Abbott Laboratories Annual Report 2019

FY2019 Annual Report · Abbott Laboratories

Loading PDF…

2 0 1 9 A N N U A L R E P O R T

Abbott is a global company with a straightforward
purpose: we help people live more fully with
life-changing health technologies and products.
Our nutrition products build and maintain health
at every stage of life. Our diagnostic solutions
provide the information to guide effective
treatment decisions. Our branded generic
medicines help people get and stay healthy.
And our medical devices use the most advanced
technologies to keep hearts and arteries healthy,
to treat chronic pain and movement disorders,
and to give people with diabetes more freedom
and less pain. With leadership positions in
every market we serve, Abbott is prepared for
continued above-market growth and consistently
strong shareholder returns.

TA B L E O F C O N T E N T S

Letter to Shareholders

1
6 This is Abbott
10 Diabetes Care
12 Cardiac Rhythm Management
14 Heart-Failure Management
16 Structural Heart
18 Vascular Care
20 Neuromodulation
22 Core Lab Diagnostics
24 Rapid Diagnostics
26 Established Pharmaceuticals
28 Adult Nutrition
30 Pediatric Nutrition
32 Financial Report

Front Cover: TYRONE MORRIS / Milwaukee, WI

Tyrone Morris is a very busy man. With a restaurant to run and a weekly bowling
league to dominate, he doesn’t let anything slow him down — not even heart failure.
Abbott technologies have let him get back to leading the life he wants to live.

Quadra
Allure MP
CRT-P

CardioMEMS
Arterial Pressure
Monitor

HeartMate 3
Left Ventricular
Assist Device

MILES WHITE
Chairman of the Board and
Chief Executive Officer
(left)

ROBERT FORD
President and
Chief Operating Officer
(right)

DEAR FELLOW
SHAREHOLDER:

In my ﬁnal letter to you as Abbott’s
CEO, I am happy to report not
only that our company delivered
another outstanding year, but that
it stands ready to meet the future,
to sustain our success for years to
come, and to serve more people, in
more ways, than ever before.

A B B O T T 2 0 1 9 A N N U A L R E P O R T

Relevant

A portfolio of innovative products,
aligned with key health trends

Balanced

A broad mix of businesses and
customers that helps to insulate
from volatility in any one market

Global

A brand that’s known
and trusted worldwide

Driven

A high-performance culture,
driven to succeed

MARKET-
LEADING
POSITIONS

Continuous Glucose Monitoring

Remote Heart-Failure Monitoring

Heart Pumps (LVADs)

Transcatheter Mitral-Valve Repair

Stents

Chronic-Pain Devices

Blood and Plasma Screening

Point-of-Care Testing

Adult Nutrition

Pediatric Nutrition (U.S.)

SALES IN

160+
countries

L E T T E R T O O U R S H A R E H O L D E R S

SUSTAINING THE LEGACY

As Abbott’s leader for the past 21
years, I have been ever mindful of
the immense responsibility entrusted
to me – of not just maintaining, but
strengthening and advancing, this
great enterprise to sustain the many
beneﬁts that it brings to innumerable
people around the world. I was given
a century-plus legacy of achievement
to protect and advance, and we’ve
strived to honor that trust.

The unwavering goal of my time at
Abbott’s helm has been to constantly
build, strengthen, and position the
company for long-term success –
to ensure its ongoing ability to
navigate the always-changing world
around us. And we’ve pursued that
goal with great focus, consistency,
and deliberation.

That’s true to Abbott’s history and its
character. Since its beginning, this
has been a purpose-driven company.
Dr. Wallace Abbott began pioneering
new medical products in order to
better serve his own patients. Ever
since, we’ve been guided by that same
commitment to bringing life-changing
health products and technologies to
the people who need them.

We believe this is the best work that
a company can do. And we aim to do
it better than anyone else. Our intent
has been no less than to make Abbott
the leading healthcare company of the
21st century. We believe that goal is
not only achievable, but within reach.

The constant question before us is:
How can we at Abbott make the
biggest difference for the most people?
The answer lies in four fundamental
characteristics that form the
foundation of our success.

In our view, the world’s leading
healthcare company must be:

Relevant. We’ve constantly shaped
Abbott to ensure that we’re aligned
with the most important trends in
health, science, medicine, business,
and society so we can deliver the
solutions that people need. As a
result, today’s Abbott is a leader in
such critical areas of medicine as:
managing diabetes, one of the world’s
fastest-growing and most costly
diseases, affecting more than 400
million people; treating heart
disease, the world’s leading killer;
and detecting infectious diseases,
with Abbott diagnostics screening
60 percent of the world’s blood supply.
Global. We’re committed to making
our innovative products available
wherever people need our help, so
we’ve signiﬁcantly broadened and
deepened the company’s international
presence. Today we do business in
more than 160 countries, with strong
local roots and a more prominent
corporate identity that’s raising both
our visibility and our reputation.
Abbott is better known and respected
around the world today than at any
time in our history.
Balanced. As always, we’ve continued
to build the company on a broad basis,
spanning the spectrum of healthcare
and all stages of life. A careful balance
among the company’s diverse parts
has been a core Abbott strategy for
decades, and we’ve maintained and
reﬁned it with great care, ensuring
that the company never becomes
overly dependent on any single,
dominant factor.
Driven. As important as building the
company’s portfolio and presence has
been building its culture. This is not
an intangible factor – we’ve worked
to hardwire our values into the fabric
of the company through norms,
standards, and in ways that are clear
and measurable.

A B B O T T 2 0 1 9 A N N U A L R E P O R T

Abbott people are deeply committed
to the company’s purpose and
understand its vital importance in the
lives of the tens of millions of people
we serve around the world every year.
This drives us to always do more,
to do better, to be the best in our
markets – to be the best Abbott ever.

consecutive years

OF DIVIDENDS PAID

consecutive years

OF RISING DIVIDENDS

THE YEAR

The soundness of our strategies and
the quality of their execution was
borne out in our highly successful
2019 performance, which stands as
an object lesson on our efforts of the
past two decades. The year shows our
model operating and succeeding at a
very high level.

Adjusted earnings per share rose 12.5
percent for the year – at the high end
of our guidance – on sales of almost
$32 billion.

We returned more than $2.2 billion
to shareholders and, in December,
announced a dividend increase of
12.5 percent. Abbott has now paid
dividends for 96 consecutive years,
and they’ve risen annually for the last
half of that span – 48 years in a row.

A B B O T T 2 0 1 9 A N N U A L R E P O R T

L E T T E R T O O U R S H A R E H O L D E R S

Abbott is fully
prepared to
deliver sustainable
growth, sustainable
success, and a
sustainable future.

All four of our major businesses
performed well in 2019 and
contributed signiﬁcantly to these
strong results. Among the highlights:

• FreeStyle Libre, our revolutionary
glucose-monitoring system now has
approximately two million users
worldwide, increasing organic sales
by 70 percent over the previous year.
In recognition of its extraordinary
impact, Libre received the Prix Galien,
the highest honor for biomedical
innovation.

• MitraClip, our market-leading
device for the minimally invasive
treatment of leaking heart valves,
grew organic sales by 30 percent.

• The rollout of our Alinity family
of systems continues to remake the
diagnostic laboratory.

• The quality and impact of our
sustainability efforts resulted in
our being named to the Dow Jones
Sustainability Index for the 15th
consecutive year, the last seven as the
leader in our industry.

• And our success across the span of
our operations was reﬂected in Abbott
being named the Most Admired
Company in our industry, also for the
seventh year in a row.

In short, our 2019 performance
clearly demonstrates the strength of
Abbott’s position and provides great
momentum as we go forward.

THE FUTURE

Business is always about the future
– about creating and providing what
people will need. This is especially
true of an innovator like Abbott,
working in a critical ﬁeld in which
people’s lives literally depend on
bringing them new solutions to
their most critical and personal
needs. That’s why Abbott is always
so intently focused on anticipating,
preparing for, and leading the future
of healthcare.

130+ years

OF LEADERSHIP
IN HEALTHCARE

As a result of the continuous
evolutionary process we’ve
conducted, Abbott now has all the
elements we need to make our own
success through organic, internal
execution. Our best opportunities,
and the strengths we need to capture
them, are all within the company.
We have all the pieces in place to
continue to meet our goals. Abbott is
fully prepared to deliver sustainable
growth, sustainable success, and a
sustainable future.

I am proud of much that we’ve
accomplished over the past 21 years
– but nothing more so than ensuring
a seamless transition to the new
generation of leadership that’s ready
to take Abbott forward.

When Robert Ford becomes our
Chief Executive Officer on March
31, our company will be in very good
hands. As I outlined in last year’s
letter, Robert is an Abbott veteran
with superb skills, temperament, and
experience for the position. He and
I have worked together shoulder to
shoulder throughout the year and a
half he’s served as Abbott’s President
and Chief Operating Officer, and he
is more than ready to forge the next
link in Abbott’s long tradition of
innovation, impact, and success. The
senior management team he’ll lead is
strong and seasoned, and I’ll provide
continuity through the transition
process as Executive Chairman of
the Board.

It has been the honor of my life to be
a part of this company, to carry its
great legacy forward, and to serve
all of those who depend on it in such
vital ways. It is my fervent hope that I
have validated the trust placed in me
by the Board 21 years ago. And it is my
belief that our company is as strong
and ready for its future as at any time
in its 132 years of success thus far.
More than a century ago, Dr. Wallace
Abbott bid the world, “Watch us
grow!” Those words have never rung
with greater truth and promise than
now, as we enter the next chapter in
Abbott’s great story.

MILES D. WHITE

Chairman of the Board and
Chief Executive Officer
March 2, 2020

A B B O T T 2 0 1 9 A N N U A L R E P O R T

Abbott 2019:
Turning Strength
into Success.

FINANCIAL HIGHLIGHTS

WORLDWIDE SALES

$31.9B
$31.9B

ORGANIC SALES GROWTH1

7.7%7.7%

ADJUSTED EARNINGS PER SHARE2

$3.24
$3.24

ADJUSTED EARNINGS-PER-SHARE GROWTH3

12.5%12.5%

3-YEAR TOTAL SHAREHOLDER RETURN

~140%
~140%

1 On a GAAP basis, Abbott sales increased 4.3%
2 Full-year 2019 GAAP diluted EPS from continuing operations $2.06
3 GAAP EPS Growth 57.3%

For full ﬁnancial data and reconciliation of non-GAAP measures, please see Abbott’s 2019
earnings release at www.abbottinvestor.com

A B B O T T 2 0 1 9 A N N U A L R E P O R T

At Abbott, we provide real answers to
real problems, delivering breakthrough
technologies to prevent, diagnose and
treat health needs. We adapt quickly
to changes in the world around us,
harnessing leading-edge science and
technology to deliver the best possible
solutions for some of the world’s most
important health challenges.

THIS IS
THIS IS
WHAT WE
WHAT WE
DO.
DO.

A B B O T T 2 0 1 9 A N N U A L R E P O R T

Tony Daly,
Amplatzer Piccolo
patient, with his
father, Anthony

THIS IS
WHY.

A B B O T T 2 0 1 9 A N N U A L R E P O R T

When people are at their healthiest,
they have the potential to live not just
longer, but better. This simple truth has
been Abbott’s guiding principle for more
than 130 years. From the start, we’ve
worked to create more possibilities,
for more people, through the power of
health. It’s an ideal that’s summed up in
the four words that deﬁne our purpose:
LIFE. TO THE FULLEST.

A B B O T T 2 0 1 9 A N N U A L R E P O R T

DIABETES CARE

SHAPING THE
FUTURE OF
DIABETES
MANAGEMENT

Abbott’s world-leading position in continuous glucose
monitoring stems from the company’s long-term focus
on devices that let people with diabetes get accurate
results faster and with minimal pain or disruption. Our
revolutionary sensing technology — the FreeStyle Libre
System — is a life-changing innovation that offers a
convenient way to get more-frequent glucose readings. Libre
is a small sensor worn on the arm that continuously measures
the amount of glucose in the blood. To get a reading, a person
simply has to scan the sensor with their smart phone or
reader. In 2019, we announced data conﬁrming that higher
rates of scanning with the FreeStyle Libre system are strongly
associated with improved glucose control.

We also offer the FreeStyle Libre Pro System, a professional
continuous glucose-monitoring device that lets doctors detect
trends and track glucose-level patterns, helping them make
therapy adjustments for their patients.

In 2019, we announced a number of partnerships designed
to further extend the positive impact of the FreeStyle Libre
technology. We plan to develop integrated diabetes solutions
that combine our glucose-sensing technology with Tandem
Diabetes Care’s insulin-delivery systems to provide more
options for diabetes management. We’re also partnering
with Omada Health to integrate the FreeStyle Libre system
with their pioneering digital coaching program. And Abbott
and Sanoﬁ are partnering to create tools that combine our
technology with Sanoﬁ’s insulin-dosing information for
future smart pens, insulin titration apps, and cloud software.

Diabetes Prevalence
Expected to
Rise Signiﬁcantly

2019

463

MILLION

2045

700

MILLION

>50%

More than half
of people with
diabetes don’t
know they have it

Source: IDF Diabetes Atlas,
Ninth edition 2019

A B B O T T 2 0 1 9 A N N U A L R E P O R T

A LIFE, CHANGED

Paloma Kemak
Scottsdale, Arizona, USA

When the FreeStyle Libre system
became available in the U.S., in 2017,
Paloma was one of the ﬁrst people
to try it. Now, as a diabetes blogger,
she’s one of the system’s most
vocal supporters. She loves that
it helps her simplify her glucose
management painlessly and on
her own terms, letting her see her
glucose levels whenever she likes,
and providing trend graphs to help
her understand how her levels have
ﬂuctuated throughout the day.

FREESTYLE
LIBRE SYSTEM

Speciﬁcally
designed to be
both affordable
and accessible

CONFIRM RX

The ﬁrst and
only wireless,
smartphone-
enabled insertable
cardiac monitor
(shown actual size)

A B B O T T 2 0 1 9 A N N U A L R E P O R T

A LIFE, CHANGED

Bruce Morley
Austin, Texas, USA

When Bruce ﬁrst started
experiencing the symptoms of
atrial ﬁbrillation (AF), he had
a separate condition that felt
similar enough that he couldn’t
always tell when his heart was,
in fact, beating irregularly.
But once his doctors implanted
Abbott’s Conﬁrm Rx Insertable
Cardiac Monitor, they could
clearly see when his symptoms
were related to his heart,
helping them better manage
his treatment and giving Bruce
some much needed peace of
mind. Today, with his AF under
control, Bruce is better able to
live the active life he loves with
his wife, Valerie.

A B B O T T 2 0 1 9 A N N U A L R E P O R T

CARDIAC RHY THM MANAGEMENT

CONNECTING
ARRHY THMIA
PATIENTS WITH THE
CARE THEY NEED

ASSURITY MRI

The world’s smallest,
longest-lasting
MRI pacemaker

82 82

MILLION PEOPLE IN THE HN
AT
ARACERE
CC AA
W
WORLD EXPERIENCE ATRIALL
NOTA
FIBRILLATION.
LIBBF
N
F RBR

h
n

brn

pm
h

np
te

hh kk
h

rr
iu
h

Abbott eengnginineee rs bring leading-edge thinkikingng
to thehe ccomompap ny’s portfolio of cardiac-rhhytythmhm--
t
l
mamananagegement devices. Our lineup inccluudedess
irO
amp
MRMRI-I-coc mpatible pacemakers that rresestotorere
nonormal heart rhythm, implantabablele ccarardid ac
ded ﬁbrillators that help slow aabnbnorormmally fast-
beating hearts, and cardiaac c reresysyncn hronization
devices that help the heearart t pupump in a more
coordinated way. In MaMay,y, wwe announced
the launch of our nenextxt-g-generation Conﬁrm
Rx, a paperclip-p-sisizezedd immplantable device
that combineess smsmara tphone connectivity
and contininuouousus,, rer mote monitoring to track
unprededicictatablble heart-rhythm problems for fast
anndd acaccucurarate diagnosis.

tnn

WeW also offer a variety of innovative
ar
technologies that diagnose and treeatat
a
irregular heart rhythms caused bby y atatririala
a
a
r H
ﬁbrillation. These include thehe AdAdvivisos r HD
mapping catheter, which ususeses aa ﬁﬁrsr t-of-
its-kind electrode conﬁgﬁgururatatioion to create
more highly-detailedd mmapaps s of the heart; and
our best-in-class cacardrdiaiac-c mapping system,
EnSite Precisionon, , whwhicich h helps doctors ﬁnd
the speciﬁﬁc c titissssueue thah t’s causing a patient’s
heart to bbeaeat t irirrer gularly. Early in 2019, we
announunceced d ththe U.S. approval of the TactiCath
Contntacact t FoForce Ablation Catheter, Sensor
EnEnabableledd, which delivers more-precise immagageses
ofof tthehe heart overlaid with real-time eleectctriricacall
acactivity information.

A B B O T T 2 0 1 9 A N N U A L R E P O R T

HEART-FAILURE MANAGEMENT

FULL-SPECTRUM
SOLUTIONS FOR
PEOPLE WITH
HEART FAILURE

CardioMEMS
Pulmonary-Artery
Pressure Monitor

Heart failure is one of the world’s
most serious and costly diseases,
impacting nearly 26 million people
worldwide. Abbott is meeting the
many challenges of this condition
with a full spectrum of solutions
— diagnostics, devices, data,
and analytics — that can help
physicians and hospitals manage
heart failure more holistically for
their patients.

Our CardioMEMS HF System
measures pulmonary-artery
blood pressure to provide early
detection of worsening heart
failure, working alongside our full
cardiac-resynchronization-therapy

portfolio and ventricular-assist
devices. Our HeartMate 3 left-
ventricular assist device (LVAD)
— a mini heart pump for patients
in advanced-stage heart failure
— is the ﬁrst implantable device
of its kind to use Full MagLev
ﬂow technology, which allows
the pump’s rotor to be suspended
by magnetic forces, reducing
trauma to the blood as it passes
through the pump. In March, we
announced data from a worldwide
trial that showed improved rates
of overall survival, better quality
of life, and a reduction in adverse
events in patients who rely on the
HeartMate 3 heart pump.

A B B O T T 2 0 1 9 A N N U A L R E P O R T

A LIFE, CHANGED

Roberto Ravenni
Colle di Val d’Elsa, Siena, Italy

Roberto was just a teenager when
his heart began to fail. For 33
years, as his heart grew continually
weaker, he felt that his life was
constrained by his condition.
By the time he was 50 years old,
his doctors determined that
drastic intervention was required.
Today, his heart is supported by
the HeartMate 3 LVAD, and he’s
doing things he hasn’t been able
to since he was 17.

HEARTMATE 3
LEFT-VENTRICULAR
ASSIST DEVICE
Advanced engineering improves
outcomes for patients

A B B O T T 2 0 1 9 A N N U A L R E P O R T

A LIFE, CHANGED

Tony Daly
Las Vegas, Nevada, USA

Tony was born prematurely
and weighed just over 2 pounds.
Within days, his doctors
determined that he had a
life-threatening opening in
the heart called patent ductus
arteriosus (PDA), a condition
that often requires urgent
and invasive surgery. Abbott’s
Amplatzer Piccolo, a device
smaller than a pea, developed
speciﬁcally to treat PDA, helped
close the opening, saving Tony’s
life. These days, Tony is doing
great. He’s 4 years old and full
of energy.

AMPLATZER PICCOLO OCCLUDER

The ﬁrst U.S.-approved device
small enough to close a hole
in the heart of a premature infant,
weighing as little as 700 grams.

A B B O T T 2 0 1 9 A N N U A L R E P O R T

STRUCTURAL HEART

STRUCTURAL
SOLUTIONS
FOR DAMAGED
HEARTS

MITRACLIP
MITRAL-VALVE REPAIR
DEVICE

The ﬁrst transcatheter
mitral device approved
to treat advanced
heart-failure patients
with signiﬁcant
secondary mitral
regurgitation

Abbott’s innovative devices are designed to treat
ststruructctururalal hheaeartrt ddefefecectsts iin n mimininimamalllly y ininvavasisiveve —— bbutut hhigighlhly y
effeffectitiveve — wwayays.

MitraClip, Abbott’s market-leading mitral-valve repair device,
clclipips s totogegeththerer aa pporortitionon oof f ththee leleaﬂaﬂetetss ofof tthehe mmititrarall vavalvlvee toto
rereduducece tthehe bbacackﬂkﬂowow oof f blblooood,d aallllowowining g ththee hehearart t toto ppumump blbloooodd
more efficiently. In 2019, we received U.S. FDA approval for
MitraClip G4, which offers doctors expanded treatment options.

InIn 2201019,9 wwe acacququirireded CCepephehea VaValvlve e TeTechchnonolologigieses, adaddidingng
a less-invasive mitral-valve-replacement technology to our
line-up of devices in development. We are also developing
TrTriCiClilipp, , a a trtricicususpipid-d-vavalvlve e rerepapairir ddevevicicee ththatat llevevereragageses ttecechnhnolologogy y
frfrom MiMitrt aCaClilip, anandd wew ’r’ e currr enentltly y condnductitingn aa ttririalal of f ouour r
transcatheter aortic-valve-replacement offering, Portico,
inin tthehe UU.S.S..

Beyond valve repair, our Amplatzer PFO Occluder is the leading
product on the U.S. market to treat holes in the heart known
asas ppatatenent t foforaramemen n ovovalaleses ((PFPFO)O).. AmAmplplatatzezer r isis pproroveven n toto rrededucuce e
ririsksk ooff rerecucurrrene t t sts rorokeke iin papatitienentsts wwitithh a a PFPFO O dedefefectct.

A B B O T T 2 0 1 9 A N N U A L R E P O R T

A LIFE, CHANGED

Rubens Bataglia
São Paulo,
São Paulo State,
Brazil

With a family history of
heart disease, Rubens
wasn’t surprised when
doctors told him he had
worrisome blockages in
two of his arteries — but
he was concerned when
they initially told him that,
due to the complexity
of his condition, he may
need open-heart surgery
to resolve the problem.
Thanks to Abbott’s best-
in-class diagnostic and
imaging technology,
Rubens’ doctors were able
to successfully treat him
with a minimally invasive
procedure using two Xience
stents, helping him get
back quickly to doing the
things he loves.

A B B O T T 2 0 1 9 A N N U A L R E P O R T

VASCUL AR CARE

INFORMED
DECISIONS FOR
MORE EFFECTIVE
TREATMENTS

Since entering the vascular-care business in
Since entering the vascular-care business in
1999, Abbott has developed a broad portfolio
1999, Abbott has developed a broad portfolio
of devices designed to optimize percutaneous
of devices designed to optimize percutaneous
coronary intervention — also known as
coronary intervention — also known as
angioplasty — procedures.
angioplasty — procedures.

We offer diagnostic and imaging devices designed
We offer diagnostic and imaging devices designed
to help interventional cardiologists assess arterial
to help interventional cardiologists assess arterial
blockages prior to placing our market-leading
blockages prior to placing our market-leading
Integrated system combines
stents. Our OptisOptis Integrated system combines
stents. Our
fractional-ﬂow-reserve technology (FFR), which
fractional-ﬂow-reserve technology (FFR), which
measures blood pressure and ﬂow through the
measures blood pressure and ﬂow through the
artery, with optical coherence tomography (OCT),
artery, with optical coherence tomography (OCT),
which provides detailed 3-D images of the vessel, to
which provides detailed 3-D images of the vessel, to
give doctors the information they need to make the
give doctors the information they need to make the
best treatment decisions.
best treatment decisions.

We also offer a full portfolio of vessel-
We also offer a full portfolio of vessel-
closure devices and catheters to round out
closure devices and catheters to round out
our vascular portfolio.
our vascular portfolio.

XIENCE SIERRA

Advanced stent system
designed to address
the most complex cases

A COMPREHENSIVE
PORTFOLIO
OF VASCULAR PRODUCTS,
INCLUDING:

XIENCE family of drug-eluting
family of drug-eluting

• XIENCE
stents
stents
• OptisOptis integrated imaging system
integrated imaging system
combines FFR and OCT
combines FFR and OCT
• PressureWire
PressureWire family of
family of
pressure-sensing guide wires
pressure-sensing guide wires
• Hi-Torque
• Supera
• Command
• Perclose ProGlide
• Perclose
closure system
closure system

Hi-Torque family of guide wires
family of guide wires
Supera peripheral-stent system
peripheral-stent system
Command guide wires
guide wires
ProGlide vascular-
vascular-

A B B O T T 2 0 1 9 A N N U A L R E P O R T

P EO P L E

WORLDWIDE ARE LIVING
WITH PARKINSON’S DISEASE

A LIFE, CHANGED

Clive
Couperthwaite
Brisbane,
Queensland, Australia

Clive is the type of
person who likes to be in
control of things. But his
Parkinson’s was making
that increasingly difficult.
He was on medication, but
it was having less and less of
an effect. After he started
treatment with Abbott’s
Inﬁnity DBS, everything
changed. He appreciates
that Inﬁnity lets him control
the delivery of prescribed
stimulation to his brain.
Even more, he’s grateful
to be able to fully engage
with life, to spend quality
time with his wife, Felicity,
and once again pursue
his life-long passion for
woodworking.

A B B O T T 2 0 1 9 A N N U A L R E P O R T

NEUROMODUL ATION

NEW TREATMENT
PATHS FOR CHRONIC
PAIN AND MOVEMENT
DISORDERS

INFINITY DBS SYSTEM

The ﬁrst deep-brain stimulation
system in the U.S. to offer directional
leads, reducing potential side effects

Abbott offers a portfolio of therapies that
Abbott offers a portfolio of therapies that
allow people living with chronic pain
allow people living with chronic pain
to work with their doctors to reduce or
to work with their doctors to reduce or
stabilize the long-term use of opioids and
stabilize the long-term use of opioids and
get back to living their lives.
get back to living their lives.

Our Our Proclaim
series of pain-management
Proclaim series of pain-management
devices includes technology designed to
devices includes technology designed to
deliver spinal-cord stimulation for the
deliver spinal-cord stimulation for the
treatment of chronic pain, and dorsal-
treatment of chronic pain, and dorsal-
root-ganglion stimulation for patients
root-ganglion stimulation for patients
seeking relief from nerve pain following
seeking relief from nerve pain following
surgery or injury in the lower limbs.
surgery or injury in the lower limbs.
platform’s Bluetooth®
Proclaim platform’s Bluetooth®
The The Proclaim
wireless technology and iOS‡ software
wireless technology and iOS‡ software
let patients tailor therapy to their
let patients tailor therapy to their
unique needs.
unique needs.

In 2019, the U.S. Food and Drug
In 2019, the U.S. Food and Drug
Proclaim
Administration approved our Proclaim
Administration approved our
XRXR SCSSCS system for people living with
system for people living with
intractable chronic pain of the trunk
intractable chronic pain of the trunk
and/or limbs. The
and/or limbs. The Proclaim XR
uses low doses of the mild electrical
uses low doses of the mild electrical
pulses that provide pain relief, helping
pulses that provide pain relief, helping
extend the system’s battery life for up to
extend the system’s battery life for up to
10 years* at low-dose settings.
10 years* at low-dose settings.

platform
Proclaim XR platform

For patients living with Parkinson’s
For patients living with Parkinson’s
disease or essential tremor, our
Inﬁnity
disease or essential tremor, our Inﬁnity
Deep Brain Stimulation (DBS) system can
Deep Brain Stimulation (DBS) system can
alleviate symptoms using mild pulses of
alleviate symptoms using mild pulses of
electricity to the brain. It was the ﬁrst
electricity to the brain. It was the ﬁrst
DBS system available with Apple iOS-
DBS system available with Apple iOS-
compatible patient controllers.
compatible patient controllers.

l
luetooth is a regigistered trademark of Bluet
ooth SIG, Inc.
Bluetooth is a regigistered trademark of BBluet
Bluetooth is a regi tered trademark of BBlue ooth SIG, I
ooth SIG, Inc.
Bluetooth is a registered trademark of BBluetooth SIG, Inc
l
‡ Indicates a thirdd-party trademark, whihich ic
Indicates a thirdd-party trademark, whihich ic
i h is property of its respectiive owneer
Indicates a thirdd-party trademark,
s property of its respectivive ownee
party trademark, whihich ic
‡ Indicates a th
s property of its respectiive owneer
s property of its respectivive owneer
e 0s on/360s off
* Up to 10 years batattery longevity at lowewest-dose setting: 0.6mA, 500 o0 ohms, dduty cycyclele 30s on/360s off
longevity at lo e -dose setting: 0.6mA, 50 oo ms, d
* Up to 10 years ba e
0s on/360s o
e 0s on/360s off
to 10 years batttery longevity at loweest-dose setting: 0.6mA, 5000 ms,
ry longevity at loww -dose setting: 0.6mA, 500 o0 ohms, dduty yy lele 30s on/360s off
Up to 10 years
* Up to 10 years batttery longevity at lo e t-dose setting: 0.6mA, 500 o0 o ms, d
Up to 10 years ba ery longevity at lowewes -dose setting: 0.6mA, 500 o0 ohms, dduty cycyclele 30s on/360s off

ty cycc

A B B O T T 2 0 1 9 A N N U A L R E P O R T

CORE L AB DIAGNOSTICS

SHIFTING THE PARADIGM
IN LABORATORY
DIAGNOSTICS

A LIFE, CHANGED

Merlijn van Hasselt
Amsterdam,
North Holland,
the Netherlands

Merlijn has long understood that donating
blood can be a life-saving gift to people in
need. That’s why he’s been a regular donor
since he was 19 years old. His dedication has
only grown over his past 9 years handling
communications for Sanquin, the non-proﬁt
foundation responsible for ensuring the safety
of the Netherlands’ blood supply.

60%

OF THE WORLD’S

DONATED BLOOD

AND PLASMA IS

SCREENED BY

ABBOTT SYSTEMS

AND TESTS

Abbottt has beenn a leader inn laboratory
diagnoostics for ddecades, devveloping
innovaative ways to screen, ddiagnose annd
monitoor a vast raange of heaalth conditioons
with greater speeed, accuraccy and efficiiency.
In 20199, the commpany continnued its gloobal
roll-ouut of its Aliinity familyy of systems
and tessts.

Alinityy systems aare designeed to be morre
efficiennt — running more teests in less sspace,
generaating test rresults fasteer and minimmizing
humann errors — while conttinuing to
providde quality rresults. In MMarch, Abbbott
p
announnced CE mmark for our Alinity m
diagnoostics systeem and assaays, the lateest
in moleecular tecchnology, too help deliveer
critical test resuults and benneﬁts to patiients.

~70%

OF CRITICAL

CLINICAL

DECISIONS ARE

INFLUENCED BY

DIAGNOSTIC TEST

RESULTS

60 million

TESTS RUN

ON ABBOTT

DIAGNOSTIC

INSTRUMENTS

EVERY DAY

A B B O T T 2 0 1 9 A N N U A L R E P O R T

This nnew technology presennts one of the
most signiﬁcant advancemeents seen in the
moleccular diagnostics ﬁeld in decades, and
will hhelp keep up with the ggrowing demand
for infectious-disease testinng.

In Jully, the U.S. Food and DDrug
Admiinistration approved thhe Alinity s
Systemm, which screens bloood and plasma
more efficiently within a smmaller space
versuus commercially availabble competitive
systemms. In a testing speciallty that can
require extensive hands-onn time, the
additiional automation and ﬂﬂexibility of
y
Alinitty
s will help blood andd plasma cent
improove productivity and mmaintain the
higheest levels of accuracy.

ters

ALINITY S

Next-generation
blood-screening
technology
for high-volume
laboratories

clinical
chemistry

informatics

immunoassay

ALINITY

point of care

hematology

molecular

transfusion

A B B O T T 2 0 1 9 A N N U A L R E P O R T

Dr. Keith Ancona
Smithtown, New York,
USA

With dozens of patient visits every day, the doctors at
Branch Pediatrics place a priority on delivering the
highest-quality care as efficiently as possible. They rely
on Abbott’s ID NOW benchtop molecular-diagnostics
system to deliver fast, accurate detection of infectious
diseases like strep and inﬂuenza.

A B B O T T 2 0 1 9 A N N U A L R E P O R T

RAPID DIAGNOSTICS

BETTER INFORMATION,
BETTER HEALTH

Abbott is the world leader in point-
of-care testing. In 2019, the company
delivered more than one billion
tests to healthcare professionals and
patients around the world. Abbott
rapid diagnostic systems provide
real-time, lab-quality results to
give doctors the insights they need
— in just minutes — to deliver the
right care, at the right time, in any
environment.

The ID NOW platform, which
provides molecular diagnostic results
for the detection of ﬂu, strep, and
RSV, allows doctors to make effective
clinical decisions sooner.

Aﬁnion 2 is a compact testing system
that can run a broad menu of tests in
doctors’ offices. In 2019, the company
introduced a new Aﬁnion HbA1c
test, which is the ﬁrst and only rapid
point-of-care test cleared in the U.S.

to help diagnose type-2 diabetes and
identify individuals at increased risk
for developing the disease.

Abbott’s SoToxa Mobile Test
System, a handheld drug-screening
device used to detect recent use of
marijuana and ﬁve other types of
drugs, is currently being used by
law-enforcement agencies in several
countries around the world, including
the U.S. and Canada.

Outside the U.S., Abbott provides
HIV, malaria and hepatitis tests in a
wide range of decentralized settings.
The company’s complete portfolio
of tests can deliver rapid results
even in the most remote areas.
Abbott has also been supporting a
public health campaign led by the
government of Egypt, which has
included testing nearly 60 million
people for hepatitis C.

>1 BILLION
TESTS
PROVIDED
IN 2019

A B B O T T 2 0 1 9 A N N U A L R E P O R T

ESTABLISHED PHARMACEUTICALS

TARGETED
PORTFOLIOS
OF TRUSTED
MEDICINES

EvEverery y daday,y, mmorore e ththanan 118 8 mimillllioion n pepeopoplele iin n ththee woworlrld’d’s s fafaststesest-t-grgrowowining g
rer gigionons usu ee AbAbbob ttt mmededicicinineses — a bbroadad pporo tftfololioio of f offff-ppata ene t brbranndsds
that help treat some of the most pervasive health conditions. We are
continually innovating, buildingg oon our leadership positions with
nenew w inindidicacatitionons s anandd imimprprovoveded wwayays s ofof uusisingng oourur mmededicicinineses.. ThThesese e
prprodducts aaree bbackekedd byby AAbbbbotott’t’s s 13130-0 plplusu -yeae r reputatatiionn ffor qualilityy,
a reliable supply chain, and world-class scientiﬁc culture
anand d exexpepertrtisise.e.

Abbott understands that better patient care requires localized
ininnonovavatitionon aandnd vvalalueue. AsAs ssucuch,h, wwe e tataililoror oourur pproroduductct ooffefferiringngss toto
memeetet tthehe sspepeciciﬁcﬁc nneeeedsds oof f ththe e lolocacal l cocommmmununititieiess wewe ssererveve. ThThisis ccanan
mean increasing access to existing products through geographic
exexpapansnsioion,n, eextxtenendidingng tthehe rreaeachch oof f lolocacal l prprododucuct t poportrtfofoliliosos tthrhrououghgh
papartrtnenersrshihipss aandnd aalllliaiancnceses, oror aadvdvananciingng tthehe qquau lilityty of f caarere tthrhrouughgh
targeted initiatives.

InIn 22010 9,9 we lalaunu chchedd a ﬁﬁrsst-t off-itsts-kkinnd didigiital heh althh ecosysystemm
— cac lllleded a:a:cacarere — tto o guguidde e pepeopoplee ttoo bebetttterer hheaealtlth h ououtctcomomeses wwitth h
pepersrsononalalizizeded rresesouourcrceses,, totoolols,s, aandnd ttipips.s. NNowow aavavaililabablele iin n momorere
pp
ththana 1100 coc unu trt iei s,s, a:cac rer hhele psps addddresss aa bbroroadad rranngege of f hehealltht carere
neneededs,s, ffrorom m prprevevenentitionon ttoo awawararenenesess,s, ttrereatatmementnt ccomomplpliaiancnce,e, aandnd
pap tient motivation.

>1,500

Abbott offers a broad portfolio
of high-quality medicines across
multiple therapeutic areas:
• Gastroenterology
• Women’s health
• Cardiometabolic
• Pain Management /
Central nervous system
• Respiratory

A B B O T T 2 0 1 9 A N N U A L R E P O R T

A LIFE, CHANGED

Soma Chatterjee
Kolkata, West Bengal, India

When her doctor conﬁrmed that she was
expecting a baby, Soma was excited, but also
a little anxious. She knew she had medical
conditions that would complicate the
pregnancy. At 15 weeks, because of an
increased risk of miscarriage, her doctor
prescribed Duphaston to help her carry
her baby to full term. Today, her son,
Anirneyo, is an energetic 7-year-old who,
says Soma, “makes my life complete.”

A B B O T T 2 0 1 9 A N N U A L R E P O R T

ADULT NUTRITION

NOURISHMENT
FOR EVERY STAGE
OF LIFE

As the world’s leading provider of adult-
and medical-nutrition products, Abbott
helps more than 8 million people a day
get the complete nourishment they need
to live their best possible lives. The
foundation of this business is our Ensure
line of complete, balanced and targeted
nutrition – products that can help people
stay active and at their best, or recover
from illness. In 2019, we expanded this
line in the U.S. with the launch of the
vegan-friendly option Ensure Plant-
Based Protein.

In May, we introduced ZonePerfect Keto
shakes and powders, formulated to support
ketosis and help burn body fat. ZonePerfect

Keto is made with true keto macros to help
people meet their wellness goals.

Abbott also has an extensive offering
of scientiﬁcally formulated, condition-
speciﬁc products. Glucerna shakes and
bars are formulated to help manage
blood-glucose levels as part of a diabetes-
management plan. Jevity is designed for
short- and long-term tube feeding. Juven
helps build lean body mass and supports
wound healing. Nepro and Suplena meet
the needs of people with kidney disease.
And Oxepa and Pulmocare help patients
with respiratory conditions.

ABBOTT IS THE
WORLDWIDE
LEADER IN ADULT-
NUTRITION
PRODUCTS

A B B O T T 2 0 1 9 A N N U A L R E P O R T

A LIFE, CHANGED

Huỳnh Nguyêt Ánh
Ho Chi Minh City, Vietnam

Feeling like she needed some change in her life,
Nguyêt decided to get back to doing the things she
loved in her youth — social activities like ballroom
dancing. Nguyêt relies on Ensure to provide the
extra energy she needs in her new, more active life.

A B B O T T 2 0 1 9 A N N U A L R E P O R T

PEDIATRIC NUTRITION

SCIENCE-BASED
NUTRITION TO BUILD A
BRIGHTER FUTURE

Every day, more than 11 million babies and children
are nourished by Abbott pediatric-nutrition products,
a portfolio of research-driven brands that provide
essential protein, minerals, and other nutrients.

For more than 90 years, we’ve helped give babies a
strong start with Similac, a complete line of milk- and
soy-based infant and toddler formulas that support
healthy growth and development of a baby’s eyes, brain,
and immune system. Abbott was the ﬁrst company in
the world to introduce formulas – Similac Pro-Advance
and Pro-Sensitive — with 2'-FL HMO (human milk

oligosaccharide), an immune-nourishing ingredient
that helps a baby’s immune system to be more like the
breastfed infant’s.

For older children, PediaSure is a supplement designed
with the right balance of protein, carbohydrates,
vitamins and minerals to help kids reach their full
potential. And Pedialyte offers an advanced rehydration
solution for children and adults. It’s specially
formulated to replenish vital ﬂuids and electrolytes to
help prevent dehydration.

A B B O T T 2 0 1 9 A N N U A L R E P O R T

A LIFE, CHANGED

Alex Lewandowski
Grayslake, Illinois, USA

When Alex was a baby, he had trouble keeping food down, and
often wouldn’t eat. His doctors concluded that Alex had oral
dysphagia (the inability to swallow food) as well as severe reﬂux
disorder. When he was 16 months old, Alex had a feeding tube
inserted to deliver nutrient-packed PediaSure directly into his
stomach. With these essential nutrients in his system, Alex began
gaining weight and demonstrating healthier growth patterns.
Today, his swallowing issues are signiﬁcantly less severe, but he
still relies on PediaSure to keep his growth on track.

PEDIASURE

A complete line of
nutrient-rich products
to help children
grow to their full
potential

A B B O T T 2 0 1 9 A N N U A L R E P O R T

2019
2019
Financial
Financial
Report
Report

33 Consolidated Statement of Earnings
33 Consolidated Statement of Earnings

34 Consolidated Statement of
34 Consolidated Statement of
Comprehensive Income
Comprehensive Income

35 Consolidated Statement of Cash Flows
35 Consolidated Statement of Cash Flows

36 Consolidated Balance Sheet
36 Consolidated Balance Sheet

38 Consolidated Statement of
38 Consolidated Statement of
Shareholders’ Investment
Shareholders’ Investment

39 Notes to Consolidated
39 Notes to Consolidated
Financial Statements
Financial Statements

60 Management Report on Internal
60 Management Report on Internal
Control Over Financial Reporting
Control Over Financial Reporting

60 Report of Independent Registered
60 Report of Independent Registered

Public Accounting Firm
Public Accounting Firm

62 Report of Independent Registered
62 Report of Independent Registered

Public Accounting Firm
Public Accounting Firm

63 Financial Instruments and
63 Financial Instruments and

Risk Management
Risk Management

64 Financial Review
64 Financial Review

77 Performance Graph
77 Performance Graph

78 Summary of Selected Financial Data
78 Summary of Selected Financial Data

79 Directors and Corporate Officers
79 Directors and Corporate Officers

80 Shareholder and Corporate Information
80 Shareholder and Corporate Information

C O N S O L I D AT E D S TAT E M E N T O F E A R N I N G S

(in millions except per share data)

Year Ended December 31

Net Sales
Cost of products sold, excluding amortization of intangible assets
Amortization of intangible assets
Research and development
Selling, general and administrative
Total Operating Cost and Expenses
Operating Earnings
Interest expense
Interest income
Net foreign exchange (gain) loss
Debt extinguishment costs
Other (income) expense, net
Earnings from Continuing Operations Before Taxes
Taxes on Earnings from Continuing Operations

Earnings from Continuing Operations

Net Earnings from Discontinued Operations, net of taxes

Net Earnings

Basic Earnings Per Common Share —
Continuing Operations
Discontinued Operations
Net Earnings

Diluted Earnings Per Common Share —
Continuing Operations
Discontinued Operations
Net Earnings

Average Number of Common Shares Outstanding Used for
Basic Earnings Per Common Share
Dilutive Common Stock Options
Average Number of Common Shares Outstanding Plus
Dilutive Common Stock Options

Outstanding Common Stock Options Having No Dilutive Effect

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

A B B O T T 2 0 1 9 A N N U A L R E P O R T

2018
$30,578
12,706
2,178
2,300
9,744
26,928
3,650
826
(105)
28
167
(139)
2,873
539

2,334

2017
$27,390
12,409
1,975
2,260
9,182
25,826
1,564
904
(124)
(34)
—
(1,413)
2,231
1,878

353

124

2019
$31,904
13,231
1,936
2,440
9,765
27,372
4,532
670
(94)
7
63
(191)
4,077
390

3,687

—

$÷3,687

$÷2,368

$÷÷«477

$÷÷2.07
—
$÷÷2.07

$÷÷2.06
—
$÷÷2.06

1,768
13

1,781

$÷÷1.32
0.02
$÷÷1.34

$÷÷1.31
0.02
$÷÷1.33

1,758
12

1,770

—

$÷÷0.20
0.07
$÷÷0.27

1,740
9

1,749

—

A B B O T T 2 0 1 9 A N N U A L R E P O R T

C O N S O L I D AT E D S TAT E M E N T O F C O M P R E H E N S I V E I N C O M E

(in millions)

Year Ended December 31

Net Earnings
Foreign currency translation gain (loss) adjustments
Net actuarial gains (losses) and prior service cost and credits and amortization of
net actuarial losses and prior service cost and credits, net of taxes of
$(238) in 2019, $47 in 2018 and $(61) in 2017
Unrealized gains (losses) on marketable equity securities, net of taxes of
$(76) in 2017
Net (losses) gains on derivative instruments designated as cash ﬂow hedges,
net of taxes of $(17) in 2019, $50 in 2018 and $(43) in 2017
Other Comprehensive Income (Loss)
Comprehensive Income

Supplemental Accumulated Other Comprehensive Income (Loss) Information,
net of tax as of December 31:
Cumulative foreign currency translation (loss) adjustments
Net actuarial (losses) and prior service (cost) and credits
Cumulative unrealized (losses) gains on marketable equity securities
Cumulative (losses) gains on derivative instruments designated as
cash ﬂow hedges
Accumulated other comprehensive income (loss)

2019
$«3,687
(12)

(814)

—

(53)
(879)
$«2,808

$(4,924)
(3,540)
—

(1)
$(8,465)

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

2018
$«2,368
(1,460)

132

—

136
(1,192)
$«1,176

$(4,912)
(2,726)
—

52
$(7,586)

2017
$÷÷477
1,365

(243)

(134)
1,052
$«1,529

$(3,452)
(2,521)
(5)

(84)
$(6,062)

A B B O T T 2 0 1 9 A N N U A L R E P O R T

2019

2018

2017

$«3,687

$÷«2,368

$÷÷÷477

C O N S O L I D AT E D S TAT E M E N T O F C A S H F L O W S

(in millions)

Year Ended December 31

Cash Flow From (Used in) Operating Activities:
Net earnings
Adjustments to reconcile earnings to net cash from operating activities —
Depreciation
Amortization of intangible assets
Share-based compensation
Amortization of inventory step-up
Investing and ﬁnancing losses, net
Loss on extinguishment of debt
Amortization of bridge ﬁnancing fees
Gains on sale of businesses
Gain on sale of Mylan N.V. shares
Trade receivables
Inventories
Prepaid expenses and other assets
Trade accounts payable and other liabilities
Income taxes
Net Cash From Operating Activities

Cash Flow From (Used in) Investing Activities:
Acquisitions of property and equipment
Acquisitions of businesses and technologies, net of cash acquired
Proceeds from business dispositions
Proceeds from the sale of Mylan N.V. shares
Purchases of investment securities
Proceeds from sales of investment securities
Other
Net Cash From (Used in) Investing Activities

Cash Flow From (Used in) Financing Activities:
Proceeds from issuance of (repayments of ) short-term debt, net and other
Proceeds from issuance of long-term debt and debt with maturities
over 3 months
Repayments of long-term debt and debt with maturities over 3 months
Purchase of Alere preferred stock
Acquisition and contingent consideration payments related to business
acquisitions
Purchases of common shares
Proceeds from stock options exercised
Dividends paid
Net Cash From (Used in) Financing Activities

Effect of exchange rate changes on cash and cash equivalents
Net Increase (Decrease) in Cash and Cash Equivalents
Cash and Cash Equivalents, Beginning of Year
Cash and Cash Equivalents, End of Year

Supplemental Cash Flow Information:
Income taxes paid
Interest paid

1,078
1,936
519
—
184
63
—
—
—
(275)
(593)
(138)
220
(545)
6,136

(1,638)
(170)
48
—
(103)
21
27
(1,815)

—

1,842
(3,441)
—

—
(718)
298
(2,270)
(4,289)

(16)
16
3,844
$«3,860

$÷÷930
677

1,100
2,178
477
32
126
167
—
—
—
(190)
(514)
23
747
(214)
6,300

(1,394)
(54)
48
—
(131)
73
102
(1,356)

(26)

4,009
(12,433)
—

—
(238)
271
(1,974)
(10,391)

(116)
(5,563)
9,407
$÷«3,844

$÷÷÷740
845

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

1,046
1,975
406
907
47
—
5
(1,163)
(45)
(207)
249
109
615
1,149
5,570

(1,135)
(17,183)
6,042
2,704
(210)
129
35
(9,618)

(1,034)

6,742
(8,650)
(710)

(13)
(117)
350
(1,849)
(5,281)

116
(9,213)
18,620
$÷«9,407

$÷÷÷570
917

A B B O T T 2 0 1 9 A N N U A L R E P O R T

C O N S O L I D AT E D B A L A N C E S H E E T

(dollars in millions)

December 31

Assets

Current assets:
Cash and cash equivalents
Investments, primarily bank time deposits and U.S. treasury bills
Trade receivables, less allowances of — 2019: $384; 2018: $314
Inventories:

Finished products
Work in process
Materials
Total inventories

Other prepaid expenses and receivables

Total current assets

Investments

Property and equipment, at cost:

Land
Buildings
Equipment
Construction in progress

Less: accumulated depreciation and amortization
Net property and equipment

Intangible assets, net of amortization
Goodwill
Deferred income taxes and other assets

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

2019

2018

$÷3,860
280
5,425

2,784
560
972
4,316
1,786
15,667

883

519
3,702
11,468
1,110

16,799
8,761
8,038

17,025
23,195
3,079
$67,887

$÷3,844
242
5,182

2,407
499
890
3,796
1,568
14,632

897

501
3,555
10,756
894

15,706
8,143
7,563

18,942
23,254
1,885
$67,173

C O N S O L I D AT E D B A L A N C E S H E E T

(dollars in millions)

December 31

Liabilities and Shareholders’ Investment

Current liabilities:
Short-term borrowings
Trade accounts payable
Salaries, wages and commissions
Other accrued liabilities
Dividends payable
Income taxes payable
Current portion of long-term debt
Total current liabilities
Long-term debt
Post-employment obligations and other long-term liabilities

Commitments and contingencies

Shareholders’ investment:
Preferred shares, one dollar par value
Authorized — 1,000,000 shares, none issued
Common shares, without par value
Authorized — 2,400,000,000 shares
Issued at stated capital amount —
Shares: 2019: 1,976,855,085; 2018: 1,971,189,465
Common shares held in treasury, at cost —
Shares: 2019: 214,351,838; 2018: 215,570,043
Earnings employed in the business
Accumulated other comprehensive income (loss)
Total Abbott Shareholders’ Investment
Noncontrolling interests in subsidiaries
Total Shareholders’ Investment

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

A B B O T T 2 0 1 9 A N N U A L R E P O R T

2019

2018

$÷÷÷201
3,252
1,237
4,035
635
226
1,277
10,863
16,661
9,062

200
2,975
1,182
3,780
563
305
7
9,012
19,359
8,080

—

23,853

(10,147)
25,847
(8,465)
31,088
213
31,301
$«67,887

23,512

(9,962)
24,560
(7,586)
30,524
198
30,722
$67,173

A B B O T T 2 0 1 9 A N N U A L R E P O R T

C O N S O L I D AT E D S TAT E M E N T O F S H A R E H O L D E R S ’ I N V E S T M E N T

(in millions except shares and per share data)

Year Ended December 31

2019

2018

2017

Common Shares:
Beginning of Year
Shares: 2019: 1,971,189,465; 2018: 1,965,908,188; 2017: 1,707,475,455

Issued under incentive stock programs
Shares: 2019: 5,665,620; 2018: 5,281,277; 2017: 8,834,924

Issued for St. Jude Medical acquisition
Shares: 2017: 249,597,809
Share-based compensation
Issuance of restricted stock awards

$«23,512

$«23,206

$«13,027

209

—
521
(389)

163

—
479
(336)

242

9,835
406
(304)

End of Year
Shares: 2019: 1,976,855,085; 2018: 1,971,189,465; 2017: 1,965,908,188

$«23,853

$«23,512

$«23,206

Common Shares Held in Treasury:
Beginning of Year
Shares: 2019: 215,570,043; 2018: 222,305,719; 2017: 234,606,250
Issued under incentive stock programs
Shares: 2019: 7,796,030; 2018: 8,870,735; 2017: 8,696,320
Issued for St. Jude Medical acquisition
Shares: 2017: 3,906,848
Purchased
Shares: 2019: 6,577,825; 2018: 2,135,059; 2017: 302,637

End of Year
Shares: 2019: 214,351,838; 2018: 215,570,043; 2017: 222,305,719

Earnings Employed in the Business:
Beginning of Year
Impact of adoption of new accounting standards
Net earnings
Cash dividends declared on common shares
(per share — 2019: $1.32; 2018: $1.16; 2017: $1.075)
Effect of common and treasury share transactions

End of Year

Accumulated Other Comprehensive Income (Loss):
Beginning of Year
Impact of adoption of new accounting standards
Business dispositions
Other comprehensive income (loss)

End of Year

Noncontrolling Interests in Subsidiaries:
Beginning of Year
Noncontrolling Interests’ share of income, business combinations,
net of distributions and share repurchases
End of Year

$÷(9,962)

$(10,225)

$(10,791)

361

—

(546)

408

—

(145)

400

180

(14)

$(10,147)

$÷(9,962)

$(10,225)

$«24,560
—
3,687

(2,343)
(57)

$«25,847

$÷(7,586)
—
—
(879)

$÷(8,465)

$÷÷÷198

15
$÷÷÷213

$«23,978
351
2,368

(2,047)
(90)

$«24,560

$÷(6,062)
(332)
—
(1,192)

$÷(7,586)

$÷÷÷201

(3)
$÷÷÷198

$«25,565
—
477

(1,947)
(117)

$«23,978

$÷(7,263)
—
149
1,052

$÷(6,062)

$÷÷÷179

22
$÷÷÷201

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

N O T E S T O C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Business — Abbott’s principal business is the discovery,
development, manufacture and sale of a broad line of health care
products.

Basis of Consolidation — The consolidated ﬁnancial statements
include the accounts of the parent company and subsidiaries, after
elimination of intercompany transactions.

Use of Estimates — The consolidated ﬁnancial statements have
been prepared in accordance with generally accepted accounting
principles in the United States and necessarily include amounts
based on estimates and assumptions by management. Actual
results could differ from those amounts. Signiﬁcant estimates
include amounts for sales rebates, income taxes, pension and other
post-employment beneﬁts, valuation of intangible assets, litiga-
tion, derivative ﬁnancial instruments, and inventory and accounts
receivable exposures.

Foreign Currency Translation — The statements of earnings of
foreign subsidiaries whose functional currencies are other than
the U.S. dollar are translated into U.S. dollars using average
exchange rates for the period. The net assets of foreign subsidiar-
ies whose functional currencies are other than the U.S. dollar are
translated into U.S. dollars using exchange rates as of the balance
sheet date. The U.S. dollar effects that arise from translating the
net assets of these subsidiaries at changing rates are recorded in
the foreign currency translation adjustment account, which is
included in equity as a component of Accumulated other compre-
hensive income (loss). Transaction gains and losses are recorded
on the Net foreign exchange (gain) loss line of the Consolidated
Statement of Earnings.

Revenue Recognition — Revenue from product sales is recognized
upon the transfer of control, which is generally upon shipment or
delivery, depending on the delivery terms set forth in the customer
contract. Provisions for discounts, rebates and sales incentives to
customers, and returns and other adjustments are provided for in
the period the related sales are recorded. Sales incentives to cus-
tomers are not material. Historical data is readily available and
reliable, and is used for estimating the amount of the reduction in
gross sales. Revenue from the launch of a new product, from an
improved version of an existing product, or for shipments in
excess of a customer’s normal requirements are recorded when
the conditions noted above are met. In those situations, manage-
ment records a returns reserve for such revenue, if necessary. In
certain of Abbott’s businesses, primarily within diagnostics,
Abbott participates in selling arrangements that include multiple
performance obligations (e.g., instruments, reagents, procedures,
and service agreements). The total transaction price of the con-
tract is allocated to each performance obligation in an amount
based on the estimated relative standalone selling prices of the
promised goods or services underlying each performance obliga-
tion. Sales of product rights for marketable products are recorded
as revenue upon disposition of the rights.

Income Taxes — Deferred income taxes are provided for the tax
effect of differences between the tax bases of assets and liabilities
and their reported amounts in the ﬁnancial statements at the
enacted statutory rate to be in effect when the taxes are paid. No
additional income taxes have been provided for any remaining

A B B O T T 2 0 1 9 A N N U A L R E P O R T

undistributed foreign earnings not subject to the transition tax
related to the U.S. Tax Cuts and Jobs Act, or any additional outside
basis differences that exist, as these amounts continue to be indeﬁ-
nitely reinvested in foreign operations. Interest and penalties on
income tax obligations are included in taxes on earnings.

Earnings Per Share — Unvested restricted stock units and awards
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 in 2019, 2018 and 2017 were
$3.666 billion, $2.320 billion and $346 million, respectively. Net
earnings allocated to common shares in 2019, 2018 and 2017 were
$3.666 billion, $2.353 billion and $468 million, respectively.

Pension and Post-Employment Beneﬁts — Abbott accrues for the
actuarially determined cost of pension and post-employment
beneﬁts over the service attribution periods of the employees.
Abbott must develop long-term assumptions, the most signiﬁcant
of which are the health care cost trend rates, discount rates and
the expected return on plan assets. Differences between the
expected long-term return on plan assets and the actual return are
amortized over a five-year period. Actuarial losses and gains are
amortized over the remaining service attribution periods of the
employees under the corridor method.

Fair Value Measurements — For assets and liabilities that are
measured using quoted prices in active markets, total fair value is
the published market price per unit multiplied by the number of
units held without consideration of transaction costs. Assets and
liabilities that are measured using signiﬁcant other observable
inputs are valued by reference to similar assets or liabilities,
adjusted for contract restrictions and other terms speciﬁc to that
asset or liability. For these items, a signiﬁcant portion of fair value
is derived by reference to quoted prices of similar assets or liabili-
ties in active markets. For all remaining assets and liabilities, fair
value is derived using a fair value model, such as a discounted
cash ﬂow model or Black-Scholes model. Purchased intangible
assets are recorded at fair value. The fair value of signiﬁcant pur-
chased intangible assets is based on independent appraisals. Abbott
uses a discounted cash ﬂow model to value intangible assets. The
discounted cash ﬂow model requires assumptions about the timing
and amount of future net cash ﬂows, risk, the cost of capital, termi-
nal values and market participants. Intangible assets are reviewed
for impairment on a quarterly basis. Goodwill and indefinite-lived
intangible assets are tested for impairment at least annually.

Share-Based Compensation — The fair value of stock options and
restricted stock awards and units are amortized over their requi-
site service period, which could be shorter than the vesting period
if an employee is retirement eligible, with a charge to compensa-
tion expense.

Litigation — Abbott accounts for litigation losses in accordance
with FASB ASC No. 450, “Contingencies.” Under ASC No. 450,
loss contingency provisions are recorded for probable losses at
management’s best estimate of a loss, or when a best estimate
cannot be made, a minimum loss contingency amount is recorded.
Legal fees are recorded as incurred.

A B B O T T 2 0 1 9 A N N U A L R E P O R T

N O T E S T O C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

Cash, Cash Equivalents and Investments — Cash equivalents con-
sist of bank time deposits, U.S. government securities money
market funds and U.S. treasury bills with original maturities of
three months or less. Abbott holds certain investments with a
carrying value of $321 million that are accounted for under the
equity method of accounting. Investments held in a rabbi trust
and investments in publicly traded equity securities are recorded
at fair value and changes in fair value are recorded in earnings.
Investments in equity securities that are not traded on public stock
exchanges are recorded at cost minus impairment, if any, plus or
minus changes resulting from observable price changes in orderly
transactions for identical or similar investments of the same issuer.
Investments in debt securities are classiﬁed as held-to-maturity, as
management has both the intent and ability to hold these securi-
ties to maturity, and are reported at cost, net of any unamortized
premium or discount. Income relating to these securities is
reported as interest income.

Trade Receivable Valuations — Accounts receivable are stated at
their net realizable value. The allowance against gross trade
receivables reﬂects the best estimate of probable losses inherent
in the receivables portfolio determined on the basis of historical
experience, speciﬁc allowances for known troubled accounts and
other currently available information. Accounts receivable are
charged off after all reasonable means to collect the full amount
(including litigation, where appropriate) have been exhausted.

Inventories — Inventories are stated at the lower of cost (first-in,
first-out basis) or net realizable value. Cost includes material and
conversion costs.

Property and Equipment — Depreciation and amortization are
provided on a straight-line basis over the estimated useful lives of
the assets. The following table shows estimated useful lives of
property and equipment:

Classiﬁcation
Buildings
Equipment

Estimated Useful Lives
10 to 50 years
3 to 20 years

Product Liability — Abbott accrues for product liability claims
when it is probable that a liability has been incurred and the
amount of the liability can be reasonably estimated based on
existing information. The liabilities are adjusted quarterly as
additional information becomes available. Product liability losses
are self-insured.

Research and Development Costs — Internal research and develop-
ment costs are expensed as incurred. Clinical trial costs incurred
by third parties are expensed as the contracted work is performed.
Where contingent milestone payments are due to third parties
under research and development arrangements, the milestone
payment obligations are expensed when the milestone results
are achieved.

Acquired In-Process and Collaborations Research and Development
(IPR&D) — The initial costs of rights to IPR&D projects obtained
in an asset acquisition are expensed as IPR&D unless the project
has an alternative future use. These costs include initial payments
incurred prior to regulatory approval in connection with research
and development collaboration agreements that provide rights to

develop, manufacture, market and/or sell pharmaceutical or
medical device products. The fair value of IPR&D projects
acquired in a business combination are capitalized and accounted
for as indefinite-lived intangible assets until completed and are
then amortized over the remaining useful life. Collaborations are
not signiﬁcant.

Concentration of Risk and Guarantees — Due to the nature of its
operations, Abbott is not subject to signiﬁcant concentration risks
relating to customers, products or geographic locations. Product
warranties are not signiﬁcant.

Abbott has no material exposures to off-balance sheet arrange-
ments; no special purpose entities; nor activities that include
non-exchange-traded contracts accounted for at fair value. Abbott
has periodically entered into agreements in the ordinary course of
business, such as assignment of product rights, with other compa-
nies, which has resulted in Abbott becoming secondarily liable for
obligations that Abbott was previously primarily liable. Since
Abbott no longer maintains a business relationship with the other
parties, Abbott is unable to develop an estimate of the maximum
potential amount of future payments, if any, under these obliga-
tions. Based upon past experience, the likelihood of payments
under these agreements is remote. Abbott periodically acquires a
business or product rights in which Abbott agrees to pay contin-
gent consideration based on attaining certain thresholds or based
on the occurrence of certain events.

NOTE 2 – NEW ACCOUNTING STANDARDS

RECENTLY ADOPTED ACCOUNTING STANDARDS

In February 2018, the Financial Accounting Standards Board
(FASB) issued Accounting Standards Update (ASU) 2018-02,
Reclassiﬁcation of Certain Tax Effects from Accumulated Other
Comprehensive Income, which allows companies to reclassify
stranded tax effects resulting from the 2017 Tax Cuts and Jobs
Act, from Accumulated other comprehensive income (loss) to
retained earnings (Earnings employed in the business). Abbott
adopted the new standard at the beginning of the fourth quarter
of 2018. As a result of the adoption of the new standard, approxi-
mately $337 million of stranded tax effects were reclassiﬁed from
Accumulated other comprehensive income (loss) to Earnings
employed in the business.

In October 2016, the FASB issued ASU 2016-16, Income Taxes
(Topic 740): Intra-Entity Transfers of Assets Other Than Inventory,
which requires the recognition of the income tax effects of inter-
company sales and transfers of assets, other than inventory, in
the period in which the transfer occurs. Abbott adopted the stan-
dard on January 1, 2018, using a modiﬁed retrospective approach
and recorded a cumulative catch-up adjustment to Earnings
employed in the business in the Consolidated Balance Sheet that
was not signiﬁcant.

A B B O T T 2 0 1 9 A N N U A L R E P O R T

RECENT ACCOUNTING STANDARDS NOT YET ADOPTED

In December 2019, the FASB issued ASU 2019-12, Income Taxes
(Topic 740): Simplifying the Accounting for Income Taxes, which
among other things, eliminates certain exceptions in the current
rules regarding the approach for intraperiod tax allocations and
the methodology for calculating income taxes in an interim period,
and clariﬁes the accounting for transactions that result in a
step-up in the tax basis of goodwill. The standard becomes effec-
tive for Abbott in the ﬁrst quarter of 2021 and early adoption is
permitted. Abbott does not expect adoption of this new standard
to have a material impact on its consolidated ﬁnancial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments
– Credit Losses, which changes the methodology to be used to
measure credit losses for certain ﬁnancial instruments and ﬁnan-
cial assets, including trade receivables. The new methodology
requires the recognition of an allowance that reﬂects the current
estimate of credit losses expected to be incurred over the life of
the ﬁnancial asset. The new standard will be effective for Abbott
at the beginning of 2020. Adoption of the new standard will not
have a material impact on the consolidated ﬁnancial statements.

NOTE 3 — REVENUE

Abbott’s revenues are derived primarily from the sale of a
broad line of health care products under short-term receivable
arrangements. Patent protection and licenses, technological and
performance features, and inclusion of Abbott’s products under
a contract most impact which products are sold; price controls,
competition and rebates most impact the net selling prices of
products; and foreign currency translation impacts the measure-
ment of net sales and costs. Abbott’s products are generally sold
directly to retailers, wholesalers, distributors, hospitals, health
care facilities, laboratories, physicians’ offices and government
agencies throughout the world. Abbott has four reportable seg-
ments: Established Pharmaceutical Products, Diagnostic Products,
Nutritional Products, and Medical Devices.

N O T E S T O C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

Abbott elected to apply the package of practical expedients related
to transition. These practical expedients allowed Abbott to carry
forward its historical assessments of whether any existing con-
tracts are or contain leases, the lease classiﬁcation for each lease
existing at January 1, 2019, and whether any initial direct costs for
such leases qualiﬁed for capitalization. The new lease accounting
standard did not have a material impact on the amounts reported
in the Consolidated Statement of Earnings but does have a mate-
rial impact on the amounts reported in the Consolidated Balance
Sheet. Adoption of the new standard resulted in the recording of
approximately $850 million of new right of use (ROU) assets and
additional liabilities for operating leases on the Consolidated
Balance Sheet as of January 1, 2019.

In January 2016, the FASB issued ASU 2016-01, Financial
Instruments – Recognition and Measurement of Financial Assets
and Financial Liabilities, which provides new guidance for the
recognition, measurement, presentation, and disclosure of ﬁnancial
assets and liabilities. Abbott adopted the standard on January 1,
2018. Under the new standard, changes in the fair value of equity
investments with readily determinable fair values are recorded in
Other (income) expense, net within the Consolidated Statement of
Earnings. Previously, such fair value changes were recorded in
other comprehensive income. Abbott has elected the measurement
alternative allowed by ASU 2016-01 for its equity investments
without readily determinable fair values. These investments are
measured at cost, less any impairment, plus or minus any changes
resulting from observable price changes in orderly transactions for
an identical or similar investment of the same issuer. Changes in
the measurement of these investments are being recorded in Other
(income) expense, net within the Consolidated Statement of
Earnings. As part of the adoption, the cumulative-effect adjust-
ment to Earnings employed in the business in the Consolidated
Balance Sheet for net unrealized losses on equity investments that
were recorded in Accumulated other comprehensive income (loss)
as of December 31, 2017 was not signiﬁcant.

In May 2014, the FASB issued ASU 2014-09, Revenue from
Contracts with Customers, which provides a single comprehensive
model for accounting for revenue from contracts with customers
and supersedes nearly all previously existing revenue recognition
guidance. The core principle of the ASU is that an entity should
recognize revenue when it transfers promised goods or services to
customers in an amount that reﬂects the consideration to which
the entity expects to be entitled in exchange for those goods or
services. Abbott adopted the new standard as of January 1, 2018,
using the modiﬁed retrospective approach method. Under this
method, entities recognize the cumulative effect of applying the
new standard at the date of initial application with no restatement
of comparative periods presented. The cumulative effect of apply-
ing the new standard resulted in an increase to Earnings employed
in the business in the Consolidated Balance Sheet of $23 million
which was recorded on January 1, 2018. The new standard has
been applied only to those contracts that were not completed as
of January 1, 2018. The impact of adopting ASU 2014-09 was not
signiﬁcant to individual ﬁnancial statement line items in the
Consolidated Balance Sheet and Consolidated Statement
of Earnings.

A B B O T T 2 0 1 9 A N N U A L R E P O R T

N O T E S T O C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

The following tables provide detail by sales category:

(in millions)

Established Pharmaceutical Products —

Key Emerging Markets
Other

Total
Nutritionals —

Pediatric Nutritionals
Adult Nutritionals

Total
Diagnostics —

Core Laboratory
Molecular
Point of Care
Rapid Diagnostics

Total
Medical Devices —

Rhythm Management (a)
Electrophysiology (a)
Heart Failure
Vascular
Structural Heart
Neuromodulation
Diabetes Care

Total
Other (b)
Total

U.S.

Int’l

2019
Total

U.S.

Int’l

2018
Total

U.S.

Int’l

2017
Total

$÷ ÷—
—
—

$÷3,392
1,094
4,486

$÷ ÷—
—
—

$3,363
1,059
4,422

$÷3,363
1,059
4,422

$ ÷—
—
—

$÷3,307
980
4,287

1,879
1,231
3,110

1,086
149
438
1,214
2,887

1,057
742
574
1,047
616
660
678
5,374
27
$11,398

2,282
2,017
4,299

3,570
293
123
840
4,826

1,087
979
195
1,803
784
171
1,846
6,865
30
$20,506

4,161
3,248
7,409

4,656
442
561
2,054
7,713

2,144
1,721
769
2,850
1,400
831
2,524
12,239
57
$31,904

1,843
1,232
3,075

985
152
432
1,148
2,717

1,105
678
467
1,126
488
690
457
5,011
36
$10,839

2,254
1,900
4,154

3,401
332
121
924
4,778

1,093
883
179
1,803
751
174
1,476
6,359
26
$19,739

4,097
3,132
7,229

4,386
484
553
2,072
7,495

2,198
1,561
646
2,929
1,239
864
1,933
11,370
62
$30,578

1,777
1,254
3,031

921
160
440
296
1,817

1,043
596
491
1,180
432
636
332
4,710
115
$9,673

2,112
1,782
3,894

3,142
303
110
244
3,799

1,089
757
152
1,712
651
172
1,082
5,615
122
$17,717

3,889
3,036
6,925

4,063
463
550
540
5,616

2,132
1,353
643
2,892
1,083
808
1,414
10,325
237
$27,390

(a) Insertable Cardiac Monitor (ICM) sales, which had previously been reported in Electrophysiology, are now included in Rhythm Management. Historic periods have been adjusted to reﬂect

this change.

(b) Diabetes Care sales, which had previously been reported in Other, are now included in the Medical Devices segment. Historic periods have been adjusted to reﬂect this change.

Abbott recognizes revenue from product sales upon the transfer
of control, which is generally upon shipment or delivery, depend-
ing on the delivery terms set forth in the customer contract. For
maintenance agreements that provide service beyond Abbott’s
standard warranty and other service agreements, revenue is
recognized ratably over the contract term. A time-based measure
of progress appropriately reﬂects the transfer of services to the
customer. Payment terms between Abbott and its customers
vary by the type of customer, country of sale, and the products or
services offered. The term between invoicing and the payment
due date is not signiﬁcant.

Management exercises judgment in estimating variable consider-
ation. Provisions for discounts, rebates and sales incentives to
customers, and returns and other adjustments are provided for
in the period the related sales are recorded. Sales incentives to
customers are not material. Historical data is readily available
and reliable, and is used for estimating the amount of the reduc-
tion in gross sales. Abbott provides rebates to government
agencies, wholesalers, group purchasing organizations and
other private entities.

Rebate amounts are usually based upon the volume of purchases
using contractual or statutory prices for a product. Factors used
in the rebate calculations include the identiﬁcation of which

products have been sold subject to a rebate, which customer or
government agency price terms apply, and the estimated lag
time between sale and payment of a rebate. Using historical trends,
adjusted for current changes, Abbott estimates the amount of the
rebate that will be paid, and records the liability as a reduction of
gross sales when Abbott records its sale of the product. Settlement
of the rebate generally occurs from one to six months after sale.
Abbott regularly analyzes the historical rebate trends and makes
adjustments to reserves for changes in trends and terms of rebate
programs. Historically, adjustments to prior years’ rebate accruals
have not been material to net income.

Other allowances charged against gross sales include cash
discounts and returns, which are not signiﬁcant. Cash discounts
are known within 15 to 30 days of sale, and therefore can be reli-
ably estimated. Returns can be reliably estimated because Abbott’s
historical returns are low, and because sales return terms and
other sales terms have remained relatively unchanged for several
periods. Product warranties are also not signiﬁcant.

Abbott also applies judgment in determining the timing of
revenue recognition related to contracts that include multiple
performance obligations. The total transaction price of the con-
tract is allocated to each performance obligation in an amount
based on the estimated relative standalone selling prices of the

N O T E S T O C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

promised goods or services underlying each performance obliga-
tion. For goods or services for which observable standalone
selling prices are not available, Abbott uses an expected cost plus
a margin approach to estimate the standalone selling price of each
performance obligation.

REMAINING PERFORMANCE OBLIGATIONS

As of December 31, 2019, the estimated revenue expected to be
recognized in the future related to performance obligations
that are unsatisﬁed (or partially unsatisﬁed) was approximately
$3.3 billion in the Diagnostic Products segment and approxi-
mately $380 million in the Medical Devices segment. Abbott
expects to recognize revenue on approximately 60 percent of
these remaining performance obligations over the next 24 months,
approximately 16 percent over the subsequent 12 months and the
remainder thereafter.

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

ASSETS RECOGNIZED FOR COSTS TO OBTAIN A
CONTRACT WITH A CUSTOMER

Abbott has applied the practical expedient in ASC 340-40-25-4
and records as an expense the incremental costs of obtaining
contracts with customers in the period of occurrence when the
amortization period of the asset that Abbott otherwise would have
recognized is one year or less. Upfront commission fees paid to
sales personnel as a result of obtaining or renewing contracts with
customers are incremental to obtaining the contract. Abbott capi-
talizes these amounts as contract costs. Capitalized commission
fees are amortized based on the contract duration to which the
assets relate which ranges from two to ten years. The amounts as
of December 31, 2019 and 2018 were not signiﬁcant.

Additionally, the cost of transmitters provided to customers that
use Abbott’s remote monitoring service with respect to certain
medical devices are capitalized as contract costs. Capitalized
transmitter costs are amortized based on the timing of the transfer
of services to which the assets relate, which typically ranges from
eight to ten years. The amounts as of December 31, 2019 and 2018
were not signiﬁcant.

OTHER CONTRACT ASSETS AND LIABILITIES

Abbott discloses Trade receivables separately in the Consolidated
Balance Sheet at their net realizable value. Contract assets primar-
ily relate to Abbott’s conditional right to consideration for work
completed but not billed at the reporting date. Contract assets at
the beginning and end of the period, as well as the changes in the
balance, were not signiﬁcant.

Contract liabilities primarily relate to payments received from
customers in advance of performance under the contract. Abbott’s
contract liabilities arise primarily in the Medical Devices report-
able segment when payment is received upfront for various

A B B O T T 2 0 1 9 A N N U A L R E P O R T

multi-period extended service arrangements. Changes in the
contract liabilities during the period are as follows:

(in millions)
Contract Liabilities
Balance at January 1, 2018

Unearned revenue from cash received during the period
Revenue recognized related to contract liability balance

Balance at December 31, 2018

Unearned revenue from cash received during the period
Revenue recognized related to contract liability balance

Balance at December 31, 2019

NOTE 4 — DISCONTINUED OPERATIONS AND
BUSINESS DISPOSITIONS

$«198
304
(243)
259
411
(376)
$«294

In February 2015, Abbott completed the sale of its developed
markets branded generics pharmaceuticals business to Mylan Inc.
(Mylan) for 110 million ordinary shares (or approximately
22 percent) of a newly formed entity (Mylan N.V.) that combined
Mylan’s existing business and Abbott’s developed markets branded
generics pharmaceuticals business. In April 2015, Abbott sold
40.25 million of the 110 million ordinary shares of Mylan N.V. and
recorded a pretax gain of $207 million on $2.29 billion in net
proceeds from the sale of these shares. In 2017, Abbott sold
69.75 million ordinary shares of Mylan N.V. and received
$2.704 billion in proceeds. Abbott recorded a $45 million gain
from the sale of these ordinary shares in 2017, which was recog-
nized in the Other (income) expense, net line of the Consolidated
Statement of Earnings. Abbott no longer has an ownership interest
in Mylan N.V.

The net earnings of discontinued operations include income tax
beneﬁts of $39 million in 2018 and $109 million in 2017. These tax
beneﬁts primarily relate to the resolution of various tax positions
related to AbbVie’s operations for years prior to the separation.
Abbott completed the separation of AbbVie Inc. (AbbVie), which
was formed to hold Abbott’s research-based proprietary pharma-
ceuticals business, in January 2013. 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 attrib-
utable to AbbVie’s business. AbbVie generally will be liable for all
other taxes attributable to its business.

In September 2016, Abbott announced that it entered into a
deﬁnitive agreement to sell Abbott Medical Optics (AMO), its
vision care business, to Johnson & Johnson for $4.325 billion in
cash, subject to customary purchase price adjustments for cash,
debt and working capital. The decision to sell AMO reﬂected
Abbott’s proactive shaping of its portfolio in line with its strategic
priorities. In February 2017, Abbott completed the sale of AMO to
Johnson & Johnson and recognized a pre-tax gain of $1.163 billion
including working capital adjustments, which was reported in the
Other (income) expense, net line of the Consolidated Statement of
Earnings in 2017. Abbott recorded an after-tax gain of $728 million
in 2017 related to the sale of AMO. The operating results of AMO
up to the date of sale continued to be included in Earnings from
continuing operations as the business did not qualify for reporting
as discontinued operations. For 2017, the AMO loss before taxes
included in Abbott’s consolidated earnings was $18 million.

A B B O T T 2 0 1 9 A N N U A L R E P O R T

N O T E S T O C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

NOTE 5 — SUPPLEMENTAL FINANCIAL INFORMATION

Other (income) expense, net, for 2019, 2018 and 2017 includes
approximately $225 million, $160 million and $160 million of
income, respectively, related to the non-service cost components
of the net periodic beneﬁt costs associated with the pension and
post-retirement medical plans. Other (income) expense, net, for
2017 includes a pre-tax gain of $1.163 billion related to the sale
of AMO to Johnson & Johnson. In 2017, Abbott recorded a
$45 million pre-tax gain related to the sale of the Mylan N.V. ordi-
nary shares. See Note 4 — Discontinued Operations and Business
Dispositions for further discussion of these 2017 sales.

The detail of various balance sheet components is as follows:

(in millions)
December 31

Long-term Investments:
Equity securities
Other
Total

2019

2018

$836
47
$883

$856
41
$897

Abbott’s equity securities as of December 31, 2019 and December 31,
2018, include $346 million and $307 million, respectively, of
investments in mutual funds that are held in a rabbi trust acquired
as part of the St. Jude Medical, Inc. (St. Jude Medical) business
acquisition. These investments, which are speciﬁcally designated
as available for the purpose of paying beneﬁts under a deferred
compensation plan, are not available for general corporate pur-
poses and are subject to creditor claims in the event of insolvency.

Abbott also holds certain investments as of December 31, 2019 with
a carrying value of $321 million that are accounted for under the
equity method of accounting and other equity investments with a
carrying value of $158 million that do not have a readily determin-
able fair value. The $158 million carrying value includes an

unrealized gain of approximately $50 million on an investment. The
gain was recorded in the second quarter of 2018 and relates to an
observable price change for a similar investment of the same issuer.

In the ﬁrst quarter of 2019, in conjunction with the acquisition of
Cephea Valve Technologies, Inc., Abbott acquired a research &
development (R&D) asset valued at $102 million, which was
immediately expensed. The $102 million of expense was recorded
in the R&D line of Abbott’s Consolidated Statement of Earnings.

(in millions)
December 31

Other Accrued Liabilities:
Accrued rebates payable to government agencies
Accrued other rebates (a)
All other
Total

2019

2018

$ «212
655
3,168
$4,035

$ «166
608
3,006
$3,780

(a) Accrued wholesaler chargeback rebates of $175 million and $197 million at December 31, 2019
and 2018, respectively, are netted in trade receivables because Abbott’s customers are invoiced
at a higher catalog price but only remit to Abbott their contract price for the products.

(in millions)
December 31

Post-employment Obligations and Other Long-term
Liabilities:
Deﬁned beneﬁt pension plans and post-employment
medical and dental plans for signiﬁcant plans
Deferred income taxes
Operating lease liabilities
All other (b)
Total

2019

2018

$2,817
1,546
755
3,944
$9,062

$2,040
2,056
—
3,984
$8,080

(b) 2019 includes approximately $580 million of net unrecognized tax beneﬁts, as well as

approximately $68 million of acquisition consideration payable. 2018 includes approxi-
mately $465 million of net unrecognized tax beneﬁts, as well as approximately
$65 million of acquisition consideration payable.

NOTE 6 — ACCUMUL ATED OTHER COMPREHENSIVE INCOME (LOSS)

The components of the changes in accumulated other comprehensive income (loss) from continuing operations,
net of income taxes, are as follows:

(in millions)
Balance at December 31, 2017
Impact of adoption of new accounting standards
Other comprehensive income (loss) before
reclassiﬁcations
(Income) loss amounts reclassiﬁed from accumulated
other comprehensive income (a)
Net current period other comprehensive income (loss)
Balance at December 31, 2018
Other comprehensive income (loss) before
reclassiﬁcations
(Income) loss amounts reclassiﬁed from accumulated
other comprehensive income (a)
Net current period other comprehensive income (loss)
Balance at December 31, 2019

Cumulative
Foreign Currency
Translation
Adjustments
$(3,452)
—

Net Actuarial
(Losses) and Prior
Service (Costs)
and Credits
$(2,521)
(337)

Cumulative
Unrealized Gains
(Losses) on
Marketable Equity
Securities
$(5)
5

Cumulative Gains
(Losses) on
Derivative
Instruments
Designated as Cash
Flow Hedges
$(84)
—

(1,488)

28
(1,460)
(4,912)

(12)

—
(12)
$(4,924)

(18)

150
132
(2,726)

(719)

(95)
(814)
$(3,540)

—

—
—
—

—

—
—
$—

78
136
52

(55)
(53)
$ (1)

Total
$(6,062)
(332)

(1,448)

256
(1,192)
(7,586)

(729)

(150)
(879)
$(8,465)

(a) Reclassiﬁed amounts for foreign currency translation adjustments are recorded in the Consolidated Statement of Earnings as Net Foreign exchange (gain) loss and gains/losses related to cash
ﬂow hedges are recorded as Cost of products sold. Net actuarial losses and prior service cost is included as a component of net periodic beneﬁt cost – see Note 15 for additional information.

N O T E S T O C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

NOTE 7 — BUSINESS ACQUISITIONS

On January 4, 2017, Abbott completed the acquisition of St. Jude
Medical, a global medical device manufacturer, for approximately
$23.6 billion, including approximately $13.6 billion in cash and
approximately $10 billion in Abbott common shares, which repre-
sented approximately 254 million shares of Abbott common stock,
based on Abbott’s closing stock price on the acquisition date. As
part of the acquisition, approximately $5.9 billion of St. Jude
Medical’s debt was assumed, repaid or reﬁnanced by Abbott. The
acquisition provides expanded opportunities for future growth
and is an important part of the company’s ongoing effort to
develop a strong, diverse portfolio of devices, diagnostics, nutri-
tionals and branded generic pharmaceuticals. The combined
business competes in nearly every area of the cardiovascular
device market, as well as in the neuromodulation market.

Under the terms of the agreement, for each St. Jude Medical
common share, St. Jude Medical shareholders received $46.75 in
cash and 0.8708 of an Abbott common share. At an Abbott stock
price of $39.36, which reﬂects the closing price on January 4, 2017,
this represented a value of approximately $81 per St. Jude Medical
common share and total purchase consideration of $23.6 billion.
The cash portion of the acquisition was funded through a combi-
nation of medium and long-term debt issued in November 2016
and a $2.0 billion 120-day senior unsecured bridge term loan
facility which was subsequently repaid.

In 2016, Abbott and St. Jude Medical agreed to sell certain busi-
nesses to Terumo Corporation (Terumo) for approximately
$1.12 billion. The sale included the St. Jude Medical Angio-Seal™
and Femoseal™ vascular closure and Abbott’s Vado® Steerable
Sheath businesses. The sale closed on January 20, 2017 and no
gain or loss was recorded in the Consolidated Statement
of Earnings.

On October 3, 2017, Abbott acquired Alere, a diagnostic device
and service provider, for $51.00 per common share in cash, which
equated to a purchase price of approximately $4.5 billion. As part
of the acquisition, Abbott tendered for Alere’s preferred shares for
a total value of approximately $0.7 billion. In addition, approxi-
mately $3.0 billion of Alere’s debt was assumed and subsequently
repaid. The acquisition establishes Abbott as a leader in point of
care testing, expands Abbott’s global diagnostics presence and
provides access to new products, channels and geographies.
Abbott utilized a combination of cash on hand and debt to fund
the acquisition. See Note 11 — Debt and Lines of Credit for further
details regarding the debt utilized for the acquisition.

In the third quarter of 2017, Alere entered into agreements to sell
its Triage MeterPro cardiovascular and toxicology business and
the assets and liabilities related to its B-type Natriuretic Peptide
assay business run on Beckman Coulter analyzers to Quidel.
The transactions with Quidel reﬂect a total purchase price of
$400 million payable at the close of the transaction, $240 million
payable in six annual installments beginning approximately six
months after the close of the transaction, and contingent consider-
ation with a maximum value of $40 million. In the third quarter of
2017, Alere entered into an agreement with Siemens Diagnostics
Holding II B.V. (Siemens) to sell its subsidiary, Epocal Inc., for
approximately $200 million payable at the close of the transaction.
Alere agreed to divest these businesses in connection with the
review by the Federal Trade Commission and the European
Commission of Abbott’s agreement to acquire Alere. The sale to
Quidel closed on October 6, 2017, and the sale to Siemens closed

A B B O T T 2 0 1 9 A N N U A L R E P O R T

on October 31, 2017. No gain or loss on these sales was recorded
in the Consolidated Statement of Earnings.

In 2017, consolidated Abbott results include $6.5 billion of sales
and a pre-tax loss of approximately $1.3 billion related to the
St. Jude Medical and Alere acquisitions, including approximately
$1.5 billion of intangible amortization and $907 million of inven-
tory step-up amortization. The pre-tax loss excludes acquisition,
integration and restructuring-related costs.

If the acquisitions of St. Jude Medical and Alere had occurred at
the beginning of 2016, unaudited pro forma consolidated net sales
would have been approximately $28.9 billion and the unaudited
pro forma consolidated net loss from continuing operations would
have been approximately $485 million in 2016. This includes
amortization of approximately $940 million of inventory step-up
and $1.7 billion of intangibles related to St. Jude Medical and
Alere. For 2017, unaudited pro forma consolidated net sales would
have been approximately $28.9 billion and unaudited pro forma
consolidated net earnings from continuing operations would have
been approximately $750 million, which includes $225 million of
intangible amortization related to Alere. The unaudited pro forma
consolidated net earnings from continuing operations for 2017
exclude inventory step-up amortization related to St. Jude
Medical and Alere of approximately $907 million which was
recorded in 2017 but included in the 2016 unaudited pro forma
results as noted above. The unaudited pro forma information is
not necessarily indicative of the consolidated results of operations
that would have been realized had the St. Jude Medical and Alere
acquisitions been completed as of the beginning of 2016, nor is it
meant to be indicative of future results of operations that the
combined entity will experience.

On July 17, 2017, Abbott commenced a tender offer to purchase
for cash the 1.77 million outstanding shares of Alere’s Series B
Convertible Perpetual Preferred Stock at a price of $402 per share,
plus accrued but unpaid dividends to, but not including, the settle-
ment date of the tender offer. This tender offer was subject to the
satisfaction of certain conditions, including Abbott’s acquisition of
Alere and upon there being validly tendered (and not properly
withdrawn) at the expiration date of the tender offer that number
of shares of Preferred Stock that equaled at least a majority of the
Preferred Stock issued and outstanding at the expiration of the
tender offer. The tender offer expired on October 3, 2017. All con-
ditions to the offer were satisﬁed and Abbott accepted for payment
the 1.748 million shares of Preferred Stock that were validly ten-
dered (and not properly withdrawn). The remaining shares were
cashed out for an amount equal to the $400.00 per share liquida-
tion preference of such shares, plus accrued but unpaid dividends,
without interest. Payment for all of the shares of Preferred Stock
was made in the fourth quarter of 2017.

NOTE 8 — GOODWILL AND INTANGIBLE ASSETS

The total amount of goodwill reported was $23.2 billion at
December 31, 2019 and $23.3 billion at December 31, 2018. Foreign
currency translation adjustments decreased goodwill by approxi-
mately $103 million in 2019 and $440 million in 2018. Purchase
price accounting adjustments associated with the Alere acquisi-
tion decreased goodwill by $326 million in 2018. The amount of
goodwill related to reportable segments at December 31, 2019 was
$3.0 billion for the Established Pharmaceutical Products segment,
$286 million for the Nutritional Products segment, $3.7 billion for
the Diagnostic Products segment, and $16.1 billion for the Medical

A B B O T T 2 0 1 9 A N N U A L R E P O R T

N O T E S T O C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

Devices segment. There was no signiﬁcant reduction of goodwill
relating to impairments in 2019 and 2018.

The gross amount of amortizable intangible assets, primarily
product rights and technology was $27.6 billion and $25.7 billion
as of December 31, 2019 and 2018, respectively, and accumulated
amortization was $11.9 billion and $10.4 billion as of December 31,
2019 and 2018, respectively. Foreign currency translation adjust-
ments decreased intangible assets by approximately $71 million in
2019 and $281 million in 2018. In 2018, purchase price allocation
adjustments increased intangible assets by $280 million. The
estimated annual amortization expense for intangible assets
recorded at December 31, 2019 is approximately $2.1 billion in
2020, $2.0 billion in 2021, $2.0 billion in 2022, $2.0 billion in 2023
and $1.9 billion in 2024. Amortizable intangible assets are amor-
tized over 2 to 20 years.

Indefinite-lived intangible assets, which relate to in-process
research and development acquired in a business combination,
were approximately $1.3 billion and $3.6 billion at December 31,
2019 and 2018, respectively. The decrease is due to an in-process
research and development intangible asset related to the Medical
Devices segment that became amortizable at the end of 2019. In
2017, Abbott recorded a $53 million impairment of an in-process
research and development project related to the Medical Devices
segment.

NOTE 9 — RESTRUCTURING PL ANS

From 2017 to 2019, Abbott management approved restructuring
plans as part of the integration of the acquisitions of St. Jude
Medical into the Medical Devices segment, and Alere into the
Diagnostic Products segment, in order to leverage economies of
scale and reduce costs. Abbott recorded employee related sever-
ance and other charges of approximately $72 million in 2019,
$52 million in 2018 and $187 million in 2017. Approximately
$19 million in 2019, $5 million in 2018 and $5 million in 2017 are
recorded in Cost of products sold, approximately $4 million in
2019 and $10 million in 2018 are recorded in Research and devel-
opment, and approximately $49 million in 2019, $37 million in
2018 and $182 million in 2017 are recorded in Selling, general and
administrative expense. Abbott also assumed restructuring liabili-
ties of approximately $23 million as part of the St Jude Medical
and Alere acquisitions.

The following summarizes the activity related to these actions and
the status of the related accruals:

(in millions)
Liabilities assumed as part of business acquisitions
Restructuring charges
Payments and other adjustments
Accrued balance at December 31, 2017
Restructuring charges
Payments and other adjustments
Accrued balance at December 31, 2018
Restructuring charges
Payments and other adjustments
Accrued balance at December 31, 2019

$÷«23
187
(142)
68
52
(79)
41
72
(67)
$÷«46

From 2016 to 2019, Abbott management approved plans to stream-
line operations in order to reduce costs and improve efficiencies in
various Abbott businesses including the nutritional, established

pharmaceuticals and vascular businesses. Abbott recorded
employee related severance and other charges of approximately
$66 million in 2019, $28 million in 2018 and $120 million in 2017.
Approximately $16 million in 2019, $10 million in 2018 and
$7 million in 2017 are recorded in Cost of products sold, approxi-
mately $28 million in 2019, $2 million in 2018 and $77 million in
2017 are recorded in Research and development, and approxi-
mately $22 million in 2019, $16 million in 2018 and $36 million in
2017 are recorded in Selling, general and administrative expense.
Additional charges of approximately $2 million in 2017 were
recorded, primarily for accelerated depreciation.

The following summarizes the activity for these restructurings:

(in millions)
Restructuring charges recorded in 2016
Payments and other adjustments
Accrued balance at December 31, 2016
Restructuring charges
Payments and other adjustments

Accrued balance at December 31, 2017
Restructuring charges
Payments and other adjustments
Accrued balance at December 31, 2018
Restructuring charges
Payments and other adjustments
Accrued balance at December 31, 2019

$«32
(15)
17
120
(18)

119
28
(77)
70
66
(57)
$«79

NOTE 10 — INCENTIVE STOCK PROGRAM

The 2017 Incentive Stock Program authorizes the granting of
nonqualiﬁed stock options, restricted stock awards, restricted
stock units, performance awards, foreign beneﬁts and other
share-based awards. Stock options and restricted stock awards
and units comprise the majority of beneﬁts that have been
granted and are currently outstanding under this program and a
prior program. In 2019, Abbott granted 4,579,283 stock options,
736,100 restricted stock awards and 6,628,009 restricted stock
units under this program.

Under Abbott’s stock incentive programs, the purchase price
of shares under option must be at least equal to the fair market
value of the common stock on the date of grant, and the maxi-
mum term of an option is 10 years. Options generally vest equally
over three years. Restricted stock awards generally vest over
3 years, with no more than one-third of the award vesting in any
one year upon Abbott reaching a minimum return on equity
target. Restricted stock units vest over three years and upon
vesting, the recipient receives one share of Abbott stock for each
vested restricted stock unit. The aggregate fair market value of
options and restricted stock awards and units is recognized as
expense over the requisite service period, which may be shorter
than the vesting period if an employee is retirement eligible.
Forfeitures are estimated at the time of grant. Restricted stock
awards and settlement of vested restricted stock units are issued
out of treasury shares. Abbott generally issues new shares for
exercises of stock options. As a policy, Abbott does not purchase
its shares relating to its share-based programs.

In April 2017, Abbott’s shareholders authorized the 2017 Incentive
Stock Program under which a maximum of 170 million shares
were available for issuance. At December 31, 2019, approximately
127 million shares remained available for future issuance.

A B B O T T 2 0 1 9 A N N U A L R E P O R T

N O T E S T O C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

In connection with the completion of the St. Jude Medical acquisi-
tion in the ﬁrst quarter of 2017, unvested St. Jude Medical stock
options and restricted stock units were assumed by Abbott and
converted into Abbott options and restricted stock units (as appli-
cable) of substantially equivalent value, in accordance with the
merger agreement. The number of shares underlying the

converted options was 7,364,571 at a weighted average exercise
price of $30.50. The number of restricted stock units converted
was 2,324,500 at a weighted average grant date fair value of $37.69.

The following table summarizes stock option activity for the year
ended December 31, 2019 and the outstanding stock options as of
December 31, 2019.

(intrinsic values in millions)
Outstanding at December 31, 2018
Granted
Exercised
Lapsed
Outstanding at December 31, 2019

Exercisable at December 31, 2019

The following table summarizes restricted stock awards and
units activity for 2019.

Outstanding at December 31, 2018
Granted
Vested
Forfeited
Outstanding at December 31, 2019

Weighted
Average
Grant-Date
Fair Value
$52.11
76.17
48.52
62.28
$65.51

Share Units
15,952,602
7,364,109
(7,750,049)
(1,103,348)
14,463,314

Weighted
Average
Exercise Price
$42.21
76.35
35.51
60.06
$48.78

$41.26

Options
33,074,613
4,579,283
(7,281,472)
(494,509)
29,877,915

20,555,321

Weighted
Average
Remaining
Life (Years)
6.3

Aggregate
Intrinsic Value
$÷ 996

6.2

5.3

$1,138

$÷ 937

The risk-free interest rate is based on the rates available at the
time of the grant for zero-coupon U.S. government issues with a
remaining term equal to the option’s expected life. The average life
of an option is based on both historical and projected exercise and
lapsing data. Expected volatility is based on implied volatilities
from traded options on Abbott’s stock and historical volatility of
Abbott’s stock over the expected life of the option. Dividend yield
is based on the option’s exercise price and annual dividend rate at
the time of grant.

NOTE 11 — DEBT AND LINES OF CREDIT

The following is a summary of long-term debt at December 31:

The fair market value of restricted stock awards and units vested
in 2019, 2018 and 2017 was $588 million, $458 million and
$348 million, respectively.

The total intrinsic value of options exercised in 2019, 2018 and
2017 was $315 million, $249 million and $233 million, respectively.
The total unrecognized compensation cost related to all share-
based compensation plans at December 31, 2019 amounted to
approximately $419 million, which is expected to be recognized
over the next three years.

Total non-cash stock compensation expense charged against
income from continuing operations in 2019, 2018 and 2017 for
share-based plans totaled approximately $519 million, $477 million
and $406 million, respectively, and the tax beneﬁt recognized was
approximately $197 million, $185 million and $242 million, respec-
tively. The decrease in the tax beneﬁt in 2018 primarily relates to
the Tax Cuts and Jobs Act (TCJA), which reduces the U.S. federal
corporate tax rate from 35% to 21%. Stock compensation cost
capitalized as part of inventory is not signiﬁcant.

The table below summarizes the fair value of an option granted
in 2019, 2018 and 2017 and the assumptions included in the Black-
Scholes option-pricing model used to estimate the fair value:

Fair value
Risk-free interest rate
Average life of options (years)
Volatility
Dividend yield

2019
$14.50

2.5%
6.0
19.8%
1.7%

2018
$10.93
2.7%
6.0
19.0%
1.9%

2017
$6.54
2.1%
6.0
18.0%
2.4%

(in millions)
0.00% Notes, due 2020
2.80% Notes, due 2020
2.90% Notes, due 2021
2.55% Notes, due 2022
0.875% Notes, due 2023
3.40% Notes, due 2023
5-year term loan due 2024
0.10% Notes, due 2024
3.875% Notes, due 2025
2.95% Notes, due 2025
1.50% Notes, due 2026
3.75% Notes, due 2026
0.375% Notes, due 2027
4.75% Notes, due 2036
6.15% Notes, due 2037
6.00% Notes, due 2039
5.30% Notes, due 2040
4.75% Notes, due 2043
4.90% Notes, due 2046
Unamortized debt issuance costs
Other, including fair value adjustments
relating to interest rate hedge contracts
designated as fair value hedges
Total carrying amount of long-term debt
Less: Current portion
Total long-term portion

2019
$ 1,272
—
—
750
1,272
1,050
546
658
500
1,000
1,272
1,700
658
1,650
547
515
694
700
3,250
(90)

(6)
17,938
1,277
$16,661

2018
$ 1,300
500
2,850
750
1,303
1,050
—
—
500
1,000
1,300
1,700
—
1,650
547
515
694
700
3,250
(102)

(141)
19,366
7
$19,359

A B B O T T 2 0 1 9 A N N U A L R E P O R T

N O T E S T O C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

On February 16, 2018, the board of directors authorized the early
redemption of up to $5 billion of outstanding long-term notes.
Redemptions under this authorization include the following:

• $0.947 billion principal amount of its 5.125% Notes due 2019 –

redeemed on March 22, 2018

• $1.055 billion of the $2.850 billion principal amount of its 2.35%

Notes due 2019 – redeemed on March 22, 2018

• $1.300 billion of the $1.795 billion outstanding principal amount

of its 2.35% Notes due 2019 – redeemed on June 22, 2018

• $0.495 billion outstanding principal amount of its 2.35% Notes

due 2019 – redeemed on September 28, 2018

• $0.500 billion outstanding principal amount of its 2.80% Notes

due 2020 – redeemed on February 24, 2019

Abbott incurred a net charge of $14 million related to the
March 22, 2018 early repayment of debt.

In September 2019, the board of directors authorized the early
redemption of up to $5 billion of outstanding long-term notes.
This bond redemption authorization supersedes the board’s
previous authorization under which $700 million had not yet
been redeemed.

On November 19, 2019, Abbott’s wholly owned subsidiary, Abbott
Ireland Financing DAC, completed an offering of €1.180 billion of
long-term debt consisting of €590 million of 0.10% Notes due 2024
and €590 million of 0.375% Notes due 2027. The proceeds equated
to approximately $1.3 billion. The Notes are guaranteed by Abbott.

On November 21, 2019, Abbott borrowed ¥59.8 billion under a
5-year term loan and designated the yen-denominated loan as a
hedge of its net investment in certain foreign subsidiaries. The
term loan bears interest at TIBOR plus a ﬁxed spread, and the
interest rate is reset quarterly. The proceeds equated to approxi-
mately $550 million.

On December 19, 2019, Abbott redeemed the $2.850 billion princi-
pal amount of its 2.9% Notes due 2021. Abbott incurred a charge
of $63 million related to the early repayment of this debt.

On September 17, 2018, Abbott repaid upon maturity the
$500 million aggregate principal amount outstanding of the
2.00% Senior Notes due 2018.

On September 27, 2018, Abbott’s wholly owned subsidiary,
Abbott Ireland Financing DAC, completed a euro debt offering
of €3.420 billion of long-term debt consisting of €1.140 billion of
non-interest bearing Senior Notes due 2020 at 99.727% of par
value; €1.140 billion of 0.875% Senior Notes due 2023 at 99.912%
of par value; and €1.140 billion of 1.50% Senior Notes due 2026 at
99.723% of par value. The proceeds equated to approximately
$4 billion. The notes are guaranteed by Abbott.

On October 28, 2018, Abbott redeemed approximately $4 billion
of debt, which included $750 million principal amount of its 2.00%
Notes due 2020; $597 million principal amount of its 4.125% Notes
due 2020; $900 million principal amount of its 3.25% Notes due
2023; $450 million principal amount of its 3.4% Notes due 2023;
and $1.300 billion principal amount of its 3.75% Notes due 2026.
These amounts are in addition to the $5 billion authorization in
2018 discussed above. In conjunction with the redemption, Abbott
unwound approximately $1.1 billion in interest rate swaps relating
to the 3.40% Note due in 2023 and the 3.75% Note due in 2026.
Abbott incurred a net charge of $153 million related to the early

repayment of this debt and the unwinding of related interest
rate swaps.

On November 30, 2018, Abbott entered into a Five Year Credit
Agreement (Revolving Credit Agreement) and terminated the 2014
revolving credit agreement. There were no outstanding borrow-
ings under the 2014 revolving credit agreement at the time of its
termination. The Revolving Credit Agreement provides Abbott
with the ability to borrow up to $5 billion on an unsecured basis.
Any borrowings under the Revolving Credit Agreement will
mature and be payable on November 30, 2023. Any borrowings
under the Revolving Credit Agreement will bear interest, at
Abbott’s option, based on either a base rate or Eurodollar rate, plus
an applicable margin based on Abbott’s credit ratings.

In the ﬁrst quarter of 2017, as part of the acquisition of St. Jude
Medical, Abbott’s long-term debt increased due to the assumption
of outstanding debt previously issued by St. Jude Medical. Abbott
exchanged certain St. Jude Medical debt obligations with an
aggregate principal amount of approximately $2.9 billion for debt
issued by Abbott which consists of:

(in millions)
2.00% Senior Notes due 2018
2.80% Senior Notes due 2020
3.25% Senior Notes due 2023
3.875% Senior Notes due 2025
4.75% Senior Notes due 2043

Principal Amount
$473.8
483.7
818.4
490.7
639.1

Following this exchange, approximately $194.2 million of existing
St. Jude Medical notes remained outstanding across the ﬁve series
of existing notes which have the same coupons and maturities as
those listed above. There were no signiﬁcant costs associated with
the exchange of debt. In addition, during the ﬁrst quarter of 2017,
Abbott assumed and subsequently repaid approximately
$2.8 billion of various St. Jude Medical debt obligations.

In 2017, Abbott issued 364-day yen-denominated debt, of which
$201 million and $199 million was outstanding at December 31,
2019 and 2018, respectively. In 2017, Abbott also paid off a
$479 million yen-denominated short-term borrowing during
the year.

On July 31, 2017, Abbott entered into a 5-year term loan agreement
that allowed Abbott to borrow up to $2.8 billion on an unsecured
basis for the acquisition of Alere. On October 3, 2017, Abbott bor-
rowed $2.8 billion under this term loan agreement to ﬁnance the
acquisition of Alere, to repay certain indebtedness of Abbott and
Alere, and to pay fees and expenses in connection with the acqui-
sition. Borrowings under the term loan bore interest based on a
Eurodollar rate, plus an applicable margin based on Abbott’s credit
ratings. Abbott paid off this term loan on January 5, 2018.

On October 3, 2017 Abbott borrowed $1.7 billion under its lines of
credit. Proceeds from such borrowing were used to ﬁnance the
acquisition of Alere, to repay certain indebtedness of Abbott and
Alere, and to pay fees and expenses in connection with the acqui-
sition. These lines of credit were part of a 2014 revolving credit
agreement that provided Abbott with the ability to borrow up to
$5 billion on an unsecured basis. Advances under the revolving
credit agreement, including the $1.7 billion borrowing in October
2017, were scheduled to mature and be payable on July 10, 2019.
The $1.7 billion borrowing bore interest based on a Eurodollar
rate, plus an applicable margin based on Abbott’s credit ratings.

N O T E S T O C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

Prior to October 3, 2017, no amounts were previously drawn under
the revolving credit agreement. In the fourth quarter of 2017,
Abbott paid off $550 million on the revolving loan. Abbott paid off
the remaining balance on this revolving loan on January 5, 2018.

In the fourth quarter of 2017, in conjunction with the acquisition
of Alere, Abbott assumed and subsequently repaid $3.0 billion of
Alere’s debt.

Principal payments required on long-term debt outstanding at
December 31, 2019 are $1.3 billion in 2020, $5 million in 2021,
$752 million in 2022, $2.3 billion in 2023, $1.2 billion in 2024 and
$12.5 billion in 2025 and thereafter.

At December 31, 2019, Abbott’s long-term debt rating was A- by
Standard & Poor’s Corporation and A3 by Moody’s. Abbott has
readily available ﬁnancial resources, including lines of credit of
$5.0 billion which expire in 2023 and support commercial paper
borrowing arrangements. Abbott’s weighted-average interest rate
on short-term borrowings was 0.4% at December 31, 2019, 0.4%
at December 31, 2018 and 0.3% at December 31, 2017.

NOTE 12 — LEASES

LEASES WHERE ABBOTT IS THE LESSEE

Abbott has entered into operating leases as the lessee for office
space, manufacturing facilities, R&D laboratories, warehouses,
vehicles and equipment. Finance leases are not signiﬁcant.
Abbott’s operating leases generally have remaining lease terms
of 1 to 10 years. Some leases include options to extend beyond the
original lease term, generally up to 10 years and some include
options to terminate early. These options have been included in
the determination of the lease liability when it is reasonably cer-
tain that the option will be exercised.

For all of its asset classes, Abbott elected the practical expedient
allowed under FASB ASC No. 842, “Leases” to account for each
lease component (e.g., the right to use office space) and the
associated non-lease components (e.g., maintenance services) as a
single lease component. Abbott also elected the short-term lease
accounting policy for all asset classes; therefore, Abbott is not
recognizing a lease liability or ROU asset for any lease that, at the
commencement date, has a lease term of 12 months or less and
does not include an option to purchase the underlying asset that
Abbott is reasonably certain to exercise.

As Abbott’s leases typically do not provide an implicit rate, the
interest rate used to determine the present value of the payments
under each lease typically reﬂects Abbott’s incremental borrowing
rate based on information available at the lease commencement
date. Abbott’s incremental borrowing rates at January 1, 2019 were
used for operating leases that commenced prior to January 1, 2019.

The following table provides information related to Abbott’s
operating leases:

A B B O T T 2 0 1 9 A N N U A L R E P O R T

The weighted average remaining lease term and discount rate
for operating leases as of December 31, 2019 were 8 years and
3.9%, respectively.

Future minimum lease payments under non-cancellable operating
leases as of December 31, 2019 were as follows:

(in millions)
2020
2021
2022
2023
2024
Thereafter
Total future minimum lease payments – undiscounted

Less: imputed interest

Present value of lease liabilities

$ «238
197
155
115
80
353
1,138
(178)
$ «960

The following table summarizes the amounts and location of
operating lease ROU assets and lease liabilities as of
December 31, 2019:

(in millions)
Operating Lease – ROU Asset

December 31, 2019 Balance Sheet Caption
$934 Deferred income taxes
and other assets

Operating Lease Liability:

Current

Non-current

Total Liability

$205

755

$960

Other accrued
liabilities
Post-employment
obligations and other
long-term liabilities

LEASES WHERE ABBOTT IS THE LESSOR

Certain assets, primarily diagnostics instruments, are leased to
customers under contractual arrangements that typically include
an operating or sales-type lease as well as performance obliga-
tions for reagents and other consumables. Sales-type leases are
not signiﬁcant. Contract terms vary by customer and may include
options to terminate the contract or options to extend the con-
tract. Where instruments are provided under operating lease
arrangements, some portion or the entire lease revenue may be
variable and subject to subsequent non-lease component
(e.g., reagent) sales. The allocation of revenue between the lease
and non-lease components is based on stand-alone selling prices.
Operating lease revenue represented less than 3 percent of
Abbott’s total net sales in the year ended December 31, 2019.

Assets related to operating leases are reported within Net property
and equipment on the Consolidated Balance Sheet. The original
cost and the net book value of such assets were $2.8 billion and
$1.2 billion, respectively, as of December 31, 2019.

(in millions)
Year Ended December 31
Operating lease cost (a)

Cash paid for amounts included in the
measurement of operating lease liabilities

ROU assets arising from entering into
new operating lease obligations

(a) Includes short-term lease expense and variable lease costs, which were

immaterial in the year ended December 31, 2019.

2019
$314

$253

$310

NOTE 13 — FINANCIAL INSTRUMENTS, DERIVATIVES
AND FAIR VALUE MEASURES

Certain Abbott foreign subsidiaries enter into foreign currency
forward exchange contracts to manage exposures to changes in
foreign exchange rates primarily for anticipated intercompany
purchases by those subsidiaries whose functional currencies are
not the U.S. dollar. These contracts, with gross notional amounts
totaling $6.8 billion at December 31, 2019, and $5.1 billion at
December 31, 2018, are designated as cash ﬂow hedges of the

A B B O T T 2 0 1 9 A N N U A L R E P O R T

N O T E S T O C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

variability of the cash ﬂows due to changes in foreign exchange
rates and are recorded at fair value. Accumulated gains and losses
as of December 31, 2019 will be included in Cost of products sold
at the time the products are sold, generally through the next
twelve to eighteen months.

Abbott enters into foreign currency forward exchange contracts to
manage currency exposures for foreign currency denominated
third-party trade payables and receivables, and for intercompany
loans and trade accounts payable where the receivable or payable
is denominated in a currency other than the functional currency of
the entity. For intercompany loans, the contracts require Abbott to
sell or buy foreign currencies, primarily European currencies, in
exchange for primarily U.S. dollars and European currencies. For
intercompany and trade payables and receivables, the currency
exposures are primarily the U.S. dollar and European currencies.
At December 31, 2019 and 2018, Abbott held gross notional
amounts of $9.1 billion and $13.6 billion, respectively, of such
foreign currency forward exchange contracts.

$479 million yen-denominated short-term debt which was
designated as a hedge of the net investment in a foreign subsidiary.
At December 31, 2016, the value of this short-term debt was
$454 million and changes in the fair value of the debt up through
the date of repayment due to changes in exchange rates were
recorded in Accumulated other comprehensive income (loss),
net of tax.

Abbott is a party to interest rate hedge contracts totaling approxi-
mately $2.9 billion at December 31, 2019 and 2018, 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.

In October 2018, Abbott unwound approximately $1.1 billion in
interest rate swaps relating to the 3.40% Note due in 2023 and the
3.75% Note due in 2026. As a part of the unwinding, Abbott paid
approximately $90 million in cash, which was included in the
Financing Activities section of the Consolidated Statement of
Cash Flows in 2018.

In the second quarter of 2017, Abbott unwound approximately
$1.5 billion in interest rate swaps relating to the 2.00% Note due
in 2020 and the 2.55% Note due in 2022. The proceeds received
were not signiﬁcant.

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

(in millions)
Interest rate swaps designated as fair value hedges

Foreign currency forward exchange contracts:

Hedging instruments

Others not designated as hedges

Debt designated as a hedge of net investment in a
foreign subsidiary

Fair Value—Assets

2019
$÷48

2018
$ —

Balance Sheet Caption
Deferred income taxes
and other assets

110

—

Other prepaid expenses
and receivables
Other prepaid expenses
and receivables
n/a

2019
$÷«—

546

Fair Value—Liabilities
2018
$100

Balance Sheet Caption
Post-employment
obligations and other
long-term liabilities

—

Other accrued
liabilities
Other accrued
liabilities
Long-term debt

$196

$114

$635

$195

The following table summarizes the activity for foreign currency forward exchange contracts designated as cash ﬂow hedges, debt desig-
nated 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.

Gain (loss) Recognized in Other
Comprehensive Income (loss)
2017
2018
2019
$(226)
$73
$9

Income (expense) and Gain (loss)
Reclassiﬁed into Income
2017
$(48)

2018
$(114)

2019
$ 79

Income Statement Caption
Cost of products sold

n/a

—

n/a

(25)

n/a

148

n/a

(97)

n/a

(24)

n/a

Interest expense

(in millions)
Foreign currency forward exchange contracts
designated as cash ﬂow hedges
Debt designated as a hedge of net investment in a
foreign subsidiary
Interest rate swaps designated as fair value hedges

A B B O T T 2 0 1 9 A N N U A L R E P O R T

N O T E S T O C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

A gain of $75 million and losses of $100 million and $64 million
were recognized in 2019, 2018 and 2017, respectively, related to
foreign currency forward exchange contracts not designated as
hedges. These amounts are reported in the Consolidated
Statement of Earnings on the Net foreign exchange (gain) loss line.

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.

(in millions)
Long-term Investment Securities:

Equity securities
Other

Total Long-term debt
Foreign Currency Forward Exchange Contracts:

Receivable position
(Payable) position

Interest Rate Hedge Contracts:

Receivable position

(Payable) position

The carrying values and fair values of certain ﬁnancial
instruments as of December 31 are shown in the table below.
The carrying values of all other ﬁnancial instruments approxi-
mate their estimated fair values. The counterparties to ﬁnancial
instruments consist of select major international ﬁnancial institu-
tions. Abbott does not expect any losses from nonperformance
by these counterparties.

Carrying Value

$ ÷ 836
47
(17,938)

148
(89)

—

2019
Fair Value

$ ÷ 836
47
(20,772)

148
(89)

—

Carrying Value

$ ÷ 856
41
(19,366)

114
(95)

—

(100)

2018
Fair Value

$ ÷ 856
41
(19,871)

114
(95)

—

(100)

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:

( in millions)

December 31, 2019:

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, 2018:

Equity securities
Foreign currency forward exchange contracts

Total Assets

Fair value of hedged long-term debt
Interest rate swap derivative ﬁnancial instruments
Foreign currency forward exchange contracts
Contingent consideration related to business combinations

Total Liabilities

Outstanding
Balances

Quoted Prices in
Active Markets

Basis of Fair Value Measurement
Signiﬁcant
Unobservable
Inputs

Signiﬁcant Other
Observable
Inputs

$ 357
48
148
$ «553

$2,890
89
68
$3,047

$ 320
114
$ «434

$2,743
100
95
71
$3,009

$357
—
—
$357

$÷«—
—
—
$÷«—

$320
—
$320

$÷«—
—
—
—
$÷«—

$÷÷ —
48
148
$ «196

$2,890
89
—
$2,979

$÷÷ —
114
$ «114

$2,743
100
95
—
$2,938

$ —
—
—
$ —

$ —
—
68
$68

$ —
—
$ —

$ —
—
—
71
$71

A B B O T T 2 0 1 9 A N N U A L R E P O R T

N O T E S T O C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

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 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 using signiﬁcant other observ-
able inputs.

Contingent consideration relates to businesses acquired by Abbott.
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. The maximum amount for
certain contingent consideration is not determinable as it is based
on a percent of certain sales. Excluding such contingent consider-
ation, the maximum amount estimated to be due is approximately
$470 million, which is dependent upon attaining certain sales
thresholds or based on the occurrence of certain events, such as
regulatory approvals.

NOTE 14 — 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 expo-
sure is not expected to exceed $10 million.

Abbott is involved in various claims and legal proceedings, and
Abbott estimates the range of possible loss for its legal proceed-
ings and environmental exposures to be from approximately
$95 million to $130 million. The recorded accrual balance at
December 31, 2019 for these proceedings and exposures was
approximately $110 million. This accrual represents manage-
ment’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, manage-
ment believes that their ultimate disposition should not have a
material adverse effect on Abbott’s ﬁnancial position, cash ﬂows,
or results of operations.

NOTE 15 — POST-EMPLOYMENT BENEFITS

Retirement plans consist of deﬁned beneﬁt, deﬁned contribution
and medical and dental plans. Information for Abbott’s major
deﬁned beneﬁt plans and post-employment medical and dental
beneﬁt plans is as follows:

(in millions)

Projected beneﬁt obligations, January 1
Service cost — beneﬁts earned during the year
Interest cost on projected beneﬁt obligations
(Gains) losses, primarily changes in discount rates, plan design
changes, law changes and differences between actual and estimated health care costs
Beneﬁts paid
Other, including foreign currency translation
Projected beneﬁt obligations, December 31

Plan assets at fair value, January 1
Actual return (loss) on plans’ assets
Company contributions
Beneﬁts paid
Other, including foreign currency translation
Plan assets at fair value, December 31

Projected beneﬁt obligations greater than plan assets, December 31

Long-term assets
Short-term liabilities
Long-term liabilities
Net liability

Amounts Recognized in Accumulated Other Comprehensive Income (loss):
Actuarial losses, net
Prior service cost (credits)
Total

Deﬁned Beneﬁt Plans
2018
2019
$«9,953
$÷9,093
293
250
308
337

Medical and Dental Plans
2018
$1,393
26
48

2019
$«1,292
23
52

1,856
(302)
4
$11,238

$÷8,553
1,622
382
(302)
22
$10,277

$ ÷(961)

$÷ «687
(26)
(1,622)
$ ÷(961)

$÷4,131
(2)
$÷4,129

(1,044)
(295)
(122)
$«9,093

$«9,298
(450)
114
(295)
(114)
$«8,553

$ «(540)

$÷ 583
(23)
(1,100)
$ «(540)

$«3,326
(2)
$«3,324

228
(76)
37
$«1,556

$÷ 351
65
12
(68)
—
$÷ 360

$(1,196)

$÷

«—
(1)
(1,195)
$(1,196)

$÷ 529
(95)
$÷ 434

(106)
(68)
(1)
$1,292

$÷ 419
(20)
12
(60)
—
$÷ 351

$÷(941)

$ ÷ —
(1)
(940)
$÷(941)

$÷ 361
(163)
$÷ 198

A B B O T T 2 0 1 9 A N N U A L R E P O R T

N O T E S T O C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

The projected beneﬁt obligations for non-U.S. deﬁned beneﬁt
plans was $3.3 billion and $2.7 billion at December 31, 2019 and
2018, respectively. The accumulated beneﬁt obligations for all
deﬁned beneﬁt plans were $10.2 billion and $8.3 billion at
December 31, 2019 and 2018, respectively.

For plans where the accumulated beneﬁt obligations exceeded
plan assets at December 31, 2019 and 2018, the aggregate

accumulated beneﬁt obligations, the projected beneﬁt obligations
and the aggregate plan assets were as follows:

(in millions)
Accumulated beneﬁt obligation
Projected beneﬁt obligation
Fair value of plan assets

2019
$1,985
2,266
821

2018
$1,265
1,362
375

The components of the net periodic beneﬁt cost were as follows:

(in millions)

Service cost — beneﬁts earned during the year
Interest cost on projected beneﬁt obligations
Expected return on plans’ assets
Amortization of actuarial losses
Amortization of prior service cost (credits)
Total net cost

2019
$«250
337
(710)
132
1
$÷«10

Deﬁned Beneﬁt Plans
2017
2018
$«283
$«293
287
308
(613)
(680)
163
205
1
1
$«121
$«127

2019
$«23
52
(27)
22
(32)
$«38

Medical and Dental Plans
2017
$«25
45
(33)
23
(45)
$«15

2018
$«26
48
(33)
33
(45)
$«29

In 2017, Abbott recognized a $10 million curtailment gain related
to the sale of AMO.

Other comprehensive income (loss) for each respective year
includes the amortization of actuarial losses and prior service
costs (credits) as noted in the previous table. Other comprehensive
income (loss) for each respective year also includes: net actuarial
losses of $944 million for deﬁned beneﬁt plans and a loss of
$190 million for medical and dental plans in 2019; net actuarial
losses of $86 million for deﬁned beneﬁt plans and a gain of
$53 million for medical and dental plans in 2018; net actuarial
losses of $247 million for deﬁned beneﬁt plans and $97 million for
medical and dental plans in 2017. The change in net actuarial
losses in 2019 primarily relates to lower discount rates at
December 31, 2019 compared to December 31, 2018, partially
offset by the impact of actual 2019 asset returns in excess of
expected returns.

The pretax amount of actuarial losses and prior service cost
(credits) included in Accumulated other comprehensive income
(loss) at December 31, 2019 that is expected to be recognized in
the net periodic beneﬁt cost in 2020 is $253 million and $1 million
of expense, respectively, for deﬁned beneﬁt pension plans and
$32 million of expense and $28 million of income, respectively,
for medical and dental plans.

The weighted average assumptions used to determine beneﬁt
obligations for deﬁned beneﬁt plans and medical and dental plans
are as follows:

Discount rate
Expected aggregate average
long-term change in compensation

2019
3.0%

4.3%

2018
4.0%

4.3%

2017
3.4%

4.4%

The weighted average assumptions used to determine the
net cost for deﬁned beneﬁt plans and medical and dental plans
are as follows:

Discount rate
Expected return on plan assets
Expected aggregate average long-
term change in compensation

2019
4.0%
7.5%

4.3%

2018
3.4%
7.7%

4.4%

2017
3.9%
7.6%

4.3%

The assumed health care cost trend rates for medical and dental
plans at December 31 were as follows:

Health care cost trend rate
assumed for the next year
Rate that the cost trend rate
gradually declines to
Year that rate reaches the
assumed ultimate rate

2019

2018

2017

2025

2027

The discount rates used to measure liabilities were determined
based on high-quality ﬁxed income securities that match the
duration of the expected retiree beneﬁts. The health care cost
trend rates represent Abbott’s expected annual rates of change in
the cost of health care beneﬁts and are forward projections of
health care costs as of the measurement date. A one-percentage
point increase/(decrease) in the assumed health care cost trend
rate would increase/(decrease) the accumulated post-employment
beneﬁt obligations as of December 31, 2019, by $221 million
/$(179) million, and the total of the service and interest cost com-
ponents of net post-employment health care cost for the year then
ended by approximately $12 million/$(9) million.

A B B O T T 2 0 1 9 A N N U A L R E P O R T

N O T E S T O C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

The following table summarizes the bases used to measure the deﬁned beneﬁt and medical and dental plan assets at fair value:

(in millions)

December 31, 2019:
Equities:

U.S. large cap (a)
U.S. mid and small cap (b)
International (c)

Fixed income securities:

U.S. government securities (d)
Corporate debt instruments (e)
Non-U.S. government securities (f )
Other (g)

Absolute return funds (h)
Commodities (i)
Cash and Cash Equivalents
Other ( j)

December 31, 2018:
Equities:

U.S. large cap (a)
U.S. mid and small cap (b)
International (c)

Fixed income securities:

U.S. government securities (d)
Corporate debt instruments (e)
Non-U.S. government securities (f )
Other (g)

Absolute return funds (h)
Commodities (i)
Cash and Cash Equivalents
Other ( j)

Outstanding
Balances

Quoted
Prices in
Active Markets

Signiﬁcant
Other Observable
Inputs

Signiﬁcant
Unobservable
Inputs

Measured
at NAV (k)

Basis of Fair Value Measurement

$ 2,873
648
2,202

562
1,266
445
320
1,557
32
182
550
$10,637

$ 2,168
515
1,671

476
1,150
405
199
1,684
59
192
385
$ 8,904

$1,647
548
464

52
362
3
69
424
—
84
8
$3,661

$1,319
226
370

51
269
5
15
448
—
123
11
$2,837

$ —
4
—

357
724
2
27
—
—
—
—
$1,114

$ ÷÷ 5
—
—

269
701
—
55
—
—
—
—
$1,030

$—
2
—

—
—
—
—
—
1
—
—
$ 3

$—
—
—

—
—
—
—
—
4
—
—
$ 4

$1,226
94
1,738

153
180
440
224
1,133
31
98
542
$5,859

$ «844
289
1,301

156
180
400
129
1,236
55
69
374
$5,033

(a) A mix of index funds and actively managed equity accounts that are benchmarked to various large cap indices.

(b) A mix of index funds and actively managed equity accounts that are benchmarked to various mid and small cap indices.

(c) A mix of index funds and actively managed pooled investment funds that are benchmarked to various non-U.S. equity indices in both developed and emerging markets.

(d) A mix of index funds and actively managed accounts that are benchmarked to various U.S. government bond indices.

(e) A mix of index funds and actively managed accounts that are benchmarked to various corporate bond indices.

(f ) Primarily United Kingdom, Japan and Eurozone government bonds.

(g) Primarily asset backed securities and an actively managed, diversiﬁed ﬁxed income vehicle benchmarked to the one-month Libor / Euribor.

(h) Primarily funds invested by managers that have a global mandate with the ﬂexibility to allocate capital broadly across a wide range of asset classes and strategies including, but not limited to

equities, ﬁxed income, commodities, interest rate futures, currencies and other securities to outperform an agreed upon benchmark with speciﬁc return and volatility targets.

(i) Primarily investments in private energy funds.

( j) Primarily investments in private funds, such as private equity, private credit and private real estate.

(k) In accordance with ASU 2015-07, investments measured at fair value using the net asset value (NAV) practical expedient have not been classiﬁed in the fair value hierarchy. The fair value

amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated balance sheet.

N O T E S T O C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

Equities that are valued using quoted prices are valued at the
published market prices. Equities in a common collective trust
or a registered investment company that are valued using signiﬁ-
cant other observable inputs are valued at the NAV provided by
the fund administrator. The NAV is based on the value of the
underlying assets owned by the fund minus its liabilities. For
approximately half of these funds, investments may be redeemed
once per month, with a required 7 to 30 day notice period. For the
remaining funds, daily redemption of an investment is allowed.
Fixed income securities that are valued using signiﬁcant other
observable inputs are valued at prices obtained from independent
ﬁnancial service industry recognized vendors. Abbott did not have
any unfunded commitments related to ﬁxed income funds at
December 31, 2019 and 2018. Fixed income securities in a com-
mon collective trust or a registered investment company that are
valued using signiﬁcant other observable inputs are valued at the
NAV provided by the fund administrator. For the majority of these
funds, investments may be redeemed either weekly or monthly,
with a required 2 to 14 day notice period. For the remaining funds,
investments may be generally redeemed daily.

Absolute return funds and commodities are valued at the NAV
provided by the fund administrator. All private funds are valued
at the NAV provided by the fund on a one-quarter lag adjusted for
known cash ﬂows and signiﬁcant events through the reporting
date. Abbott did not have any unfunded commitments related to
absolute return funds at December 31, 2019 and 2018. Investments
in these funds may be generally redeemed monthly or quarterly
with required notice periods ranging from 5 to 90 days. For
approximately $235 million and $100 million of the absolute
return funds, redemptions are subject to a 33 percent gate and a
25 percent gate, respectively, and $45 million is subject to a lock
until 2022. For commodities, investments in the private energy
funds cannot be redeemed but the funds will make distributions
through liquidation. The estimate of the liquidation period for
each fund ranges from 2020 to 2022. Abbott’s unfunded commit-
ments in these funds as of December 31, 2019 and 2018 were not
signiﬁcant. Investments in the private funds (excluding private
energy funds) cannot be redeemed but the funds will make distri-
butions through liquidation. The estimate of the liquidation period
for each fund ranges from 2020 to 2029. Abbott’s unfunded com-
mitment in these funds was $571 million and $518 million as of
December 31, 2019 and 2018, respectively.

The investment mix of equity securities, ﬁxed income and other
asset allocation strategies is based upon achieving a desired return,
as well as balancing higher return, more volatile equity securities
with lower return, less volatile ﬁxed income securities. Investment
allocations are made across a range of markets, industry sectors,
capitalization sizes, and in the case of ﬁxed income securities,
maturities and credit quality. The plans do not directly hold any
securities of Abbott. There are no known signiﬁcant concentrations
of risk in the plans’ assets. Abbott’s medical and dental plans’
assets are invested in a similar mix as the pension plan assets. The
actual asset allocation percentages at year end are consistent with
the company’s targeted asset allocation percentages.

A B B O T T 2 0 1 9 A N N U A L R E P O R T

The plans’ expected return on assets, as shown above is based
on management’s expectations of long-term average rates of
return to be achieved by the underlying investment portfolios.
In establishing this assumption, management considers historical
and expected returns for the asset classes in which the plans are
invested, as well as current economic and capital market conditions.

Abbott funds its domestic pension plans according to IRS funding
limitations. International pension plans are funded according to
similar regulations. Abbott funded $382 million in 2019 and
$114 million in 2018 to deﬁned pension plans. Abbott expects to
contribute approximately $387 million to its pension plans
in 2020.

Total beneﬁt payments expected to be paid to participants, which
includes payments funded from company assets, as well as paid
from the plans, are as follows:

(in millions)
2020
2021
2022
2023
2024
2025 to 2029

Deﬁned
Beneﬁt Plans
$ «315
325
342
360
382
2,219

Medical and
Dental Plans
$ 76
78
79
80
82
421

The Abbott Stock Retirement Plan is the principal deﬁned contri-
bution plan. Abbott’s contributions to this plan were $158 million
in 2019, $146 million in 2018 and $79 million in 2017. The 2018
contributions include amounts related to participants of the
St. Jude Medical Retirement Plan which was terminated in
January 2018.

NOTE 16 — TAXES ON EARNINGS FROM
CONTINUING OPERATIONS

Taxes on earnings from continuing operations reﬂect the annual
effective rates, including charges for interest and penalties.
Deferred income taxes reﬂect the tax consequences on future
years of differences between the tax bases of assets and liabilities
and their ﬁnancial reporting amounts.

The Tax Cuts and Jobs Act (TCJA) was enacted in the U.S. on
December 22, 2017. The TCJA reduces the U.S. federal corporate
tax rate from 35% to 21%, requires companies to pay a one-time
transition tax on earnings of certain foreign subsidiaries that were
previously tax deferred and creates new taxes on certain foreign
sourced earnings. As of December 31, 2018, Abbott completed its
accounting for all of the enactment date income tax effects of
the TCJA.

Effective for ﬁscal years beginning after December 31, 2017, the
TCJA subjects taxpayers to tax on global intangible low-taxed
income (GILTI) earned by certain foreign subsidiaries. In
January 2018, the FASB staff provided guidance that an entity may
make an accounting policy election to either recognize deferred
taxes related to items that will give rise to GILTI in future years or
provide for the tax expense related to GILTI in the year that the tax
is incurred. Abbott has elected to treat the GILTI tax as a period
expense and provide for the tax in the year that the tax is incurred.

A B B O T T 2 0 1 9 A N N U A L R E P O R T

N O T E S T O C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

In the fourth quarter of 2017, Abbott recorded an estimate of net
tax expense of $1.46 billion for the impact of the TCJA, which was
included in Taxes on Earnings from Continuing Operations in the
Consolidated Statement of Earnings. The estimate was provisional
and included a charge of approximately $2.89 billion for the tran-
sition tax, partially offset by a net beneﬁt of approximately
$1.42 billion for the remeasurement of deferred tax assets and
liabilities, and a net beneﬁt of approximately $10 million related
to certain other impacts of the TCJA. In 2018, Abbott recorded
$130 million of additional tax expense which increased the ﬁnal
tax expense related to the TCJA to $1.59 billion. The $130 million
of additional tax expense reﬂects a $120 million increase in the
transition tax from $2.89 billion to $3.01 billion and a $10 million
reduction in the net beneﬁt related to the remeasurement of
deferred tax assets and liabilities. In 2019, taxes on earnings from
continuing operations include an $86 million reduction to the
transition tax. The $86 million reduction to the transition tax
liability was the result of the issuance of ﬁnal transition tax regula-
tions by the U.S. Department of Treasury in 2019. This adjustment
decreased the cumulative net tax expense related to the TCJA to
$1.50 billion.

The one-time transition tax is based on Abbott’s total post-1986
earnings and proﬁts (E&P) that were previously deferred from
U.S. income taxes. The tax computation also requires the determi-
nation of the amount of post-1986 E&P considered held in cash
and other speciﬁed assets. As of December 31, 2019, the remaining
balance of Abbott’s transition tax obligation is approximately
$1.33 billion, which will be paid over the next seven years as
allowed by the TCJA.

In 2019, taxes on earnings from continuing operations included
$68 million of tax expense resulting from tax legislation enacted in
the fourth quarter of 2019 in India. In 2018, taxes on earnings from
continuing operations included $98 million of net tax expense
related to the settlement of Abbott’s 2014-2016 federal income tax
audit in the U.S., partial settlement of the former St. Jude Medical
consolidated group’s 2014 and 2015 federal income tax returns in
the U.S. and audit settlements in various countries. In 2017, taxes
on earnings from continuing operations include $435 million of
tax expense related to the gain on the sale of the AMO business.

Undistributed foreign earnings remain indeﬁnitely reinvested in
foreign operations. Determining the amount of unrecognized
deferred tax liability related to any remaining undistributed foreign
earnings not subject to the transition tax and additional outside
basis difference in its foreign entities is not practicable. In the U.S.,
Abbott’s federal income tax returns through 2016 are settled except
for the federal income tax returns of the former Alere consolidated
group which are settled through 2015 and the former St. Jude
Medical consolidated group which are settled through 2013. There
are numerous other income tax jurisdictions for which tax returns
are not yet settled, none of which are individually signiﬁcant.
Reserves for interest and penalties are not signiﬁcant.

Earnings from continuing operations before taxes, and the
related provisions for taxes on earnings from continuing opera-
tions, were as follows:

(in millions)
Earnings From Continuing
Operations Before Taxes:
Domestic
Foreign
Total

(in millions)
Taxes on Earnings From
Continuing Operations:
Current:
Domestic
Foreign

Total current

Deferred:
Domestic
Foreign

Total deferred
Total

2019

2018

2017

$ «889
3,188
$4,077

$ (430)
3,303
$2,873

$ «308
1,923
$2,231

2019

2018

2017

$ «291
590
881

(305)
(186)
(491)
$ «390

$ (812)
606
(206)

832
(87)
745
$ «539

$2,260
508
2,768

(679)
(211)
(890)
$1,878

Differences between the effective income tax rate and the U.S.
statutory tax rate were as follows:

2019

2018

2017

Statutory tax rate on earnings
from continuing operations
Impact of foreign operations
Impact of TCJA and other
related items
Foreign-derived intangible
income beneﬁt
Domestic impairment loss
Excess tax beneﬁts related to
stock compensation
Research tax credit
Resolution of certain tax positions
pertaining to prior years
State taxes, net of federal beneﬁt
Federal tax cost on sale of
Mylan N.V. shares
All other, net
Effective tax rate on earnings
from continuing operations

21.0%
(5.0)

21.0%
(5.4)

(2.1)

(2.0)
—

(2.5)
(1.2)

—
0.8

—
0.6

6.3

(1.9)
(2.1)

(3.1)
(1.8)

3.4
0.4

—
2.0

35.0%
(16.3)

65.5

—
—

(5.4)
(1.9)

—
0.5

3.4
3.4

9.6%

18.8%

84.2%

Impact of foreign operations is primarily derived from operations
in Puerto Rico, Switzerland, Ireland, the Netherlands, Costa Rica,
and Singapore.

N O T E S T O C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

The tax effect of the differences that give rise to deferred tax
assets and liabilities were as follows:

(in millions)
Deferred tax assets:

Compensation and employee beneﬁts
Other, primarily reserves not currently
deductible, and NOL’s and credit carryforwards
Trade receivable reserves
Inventory reserves
Lease liabilities
Deferred intercompany proﬁt
Total deferred tax assets before
valuation allowance
Valuation allowance
Total deferred tax assets

Deferred tax liabilities:

Depreciation
Right of Use lease assets
Other, primarily the excess of book basis
over tax basis of intangible assets
Total deferred tax liabilities

Total net deferred tax assets (liabilities)

2019

2018

$ ÷982

$ ÷829

2,227
190
110
209
259

3,977
(978)
2,999

(219)
(209)

(3,107)
(3,535)
$ «(536)

2,546
196
97
—
203

3,871
(1,363)
2,508

(226)
—

(3,557)
(3,783)
$(1,275)

Abbott has incurred losses in a foreign jurisdiction where realiza-
tion of the future economic beneﬁt is so remote that the beneﬁt is
not reﬂected as a deferred tax asset.

The following table summarizes the gross amounts of unrecog-
nized tax beneﬁts without regard to reduction in tax liabilities or
additions to deferred tax assets and liabilities if such unrecognized
tax beneﬁts were settled:

(in millions)
January 1
Decrease in tax positions due to acquisitions
Increase due to current year tax positions
Increase due to prior year tax positions
Decrease due to prior year tax positions
Settlements
Lapse of statute
December 31

2019
$1,120
—
137
75
(117)
(32)
(8)
$1,175

2018
$1,440
(13)
164
235
(611)
(91)
(4)
$1,120

The total amount of unrecognized tax beneﬁts that, if recognized,
would impact the effective tax rate is approximately $1.07 billion.
Abbott believes that it is reasonably possible that the recorded
amount of gross unrecognized tax beneﬁts may decrease within a
range of $220 million to $510 million, including cash adjustments,
within the next twelve months as a result of concluding various
domestic and international tax matters.

A B B O T T 2 0 1 9 A N N U A L R E P O R T

NOTE 17 — SEGMENT AND GEOGRAPHIC AREA INFORMATION

Abbott’s principal business is the discovery, development, manu-
facture 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.

Beginning in the fourth quarter of 2019, the results of the Diabetes
Care business, which had previously been included in Other, were
aggregated with the results of the businesses in the Cardiovascular
and Neuromodulation segment to comprise the Medical Devices
reportable segment. Historic periods have been adjusted to
reﬂect this change.

On October 3, 2017, Abbott completed the acquisition of Alere.
Beginning with the fourth quarter of 2017, Abbott’s Diagnostic
Products reportable segment includes the results of Alere from
the date of acquisition.

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, Rapid Diagnostics, Molecular
Diagnostics and Point of Care divisions are aggregated and
reported as the Diagnostic Products segment. Rapid Diagnostics
is the business acquired from Alere.

Medical Devices — Worldwide sales of rhythm management,
electrophysiology, heart failure, vascular, structural heart, neuro-
modulation and diabetes care products. For segment reporting
purposes, the Cardiac Arrhythmias & Heart Failure, Vascular,
Neuromodulation, Structural Heart and Diabetes Care divisions
are aggregated and reported as the Medical Devices segment.

Non-reportable segments include AMO through the date of its
sale in February 2017.

Abbott’s underlying accounting records are maintained on a
legal entity basis for government and public reporting require-
ments. Segment disclosures are on a performance basis consistent
with internal management reporting. 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 seg-
ments, and intangible assets and goodwill are not included in the
measure of each segment’s assets.

A B B O T T 2 0 1 9 A N N U A L R E P O R T

N O T E S T O C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

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.

(in millions)
Established
Pharmaceutical
Products
Nutritional
Products
Diagnostic
Products
Medical Devices
Total Reportable
Segments

Other
Total

Net Sales to External
Customers (a)
2017
2018

2019

Operating Earnings (a)
2017
2018
2019

$ 4,486 $ 4,422 $ 4,287

$ «904 $ «894 $ «848

7,409

7,229

6,925

1,705

1,652

1,589

7,713
12,239

7,495
11,370

5,616
10,325

1,912
3,769

1,868
3,500

1,468
3,011

31,847

30,516

27,153

$8,290 $7,914 $6,916

(in millions)
Total Reportable Segment
Operating Earnings
Corporate functions and
beneﬁt plan costs
Net interest expense
Loss on extinguishment of debt
Share-based compensation
Amortization of intangible assets
Other, net (b)
Earnings from Continuing
Operations Before Taxes

2019

2018

2017

$ 8,290

$ 7,914

$ 6,916

(468)
(576)
(63)
(519)
(1,936)
(651)

(618)
(721)
(167)
(477)
(2,178)
(880)

(506)
(780)
—
(406)
(1,975)
(1,018)

$ 4,077

$ 2,873

$ 2,231

237
$31,904 $30,578 $27,390

(a) Net sales were unfavorably affected by the relatively stronger U.S. dollar in 2019 and 2018.

Operating earnings were unfavorably affected by the impact of foreign exchange in 2019,
2018 and 2017.

(b) Other, net includes integration costs associated with the acquisition of St. Jude Medical
and Alere, and restructuring charges in 2019. Other, net includes inventory step-up
amortization, integration costs associated with the acquisition of St. Jude Medical and
Alere, and restructuring charges in 2018. In 2017, Other, net includes inventory step-up
amortization, integration costs associated with the acquisition of St. Jude Medical and
Alere, and restructuring charges, partially offset by the gain on the sale of the AMO
business. Charges for restructuring actions and other cost reduction initiatives were
approximately $215 million in 2019, $153 million in 2018 and $384 million in 2017.

(in millions)

Established Pharmaceuticals
Nutritionals
Diagnostics
Medical Devices

Total Reportable Segments

Other
Total

2019
$ ÷«98
139
403
266

906

172
$1,078

Depreciation
2017
$ ÷«90
164
300
338

2018
$ ÷«92
150
397
294

933

167
$1,100

892

154
$1,046

Additions to Property, Plant
and Equipment (c)
2017
2018
$ «181
$ «131
147
86
374
609
276
408

2019
$ «109
141
726
532

1,508

160
$1,668

1,234

160
$1,394

978

157
$1,135

2019
$ 2,858
3,274
5,235
6,640
$18,007

Total Assets
2017
$ 2,728
3,160
4,226
5,799
$15,913

2018
$ 2,664
3,071
4,464
5,886
$16,085

Long-lived assets on a geographic basis primarily include property,
plant and equipment. It excludes goodwill, intangible assets,
deferred tax assets, and ﬁnancial instruments. At December 31,
2019 and 2018, long-lived assets totaled $10.2 billion and
$8.7 billion, respectively, and in the United States such assets
totaled $5.1 billion and $4.3 billion, respectively. Long-lived asset
balances associated with other countries were not material on an
individual country basis in either of the two years.

(in millions)
Total Reportable Segment Assets
Cash and investments
Goodwill and intangible assets
All other
Total Assets

(in millions)
United States
China
Germany
Japan
India
Switzerland
The Netherlands
All Other Countries
Consolidated

2019
$18,007
5,023
40,220
4,637
$67,887

2019
$11,398
2,346
1,751
1,435
1,397
1,068
975
11,534
$31,904

2018
$16,085
4,983
42,196
3,909
$67,173

2017
$15,913
10,493
45,493
4,351
$76,250

Net Sales to
External Customers (d)
2017
$ 9,673
2,146
1,366
1,255
1,237
841
929
9,943
$27,390

2018
$10,839
2,311
1,619
1,326
1,333
1,005
930
11,215
$30,578

(d) Sales by country are based on the country that sold the product.

N O T E S T O C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

NOTE 18 — QUARTERLY RESULTS (UNAUDITED)

(in millions except per share data)

2019

2018

First Quarter
Continuing Operations:

Net Sales
Gross Proﬁt
Earnings from Continuing Operations
Basic Earnings per Common Share
Diluted Earnings per Common Share

Net Earnings
Basic Earnings Per Common Share (a)
Diluted Earnings Per Common Share (a)

Second Quarter
Continuing Operations:

Net Sales
Gross Proﬁt
Earnings from Continuing Operations
Basic Earnings per Common Share
Diluted Earnings per Common Share

Net Earnings
Basic Earnings Per Common Share (a)
Diluted Earnings Per Common Share (a)

Third Quarter
Continuing Operations:

Net Sales
Gross Proﬁt
Earnings from Continuing Operations
Basic Earnings per Common Share
Diluted Earnings per Common Share

Net Earnings
Basic Earnings Per Common Share (a)
Diluted Earnings Per Common Share (a)

Fourth Quarter
Continuing Operations:

Net Sales
Gross Proﬁt
Earnings from Continuing Operations
Basic Earnings per Common Share
Diluted Earnings per Common Share

Net Earnings
Basic Earnings Per Common Share (a)
Diluted Earnings Per Common Share (a)

$7,535
3,889
672
0.38
0.38
672
0.38
0.38

$7,979
4,217
1,006
0.57
0.56
1,006
0.57
0.56

$8,076
4,234
960
0.54
0.53
960
0.54
0.53

$8,314
4,397
1,049
0.59
0.59
1,049
0.59
0.59

$7,390
3,739
409
0.23
0.23
418
0.24
0.23

$7,767
3,923
718
0.41
0.40
733
0.42
0.41

$7,656
3,946
552
0.31
0.31
563
0.32
0.32

$7,765
4,086
655
0.37
0.37
654
0.37
0.37

(a) The sum of the four quarters of earnings per share for 2019 and 2018 may not add to the full
year earnings per share amount due to rounding and/or the use of quarter-to-date weighted
average shares to calculate the earnings per share amount in each respective quarter.

A B B O T T 2 0 1 9 A N N U A L R E P O R T

M A N A G E M E N T R E P O R T O N I N T E R N A L

R E P O R T O F I N D E P E N D E N T R E G I S T E R E D

C O N T R O L O V E R F I N A N C I A L R E P O R T I N G

P U B L I C A C C O U N T I N G F I R M

The management of Abbott Laboratories is responsible for estab-
lishing and maintaining adequate internal control over ﬁnancial
reporting. Abbott’s internal control system was designed to pro-
vide reasonable assurance to the company’s management and
board of directors regarding the preparation and fair presentation
of published ﬁnancial statements.

All internal control systems, no matter how well designed, have
inherent limitations. Therefore, even those systems determined to
be effective can provide only reasonable assurance with respect to
ﬁnancial statement preparation and presentation.

Abbott’s management assessed the effectiveness of the company’s
internal control over ﬁnancial reporting as of December 31, 2019.
In making this assessment, it used the criteria set forth in Internal
Control – Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission. Based on
our assessment, we believe that, as of December 31, 2019, the
company’s internal control over ﬁnancial reporting was effective
based on those criteria.

Abbott’s independent registered public accounting ﬁrm has issued
an audit report on their assessment of the effectiveness of the
company’s internal control over ﬁnancial reporting. This report
appears on page 62.

Miles D. White
Chairman of the Board and Chief Executive Officer

Brian B. Yoor
Executive Vice President, Finance and Chief Financial Officer

Robert E. Funck, Jr.
Senior Vice President, Finance and Controller

February 21, 2020

To the Shareholders and Board of Directors of Abbott Laboratories

OPINION ON THE FINANCIAL STATEMENTS
We have audited the accompanying consolidated balance sheets
of Abbott Laboratories and subsidiaries (the Company) as of
December 31, 2019 and 2018, the related consolidated statements
of earnings, comprehensive income, shareholders’ investment and
cash ﬂows for each of the three years in the period ended
December 31, 2019, and the related notes (collectively referred to
as the “consolidated ﬁnancial statements”). In our opinion, the
consolidated ﬁnancial statements present fairly, in all material
respects, the ﬁnancial position of the Company as of December 31,
2019 and 2018, and the results of its operations and its cash ﬂows
for each of the three years in the period ended December 31, 2019,
in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States)
(PCAOB), the Company’s internal control over ﬁnancial reporting
as of December 31, 2019, based on criteria established in Internal
Control — Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (2013
framework), and our report dated February 21, 2020 expressed
an unqualiﬁed opinion thereon.

BASIS FOR OPINION
These ﬁnancial statements are the responsibility of the
Company’s management. Our responsibility is to express an
opinion on the Company’s ﬁnancial statements based on our
audits. We are a public accounting ﬁrm registered with the
PCAOB and are required to be independent with respect to the
Company in accordance with the U.S. federal securities laws and
the applicable rules and regulations of the Securities and
Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the
PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the ﬁnancial
statements are free of material misstatement, whether due to
error or fraud. Our audits included performing procedures to
assess the risks of material misstatement of the ﬁnancial state-
ments, whether due to error or fraud, and performing procedures
that respond to those risks. Such procedures included examining,
on a test basis, evidence regarding the amounts and disclosures in
the ﬁnancial statements. Our audits also included evaluating the
accounting principles used and signiﬁcant estimates made by
management, as well as evaluating the overall presentation of the
ﬁnancial statements. We believe that our audits provide a reason-
able basis for our opinion.

A B B O T T 2 0 1 9 A N N U A L R E P O R T

CRITICAL AUDIT MATTERS
The critical audit matters communicated below are matters aris-
ing from the current period audit of the ﬁnancial statements that
were communicated or required to be communicated to the audit
committee and that: (1) relate to accounts or disclosures that are
material to the ﬁnancial statements and (2) involved our especially
challenging, subjective or complex judgments. The communica-
tion of critical audit matters does not alter in any way our opinion
on the consolidated ﬁnancial statements, taken as a whole, and we
are not, by communicating the critical audit matters below, pro-
viding separate opinions on the critical audit matters or on the
accounts or disclosures to which they relate.

Evaluation of acquired in-process research & development
intangible assets
Description of the Matter

As described in Note 8 to the consolidated ﬁnancial statements,
acquired in-process research & development (“IPR&D”) intangible
assets were approximately $1.3 billion at December 31, 2019.
IPR&D intangible assets are assessed for impairment annually, or
more frequently if impairment indicators suggest the fair value
of the IPR&D intangible asset may be below its carrying value.
Auditing the fair value estimate of IPR&D intangible assets is
complex because the estimate involves making assumptions about
the timing and amount of forecasted future net cash ﬂows of the
related IPR&D projects, as well as the risk associated with the
forecasted future net cash ﬂows. These signiﬁcant assumptions
are forward-looking and could be affected by future economic
and market conditions.

How We Addressed the Matter in our Audit

We obtained an understanding, evaluated the design and tested
the operating effectiveness of controls over the Company’s IPR&D
intangible asset impairment assessment, as well as its process for
identiﬁcation of events that indicate an IPR&D intangible asset
may be impaired. This included controls over management’s
review of the valuation model and the signiﬁcant assumptions
(e.g., discount rate, projected research and development (“R&D”)
costs, probability of technical success, projected revenues and
product proﬁtability) used to develop the prospective ﬁnancial
information (PFI).

To test the fair value of the Company’s IPR&D intangible assets,
our audit procedures included, among others, evaluating the
Company’s use of the income approach, testing the signiﬁcant
assumptions described above used to develop the prospective
ﬁnancial information and testing the completeness and accuracy
of the underlying data. For example, we compared certain signiﬁ-
cant assumptions to current industry, market and economic
trends, historical results of the Company’s business and other
guideline companies within the same industry and to other rele-
vant factors. We performed a sensitivity analysis of the signiﬁcant
assumptions to evaluate the change in the fair value of the IPR&D
assets resulting from changes in the assumptions. We also involved

our valuation specialists to assist in testing certain signiﬁcant
assumptions in the fair value estimate. In addition, to evaluate the
probability of technical success, we considered the phase of devel-
opment of the IPR&D project and the Company’s history of
obtaining regulatory approvals.

Income taxes – Unrecognized tax beneﬁts
Description of the Matter

As described in Note 16 to the consolidated ﬁnancial statements,
unrecognized tax beneﬁts were approximately $1.2 billion at
December 31, 2019. Unrecognized tax beneﬁts are assessed by
management quarterly for identiﬁcation and measurement, or
more frequently if there are any indicators suggesting change in
unrecognized tax beneﬁts. Assessing tax positions involves judge-
ment including interpreting tax laws of multiple jurisdictions and
assumptions relevant to the measurement of an unrecognized tax
beneﬁt, including the estimated amount of tax liability that may be
incurred should the tax position not be sustained upon inspection
by a tax authority. These judgements and assumptions can signiﬁ-
cantly affect unrecognized tax beneﬁts.

How We Addressed the Matter in our Audit

We obtained an understanding, evaluated the design and tested
the operating effectiveness of controls over the Company’s identi-
ﬁcation and measurement of unrecognized tax beneﬁts, as well
as its process for the assessment of events that may indicate a
change in unrecognized tax beneﬁts is warranted. For example,
we tested controls over management’s review of the completeness
of identiﬁed unrecognized tax beneﬁts, as well as controls over
management’s review of signiﬁcant assumptions used within the
measurement of unrecognized tax beneﬁts.

With the support of our tax professionals and valuation specialists,
among other audit procedures performed, we evaluated the reason-
ableness of management’s judgement with respect to the
interpretation of tax laws of multiple jurisdictions by reading and
evaluating management’s documentation, including relevant
accounting policies, and by considering how tax law, including
statutes, regulations and case law, affected management’s judg-
ments. We tested the completeness of management’s assessment
of the identiﬁcation of unrecognized tax beneﬁts and possible
outcomes related to it including evaluation of technical merits of
the unrecognized tax beneﬁts. We also tested appropriateness and
consistency of management’s methods and signiﬁcant assumptions
associated with the measurement of unrecognized tax beneﬁts,
including assessing the estimated amount of tax liability that may
be incurred should the tax position not be sustained upon inspec-
tion by a tax authority.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2013.

Chicago, Illinois
February 21, 2020

DEFINITION AND LIMITATIONS OF INTERNAL CONTROL
OVER FINANCIAL REPORTING
A company’s internal control over ﬁnancial reporting is a process
designed to provide reasonable assurance regarding the reliability
of ﬁnancial reporting and the preparation of ﬁnancial statements
for external purposes in accordance with generally accepted
accounting principles. A company’s internal control over ﬁnancial
reporting includes those policies and procedures that (1) pertain to
the maintenance of records that, in reasonable detail, accurately
and fairly reﬂect the transactions and dispositions of the assets of
the company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of ﬁnancial
statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of manage-
ment and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unautho-
rized acquisition, use, or disposition of the company’s assets that
could have a material effect on the ﬁnancial statements.

Because of its inherent limitations, internal control over ﬁnan-
cial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because
of changes in conditions, or that the degree of compliance with
the policies or procedures may deteriorate.

/s/ Ernst & Young LLP

Chicago, Illinois
February 21, 2020

A B B O T T 2 0 1 9 A N N U A L R E P O R T

R E P O R T O F I N D E P E N D E N T R E G I S T E R E D

P U B L I C A C C O U N T I N G F I R M

To the Shareholders and Board of Directors of Abbott Laboratories

OPINION ON INTERNAL CONTROL OVER
FINANCIAL REPORTING
We have audited Abbott Laboratories and subsidiaries’ internal
control over ﬁnancial reporting as of December 31, 2019, based on
criteria established in Internal Control—Integrated Framework
issued by the Committee of Sponsoring Organizations of the
Treadway Commission (2013 framework) (the COSO criteria).
In our opinion, Abbott Laboratories and subsidiaries (the
Company) maintained, in all material respects, effective inter-
nal control over ﬁnancial reporting as of December 31, 2019,
based on the COSO criteria.

We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States)
(PCAOB), the consolidated balance sheets of the Company as of
December 31, 2019 and 2018, the related consolidated statements
of earnings, comprehensive income, shareholders’ investment
and cash ﬂows for each of the three years in the period ended
December 31, 2019, and the related notes and our report dated
February 21, 2020 expressed an unqualiﬁed opinion thereon.

BASIS FOR OPINION
The Company’s management is responsible for maintaining effec-
tive internal control over ﬁnancial reporting and for its assessment
of the effectiveness of internal control over ﬁnancial reporting
included in the accompanying Management Report on Internal
Control Over Financial Reporting. Our responsibility is to express
an opinion on the Company’s internal control over ﬁnancial
reporting based on our audit. We are a public accounting ﬁrm
registered with the PCAOB and are required to be independent
with respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the
PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether effective
internal control over ﬁnancial reporting was maintained in all
material respects.

Our audit included obtaining an understanding of internal control
over ﬁnancial reporting, assessing the risk that a material weak-
ness exists, testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk, and
performing such other procedures as we considered necessary in
the circumstances. We believe that our audit provides a reasonable
basis for our opinion.

A B B O T T 2 0 1 9 A N N U A L R E P O R T

F I N A N C I A L I N S T R U M E N T S A N D R I S K M A N A G E M E N T

MARKET PRICE SENSITIVE INVESTMENTS

FOREIGN CURRENCY SENSITIVE FINANCIAL INSTRUMENTS

The fair value of equity securities held by Abbott with a readily
determinable fair value was approximately $11 million and
$13 million as of December 31, 2019 and 2018, respectively. These
equity securities are subject to potential changes in fair value.
A hypothetical 20 percent decrease in the share prices of these
investments would decrease their fair value at December 31, 2019
by approximately $2 million. Changes in the fair value of these
securities are recorded in earnings. The fair value of investments
in mutual funds that are held in a rabbi trust for the purpose of
paying beneﬁts under a deferred compensation plan was approxi-
mately $346 million and $307 million as of December 31, 2019 and
2018, respectively. Changes in the fair value of these investments,
as well as an offsetting change in the beneﬁt obligation, are
recorded in earnings.

NON-PUBLICLY TRADED EQUIT Y SECURITIES

Abbott holds equity securities that are not traded on public
stock exchanges. The carrying value of these investments was
$158 million and $211 million as of December 31, 2019 and 2018,
respectively. No individual investment is recorded at a value in
excess of $61 million. Abbott measures these investments at cost
minus impairment, if any, plus or minus changes resulting from
observable price changes in orderly transactions for the identical
or a similar investment of the same issuer.

INTEREST RATE SENSITIVE FINANCIAL INSTRUMENTS

At December 31, 2019 and 2018, Abbott had interest rate hedge
contracts totaling $2.9 billion to manage its exposure to changes in
the fair value of debt. The effect of these hedges is to change the
ﬁxed interest rate to a variable rate for the portion of the debt that
is hedged. Abbott does not use derivative ﬁnancial instruments,
such as interest rate swaps, to manage its exposure to changes
in interest rates for its investment securities. The fair value of
long-term debt at December 31, 2019 and 2018 amounted to
$20.8 billion and $19.9 billion, respectively (average interest rates
of 3.3% and 3.5% as of December 31, 2019 and 2018, respectively)
with maturities through 2046. At December 31, 2019 and 2018,
the fair value of current and long-term investment securities
amounted to approximately $1.2 billion and $1.1 billion, respec-
tively. A hypothetical 100-basis point change in the interest rates
would not have a material effect on cash ﬂows, income or fair
values. (A 100-basis point change is believed to be a reasonably
possible near-term change in rates.)

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 are designated as cash ﬂow hedges of
the variability of the cash ﬂows due to changes in foreign currency
exchange rates and are marked-to-market with the resulting gains
or losses reﬂected in Accumulated other comprehensive income
(loss). Gains or losses will be included in Cost of products sold at
the time the products are sold, generally within the next twelve
to eighteen months. At December 31, 2019 and 2018, Abbott
held $6.8 billion and $5.1 billion, respectively, of such contracts.
Contracts held at December 31, 2019 will mature in 2020 or 2021
depending upon the contract. Contracts held at December 31,
2018 matured in 2019 or will mature in 2020 depending upon
the contract.

Abbott enters into foreign currency forward exchange contracts
to manage its exposure to foreign currency denominated inter-
company loans and trade payables and third-party trade payables
and receivables. The contracts are marked-to-market, and result-
ing gains or losses are reﬂected in income and are generally offset
by losses or gains on the foreign currency exposure being man-
aged. At December 31, 2019 and 2018, Abbott held $9.1 billion and
$13.6 billion, respectively, of such contracts, which mature in the
next 13 months.

In November 2019, Abbott borrowed ¥59.8 billion under a 5-year
term loan and designated the yen-denominated loan as a hedge
of the net investment in certain foreign subsidiaries. From the
date of the borrowing through December 31, 2019, the value of
this long-term debt decreased approximately $4 million to
$546 million due to foreign exchange rate changes. The change
in the value was recorded in Accumulated other comprehensive
income (loss), net of tax. In March 2017, Abbott repaid its
$479 million yen-denominated short-term debt which was desig-
nated as a hedge of the net investment in a foreign subsidiary.
At December 31, 2016, the value of this short-term debt was
$454 million, and changes in the fair value of the debt up through
the date of repayment due to changes in exchange rates were
recorded in Accumulated other comprehensive income (loss),
net of tax.

The following table reﬂects the total foreign currency forward
exchange contracts outstanding at December 31, 2019 and 2018:

(dollars in millions)
Primarily U.S. Dollars to be exchanged for
the following currencies:

Euro
Chinese Yuan
Japanese Yen
All other currencies
Total

Weighted
Average
Exchange
Rate

1.1189
7.0216
106.8530

n/a

2019
Fair and
Carrying
Value
Receivable/
(Payable)

$«65
4
13
(23)
$«59

Contract
Amount

$ 7,085
2,177
1,092
5,532
$15,886

Weighted
Average
Exchange
Rate

1.1938
6.9055
108.2188

n/a

Contract
Amount

$11,630
1,592
1,079
4,388
$18,689

2018
Fair and
Carrying
Value
Receivable/
(Payable)

$«13
(10)
6
10
$«19

A B B O T T 2 0 1 9 A N N U A L R E P O R T

F I N A N C I A L R E V I E W

Abbott’s revenues are derived primarily from the sale of a broad
line of health care products under short-term receivable arrange-
ments. Patent protection and licenses, technological and
performance features, and inclusion of Abbott’s products under
a contract most impact which products are sold; price controls,
competition and rebates most impact the net selling prices of
products; and foreign currency translation impacts the measure-
ment of net sales and costs. Abbott’s primary products are medical
devices, diagnostic testing products, nutritional products and
branded generic pharmaceuticals. Sales in international markets
comprise approximately 64 percent of consolidated net sales.

Over the last several years, Abbott proactively shaped the company
with the strategic intent to deliver sustainable growth in all of its
businesses. Signiﬁcant steps over the last three years included:

• In January 2017, Abbott acquired St. Jude Medical, Inc.

(St. Jude Medical), a global medical device manufacturer, for
approximately $23.6 billion. As part of the acquisition, Abbott
also assumed, repaid or reﬁnanced approximately $5.9 billion of
St. Jude Medical’s debt. The acquisition provided expanded
opportunities for future growth and is an important part of the
company’s effort to develop a strong, diverse portfolio.

• In October 2017, Abbott acquired Alere Inc. (Alere), a diagnostic

device and service provider, for approximately $4.5 billion.
As part of the acquisition, Abbott also tendered for Alere’s
preferred shares for a total value of approximately $0.7 billion
and assumed and subsequently repaid approximately
$3.0 billion of Alere’s debt. The acquisition established Abbott
as a leader in point of care testing, expanded Abbott’s global
diagnostics presence and provided access to new products,
channels and geographies.

• In February 2017, Abbott completed the sale of Abbott Medical
Optics (AMO), its vision care business, to Johnson & Johnson
for $4.325 billion in cash and recognized an after-tax gain of
$728 million.

The increase in total sales over the last three years reﬂects both
volume growth across Abbott’s businesses and the 2017 acquisi-
tions of St. Jude Medical and Alere. Volume growth reﬂects the
introduction of new products as well as higher sales of existing
products. Sales in emerging markets, which represent approxi-
mately 40 percent of total company sales, increased 8.2 percent
in 2019 and 12.3 percent in 2018, excluding the impact of foreign
exchange. (Emerging markets include all countries except the
United States, Western Europe, Japan, Canada, Australia and
New Zealand.)

Over the last three years, Abbott’s operating margin was positively
impacted by margin improvements in various businesses, includ-
ing Established Pharmaceutical Products, Diabetes Care, Rapid
Diagnostics, and Structural Heart. A reduction in the costs associ-
ated with the recent business acquisitions also drove the
improvement in operating margins from 2017 to 2019. In 2019,
Abbott’s operating margin increased by approximately 2 percent-
age points primarily due to lower intangible amortization expense
and lower business integration and restructuring costs compared
to 2018. In 2018, Abbott’s operating margin increased by approxi-
mately 6 percentage points primarily due to operating margin
improvement in various businesses and lower inventory step-up
amortization and integration costs associated with the acquisitions.

Beginning in the fourth quarter of 2019, the results of the Diabetes
Care business, which had previously been included in the

non-reportable segment category, were aggregated with the
results of the businesses in the Cardiovascular and
Neuromodulation segment to comprise the Medical Devices
reportable segment. Historic periods have been adjusted to
reﬂect this change.

Excluding the impact of foreign exchange, sales in the Medical
Devices segment increased 10.5 percent in 2019 and 9.0 percent
in 2018. The sales increase in 2019 was driven primarily by higher
Diabetes Care, Structural Heart, Electrophysiology and Heart
Failure sales. The sales increase in 2018 was driven primarily by
higher Diabetes Care, Structural Heart, Electrophysiology, and
Neuromodulation sales.

In 2019, operating earnings for this segment increased 7.7 percent.
The operating margin proﬁle increased from 29.2 percent of sales
in 2017 to 30.8 percent in 2019 primarily due to sales volume
growth and various cost improvement initiatives, partially offset
by investment spending to drive the growth of new products.

In 2019, in the Medical Devices segment, product approvals from
the U.S. Food and Drug Administration (FDA) included:

• the TactiCath® contact force ablation catheter, Sensor

enabled™, which is designed to help physicians treat atrial
ﬁbrillation, a form of irregular heartbeat.

• a new, expanded indication for Abbott’s MitraClip® heart valve
repair device to treat clinically signiﬁcant secondary mitral
regurgitation (MR) as a result of underlying heart failure. This
new indication expands the number of people with MR that can
be treated with the MitraClip device.

• the next-generation version of the MitraClip device, which

includes a new leaﬂet grasping enhancement, an expanded range
of clip sizes and facilitation of procedure assessment in real time
to offer doctors further options when treating mitral valve disease.

• the Proclaim XR recharge-free neurostimulation system for

people living with chronic pain which works by using low doses
of mild electrical pulses to change pain signals as they travel
from the spinal cord to the brain.

In March 2019, Abbott announced new data from its MOMENTUM 3
clinical study, the largest randomized controlled trial to assess
outcomes in patients receiving a heart pump to treat advanced
heart failure, which demonstrated Abbott’s HeartMate 3® Left
Ventricular Assist Device (LVAD) improved survival and clinical
outcomes in this patient population. In October 2018, the FDA
approved HeartMate 3 as a destination (long-term use) therapy for
patients living with advanced heart failure.

In December 2019, Abbott received CE Mark approval in Europe
for its next-generation high-voltage implantable cardioverter
deﬁbrillator (ICD) and cardiac resynchronization therapy deﬁbril-
lator (CRT-D) devices.

In January 2020, Abbott received CE Mark approval in Europe for
its Tendyne Transcatheter Mitral Valve Implantation system for
the treatment of signiﬁcant MR in patients requiring a heart valve
replacement who are not candidates for open-heart surgery or
transcatheter mitral valve repair.

In Abbott’s worldwide diagnostics business, sales growth over the
last three years reﬂected the acquisition of Alere in October 2017,
as well as continued market penetration by the core laboratory
business in the U.S. and internationally. Alere’s results are
included in Abbott’s Diagnostic Products reportable segment from
the date of acquisition. Worldwide diagnostic sales increased

F I N A N C I A L R E V I E W

5.9 percent in 2019 and 33.6 percent in 2018, excluding the impact
of foreign exchange. Excluding the impact of the Alere acquisition,
as well as the impact of foreign exchange, sales in the Diagnostic
Products segment increased 6.5 percent in 2018. The 2019 and
2018 growth includes the continued adoption by customers of
Alinity®, which is Abbott’s integrated family of next-generation
diagnostic systems and solutions that are designed to increase
efficiency by running more tests in less space, generating test
results faster and minimizing human errors while continuing to
provide quality results.

Abbott has regulatory approvals in the U.S., Europe, China, and
other markets for the “Alinity c” and “Alinity i” instruments and
multiple assays for clinical chemistry and immunoassay diagnos-
tics, respectively. Abbott has obtained regulatory approval for the
“Alinity h” instrument for hematology in Europe and Japan. In
2019, Abbott continued the roll-out in Europe of its “Alinity s”
blood and plasma screening system and received U.S. FDA
approval for “Alinity s” and several testing assays. In 2019, Abbott
also announced that it had obtained CE Mark for its “Alinity m”
(molecular) diagnostics system and several testing assays.

In 2019, operating earnings for the Diagnostics segment increased
2.3 percent. The operating margin proﬁle decreased from
26.1 percent of sales in 2017 to 24.8 percent in 2019 primarily due
to dilution from the acquisition of Alere, the negative impact of
foreign exchange, and costs to accelerate the roll-out of Alinity,
partially offset by the continued focus on cost improvement.

In Abbott’s worldwide nutritional products business, sales over the
last three years were positively impacted by numerous new prod-
uct introductions, including the roll-out of HMO in infant formula,
that leveraged Abbott’s strong brands. Sales were also positively
affected by demographics such as an aging population and an
increasing rate of chronic disease in developed markets and the rise
of a middle class in many emerging markets. In 2019, excluding the
impact of foreign exchange, total adult nutrition sales increased
6.6 percent led by the continued growth of Ensure®, Abbott’s
market-leading complete and balanced nutrition brand, and
Glucerna®, Abbott’s market-leading diabetes-specific nutrition
brand, across several countries, partially offset by the unfavorable
impact of the discontinuation of a non-core product line in the U.S.
In 2019, excluding the impact of foreign exchange, total pediatric
nutrition sales increased 3.4 percent driven by the PediaSure® and
Pedialyte® brands in the U.S. as well as infant and toddler product
growth across several markets in Asia and Latin America, partially
offset by challenging conditions in the Greater China market.

In 2018, excluding the impact of foreign exchange, the nutritional
business experienced above-market growth in the worldwide
pediatric business driven by the Similac® and Pedialyte brands in
the U.S. as well as growth across several markets in Asia.
Worldwide, adult nutrition sales increased in 2018 led by the
growth of Ensure and Glucerna.

The Established Pharmaceutical Products segment focuses on the
sale of its products in emerging markets. Excluding the impact of
foreign exchange, Established Pharmaceutical sales increased
7.3 percent in 2019 and 7.0 percent in 2018. The sales increase in
2019 was driven by growth in several geographies including China,
Brazil, Russia and India. The sales increase in 2018 was driven by
double-digit growth in India and China. Operating margins
increased from 19.8 percent of sales in 2017 to 20.1 percent in 2019
primarily due to the continued focus on cost reduction initiatives,
partially offset by the unfavorable impact of foreign exchange.

A B B O T T 2 0 1 9 A N N U A L R E P O R T

In conjunction with the funding of the St. Jude Medical and Alere
acquisitions and the assumption of St. Jude Medical’s and Alere’s
existing debt, Abbott’s total short-term and long-term debt
increased from approximately $9.0 billion at December 31, 2015 to
$27.9 billion at December 31, 2017. In 2018, Abbott repaid approxi-
mately $8.3 billion of debt, net of borrowings, bringing its total
debt to $19.6 billion at December 31, 2018. In 2019, Abbott repaid
approximately $1.6 billion of debt, net of borrowings, bringing its
total debt to $18.1 billion at December 31, 2019.

Abbott declared dividends of $1.32 per share in 2019 compared to
$1.16 per share in 2018, an increase of approximately 14 percent.
Dividends paid totaled $2.270 billion in 2019 compared to
$1.974 billion in 2018. The year-over-year change in the amount of
dividends paid primarily reﬂects the increase in the dividend rate.
In December 2019, Abbott increased the company’s quarterly
dividend by approximately 12.5 percent to $0.36 per share from
$0.32 per share, effective with the dividend paid in February 2020.

In 2020, Abbott will focus on continuing to invest in product
development areas that provide the opportunity for strong sus-
tainable growth over the next several years. In its diagnostics
business, Abbott will continue to focus on driving market adoption
and geographic expansion of its Alinity suite of diagnostics instru-
ments. In the medical devices business, Abbott will continue to
focus on expanding its market position in various areas including
diabetes care, structural heart, electrophysiology, and heart failure.
In its nutritionals business, Abbott will continue to focus on driv-
ing growth globally and further enhancing its portfolio with the
introduction of several new science-based products. In the estab-
lished pharmaceuticals business, Abbott will continue to focus on
growing its business with the depth and breadth of its portfolio
in emerging markets.

CRITICAL ACCOUNTING POLICIES

Sales Rebates — In 2019, approximately 44 percent of Abbott’s
consolidated gross revenues were subject to various forms of
rebates and allowances that Abbott recorded as reductions of
revenues at the time of sale. Most of these rebates and allowances
in 2019 are in the Nutritional Products and Diabetes Care busi-
nesses. Abbott provides rebates to state agencies that administer
the Special Supplemental Nutrition Program for Women, Infants,
and Children (WIC), wholesalers, group purchasing organizations,
and other government agencies and private entities. Rebate
amounts are usually based upon the volume of purchases using
contractual or statutory prices for a product. Factors used in the
rebate calculations include the identiﬁcation of which products
have been sold subject to a rebate, which customer or government
agency price terms apply, and the estimated lag time between sale
and payment of a rebate. Using historical trends, adjusted for
current changes, Abbott estimates the amount of the rebate that
will be paid, and records the liability as a reduction of gross sales
when Abbott records its sale of the product. Settlement of the
rebate generally occurs from one to six months after sale. Abbott
regularly analyzes the historical rebate trends and makes adjust-
ments to reserves for changes in trends and terms of rebate
programs. Rebates and chargebacks charged against gross sales
in 2019, 2018 and 2017 amounted to approximately $3.1 billion,
$3.0 billion and $2.8 billion, respectively, or 19.1 percent,
19.0 percent and 20.5 percent of gross sales, respectively, based
on gross sales of approximately $16.3 billion, $16.0 billion and
$13.9 billion, respectively, subject to rebate. A one-percentage
point increase in the percentage of rebates to related gross sales

A B B O T T 2 0 1 9 A N N U A L R E P O R T

F I N A N C I A L R E V I E W

would decrease net sales by approximately $163 million in 2019.
Abbott considers a one-percentage point increase to be a reason-
ably likely increase in the percentage of rebates to related gross
sales. Other allowances charged against gross sales were approxi-
mately $169 million, $175 million and $166 million for cash
discounts in 2019, 2018 and 2017, respectively, and $192 million,
$191 million and $204 million for returns in 2019, 2018 and 2017,
respectively. Cash discounts are known within 15 to 30 days of
sale, and therefore can be reliably estimated. Returns can be reli-
ably estimated because Abbott’s historical returns are low, and
because sales returns terms and other sales terms have remained
relatively unchanged for several periods.

Management analyzes the adequacy of ending rebate accrual
balances each quarter. In the domestic nutritional business, man-
agement uses both internal and external data available to estimate
the accruals. In the WIC business, estimates are required for the
amount of WIC sales within each state where Abbott holds the
WIC contract. The state where the sale is made, which is the
determining factor for the applicable rebated price, is reliably
determinable. Rebated prices are based on contractually obligated
agreements generally lasting a period of two to four years. Except
for a change in contract price or a transition period before or after
a change in the supplier for the WIC business in a state, accruals
are based on historical redemption rates and data from the U.S.
Department of Agriculture (USDA) and the states submitting
rebate claims. The USDA, which administers the WIC program,
has been making its data available for many years. Management
also estimates the states’ processing lag time based on sales and
claims data. Inventory in the retail distribution channel does not
vary substantially. Management has access to several large custom-
ers’ inventory management data, which allows management to
make reliable estimates of inventory in the retail distribution chan-
nel. At December 31, 2019, Abbott had WIC business in 26 states.

Historically, adjustments to prior years’ rebate accruals have not
been material to net income. Abbott employs various techniques to
verify the accuracy of claims submitted to it, and where possible,
works with the organizations submitting claims to gain insight
into changes that might affect the rebate amounts. For government
agency programs, the calculation of a rebate involves interpreta-
tions of relevant regulations, which are subject to challenge or
change in interpretation.

Income Taxes — Abbott operates in numerous countries where its
income tax returns are subject to audits and adjustments. Because
Abbott operates globally, the nature of the audit items is often very
complex, and the objectives of the government auditors can result
in a tax on the same income in more than one country. Abbott
employs internal and external tax professionals to minimize audit
adjustment amounts where possible. In accordance with the
accounting rules relating to the measurement of tax contingencies,
in order to recognize an uncertain tax beneﬁt, the taxpayer must
be more likely than not of sustaining the position, and the mea-
surement of the beneﬁt is calculated as the largest amount that is
more than 50 percent likely to be realized upon resolution of the
beneﬁt. Application of these rules requires a signiﬁcant amount of
judgment. In the U.S., Abbott’s federal income tax returns through
2016 are settled except for the federal income tax returns of the
former Alere consolidated group which are settled through 2015
and the former St. Jude Medical consolidated group which are
settled through 2013. Undistributed foreign earnings remain
indeﬁnitely reinvested in foreign operations. Determining the
amount of unrecognized deferred tax liability related to any

remaining undistributed foreign earnings not subject to the
transition tax and additional outside basis difference in its foreign
entities is not practicable.

Pension and Post-Employment Beneﬁts — Abbott offers pension
beneﬁts and post-employment health care to many of its employ-
ees. Abbott engages outside actuaries to assist in the determination
of the obligations and costs under these programs. Abbott must
develop long-term assumptions, the most signiﬁcant of which are
the health care cost trend rates, discount rates and the expected
return on plan assets. The discount rates used to measure liabili-
ties were determined based on high-quality ﬁxed income
securities that match the duration of the expected retiree beneﬁts.
The health care cost trend rates represent Abbott’s expected
annual rates of change in the cost of health care beneﬁts and are a
forward projection of health care costs as of the measurement
date. A difference between the assumed rates and the actual rates,
which will not be known for years, can be signiﬁcant in relation to
the obligations and the annual cost recorded for these programs.
Low interest rates have signiﬁcantly increased actuarial losses for
these plans. At December 31, 2019, pretax net actuarial losses and
prior service costs and (credits) recognized in Accumulated other
comprehensive income (loss) for Abbott’s deﬁned beneﬁt plans
and medical and dental plans were losses of $4.1 billion and
$434 million, respectively. Actuarial losses and gains are amor-
tized over the remaining service attribution periods of the
employees under the corridor method, in accordance with the
rules for accounting for post-employment beneﬁts. Differences
between the expected long-term return on plan assets and the
actual annual return are amortized over a five-year period. Note 15
to the consolidated ﬁnancial statements describes the impact of a
one-percentage point change in the health care cost trend rate;
however, there can be no certainty that a change would be limited
to only one percentage point.

Valuation of Intangible Assets — Abbott has acquired and continues
to acquire signiﬁcant intangible assets that Abbott records at fair
value at the acquisition date. Transactions involving the purchase
or sale of intangible assets occur with some frequency between
companies in the health care ﬁeld and valuations are usually based
on a discounted cash ﬂow analysis. The discounted cash ﬂow
model requires assumptions about the timing and amount of future
net cash ﬂows, risk, cost of capital, terminal values and market
participants. Each of these factors can signiﬁcantly affect the value
of the intangible asset. Abbott engages independent valuation
experts who review Abbott’s critical assumptions and calculations
for acquisitions of signiﬁcant intangibles. Abbott reviews deﬁnite-
lived intangible assets for impairment each quarter using an
undiscounted net cash ﬂows approach. If the undiscounted cash
ﬂows of an intangible asset are less than the carrying value of an
intangible asset, the intangible asset is written down to its fair
value, which is usually the discounted cash ﬂow amount. Where
cash ﬂows cannot be identiﬁed for an individual asset, the review is
applied at the lowest group level for which cash ﬂows are identiﬁ-
able. Goodwill and indefinite-lived intangible assets, which relate
to in-process research and development acquired in a business
combination, are reviewed for impairment annually or when an
event that could result in impairment occurs. At December 31, 2019,
goodwill amounted to $23.2 billion and net intangibles amounted
to $17.0 billion. Amortization expense in continuing operations for
intangible assets amounted to $1.9 billion in 2019, $2.2 billion in
2018 and $2.0 billion in 2017. There was no signiﬁcant reduction
of goodwill relating to impairments in 2019, 2018 and 2017.

F I N A N C I A L R E V I E W

Litigation — Abbott accounts for litigation losses in accordance
with Financial Accounting Standards Board (FASB) Accounting
Standards Codiﬁcation (ASC) No. 450, “Contingencies.” Under
ASC No. 450, loss contingency provisions are recorded for proba-
ble losses at management’s best estimate of a loss, or when a best
estimate cannot be made, a minimum loss contingency amount is
recorded. These estimates are often initially developed substan-
tially earlier than the ultimate loss is known, and the estimates are
reﬁned each accounting period as additional information becomes
known. Accordingly, Abbott is often initially unable to develop a
best estimate of loss, and therefore the minimum amount, which
could be zero, is recorded. As information becomes known, either
the minimum loss amount is increased, resulting in additional loss
provisions, or a best estimate can be made, also resulting in addi-
tional loss provisions. Occasionally, a best estimate amount is
changed to a lower amount when events result in an expectation
of a more favorable outcome than previously expected. Abbott
estimates the range of possible loss to be from approximately
$95 million to $130 million for its legal proceedings and environ-
mental exposures. Accruals of approximately $110 million have
been recorded at December 31, 2019 for these proceedings and
exposures. These accruals represent management’s best estimate
of probable loss, as deﬁned by FASB ASC No. 450, “Contingencies.”

RESULTS OF OPERATIONS

SALES

The following table details the components of sales growth by
reportable segment for the last two years:

Components of % Change

Total %
Change

Business
Acquisitions/
Divestitures

Price Volume Exchange

Total Net Sales
2019 vs. 2018
2018 vs. 2017

Total U.S.
2019 vs. 2018
2018 vs. 2017

Total International
2019 vs. 2018
2018 vs. 2017

4.3
11.6

5.2
12.1

3.9
11.4

—
4.9

—
8.0

—
3.2

Established Pharmaceutical Products Segment
2019 vs. 2018
2018 vs. 2017

1.4
3.2

—
—

Nutritional Products Segment
2019 vs. 2018
2018 vs. 2017

2.5
4.4

Diagnostic Products Segment
2019 vs. 2018
2018 vs. 2017

2.9
33.5

Medical Devices Segment
2019 vs. 2018
2018 vs. 2017

7.6
10.1

—
—

—
27.1

—
—

0.2
(1.0)

(0.4)
(1.1)

0.5
(1.0)

3.0
2.2

0.9
0.2

(0.5)
(2.0)

(0.9)
(2.7)

7.3
8.1

5.6
5.2

8.3
9.7

4.3
4.8

3.9
4.7

6.4
8.5

11.4
11.7

(3.2)
(0.4)

—
—

(4.9)
(0.5)

(5.9)
(3.8)

(2.3)
(0.5)

(3.0)
(0.1)

(2.9)
1.1

Note: Diabetes Care sales, which had previously been reported in Other, are now included in
the Medical Devices segment. Historic periods have been adjusted to reﬂect this change.

A B B O T T 2 0 1 9 A N N U A L R E P O R T

The increase in Total Net Sales in 2019 reﬂects volume growth
across all of Abbott’s segments. The increase in Total Net Sales in
2018 reﬂects the acquisition of Alere, as well as volume growth
across all of Abbott’s segments. The price declines related to the
Medical Devices segment in 2019 and 2018 primarily reﬂect pric-
ing pressures on drug eluting stents (DES) as a result of market
competition in the U.S. and other major markets.

A comparison of signiﬁcant product and product group sales is as
follows. Percent changes are versus the prior year and are based
on unrounded numbers.

(dollars in millions)
Total Established
Pharmaceuticals —
Key Emerging
Markets
Other

Nutritionals —
International
Pediatric
Nutritionals
U.S. Pediatric
Nutritionals
International Adult
Nutritionals
U.S. Adult
Nutritionals

Diagnostics —

Core Laboratory
Molecular
Point of Care
Rapid Diagnostics

Medical Devices —

Rhythm
Management
Electrophysiology
Heart Failure
Vascular (a)
Structural Heart
Neuromodulation
Diabetes Care

(a) Vascular
Product Lines:
Coronary and
Endovascular

2019

2018

Total
Change

Impact of
Exchange

Total
Change
Excl.
Exchange

$3,392
1,094

$3,363
1,059

1%
3

(7) %
(3)

8%
6

2,282

2,254

1,879

1,843

2,017

1,900

1,231

1,232

4,656
442
561
2,054

2,144
1,721
769
2,850
1,400
831
2,524

4,386
484
553
2,072

2,198
1,561
646
2,929
1,239
864
1,933

—

6
(9)
2
(1)

(3)
10
19
(3)
13
(4)
31

2,740

2,778

(1)

(4))

—

(5)

—

(4)
(3)
—
(2)

(3)
(3)
(1)
(3)
(3)
(2)
(5)

(2)

—

10
(6)
2
1

—
13
20
—
16
(2)
36

A B B O T T 2 0 1 9 A N N U A L R E P O R T

F I N A N C I A L R E V I E W

(dollars in millions)
Total Established
Pharmaceuticals —
Key Emerging
Markets
Other

Nutritionals —
International
Pediatric
Nutritionals
U.S. Pediatric
Nutritionals
International Adult
Nutritionals
U.S. Adult
Nutritionals

Diagnostics —

Core Laboratory
Molecular
Point of Care
Rapid Diagnostics

Medical Devices —

Rhythm
Management
Electrophysiology
Heart Failure
Vascular (a)
Structural Heart
Neuromodulation
Diabetes Care

(a) Vascular
Product Lines:
Coronary and
Endovascular

2018

2017

Total
Change

Impact of
Exchange

Total
Change
Excl.
Exchange

$3,363
1,059

$3,307
980

2%
8

(5) %
2

7%
6

2,254

2,112

1,843

1,777

1,900

1,782

1,232

1,254

4,386
484
553
2,072

2,198
1,561
646
2,929
1,239
864
1,933

4,063
463
550
540

2,132
1,353
643
2,892
1,083
808
1,414

(2)

8
5
—

—

(1)

—

—
1
—

(2)

8
4
—

n/m

3
15
—
1
14
7
37

1
1
—
1
1
—
2

2
14
—
—
13
7
35

2,778

2,727

n/m = percent change is not meaningful.

Note: Insertable Cardiac Monitor (ICM) sales, which had previously been reported in

Electrophysiology, are now included in Rhythm Management. Historic periods have
been adjusted to reﬂect this change.

In order to compute results excluding the impact of exchange rates, current year U.S.
dollar sales are multiplied or divided, as appropriate, by the current year average foreign
exchange rates and then those amounts are multiplied or divided, as appropriate, by the
prior year average foreign exchange rates.

Total Established Pharmaceutical Products sales increased
7.3 percent in 2019 and 7.0 percent in 2018, excluding the unfavor-
able impact of foreign exchange. The Established Pharmaceutical
Products segment is focused on several key emerging markets
including India, Russia, China and Brazil. Excluding the impact
of foreign exchange, total sales in these key emerging markets
increased 7.9 percent in 2019 due to growth in several geographies
including China, Brazil, Russia and India. In 2018, excluding the
impact of foreign exchange, total sales in these key emerging
markets increased 7.4 percent as sales in India and China experi-
enced double-digit growth. Excluding the impact of foreign
exchange, sales in Established Pharmaceuticals’ other emerging
markets increased 5.6 percent in 2019 and 5.8 percent in 2018.

Total Nutritional Products sales increased 4.8 percent in 2019 and
4.9 percent in 2018, excluding the impact of foreign exchange. In
2019, the 4.6 percent increase in International Pediatric Nutritional
sales, excluding the effect of foreign exchange, was driven by
growth across Abbott’s portfolio, including Similac and PediaSure in
various countries in Asia and Latin America and Pedialyte in Latin
America. This growth was partially offset by challenging market
dynamics in the Greater China infant category. The 7.2 percent
increase in 2018 International Pediatric Nutritional sales, excluding
the effect of foreign exchange, was driven primarily by growth in
Asia and Latin America. In the U.S. Pediatric Nutritional business,
the 1.9 percent increase in 2019 sales reﬂects growth in Pedialyte
and PediaSure. 2018 U.S. Pediatric Nutritional sales increased
3.7 percent primarily due to above-market performance in Abbott’s
infant and toddler brands, including Similac and Pedialyte.

In the International Adult Nutritional business, the 10.9 percent
increase in 2019 sales, excluding the effect of foreign exchange,
reﬂects continued growth of Ensure, Abbott’s market-leading
complete and balanced nutrition brand, and Glucerna, Abbott’s
market-leading diabetes-specific nutrition brand in several coun-
tries. In 2018, the 8.0 percent sales increase in the International
Adult Nutritional business, excluding the effect of foreign
exchange, was led by growth of Ensure and Glucerna in Asia
and Latin America. In 2019, U.S. Adult Nutritional sales were
unchanged from 2018 due to the impact of Abbott’s discontinua-
tion of a non-core product line during the third quarter of 2018
that was offset by growth in other areas of the business. In 2018,
the 1.7 percent decrease in U.S. Adult Nutritional was also primar-
ily driven by the wind down of this non-core product line.

Total Diagnostic Products sales increased 5.9 percent in 2019
and 33.6 percent in 2018, excluding the impact of foreign
exchange. The sales increase in 2019 was driven by above-market
growth in Core Laboratory in the U.S. and internationally, where
Abbott is achieving continued adoption of its Alinity family of
diagnostic instruments. In July 2019, Abbott received U.S. FDA
approval for its “Alinity s” blood and plasma screening system and
several testing assays. The 6.3 percent decrease in 2019 Molecular
sales, excluding the effect of foreign exchange, reﬂects the nega-
tive impact of lower non-governmental organization purchases in
Africa. In March 2019, Abbott announced that it obtained CE Mark
for its “Alinity m” molecular diagnostics system and several testing
assays. In Rapid Diagnostics, sales growth in 2019 in various areas,
including infectious disease testing in developed markets and
cardio-metabolic testing, was mostly offset by lower than expected
infectious disease testing sales in Africa.

In 2018, the increase in total Diagnostic Products sales included
the acquisition of Alere, which was completed on October 3, 2017.
Excluding the impact of the acquisition, as well as the impact of
foreign exchange, sales in the Diagnostic Products segment in
2018 increased 6.5 percent. The 2018 increase in sales was primar-
ily driven by above-market growth in Core Laboratory in the U.S.
and internationally. In 2018, Abbott accelerated the roll out of its
Alinity systems for Core Laboratory in Europe.

Excluding the effect of foreign exchange, total Medical Devices
sales grew 10.5 percent and 9.0 percent in 2019 and 2018, respec-
tively. The 2019 sales increase was driven by double-digit growth
in Diabetes Care, Structural Heart, Electrophysiology and Heart
Failure. The 2018 sales increase was driven by growth in several
areas, including double-digit growth in Diabetes Care,
Electrophysiology and Structural Heart.

F I N A N C I A L R E V I E W

The 2019 and 2018 growth in Diabetes Care revenue was driven
by continued growth of FreeStyle Libre, Abbott’s continuous
glucose monitoring system, internationally and in the U.S. In 2019,
FreeStyle Libre sales totaled $1.842 billion, which reﬂected a
69.8 percent increase over 2018 sales, excluding the effect of for-
eign exchange. In July 2018, Abbott received U.S. FDA approval
of its FreeStyle Libre 14 day sensor, making it the longest lasting
wearable glucose sensor available. In October 2018, Abbott
obtained CE Mark for its FreeStyle Libre 2 system, a next-
generation product offering with optional real-time alarms.

The 2019 growth in Structural Heart revenue was broad-based
across several areas of the business, including MitraClip, Abbott’s
market-leading device for the minimally invasive treatment of
mitral regurgitation (MR), a leaky heart valve. During the ﬁrst
quarter of 2019, Abbott received U.S. FDA approval for a new,
expanded indication for MitraClip to treat clinically signiﬁcant
secondary MR as a result of underlying heart failure. This new
indication expands the number of people with MR that can be
treated with the MitraClip device. In July 2019, Abbott received
U.S. FDA approval of the next generation of its MitraClip device,
which includes a new leaﬂet grasping enhancement, an expanded
range of clip sizes and facilitation of procedure assessment in real
time to offer doctors further options when treating mitral valve
disease. In 2018, growth in Structural Heart was driven by several
product areas including MitraClip and the AMPLATZER® PFO
occluder, a device designed to close a hole-like opening in the
heart. In September 2018, Abbott announced positive clinical
results from its COAPT study, which demonstrated that MitraClip
improved survival and clinical outcomes for select patients with
functional MR. In September 2019, Abbott announced additional
data from its COAPT trial that shows that MitraClip is projected
to increase life expectancy and quality of life compared to
guideline-directed medical therapy alone in heart failure patients
with secondary MR.

In 2019, the growth in Electrophysiology revenue reﬂects higher
sales of cardiac diagnostic and ablation catheters in both the U.S.
and internationally. In January 2019, Abbott announced U.S. FDA
approval of its TactiCath® contact force ablation catheter, Sensor
Enabled™, which is designed to help physicians treat atrial ﬁbril-
lation, a form of irregular heartbeat. In 2018, the growth in
Electrophysiology was led by higher sales in cardiac mapping and
ablation catheters. In May 2018, Abbott announced U.S. FDA
clearance of the Advisor HD Grid Mapping Catheter, Sensor
Enabled, which creates detailed maps of the heart and expands
Abbott’s electrophysiology product portfolio.

In 2019, the growth in Heart Failure revenue was driven by
rapid market adoption in the U.S. of Abbott’s HeartMate 3® Left
Ventricular Assist Device (LVAD) following FDA approval in
October 2018 as a destination (long-term use) therapy for people
living with advanced heart failure as well as higher sales of
Abbott’s CardioMEMS® heart failure monitoring system. In
March 2019, Abbott announced new data from its MOMENTUM 3
clinical study, the largest randomized controlled trial to assess
outcomes in patients receiving a heart pump to treat advanced
heart failure, which demonstrated HeartMate 3 improved survival
and clinical outcomes in this patient population. In 2018, growth
in international Heart Failure sales was offset by lower U.S. sales.

A B B O T T 2 0 1 9 A N N U A L R E P O R T

In Vascular, excluding the effect of foreign exchange, sales in 2019
were ﬂat as the 1.3 percent increase in coronary and endovascular
product sales, which includes drug-eluting stents, balloon cathe-
ters, guidewires, vascular imaging/diagnostics products, vessel
closure, carotid and other coronary and peripheral products, was
offset by reductions in royalty and contract manufacturing reve-
nue. In 2018, growth in Vascular imaging, vessel closure and other
endovascular revenues was partially offset by lower DES sales due
to lower U.S. market share and price erosion in various markets.
During the second quarter of 2018, Abbott received approval from
the U.S. FDA for the XIENCE Sierra Drug Eluting Stent System,
the newest generation of its coronary stent system. During the
second quarter of 2018, the XIENCE Sierra Drug Eluting Stent
System also received national reimbursement in Japan to treat
people with coronary artery disease.

In Rhythm Management, higher 2019 international sales, exclud-
ing the effect of foreign exchange, were offset by a 4.4 percent
decrease in U.S. revenue. In 2018, market share gains in the new
patient segment for Rhythm Management and the U.S. launch of
Abbott’s Conﬁrm Rx® Insertable Cardiac Monitor (ICM), the
world’s ﬁrst and only smartphone-compatible ICM designed to
help physicians remotely identify cardiac arrhythmias, were par-
tially offset by replacement cycle dynamics.

In 2019, the 2.4 percent decline in Neuromodulation sales, exclud-
ing the effect of foreign exchange, reﬂects a 4.2 percent decline in
U.S. sales. In 2018, the growth in Neuromodulation reﬂects higher
revenue for various products for the treatment of chronic pain and
movement disorders.

Abbott has periodically sold product rights to non-strategic prod-
ucts and has recorded the related gains in net sales in accordance
with Abbott’s revenue recognition policies as discussed in Note 1
to the consolidated ﬁnancial statements. Related net sales were
not signiﬁcant in 2019, 2018 and 2017.

The expiration of licenses and patent protection can affect the
future revenues and operating income of Abbott. There are no
signiﬁcant patent or license expirations in the next three years
that are expected to materially affect Abbott.

In April 2017, Abbott received a warning letter from the U.S. FDA
related to its manufacturing facility in Sylmar, CA which was
acquired by Abbott on January 4, 2017 as part of the acquisition
of St. Jude Medical. This facility manufactures implantable
cardioverter deﬁbrillators, cardiac resynchronization therapy
deﬁbrillators, and monitors. The warning letter relates to the
FDA’s observations from an inspection of this facility. Abbott has
prepared a comprehensive plan of corrective actions which has
been provided to the FDA. Abbott is continuing to execute the
corrective actions in the plan.

OPERATING EARNINGS

Gross proﬁt margins were 52.5 percent of net sales in 2019,
51.3 percent in 2018 and 47.5 percent in 2017. In 2019, the increase
primarily reﬂects lower intangible amortization expense and
lower integration and restructuring costs. In 2018, the increase
primarily reﬂects lower inventory step-up amortization related to
the St. Jude Medical and Alere acquisitions and margin improve-
ments in various businesses.

A B B O T T 2 0 1 9 A N N U A L R E P O R T

F I N A N C I A L R E V I E W

Research and development (R&D) expense was $2.4 billion in
2019, $2.3 billion in 2018, and $2.3 billion in 2017 and represented
a 6.1 percent increase in 2019, and a 1.7 percent increase in 2018.
The increase in R&D spending in 2019 primarily reﬂects higher
spending on the acquisition of R&D assets which were immedi-
ately expensed. In 2019, spending on R&D assets totaled
$116 million and included the acquisition of an R&D asset valued
at $102 million that was acquired in conjunction with the acquisi-
tion of Cephea Valve Technologies, Inc. In 2018, Abbott acquired
R&D assets valued at $47 million which were also immediately
expensed. The 2019 increase in R&D expense was also driven by
higher R&D spending in various businesses, primarily in Medical
Devices, partially offset by the favorable effect of foreign exchange.
The 2018 increase in R&D expenses was primarily due to higher
spending on various projects, partially offset by lower restructur-
ing and integration costs. In 2019, R&D expenditures totaled
$1.2 billion for the Medical Devices segment, $553 million for the
Diagnostic Products segment, $193 million for the Nutritional
Products segment and $185 million for the Established
Pharmaceutical Products segment.

Selling, general and administrative (SG&A) expenses were basi-
cally ﬂat in 2019 and increased 6.1 percent in 2018 versus the
respective prior year. In 2019, the favorable effect of foreign
exchange and lower acquisition-related integration costs offset
higher selling and marketing costs to drive continued growth
across various businesses. The 2018 increase was primarily due to
the impact of the acquisition of the Alere business in October 2017,
as well as higher spending to drive continued growth and market
expansion in various businesses, partially offset by lower
acquisition-related expenses.

BUSINESS ACQUISITIONS

On January 4, 2017, Abbott completed the acquisition of St. Jude
Medical, a global medical device manufacturer, for approximately
$23.6 billion, including approximately $13.6 billion in cash and
approximately $10 billion in Abbott common shares, which repre-
sented approximately 254 million shares of Abbott common
stock, based on Abbott’s closing stock price on the acquisition
date. The cash portion of the acquisition was funded through a
combination of medium and long-term debt issued in November
2016 and a $2.0 billion 120-day senior unsecured bridge term
loan facility which was subsequently repaid. As part of the acqui-
sition, approximately $5.9 billion of St. Jude Medical’s debt was
assumed, repaid or reﬁnanced by Abbott. The acquisition provides
expanded opportunities for future growth and is an important
part of the company’s ongoing effort to develop a strong, diverse
portfolio of devices, diagnostics, nutritionals and branded generic
pharmaceuticals. The combined business competes in nearly
every area of the cardiovascular device market, as well as in the
neuromodulation market.

In 2016, Abbott and St. Jude Medical agreed to sell certain busi-
nesses to Terumo Corporation for approximately $1.12 billion. The
sale included the St. Jude Medical Angio-Seal™ and Femoseal™
vascular closure and Abbott’s Vado® Steerable Sheath businesses.
The sale closed on January 20, 2017 and no gain or loss was
recorded in the Consolidated Statement of Earnings.

In the third quarter of 2017, Alere entered into agreements to sell
its Triage MeterPro cardiovascular and toxicology business and
the assets and liabilities related to its B-type Natriuretic Peptide
assay business run on Beckman Coulter analyzers to Quidel
Corporation (Quidel). The transactions with Quidel reﬂect a total
purchase price of $400 million payable at the close of the transac-
tion, $240 million payable in six annual installments beginning
approximately six months after the close of the transaction, and
contingent consideration with a maximum value of $40 million.
In the third quarter of 2017, Alere entered into an agreement with
Siemens Diagnostics Holding II B.V. (Siemens) to sell its subsidi-
ary, Epocal Inc., for approximately $200 million payable at the
close of the transaction. Alere agreed to divest these businesses in
connection with the review by the Federal Trade Commission and
the European Commission of Abbott’s agreement to acquire Alere.
The sale to Quidel closed on October 6, 2017, and the sale to
Siemens closed on October 31, 2017. No gain or loss on these sales
was recorded in the Consolidated Statement of Earnings.

On July 17, 2017, Abbott commenced a tender offer to purchase
for cash the 1.77 million outstanding shares of Alere’s Series B
Convertible Perpetual Preferred Stock at a price of $402 per
share, plus accrued but unpaid dividends to, but not including,
the settlement date of the tender offer. This tender offer was
subject to the satisfaction of certain conditions, including
Abbott’s acquisition of Alere and upon there being validly ten-
dered (and not properly withdrawn) at the expiration date of the
tender offer that number of shares of Preferred Stock that equaled
at least a majority of the Preferred Stock issued and outstanding
at the expiration of the tender offer. All conditions to the offer
were satisﬁed and Abbott accepted for payment the 1.748 million
shares of Preferred Stock that were validly tendered (and not
properly withdrawn). The remaining shares were cashed out for
an amount equal to the $400.00 per share liquidation preference
of such shares, plus accrued but unpaid dividends, without inter-
est. Payment for all of the shares of Preferred Stock was made in
the fourth quarter of 2017.

RESTRUCTURINGS

F I N A N C I A L R E V I E W

2019 and $10 million in 2018 are recorded in Research and devel-
opment, and approximately $49 million in 2019, $37 million in
2018 and $182 million in 2017 are recorded in Selling, general and
administrative expense. Abbott also assumed restructuring liabili-
ties of approximately $23 million as part of the St Jude Medical
and Alere acquisitions.

From 2016 to 2019, Abbott management approved plans to stream-
line operations in order to reduce costs and improve efficiencies
in various Abbott businesses including the nutritional, established
pharmaceuticals and vascular businesses. Abbott recorded
employee related severance and other charges of approximately
$66 million in 2019, $28 million in 2018 and $120 million in 2017.
Approximately $16 million in 2019, $10 million in 2018 and
$7 million in 2017 are recorded in Cost of products sold, approxi-
mately $28 million in 2019, $2 million in 2018 and $77 million in
2017 are recorded in Research and development, and approxi-
mately $22 million in 2019, $16 million in 2018 and $36 million in
2017 are recorded in Selling, general and administrative expense.
Additional charges of approximately $2 million in 2017 were
recorded, primarily for accelerated depreciation.

INTEREST EXPENSE AND INTEREST (INCOME)

Interest expense decreased $156 million in 2019 due to the
favorable impact of the euro debt ﬁnancing in September 2018,
as well as the repayment of debt in 2018 and the ﬁrst quarter of
2019. In 2018, interest expense decreased primarily due to the net
repayment of $8.3 billion of debt, partially offset by lower interest
income due to lower cash balances. In 2017, interest expense
increased primarily due to the $15.1 billion of debt issued in
November of 2016 related to the ﬁnancing of the St. Jude Medical
acquisition which closed on January 4, 2017.

DEBT EXTINGUISHMENT COSTS

On December 19, 2019, Abbott redeemed the $2.850 billion princi-
pal amount of its 2.9% Notes due 2021. Abbott incurred a charge
of $63 million related to the early repayment of this debt.

On October 28, 2018, Abbott redeemed approximately $4 billion
of debt, which included $750 million principal amount of its
2.00% Notes due 2020; $597 million principal amount of its
4.125% Notes due 2020; $900 million principal amount of its
3.25% Notes due 2023; $450 million principal amount of its 3.4%
Notes due 2023; and $1.300 billion principal amount of its 3.75%
Notes due 2026. Abbott incurred a net charge of $153 million
related to the early repayment of this debt and the unwinding of
related interest rate swaps.

On March 22, 2018, Abbott redeemed all of the $947 million prin-
cipal amount of its 5.125% Notes due 2019, as well as $1.055 billion
of the $2.850 billion principal amount of its 2.35% Notes due 2019.
Abbott incurred a net charge of $14 million related to the early
repayment of this debt.

OTHER (INCOME) EXPENSE, NET

Other (income) expense, net, for 2019, 2018 and 2017 includes
approximately $225 million, $160 million, and $160 million of
income in each year, respectively, related to the non-service cost
components of the net periodic beneﬁt costs associated with the
pension and post-retirement medical plans. 2017 includes a pre-
tax gain of $1.163 billion on the sale of AMO to Johnson & Johnson.

A B B O T T 2 0 1 9 A N N U A L R E P O R T

TAXES ON EARNINGS

The income tax rates on earnings from continuing operations were
9.6 percent in 2019, 18.8 percent in 2018 and 84.2 percent in 2017.

The Tax Cuts and Jobs Act (TCJA) was enacted in the U.S. on
December 22, 2017. The TCJA reduces the U.S. federal corporate
tax rate from 35% to 21%, requires companies to pay a one-time
transition tax on earnings of certain foreign subsidiaries that
were previously tax deferred and creates new taxes on certain
foreign sourced earnings. As of December 31, 2018, Abbott com-
pleted its accounting for all of the enactment date income tax
effects of the TCJA.

Effective for ﬁscal years beginning after December 31, 2017, the
TCJA subjects taxpayers to tax on global intangible low-taxed
income (GILTI) earned by certain foreign subsidiaries. In January
2018, the FASB staff provided guidance that an entity may make an
accounting policy election to either recognize deferred taxes
related to items that will give rise to GILTI in future years or pro-
vide for the tax expense related to GILTI in the year that the tax
is incurred. Abbott has elected to treat the GILTI tax as a period
expense and provide for the tax in the year that the tax is incurred.

The one-time transition tax is based on Abbott’s total post-1986
earnings and proﬁts (E&P) that were previously deferred from U.S.
income taxes. The tax computation also requires the determina-
tion of the amount of post-1986 E&P considered held in cash and
other speciﬁed assets. As of December 31, 2019, the remaining
balance of Abbott’s transition tax obligation is approximately
$1.33 billion, which will be paid over the next seven years as
allowed by the TCJA.

A B B O T T 2 0 1 9 A N N U A L R E P O R T

F I N A N C I A L R E V I E W

on earnings from continuing operations include $435 million of
tax expense related to the gain on the sale of the AMO business.

Depending upon the product, the phases of development
may include:

Exclusive of these discrete items, tax expense was favorably
impacted by lower tax rates and tax exemptions on foreign income
primarily derived from operations in Puerto Rico, Switzerland,
Ireland, the Netherlands, Costa Rica, and Singapore. Abbott bene-
ﬁts from a combination of favorable statutory tax rules, tax rulings,
grants, and exemptions in these tax jurisdictions. See Note 16 to
the consolidated ﬁnancial statements for a full reconciliation of
the effective tax rate to the U.S. federal statutory rate.

DISCONTINUED OPERATIONS

Earnings from discontinued operations, net of tax of $34 million
and $124 million, in 2018 and 2017, respectively, were driven
primarily by the recognition of net tax beneﬁts as a result of the
resolution of various tax positions pertaining to AbbVie’s opera-
tions for years prior to the separation. On January 1, 2013, Abbott
completed the separation of AbbVie Inc. (AbbVie), which was
formed to hold Abbott’s research-based proprietary pharmaceuti-
cals business. 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.
AbbVie generally will be liable for all other taxes attributable to
its business.

BUSINESS DISPOSITION

RESEARCH AND DEVELOPMENT PROGRAMS

Abbott currently has numerous pharmaceutical, medical devices,
diagnostic and nutritional products in development.

RESEARCH AND DEVELOPMENT PROCESS

In the Established Pharmaceuticals segment, the development
process focuses on the geographic expansion and continuous
improvement of the segment’s existing products to provide bene-
ﬁts to patients and customers. As Established Pharmaceuticals
does not actively pursue primary research, development usually
begins with work on existing products or after the acquisition
of an advanced stage licensing opportunity.

• Drug product development.

• Phase I bioequivalence studies to compare a future Established
Pharmaceutical’s brand with an already marketed compound
with the same active pharmaceutical ingredient (API).

• Phase II studies to test the efficacy of beneﬁts in a small group

of patients.

• Phase III studies to broaden the testing to a wider population

that reﬂects the actual medical use.

• Phase IV and other post-marketing studies to obtain new clini-
cal use data on existing products within approved indications.

The speciﬁc requirements (e.g., scope of clinical trials) for
obtaining regulatory approval vary across different countries and
geographic regions. The process may range from one year for a
bioequivalence study project to 6 or more years for complex for-
mulations, new indications, or geographic expansion in speciﬁc
countries, such as China.

In the Diagnostics segment, the phases of the research and devel-
opment process include:

• Discovery which focuses on identiﬁcation of a product that
will address a speciﬁc therapeutic area, platform, or unmet
clinical need.

• Concept/Feasibility during which the materials and manufac-
turing processes are evaluated, testing may include product
characterization and analysis is performed to conﬁrm
clinical utility.

• Development during which extensive testing is performed to
demonstrate that the product meets speciﬁed design require-
ments and that the design speciﬁcations conform to user needs
and intended uses.

The regulatory requirements for diagnostic products vary across
different countries and geographic regions. In the U.S., the FDA
classiﬁes diagnostic products into classes (I, II, or III) and the
classiﬁcation determines the regulatory process for approval.
While the Diagnostics segment has products in all three classes,
the vast majority of its products are categorized as Class I or
Class II. Submission of a separate regulatory ﬁling is not required
for Class I products. Class II devices typically require pre-market
notiﬁcation to the FDA through a regulatory ﬁling known as a
510(k) submission. Most Class III products are subject to the
FDA’s Premarket Approval (PMA) requirements. Other Class III
products, such as those used to screen blood, require the submis-
sion and approval of a Biological License Application (BLA).

In the European Union (EU), diagnostic products are also catego-
rized into different categories and the regulatory process, which
has been governed by the European In Vitro Diagnostic Medical
Device Directive, depends upon the category, with certain product
categories requiring review and approval by an independent com-
pany, known as a Notiﬁed Body, before the manufacturer can affix
a CE mark to the product to declare conformity to the Directive.

F I N A N C I A L R E V I E W

Other products only require a self-certification process. In the
second quarter of 2017, the EU adopted the new In Vitro
Diagnostic Regulation (IVDR) which replaces the existing direc-
tive in the EU for in vitro diagnostic products. The IVDR will
apply after a five-year transition period and imposes additional
premarket and postmarket regulatory requirements on manufac-
turers of such products.

In the Medical Devices segment, the research and development
process begins with research on a speciﬁc technology that is
evaluated for feasibility and commercial viability. If the research
program passes that hurdle, it moves forward into development.
The development process includes evaluation, selection and quali-
ﬁcation of a product design, completion of applicable clinical trials
to test the product’s safety and efficacy, and validation of the
manufacturing process to demonstrate its repeatability and ability
to consistently meet pre-determined speciﬁcations.

Similar to the diagnostic products discussed above, in the U.S.,
medical devices are classiﬁed as Class I, II, or III. Most of Abbott’s
medical device products are classiﬁed as Class II devices that
follow the 510(k) regulatory process or Class III devices that are
subject to the PMA process.

In the EU, medical devices are also categorized into different
classes and the regulatory process, which has been governed
by the European Medical Device Directive and the Active
Implantable Medical Device Directive, varies by class. Each prod-
uct must bear a CE mark to show compliance with the Directive.
In the second quarter of 2017, the EU adopted the new Medical
Devices Regulation (MDR) which replaces the existing directives
in the EU for medical devices. The MDR will apply after a three to
five-year (depending on product classiﬁcation) transition period
and imposes additional premarket and postmarket regulatory
requirements on manufacturers of such products.

Some products require submission of a design dossier to the
appropriate regulatory authority for review and approval prior to
CE marking of the device. For other products, the company is
required to prepare a technical ﬁle which includes testing results
and clinical evaluations but can self-certify its ability to apply the
CE mark to the product. Outside the U.S. and the EU, the regula-
tory requirements vary across different countries and regions.

After approval and commercial launch of some medical devices,
post-market trials may be conducted either due to a conditional
requirement of the regulatory market approval or with the objec-
tive of proving product superiority.

In the Nutritional segment, the research and development process
generally focuses on identifying and developing ingredients and
products that address the nutritional needs of particular popula-
tions (e.g., infants and adults) or patients (e.g., people with
diabetes). Depending upon the country and/or region, if claims
regarding a product’s efficacy will be made, clinical studies typi-
cally must be conducted.

In the U.S., the FDA requires that it be notiﬁed of proposed new
formulations and formulation or packaging changes related to
infant formula products. Prior to the launch of an infant formula
or product packaging change, the company is required to obtain
the FDA’s conﬁrmation that it has no objections to the proposed
product or packaging. For other nutritional products, notiﬁcation
or pre-approval from the FDA is not required unless the product

A B B O T T 2 0 1 9 A N N U A L R E P O R T

includes a new food additive. In some countries, regulatory
approval may be required for certain nutritional products, includ-
ing infant formula and medical nutritional products.

AREAS OF FOCUS

In 2020 and beyond, Abbott’s signiﬁcant areas of therapeutic
focus will include the following:

Established Pharmaceuticals — Abbott focuses on building country-
specific portfolios made up of high-quality medicines that meet the
needs of people in emerging markets. Over the next several years,
Abbott plans to expand its product portfolio in key therapeutic
areas with the aim of being among the ﬁrst to launch new off-
patent and differentiated medicines. In addition, Abbott continues
to expand existing brands into new markets, implement product
enhancements that provide value to patients and acquire strategic
products and technology through licensing activities. Abbott is also
actively working on the further development of several key brands
such as Creon™, Duphaston™, Duphalac™ and Inﬂuvac™.
Depending on the product, the activities focus on development of
new data, markets, formulations, delivery systems, or indications.

Medical Devices — Abbott’s research and development programs
focus on:

• Cardiac Rhythm Management – Development of next-generation
rhythm management technologies, including enhanced patient
engagement and expanded magnetic resonance
(MR)-compatibility.

• Heart Failure – Continued enhancements to Abbott’s left ven-
tricular assist systems and pulmonary artery heart failure
system, including enhanced connectivity, user-interfaces and
remote patient monitoring.

• Electrophysiology – Development of next-generation technolo-

gies in the areas of ablation, diagnostic, mapping and
visualization and recording and monitoring.

• Vascular – Development of next-generation technologies for use

in coronary and peripheral vascular procedures.

• Structural Heart – Development of minimally-invasive devices
for the repair and replacement of heart valves and other struc-
tural heart conditions.

• Neuromodulation – Development of next-generation technolo-
gies with enhanced patient and physician engagement and
expanded MR-compatibility to treat chronic pain, movement
disorders and other indications.

• Diabetes Care – Develop enhancements and additional indica-
tions for the FreeStyle Libre platform of continuous glucose
monitoring products to help patients improve their ability to
manage diabetes.

Core Laboratory Diagnostics — Abbott continues to commercialize
its next-generation blood screening, immunoassay, clinical chemis-
try and hematology systems, along with assays, including a focus on
unmet medical need, in various areas including infectious disease,
cardiac care, metabolics, and oncology, as well as informatics solu-
tions to help optimize diagnostics laboratory performance and
automation solutions to increase efficiency in laboratories.

Molecular Diagnostics — Several new molecular in vitro diagnostic
(IVD) tests and “Alinity m”, a next generation instrument system,
are in various stages of development and launch.

A B B O T T 2 0 1 9 A N N U A L R E P O R T

F I N A N C I A L R E V I E W

Rapid Diagnostics — Abbott’s research and development programs
focus on the development of diagnostic products for cardiometa-
bolic disease, infectious disease and toxicology.

Nutritionals — Abbott is focusing its research and development
spend on platforms that span the pediatric and adult nutrition
areas: gastro intestinal/immunity health, brain health, mobility
and metabolism, and user experience platforms. Numerous new
products that build on advances in these platforms are currently
under development, including clinical outcome testing, and are
expected to be launched over the coming years.

Given the diversity of Abbott’s business, its intention to remain
a broad-based healthcare company and the numerous sources for
potential future growth, no individual project is expected to be
material to cash ﬂows or results of operations over the next ﬁve
years. Factors considered included research and development
expenses projected to be incurred for the project over the next year
relative to Abbott’s total research and development expenses, as
well as qualitative factors, such as marketplace perceptions and
impact of a new product on Abbott’s overall market position. There
were no delays in Abbott’s 2019 research and development activi-
ties that are expected to have a material impact on operations.

While the aggregate cost to complete the numerous projects cur-
rently in development is expected to be material, the total cost to
complete will depend upon Abbott’s ability to successfully ﬁnish
each project, the rate at which each project advances, and the
ultimate timing for completion. Given the potential for signiﬁcant
delays and the risk of failure inherent in the development of
medical device, diagnostic and pharmaceutical products and
technologies, it is not possible to accurately estimate the total cost
to complete all projects currently in development. Abbott plans to
manage its portfolio of projects to achieve research and develop-
ment spending that will be competitive in each of the businesses
in which it participates, and such spending is expected to approxi-
mate 7.0 percent of total Abbott sales in 2020. Abbott does not
regularly accumulate or make management decisions based on
the total expenses incurred for a particular development phase
in a given period.

GOODWILL

At December 31, 2019, goodwill recorded as a result of business
combinations totaled $23.2 billion. Goodwill is reviewed for
impairment annually in the third quarter or when an event that
could result in an impairment occurs, using a quantitative assess-
ment to determine whether it is more likely than not that the fair
value of any reporting unit is less than its carrying amount. The
income and market approaches are used to calculate the fair
value of each reporting unit. The results of the last impairment
test indicated that the fair value of each reporting unit was sub-
stantially in excess of its carrying value.

FINANCIAL CONDITION

CASH FLOW

Net cash from operating activities amounted to $6.1 billion,
$6.3 billion and $5.6 billion in 2019, 2018 and 2017, respectively.
The decrease in Net cash from operating activities in 2019 was
primarily due to an increased investment in working capital,
timing of pension contributions relative to 2018 and higher income
tax payments, partially offset by the favorable cash ﬂow impact of

improved segment operating earnings and lower interest and
acquisition-related expenses. The increase in Net cash from
operating activities in 2018 was primarily due to higher segment
operating earnings, continued improvements in working capital
management, timing of pension contributions and lower
acquisition-related expenses. The income tax component of cash
from operating activities in 2018 includes the non-cash impact
of the $120 million adjustment to the transition tax associated
with the TCJA. The income tax component of operating cash ﬂow
in 2017 includes the non-cash impact of $1.46 billion of net tax
expense related to the estimated impact of the TCJA.

While a signiﬁcant portion of Abbott’s cash and cash equivalents
at December 31, 2019, are reinvested in foreign subsidiaries, Abbott
does not expect such reinvestment to affect its liquidity and capital
resources. Due to the enactment of the TCJA, if these funds were
needed for operations in the U.S., Abbott does not expect to incur
signiﬁcant additional income taxes in the future to repatriate
these funds.

Abbott funded $382 million in 2019, $114 million in 2018 and
$645 million in 2017 to deﬁned beneﬁt pension plans. Abbott
expects pension funding of approximately $387 million in 2020 for
its pension plans. Abbott expects annual cash ﬂow from operating
activities to continue to exceed Abbott’s capital expenditures and
cash dividends.

DEBT AND CAPITAL

At December 31, 2019, Abbott’s long-term debt rating was A- by
Standard & Poor’s Corporation and A3 by Moody’s. Abbott expects
to maintain an investment grade rating.

Abbott has readily available ﬁnancial resources, including unused
lines of credit that support commercial paper borrowing arrange-
ments and provide Abbott with the ability to borrow up to $5 billion
on an unsecured basis. The lines of credit are part of a 2018 revolv-
ing credit agreement that expires in 2023. Any borrowings under
the current revolving credit agreement will bear interest, at Abbott’s
option, based on either a base rate or Eurodollar rate, plus an appli-
cable margin based on Abbott’s credit ratings.

• In the ﬁrst quarter of 2017, as part of the acquisition of St. Jude
Medical, approximately $5.9 billion of St. Jude Medical’s debt
was assumed, repaid, or reﬁnanced by Abbott. This included the
exchange of certain St. Jude Medical debt obligations with an
aggregate principal amount of approximately $2.9 billion for
approximately $2.9 billion of debt issued by Abbott. Following
this exchange, approximately $194.2 million of existing St. Jude
Medical notes remained outstanding. There were no signiﬁcant
costs associated with the exchange of this debt. In addition,
during the ﬁrst quarter of 2017, Abbott assumed and subse-
quently repaid approximately $2.8 billion of various St. Jude
Medical debt obligations.

• In 2017, Abbott borrowed $2.8 billion on an unsecured basis

under a 5-year term loan agreement and borrowed $1.7 billion
under its lines of credit. Proceeds from such borrowings were
used to ﬁnance the acquisition of Alere, to repay certain

F I N A N C I A L R E V I E W

indebtedness of Abbott and Alere, and to pay fees and expenses
in connection with the acquisition. The borrowings bore interest
based on a Eurodollar rate, plus an applicable margin based on
Abbott’s credit ratings. Abbott paid off the term loan in January
2018, ahead of its 2022 due date and paid off $550 million of the
line of credit in the fourth quarter of 2017 and the remaining
$1.15 billion on January 5, 2018. In the fourth quarter of 2017, in
conjunction with the acquisition of Alere, Abbott assumed and
subsequently repaid $3.0 billion of Alere’s debt.

• In 2017, Abbott also paid off a $479 million yen-denominated
short-term borrowing during the year and issued 364-day
yen-denominated debt, of which $201 million and $199 million
was outstanding at December 31, 2019 and 2018, respectively.

In 2018, Abbott committed to reducing its debt levels and on
February 16, 2018, the board of directors authorized the early
redemption of up to $5 billion of outstanding long-term notes.
Redemptions under this authorization during 2018 included
$0.947 billion principal amount of its 5.125% Notes due 2019 and
$2.850 billion principal amount of its 2.35% Notes due 2019.
Abbott incurred a net charge of $14 million related to the early
repayment of this debt.

On September 17, 2018, Abbott repaid upon maturity the
$500 million aggregate principal amount outstanding of the
2.00% Senior Notes due 2018.

On September 27, 2018, Abbott’s wholly owned subsidiary,
Abbott Ireland Financing DAC, completed a euro debt offering
of €3.420 billion of long-term debt. The proceeds equated to
approximately $4 billion. The notes are guaranteed by Abbott.

On October 28, 2018, Abbott redeemed $4.0 billion principal
amount of its outstanding long-term debt. This amount is in
addition to the $5 billion authorization discussed above. In con-
junction with the redemption, Abbott unwound approximately
$1.1 billion in interest rate swaps relating to the 3.40% Note due in
2023 and the 3.75% Note due in 2026. Abbott incurred a net charge
of $153 million related to the early repayment of this debt and the
unwinding of related interest rate swaps.

The 2018 transactions described above, including the repayment
of $2.8 billion under the 5-year term loan and $1.15 billion of bor-
rowings under the lines of credit, resulted in the net repayment of
approximately $8.3 billion of debt.

On February 24, 2019, Abbott redeemed the $500 million out-
standing principal amount of its 2.80% Notes due 2020.

In September 2019, the board of directors authorized the early
redemption of up to $5 billion of outstanding long-term notes.
This bond redemption authorization superseded the board’s
previous authorization under which $700 million had not yet
been redeemed. On December 19, 2019, Abbott redeemed the
$2.850 billion outstanding principal amount of its 2.90% Notes
due 2021. After redemption of the 2.90% Notes, $2.15 billion of
the $5 billion debt redemption authorization remains available.

On November 19, 2019, Abbott’s wholly owned subsidiary,
Abbott Ireland Financing DAC, completed a euro debt offering
of €1.180 billion of long-term debt. The proceeds equated to
approximately $1.3 billion. The Notes are guaranteed by Abbott.

A B B O T T 2 0 1 9 A N N U A L R E P O R T

The 2019 transactions described above resulted in the repayment
of approximately of $1.6 billion of debt, net of borrowings, bring-
ing Abbott’s total debt to $18.1 billion at December 31, 2019.

In September 2014, the board of directors authorized the repur-
chase of up to $3.0 billion of Abbott’s common shares from time to
time. Under the program authorized in 2014, Abbott repurchased
36.2 million shares at a cost of $1.666 billion in 2015, 10.4 million
shares at a cost of $408 million in 2016, 1.9 million shares at a cost
of $130 million in 2018, and 6.3 million shares at a cost of
$525 million in 2019 for a total of approximately $2.730 billion.
In October 2019, the board of directors authorized the repurchase
of up to $3 billion of Abbott’s common shares from time to time.
The new authorization is in addition to the $270 million unused
portion of the share repurchase program authorized in 2014.

On April 27, 2016, the board of directors authorized the issuance
and sale for general corporate purposes of up to 75 million com-
mon shares that would result in proceeds of up to $3 billion.
No shares have been issued under this authorization.

Abbott declared dividends of $1.32 per share in 2019 compared to
$1.16 per share in 2018, an increase of approximately 14 percent.
Dividends paid were $2.270 billion in 2019 compared to
$1.974 billion in 2018. The year-over-year change in dividends paid
primarily reﬂects the impact of the increase in the dividend rate.

WORKING CAPITAL

Working capital was $4.8 billion at December 31, 2019 and
$5.6 billion at December 31, 2018. The decrease in working capital
in 2019 reﬂects the presentation of $1.3 billion of Senior Notes due
2020 as current liabilities at December 31, 2019, partially offset by
an overall net increase in working capital of approximately
$485 million due to changes in accounts receivable, inventory and
accounts payable associated with the growth of the business.

Abbott monitors the credit worthiness of customers and establishes
an allowance against a trade receivable when it is probable that the
balance will not be collected. In addition to closely monitoring
economic conditions and budgetary and other ﬁscal developments,
Abbott regularly communicates with its customers regarding the
status of receivable balances, including their payment plans and
obtains positive conﬁrmation of the validity of the receivables.
Abbott also monitors the potential for and periodically has utilized
factoring arrangements to mitigate credit risk although the receiv-
ables included in such arrangements have historically not been a
material amount of total outstanding receivables.

CAPITAL EXPENDITURES

Capital expenditures of $1.6 billion in 2019, $1.4 billion in 2018 and
$1.1 billion in 2017 were principally for upgrading and expanding
manufacturing and research and development facilities and equip-
ment in various segments, investments in information technology,
and laboratory instruments placed with customers.

A B B O T T 2 0 1 9 A N N U A L R E P O R T

F I N A N C I A L R E V I E W

CONTRACTUAL OBLIGATIONS

The table below summarizes Abbott’s estimated contractual obligations as of December 31, 2019.

(in millions)
Long-term debt, including current maturities
Interest on debt obligations
Operating lease obligations
Purchase commitments (a)
Other long-term liabilities (b)
Total (c)

Total
$18,049
9,432
1,138
3,187
4,117
$35,923

2020
$1,278
576
238
2,974
—
$5,066

2021-2022
$ «757
1,137
352
194
1,885
$4,325

Payments Due By Period
2025 and
Thereafter
$12,487
6,658
353
8
1,054
$20,560

2023-2024
$3,527
1,061
195
11
1,178
$5,972

(a) Purchase commitments are for purchases made in the normal course of business to meet operational and capital expenditure requirements.

(b) Other long-term liabilities include estimated payments for the transition tax under the TCJA, net of applicable credits.

(c) Net unrecognized tax beneﬁts totaling approximately $580 million are excluded from the table above as Abbott is unable to reasonably estimate the period of cash settlement with the respec-

tive taxing authorities on such items. See Note 16 – Taxes on Earnings from Continuing Operations for further details. The company has employee beneﬁt obligations consisting of pensions
and other post-employment beneﬁts, including medical and life, which have been excluded from the table. A discussion of the company’s pension and post-retirement plans, including funding
matters is included in Note 15 – Post-employment Beneﬁts.

CONTINGENT OBLIGATIONS

Abbott has periodically entered into agreements with other com-
panies in the ordinary course of business, such as assignment of
product rights, which has resulted in Abbott becoming secondarily
liable for obligations that Abbott was previously primarily liable.
Since Abbott no longer maintains a business relationship with the
other parties, Abbott is unable to develop an estimate of the maxi-
mum potential amount of future payments, if any, under these
obligations. Based upon past experience, the likelihood of pay-
ments under these agreements is remote. In addition, Abbott
periodically acquires a business or product rights in which Abbott
agrees to pay contingent consideration based on attaining certain
thresholds or based on the occurrence of certain events.

LEGISL ATIVE ISSUES

Abbott’s primary markets are highly competitive and subject to
substantial government regulations throughout the world.
Abbott expects debate to continue over the availability, method
of delivery, and payment for health care products and services.
It is not possible to predict the extent to which Abbott or the
health care industry in general might be adversely affected by
these factors in the future. A more complete discussion of these
factors is contained in Item 1, Business, and Item 1A, Risk Factors.

RECENTLY ISSUED ACCOUNTING STANDARDS

In December 2019, the Financial Accounting Standards Board
(FASB) issued Accounting Standards Update (ASU) 2019-12,
Income Taxes (Topic 740): Simplifying the Accounting for Income
Taxes, which among other things, eliminates certain exceptions
in the current rules regarding the approach for intraperiod tax
allocations and the methodology for calculating income taxes in
an interim period, and clariﬁes the accounting for transactions
that result in a step-up in the tax basis of goodwill. The standard
becomes effective for Abbott in the ﬁrst quarter of 2021 and early
adoption is permitted. Abbott does not expect adoption of this
new standard to have a material impact on its consolidated ﬁnan-
cial statements.

In February 2018, the FASB issued ASU 2018-02, Reclassiﬁcation
of Certain Tax Effects from Accumulated Other Comprehensive
Income, which allows companies to reclassify stranded tax effects

resulting from the 2017 Tax Cuts and Jobs Act, from Accumulated
other comprehensive income (loss) to retained earnings (Earnings
employed in the business). Abbott adopted the new standard at the
beginning of the fourth quarter of 2018. As a result of the adoption
of the new standard, approximately $337 million of stranded tax
effects were reclassiﬁed from Accumulated other comprehensive
income (loss) to Earnings employed in the business.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments –
Credit Losses, which changes the methodology to be used to mea-
sure credit losses for certain ﬁnancial instruments and ﬁnancial
assets, including trade receivables. The new methodology requires
the recognition of an allowance that reﬂects the current estimate
of credit losses expected to be incurred over the life of the ﬁnan-
cial asset. The new standard will be effective for Abbott at the
beginning of 2020. Adoption of the new standard will not have a
material impact on the consolidated ﬁnancial statements.

In February 2016, the FASB issued ASU 2016-02, Leases, which
requires lessees to measure and recognize a lease asset and liabil-
ity on the balance sheet for most leases, including operating leases.
Abbott adopted the new standard as of January 1, 2019 using the
modiﬁed retrospective approach and applied the standard’s transi-
tion provisions as of January 1, 2019. As a result, no changes were
made to the December 31, 2018 Consolidated Balance Sheet.
Abbott elected to apply the package of practical expedients related
to transition. These practical expedients allowed Abbott to carry
forward its historical assessments of whether any existing con-
tracts are or contain leases, the lease classiﬁcation for each lease
existing at January 1, 2019, and whether any initial direct costs for
such leases qualiﬁed for capitalization.

A B B O T T 2 0 1 9 A N N U A L R E P O R T

F I N A N C I A L R E V I E W

The new lease accounting standard did not have a material impact
on the amounts reported in the Consolidated Statement of
Earnings but does have a material impact on the amounts reported
in the Consolidated Balance Sheet. Adoption of the new standard
resulted in the recording of approximately $850 million of new
right of use (ROU) assets and additional liabilities for operating
leases on the Consolidated Balance Sheet as of January 1, 2019.

In January 2016, the FASB issued ASU 2016-01, Financial
Instruments – Recognition and Measurement of Financial Assets
and Financial Liabilities, which provides new guidance for the
recognition, measurement, presentation, and disclosure of ﬁnan-
cial assets and liabilities. Abbott adopted the standard on January
1, 2018. Under the new standard, changes in the fair value of equity
investments with readily determinable fair values are recorded in
Other (income) expense, net within the Consolidated Statement
of Earnings. Previously, such fair value changes were recorded in
other comprehensive income. Abbott has elected the measurement
alternative allowed by ASU 2016-01 for its equity investments
without readily determinable fair values. These investments are
measured at cost, less any impairment, plus or minus any changes
resulting from observable price changes in orderly transactions for
an identical or similar investment of the same issuer. Changes in
the measurement of these investments are being recorded in Other
(income) expense, net within the Consolidated Statement of
Earnings. As part of the adoption, the cumulative-effect

adjustment to Earnings employed in the business in the
Consolidated Balance Sheet for net unrealized losses on equity
investments that were recorded in Accumulated other compre-
hensive income (loss) as of December 31, 2017 was not signiﬁcant.

PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 — A
CAUTION CONCERNING FORWARD-LOOKING STATEMENTS

Under the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995, Abbott cautions investors that any
forward-looking statements or projections made by Abbott,

including those made in this document, are subject to risks and
uncertainties that may cause actual results to differ materially
from those projected. Economic, competitive, governmental,
technological and other factors that may affect Abbott’s operations
are discussed in Item 1A, Risk Factors.

P E R F O R M A N C E G R A P H

$250

$200

$150

$100

$50

2014

2015

2016

2017

2018

2019

Assuming $100 invested on December 31, 2014 with dividends reinvested.

This graph compares the change
in Abbott’s cumulative total shareholder
return on its common shares with the
Standard & Poor’s 500 Index and the
Standard & Poor’s 500 Health Care Index.

Abbott Laboratories

S&P 500 Index

S&P 500 Health Care

A B B O T T 2 0 1 9 A N N U A L R E P O R T

S U M M A R Y O F S E L E C T E D F I N A N C I A L D ATA

(Dollars in millions except per share data)

Year Ended December 31

2019

2018

2017

2016

2015

Summary of Operations:
Net Sales
Cost of products sold
Research & development
Selling, general, and administrative
Operating earnings
Interest expense
Interest income
Other (income) expense, net (a)
Earnings before taxes
Taxes on earnings from continuing operations
Earnings from continuing operations
Net earnings
Basic earnings per common share from continuing operations
Basic earnings per common share
Diluted earnings per common share from continuing operations
Diluted earnings per common share

Financial Positions:
Working capital (b)
Long-term investment securities
Net property & equipment
Total assets
Long-term debt, including current portion
Shareholders’ investment
Book value per share

Other Statistics:
Gross proﬁt margin
Research and development to net sales
Net cash from operating activities
Capital expenditures
Cash dividends declared per common share
Common shares outstanding (in thousands)
Number of common shareholders
Market price per share - high
Market price per share - low
Market price per share - close

$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$

$
$
$
$
$
$
$

31,904
15,167
2,440
9,765
4,532
670
(94)
(121)
4,077
390
3,687
3,687
2.07
2.07
2.06
2.06

4,804
883
8,038
67,887
17,938
31,301
17.76

30,578
14,884
2,300
9,744
3,650
826
(105)
56
2,873
539
2,334
2,368
1.32
1.34
1.31
1.33

5,620
897
7,563
67,173
19,366
30,722
17.50

27,390
14,384
2,260
9,182
1,564
904
(124)
(1,447)
2,231
1,878
353
477
0.20
0.27
0.20
0.27

11,235
883
7,607
76,250
27,718
31,098
17.84

20,853
9,644
1,447
6,736
3,026
431
(99)
1,281
1,413
350
1,063
1,400
0.71
0.94
0.71
0.94

20,116
2,947
5,705
52,666
20,684
20,717
14.07

20,405
9,354
1,408
6,791
2,853
163
(105)
(388)
3,183
577
2,606
4,423
1.73
2.94
1.72
2.92

4,969
4,041
5,730
41,247
5,874
21,326
14.48

%
%
$
$
$

$
$
$

52.5
7.6
6,136
1,638
1.32
1,762,503
38,990
89.24
65.50
86.80

51.3
7.5
6,300
1,394
1.16
1,755,619
42,827
74.92
55.58
72.33

47.5
8.3
5,570
1,135
1.075
1,743,602
44,581
57.77
38.34
57.07

53.8
6.9
3,203
1,121
1.045
1,472,869
45,545
45.79
36.00
38.41

54.2
6.9
2,966
1,110
0.98
1,472,665
47,278
51.74
39.00
44.91

(a) These amounts include debt extinguishment costs and net foreign exchange (gain) loss.

(b) In 2016, working capital includes $13.6 billion of cash that was used to fund the cash portion of the St. Jude Medical acquisition on January 4, 2017.

D I R E C T O R S A N D C O R P O R AT E O F F I C E R S

A B B O T T 2 0 1 9 A N N U A L R E P O R T

D I R EC TO R S

Robert J. Alpern, M.D.
Ensign Professor of Medicine
and Professor of Internal
Medicine, and Former Dean
of Yale School of Medicine,
New Haven, Conn.

Roxanne S. Austin
President and Chief
Executive Officer
Austin Investment Advisors,
Newport Beach, Calif.

Sally E. Blount, Ph.D.
Michael L. Nemmers
Professor of Strategy and
former Dean of the
J.L. Kellogg Graduate School
of Management
at Northwestern University,
Evanston, Ill.

S E N I O R M A N AG E M E N T

Miles D. White*
Chairman of the Board
and Chief Executive Officer

Robert B. Ford*
President and
Chief Operating Officer

Hubert L. Allen*
Executive Vice President,
General Counsel and
Secretary

John M. Capek, Ph.D.*
Executive Vice President,
Ventures

Lisa D. Earnhardt*
Executive Vice President,
Medical Devices

Robert B. Ford
President and
Chief Operating Officer,
Abbott Laboratories

Michelle A. Kumbier
Senior Vice President and
Chief Operating Officer,
Harley-Davidson
Motor Company,
Milwaukee, Wisc.

Edward M. Liddy
Retired Chairman
and CEO,
The Allstate Corporation,
Northbrook, Ill.

Darren W. McDew
Retired General, United
States Air Force, and
Former Commander of U.S.
Transportation Command,
Scott Air Force Base, Ill.

Nancy McKinstry
Chief Executive Officer
and Chairman of the
Executive Board of
Wolters Kluwer N.V.,
Alphen aan den Rijn,
The Netherlands

Phebe N. Novakovic
Chairman and
Chief Executive Officer,
General Dynamics
Corporation,
Falls Church, Va.

Robert E. Funck, Jr.*
Executive Vice President,
Finance and
Chief Financial Officer

John F. Ginascol*
Executive Vice President,
Core Diagnostics

Andrea Wainer*
Executive Vice President,
Rapid and Molecular
Diagnostics

Roger M. Bird*
Senior Vice President,
U.S. Nutrition

Andrew H. Lane*
Executive Vice President,
Established Pharmaceuticals

Charles R. Brynelsen*
Senior Vice President,
Abbott Vascular

Mary K. Moreland*
Executive Vice President,
Human Resources

Daniel Salvadori*
Executive Vice President,
Nutritional Products

Jaime Contreras*
Senior Vice President,
Core Laboratory Diagnostics,
Commercial Operations

Michael D. Dale*
Senior Vice President,
Structural Heart

William A. Osborn
Retired Chairman and
Chief Executive Officer of
Northern Trust Corporation
and The Northern Trust
Company,
Chicago, Ill.

John G. Stratton
Retired Executive Vice
President and President
of Global Operations,
Verizon
Communications Inc.,
New York, NY

Samuel C. Scott III
Retired Chairman,
President and Chief
Executive Officer,
Corn Products
International, Inc.,
Westchester, Ill.

Daniel J. Starks
Retired Chairman, President
and Chief Executive Officer of
St. Jude Medical, Inc.,
St. Paul, Minn.

J. Scott House
Senior Vice President,
Quality Assurance,
Regulatory and Engineering
Services

Sammy Karam*
Senior Vice President,
Established Pharmaceuticals,
Emerging Markets

Joseph Manning*
Senior Vice President,
International Nutrition

Michael J. Pederson*
Senior Vice President,
Electrophysiology and
Heart Failure

Glenn F. Tilton
Retired Chairman, President
and Chief Executive Officer
of UAL Corporation,
Chicago, Ill.

Miles D. White
Chairman of the Board
and Chief Executive Officer,
Abbott Laboratories

Christoper J. Scoggins*
Senior Vice President,
Rapid Diagnostics

Jared L. Watkin*
Senior Vice President,
Diabetes Care

Alejandro D. Wellisch*
Senior Vice President,
Established Pharmaceuticals,
Latin America

Randel W. Woodgrift*
Senior Vice President,
CRM

CO R P O R AT E V I C E P R E S I D E N T S

Gregory A. Ahlberg
Vice President,
Diagnostics,
Commercial Operations,
Europe, Middle East and
Africa

Venu Ambati
Vice President,
Established Pharmaceuticals,
India

Keith Boettiger
Vice President,
Neuromodulation

Philip P. Boudreau*
Vice President,
Finance and Controller

Melissa D. Brotz
Vice President,
Public Affairs and
Corporate Marketing

P. Claude Burcky
Vice President,
Government Affairs

Christopher J. Calamari
Vice President,
Pediatric Nutrition

*Denotes executive officer

Tony K. Chan
Vice President,
Abbott Diagnostics Division,
China

Kathryn S. Collins
Vice President,
Commercial Legal
Operations

Thomas C. Evers
Vice President,
U.S. Government Affairs

John S. Frels
Vice President,
Research and Development,
Immunoassay/Clinical
Chemistry

Renaud Gabay
Vice President,
Nutrition, North Asia

Jeffrey N. Haas
Vice President,
Infectious Disease,
Developed Markets

Damian P. Halloran
Vice President,
Infectious Disease,
Emerging Markets

Gene Huang, Ph.D.
Vice President,
Chief Economist

David P. Mark
Vice President,
Internal Audit

Gary C. Johnson
Vice President,
Clinical, Regulatory and
Health Economics Outcomes
Research,
Cardiovascular and
Neuromodulation

Daman Kowalski
Vice President,
Molecular Diagnostics

Robert R. Kunkler
Vice President,
Diabetes Care,
Commercial Operations

Brian Lehman
Vice President,
Commercial Operations,
Electrophysiology and
Heart Failure

Scott M. Leinenweber
Vice President,
Investor Relations,
Licensing and Acquisitions

Louis H. Morrone
Vice President,
Transfusion Medicine

John M. Murphy
Vice President,
Nutrition Supply Chain

Mark W. Murphy, II
Vice President,
Business and Technology
Services

Martin Nordenstahl
Vice President,
Nutrition,
Asia Paciﬁc

Joseph L. Novak
Vice President,
Taxes

Karen M. Peterson
Vice President,
Treasurer

William R. Phillips
Vice President,
CRM Commercial
Operations

Eric Shroff
Vice President,
Abbott Point of Care

Harvinder Singh
Vice President,
Commercial Operations,
Abbott Vascular

King Hon To
Vice President,
Core Lab Diagnostics
Commercial Operations,
Asia Paciﬁc

Frank Weitekamper
Vice President,
Abbott Transition
Organization

Monica J. Wilkins
Vice President,
Regulatory and Quality

James E. Young
Vice President,
Chief Ethics and
Compliance Officer

A B B O T T 2 0 1 9 A N N U A L R E P O R T

S H A R E H O L D E R A N D C O R P O R AT E I N F O R M AT I O N

S H A R E S L I S T I N G

D I V I D E N D D I R EC T D E P O S I T

I N V E S TO R N E W S L I N E

The ticker symbol for Abbott’s common
stock is ABT. The principal market for
Abbott’s common shares is the New York
Stock Exchange. Shares are also listed on
the Chicago Stock Exchange and traded on
various regional and electronic exchanges.
Outside the United States, Abbott’s shares
are listed on the Swiss Stock Exchange.

Q UA R T E R LY D I V I D E N D DAT E S

Dividends are expected to be declared,
recorded, and paid on the following
schedule in 2020, pending approval by the
Board of Directors:

Quarter

Declared Recorded Paid

First

Second

Third

Fourth

2/21

6/12

9/17

12/11

4/15

7/15

10/15

5/15

8/17

11/16

1/15/21

2/16/21

TA X INFORM ATION FOR SHAREHOLDERS

Abbott is an Illinois High Impact
Business and is located in a U.S. federal
Foreign Trade Sub-Zone (Sub-Zone 22F).
Dividends may be eligible for a subtraction
from base income for Illinois income-
tax purposes.

If you have any questions, please contact
your tax advisor.

D I V I D E N D R E I N V E S TM E N T P L A N

The Abbott Dividend Reinvestment
Plan offers registered shareholders
an opportunity to purchase additional
shares, commission-free, through
automatic dividend reinvestment and/or
optional cash investments. Interested
persons may contact the transfer agent
listed in the right-hand column, or
call Abbott’s Investor Newsline.

Shareholders may have quarterly dividends
deposited directly into a checking or savings
account at any ﬁnancial institution that
participates in the Automated Clearing
House system. For more information,
please contact the transfer agent, listed
below, right.

D I R EC T R EG I S T R AT I O N S Y S T E M

In August 2008, Abbott implemented a
Direct Registration System (DRS) for all
registered shareholder transactions.
Shareholders will be sent a statement in
lieu of a physical stock certiﬁcate for
Abbott Laboratories common shares. Please
contact the transfer agent with any
questions.

A N N UA L M E E T I N G

The Annual Meeting of Shareholders will
be held at 9 a.m. on Friday, April 24, 2020,
at Abbott’s corporate headquarters.
Questions regarding the annual meeting
may be directed to the Corporate Secretary.
A copy of Abbott’s 2019 Form 10-K Annual
Report, as ﬁled with the Securities and
Exchange Commission, is available on
Abbott’s Web site at www.abbott.com or by
calling the Investor Newsline (above, right).

C E O A N D C FO C E R T I F I C AT I O N S

In 2019, Abbott’s chief executive officer
(CEO) provided to the New York Stock
Exchange the annual CEO certiﬁcation
regarding Abbott’s compliance with the
New York Stock Exchange’s corporate-
governance listing standards. In addition,
Abbott’s CEO and chief ﬁnancial officer
(CFO) ﬁled with the U.S. Securities and
Exchange Commission all required
certiﬁcations regarding the quality of
Abbott’s public disclosures in its ﬁscal
2019 reports.

(224) 667-7300

I N V E S TO R R E L AT I O N S

Dept. 362, AP6D2
Abbott
100 Abbott Park Road
Abbott Park, IL 60064-6400 U.S.A.
(224) 667-6100

S H A R E H O L D E R S E R V I C E S ,
T R A N S FE R AG E N T A N D R EG I S T R A R

Computershare
P.O. Box 43078
Providence, RI 02940-3078
(888) 332-2268 (U.S. or Canada)
(781) 575-3910 (outside U.S. or Canada)
www.computershare.com

CO R P O R AT E S EC R E TA RY

Dept. 364, AP6D2
Abbott
100 Abbott Park Road
Abbott Park, IL 60064-6400 U.S.A.
(224) 667-6100

WE B S I T E

www.abbott.com

A B B OT T O N L I N E A N N UA L R E P O R T

www.abbott.com/annualreport

G LO B A L C I T IZ E N S H I P R E P O R T

www.abbott.com/citizenship

S H A R E H O L D E R I N FO R M AT I O N

Shareholders with questions about their
accounts may contact the transfer agent,
listed above.

Individuals who would like to receive
additional information, or have questions
regarding Abbott’s business activities, may
call the Investor Newsline, write Abbott
Investor Relations, or visit Abbott’s Web site,
www.abbott.com.

Abbott trademarks and products
in-licensed by Abbott are shown in
italics in the text of this report.

Some statements in this annual report may be forward-
looking statements for purposes of the Private Securities
Litigation Reform Act of 1995. Abbott cautions that
these forward-looking statements are subject to risks
and uncertainties that may cause actual results to differ
materially from those indicated in the forward-looking
statements. Economic, competitive, governmental,
technological and other factors that may affect Abbott’s
operations are discussed in Item 1A, “Risk Factors,” in
our Securities and Exchange Commission 2019 Form
10-K and are incorporated by reference. We undertake no
obligation to release publicly any revisions to forward-
looking statements as the result of subsequent events or
developments, except as required by law.

The Abbott 2019 Annual Report was printed with the use
of renewable wind power resulting in nearly zero carbon
emissions, keeping 16,425 pounds of CO2 from the atmosphere.
This amount of wind-generated electricity is equivalent to
14,251 miles not driven in an automobile or 1,187 trees planted.
The Abbott Annual Report cover and text is printed on recycled
paper that contains a minimum of 10% post-consumer ﬁber and
the ﬁnancial pages on 30% post-consumer ﬁber.

A B B O T T.CO M