized in Other Comprehensive Income (loss) | $ (11) | $ 38 | $ 3 | $ 20 |
Interest rate swaps | Fair value hedges | Designated as hedging instrument | Interest expense | ||||
Gain (loss) on derivatives | ||||
Gain (loss) Reclassified into Income | 85 | (6) | 71 | 13 |
Foreign currency forward exchange contracts. | Not designated as hedging instrument | Net foreign exchange loss (gain) | ||||
Gain (loss) on derivatives | ||||
Gain (loss) Reclassified into Income | 9 | 76 | (92) | 50 |
Foreign currency forward exchange contracts. | Cash flow hedges | Designated as hedging instrument | Cost of products sold | ||||
Gain (loss) on derivatives | ||||
Gain (loss) Recognized in Other Comprehensive Income (loss) | 41 | 58 | 89 | 56 |
Gain (loss) Reclassified into Income | $ 33 | $ 2 | $ 80 | $ 7 |
Financial Instruments, Deriva41
Financial Instruments, Derivatives and Fair Value Measures (Details 3) - USD ($) $ in Millions | Sep. 30, 2015 | Dec. 31, 2014 |
Fair value, asset and liability measures | ||
Investments Securities | $ 3,055 | $ 229 |
Foreign currency forward exchange contracts, receivable position | 379 | 358 |
Foreign currency forward exchange contracts, (payable) position | (567) | (575) |
Equity securities | ||
Fair value, asset and liability measures | ||
Investments Securities | 3,038 | 212 |
Carrying value | ||
Fair value, asset and liability measures | ||
Total long-term debt | (5,985) | (3,463) |
Foreign currency forward exchange contracts, receivable position | 207 | 263 |
Foreign currency forward exchange contracts, (payable) position | (125) | (135) |
Interest rate hedge contracts, receivable position | 172 | 101 |
Carrying value | Equity securities | ||
Fair value, asset and liability measures | ||
Investments Securities | 3,038 | 212 |
Carrying value | Other. | ||
Fair value, asset and liability measures | ||
Investments Securities | 17 | 17 |
Fair value | ||
Fair value, asset and liability measures | ||
Total long-term debt | (6,493) | (4,113) |
Foreign currency forward exchange contracts, receivable position | 207 | 263 |
Foreign currency forward exchange contracts, (payable) position | (125) | (135) |
Interest rate hedge contracts, receivable position | 172 | 101 |
Fair value | Equity securities | ||
Fair value, asset and liability measures | ||
Investments Securities | 3,038 | 212 |
Fair value | Other. | ||
Fair value, asset and liability measures | ||
Investments Securities | $ 17 | $ 17 |
Financial Instruments, Deriva42
Financial Instruments, Derivatives and Fair Value Measures (Details 4) - USD ($) $ in Millions | Sep. 30, 2015 | Dec. 31, 2014 |
Fair value, asset and liability measures | ||
Fair Value - Assets | $ 379 | $ 358 |
Fair Value - Liabilities | 567 | 575 |
Available-for-sale equity securities in an unrealized loss position | ||
Fair value of securities in an unrealized loss position | 2,812 | 6 |
Unrealized gross losses | 797 | |
Recurring | ||
Fair value, asset and liability measures | ||
Equity securities | 2,817 | 9 |
Interest rate swap derivative financial instruments, assets | 172 | 101 |
Total Assets | 3,196 | 373 |
Fair value of hedged long-term debt | 4,196 | 1,637 |
Contingent consideration related to business combinations | 180 | 243 |
Total Liabilities | 4,501 | 2,015 |
Recurring | Foreign currency forward exchange contracts | ||
Fair value, asset and liability measures | ||
Fair Value - Assets | 207 | 263 |
Fair Value - Liabilities | 125 | 135 |
Recurring | Quoted Prices in Active Markets | ||
Fair value, asset and liability measures | ||
Equity securities | 2,817 | 9 |
Total Assets | 2,817 | 9 |
Recurring | Significant Other Observable Inputs | ||
Fair value, asset and liability measures | ||
Interest rate swap derivative financial instruments, assets | 172 | 101 |
Total Assets | 379 | 364 |
Fair value of hedged long-term debt | 4,196 | 1,637 |
Total Liabilities | 4,321 | 1,772 |
Recurring | Significant Other Observable Inputs | Foreign currency forward exchange contracts | ||
Fair value, asset and liability measures | ||
Fair Value - Assets | 207 | 263 |
Fair Value - Liabilities | 125 | 135 |
Recurring | Significant Unobservable Inputs | ||
Fair value, asset and liability measures | ||
Contingent consideration related to business combinations | 180 | 243 |
Total Liabilities | $ 180 | $ 243 |
Litigation and Environmental 43
Litigation and Environmental Matters (Details) $ in Millions | Sep. 30, 2015USD ($) |
Loss Contingencies | |
Maximum expected cleanup exposure for individual site | $ 4 |
Maximum expected cleanup exposure in aggregate | 15 |
Other legal proceedings and environmental exposures | |
Loss Contingencies | |
Other legal proceedings or environmental exposure, minimum | 50 |
Other legal proceedings or environmental exposure, maximum | 65 |
Recorded reserve balance for legal proceedings and exposures | $ 60 |
Post-Employment Benefits (Detai
Post-Employment Benefits (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Defined Benefit Plans | ||||
Defined benefit plan net periodic benefit cost | ||||
Service cost - benefits earned during the period | $ 80 | $ 61 | $ 230 | $ 184 |
Interest cost on projected benefit obligations | 78 | 73 | 234 | 222 |
Expected return on plan assets | (128) | (109) | (385) | (330) |
Actuarial loss, net | 47 | 23 | 136 | 71 |
Prior service cost (credit) | 1 | 2 | ||
Total Cost | 77 | 49 | 215 | 149 |
Net amortization of: | ||||
Company contributions | 551 | 350 | ||
Defined Benefit Plans | Discontinued operations | ||||
Defined benefit plan net periodic benefit cost | ||||
Total Cost | 4 | 1 | 12 | |
Defined Benefit Plans | Continuing operations | ||||
Defined benefit plan net periodic benefit cost | ||||
Total Cost | 77 | 45 | 214 | 137 |
Medical and Dental Plans | ||||
Defined benefit plan net periodic benefit cost | ||||
Service cost - benefits earned during the period | 9 | 9 | 24 | 27 |
Interest cost on projected benefit obligations | 14 | 16 | 39 | 48 |
Expected return on plan assets | (10) | (10) | (29) | (29) |
Actuarial loss, net | 8 | 5 | 18 | 14 |
Prior service cost (credit) | (12) | (9) | (36) | (27) |
Total Cost | 9 | 11 | 16 | 33 |
Net amortization of: | ||||
Company contributions | 24 | 40 | ||
Medical and Dental Plans | Continuing operations | ||||
Defined benefit plan net periodic benefit cost | ||||
Total Cost | $ 9 | $ 11 | $ 16 | $ 33 |
Taxes on Earnings (Details)
Taxes on Earnings (Details) - USD ($) $ in Millions | 9 Months Ended | |
Sep. 30, 2015 | Sep. 30, 2014 | |
Taxes on Earnings | ||
Tax cost related to the disposal of shares | $ 71 | |
Non-cash impact of tax expense associated with the gain on the sale of businesses | 1,100 | |
Decrease in gross unrecognized tax benefits | 16 | |
Decrease in gross unrecognized tax benefits, upper bound | 635 | |
Decrease in gross unrecognized tax benefits, lower bound | 525 | |
AbbVie | ||
Taxes on Earnings | ||
Tax costs (benefits) as a result of the resolution of various tax positions. | 10 | |
Discontinued operations | ||
Taxes on Earnings | ||
Non-cash impact of tax expense associated with the gain on the sale of businesses | 667 | |
Discontinued operations | AbbVie | ||
Taxes on Earnings | ||
Favorable resolution of various tax positions and other unusual provision items | $ 101 | |
Decrease in gross unrecognized tax benefits | $ 134 | |
Developed markets branded generics pharmaceuticals business | ||
Taxes on Earnings | ||
Tax costs (benefits) as a result of the resolution of various tax positions. | $ 37 |
Segment Information (Details)
Segment Information (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | ||
Segment Reporting Information | |||||
Net Sales to External Customers | $ 5,150 | $ 5,079 | $ 15,217 | $ 14,891 | |
Operating Earnings | 713 | 728 | 2,052 | 1,770 | |
Amortization of intangible assets | (151) | (132) | (458) | (392) | |
Earnings from continuing operations before taxes | 714 | 715 | 2,353 | 1,714 | |
Other | |||||
Segment Reporting Information | |||||
Net Sales to External Customers | 572 | 611 | 1,689 | 1,828 | |
Total Reportable Segments | |||||
Segment Reporting Information | |||||
Net Sales to External Customers | 4,578 | 4,468 | 13,528 | 13,063 | |
Operating Earnings | 1,182 | 1,119 | 3,404 | 3,009 | |
Total Reportable Segments | Established Pharmaceutical Products | |||||
Segment Reporting Information | |||||
Net Sales to External Customers | 961 | 771 | 2,835 | 2,196 | |
Operating Earnings | 177 | 160 | 516 | 441 | |
Total Reportable Segments | Nutritional Products | |||||
Segment Reporting Information | |||||
Net Sales to External Customers | 1,789 | 1,787 | 5,175 | 5,149 | |
Operating Earnings | 459 | 369 | 1,198 | 954 | |
Total Reportable Segments | Diagnostic Products | |||||
Segment Reporting Information | |||||
Net Sales to External Customers | 1,156 | 1,180 | 3,426 | 3,486 | |
Operating Earnings | 307 | 310 | 887 | 810 | |
Total Reportable Segments | Vascular Products | |||||
Segment Reporting Information | |||||
Net Sales to External Customers | 672 | 730 | 2,092 | 2,232 | |
Operating Earnings | 239 | 280 | 803 | 804 | |
Corporate functions | |||||
Segment Reporting Information | |||||
Corporate functions and benefit plans costs | (109) | (76) | (330) | (237) | |
Reconciling items | |||||
Segment Reporting Information | |||||
Non-reportable segments | 76 | 124 | 193 | 297 | |
Net interest expense | (16) | (17) | (49) | (54) | |
Share-based compensation | [1] | (43) | (39) | (248) | (203) |
Amortization of intangible assets | (151) | (132) | (458) | (392) | |
Other, net | [2] | $ (225) | $ (264) | $ (159) | $ (706) |
Minimum | |||||
Segment Reporting Information | |||||
Annual share-based awards recognized in first quarter (as a percent) | 40.00% | ||||
Maximum | |||||
Segment Reporting Information | |||||
Annual share-based awards recognized in first quarter (as a percent) | 45.00% | ||||
[1] | Approximately 40 to 45 percent of the annual net cost of share-based awards will typically be recognized in the first quarter due to the timing of the granting of share-based awards. | ||||
[2] | Other, net for the nine months ended September 30, 2015 includes a gain on the sale of a portion of Abbott’s position in Mylan N.V. stock and a decrease in the fair value of contingent consideration related to a business acquisition, which was partially offset by charges associated with cost reduction initiatives. |