Form 10-Q ABBOTT LABORATORIES For: Sep 30

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

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FORM�10-Q

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(Mark One)

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

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For the quarterly period ended September�30, 2014

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OR

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

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For the transition period from ����������� to �����������

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Commission File No.�1-2189

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ABBOTT LABORATORIES

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100 Abbott Park Road

Abbott Park,�Illinois 60064-6400

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Telephone: �(224) 667-6l00

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Indicate by check mark whether the registrant: (l)�has filed all reports required to be filed by Section�13 or 15(d)�of the Securities Exchange Act of l934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)�has been subject to such filing requirements for the past 90 days.� Yes x� No o

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Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule�405 of Regulation S-T (� 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).� Yes x� No o

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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.� See the definitions of �large accelerated filer,� �accelerated filer� and �smaller reporting company� in Rule�12b-2 of the Exchange Act.� (Check one):

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

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As of September�30, 2014, Abbott Laboratories had 1,505,790,586 common shares without par value outstanding.

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Abbott Laboratories

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Abbott Laboratories and Subsidiaries

Condensed Consolidated Statement of Earnings

(Unaudited)

(dollars in millions except per share data; shares in thousands)

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

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Abbott Laboratories and Subsidiaries

Condensed Consolidated Statement of Comprehensive Income

(Unaudited)

(dollars in millions)

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

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Abbott Laboratories and Subsidiaries

Condensed Consolidated Balance Sheet

(Unaudited)

(dollars in millions)

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

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Abbott Laboratories and Subsidiaries

Condensed Consolidated Statement of Cash Flows

(Unaudited)

(dollars in millions)

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

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Abbott Laboratories and Subsidiaries

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Notes to the Condensed Consolidated Financial Statements

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September�30, 2014

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(Unaudited)

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Note 1 � Basis of Presentation

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The accompanying unaudited, condensed consolidated financial statements have been prepared pursuant to rules�and regulations of the Securities and Exchange Commission and, therefore, do not include all information and footnote disclosures normally included in audited financial statements.� However, in the opinion of management, all adjustments (which include only normal adjustments) necessary to present fairly the results of operations, financial position and cash flows have been made.� It is suggested that these statements be read in conjunction with the financial statements included in Abbott�s Annual Report on Form�10-K for the year ended December�31, 2013.� The consolidated financial statements include the accounts of the parent company and subsidiaries, after elimination of intercompany transactions.

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Note 2 � Separation of AbbVie Inc.

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On January�1, 2013, Abbott completed the separation of AbbVie Inc. (AbbVie), which was formed to hold Abbott�s research-based proprietary pharmaceuticals business. Abbott and AbbVie entered into transitional services agreements prior to the separation pursuant to which Abbott and AbbVie are providing to each other, on an interim transitional basis, various services.� Transition services may be provided for up to 24 months with an option for a one-year extension by the recipient.� Services being provided by Abbott include certain information technology and back office support.� Billings by Abbott under these transitional services agreements are recorded as a reduction of the costs to provide the respective service in the applicable expense category in the Condensed Consolidated Statement of Earnings.� This transitional support will enable AbbVie to establish its stand-alone processes for various activities that were previously provided by Abbott and does not constitute significant continuing support of AbbVie�s operations.

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For a small portion of AbbVie�s operations, the legal transfer of AbbVie�s assets (net of liabilities) did not occur with the separation of AbbVie on January�1, 2013, in certain countries,� due to the time required to transfer marketing authorizations and other regulatory requirements in each of these countries.� Under the terms of the separation agreement with Abbott, AbbVie is subject to the risks and entitled to the benefits generated by these operations and assets.� The majority of these operations were transferred to AbbVie in 2013 and 2014 with the remainder expected to be transferred in 2015.� These assets and liabilities have been presented as held for disposition in the Condensed Consolidated Balance Sheet.� At September�30, 2014, the assets and liabilities held for disposition consist of trade accounts receivable of $124 million, inventories of $121 million, equipment of $5 million, other assets of $62 million, trade accounts payable and accrued liabilities of $268 million and other liabilities of $1 million. Abbott�s obligation to transfer the net assets held for disposition to AbbVie of $43 million is included in Other accrued liabilities.

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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.

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Earnings from discontinued operations in the third quarter and first nine months of 2014 include the recognition of $5 million of tax expense and $37 million of net tax benefits, respectively, primarily as a result of the resolution of various tax positions related to AbbVie�s operations for years prior to the separation.� Earnings from discontinued operations in the third quarter and first nine months of 2013 includes a favorable adjustment to tax expense of $193 million as a result of the resolution of various tax positions related to AbbVie�s operations for years prior to the separation.

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Note 3- Discontinued Operations

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On July�14, 2014, Abbott announced that it will sell its developed markets branded generics pharmaceuticals business to Mylan Inc. (Mylan) for equity ownership of a newly formed entity that will combine Mylan�s existing business and Abbott�s developed markets pharmaceuticals business, and will be publicly traded.� Historically, this business was included in Abbott�s Established Pharmaceutical Products segment.� Abbott will retain its branded generics pharmaceuticals business in emerging markets. The transaction is expected to close in the first quarter of 2015 and is subject to customary closing conditions, including regulatory approvals. As a result of the planned disposition of the developed markets branded generics pharmaceuticals business, the current and prior year operating results of this business are reported as part of discontinued operations on the Earnings from Discontinued Operations, net of tax line in the Condensed Consolidated Statement of Earnings. Discontinued operations include an allocation of interest expense assuming a uniform ratio of consolidated debt to equity for all of Abbott�s historical operations.

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The operating results of Abbott�s developed markets branded generics pharmaceuticals businesses are as follows:

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At the close of this transaction Abbott and Mylan will enter into transitional services agreements pursuant to which Abbott and Mylan will provide various back office support services to each other on an interim transitional basis.� Transition services may be provided for up to 2 years.� Billings by Abbott under these transitional services agreements will be recorded as a reduction of the costs to provide the respective service in the applicable expense category in the Condensed Consolidated Statement of Earnings.� This transitional support will not constitute significant continuing support of Mylan�s operations. Abbott will also enter into manufacturing supply agreements with Mylan related to certain products, with the supply term ranging from 3 to 10 years and requiring a 2 year notice prior to termination.� The cash flows associated with these transitional service and manufacturing supply agreements are not expected to be significant.

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The assets of the operations held for disposition and the liabilities to be assumed in the disposition related to the businesses noted above, as well as the AbbVie assets and liabilities discussed in Note 2 are classified as held for disposition in the Condensed Consolidated Balance Sheet as of September�30, 2014.� Prior period balance sheets have not been adjusted. The cash flows associated with the developed markets branded generics pharmaceuticals businesses will be included in Abbott�s Condensed Consolidated Statement of Cash Flows up through the date of disposition.�� The following is a summary of the assets and liabilities held for disposition:

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Note 4 � Supplemental Financial Information

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Shares of unvested restricted stock that contain non-forfeitable rights to dividends are treated as participating securities and are included in the computation of earnings per share under the two-class method.� Under the two-class method, net earnings are allocated between common shares and participating securities. Earnings from Continuing Operations allocated to common shares for the three months ended September�30, 2014 and 2013 were $438 million and $640 million, respectively and for the nine months ended September�30, 2014 and 2013 were $1.083 billion and $1.495 billion, respectively.� Net earnings allocated to common shares for the three months ended September�30, 2014 and 2013 were $536 million and $959 million, respectively, and for the nine months ended September�30, 2014 and 2013 were $1.373 billion and $1.973 billion, respectively.

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Other, net use of cash in Net cash from operating activities in the Condensed Consolidated Statement of Cash Flows for the first nine months of 2014 and 2013 includes the effects of contributions to defined benefit plans of approximately $350 million and $680 million, respectively, and to the post-employment medical and dental benefit plans of $40 million in each nine month period, as well as the impact, in the first nine months of 2014, of approximately $165 million of cash refunded by taxing authorities, resulting from the resolution of various tax positions pertaining to prior years; and the timing of cash taxes. In 2013, Other, net also includes the recognition of $433 million of tax benefits in the third quarter as a result of the favorable resolution of various tax positions pertaining to prior years.

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The components of long-term investments as of September�30, 2014 and December�31, 2013 are as follows:

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Note 5 � Changes in Accumulated Other Comprehensive Income (Loss)

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The changes in accumulated other comprehensive income (loss), net of income taxes, are as follows:

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(a)�Prior year amounts have been appropriately revised to reflect a reclassification between Cumulative foreign currency translation adjustment and Net actuarial losses and prior service costs and credits.

(b)�Reclassified amounts for foreign currency translation are recorded in the Condensed Consolidated Statement of Earnings as Net foreign exchange loss (gain); gains on marketable equity securities as Other (income) expense, net and cash flow hedges as Cost of products sold, excluding amortization of intangible assets.� Net actuarial losses and prior service costs are included as a component of net periodic benefit plan costs; see Note 12 for additional details.

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Note 6 � Business Acquisitions

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On September�26, 2014, Abbott completed the acquisition of the controlling interest in CFR Pharmaceuticals S.A. (CFR) for approximately $2.9 billion in cash ($2.8 billion net of CFR cash on hand at closing). Including the assumption of approximately $570 million of debt, the total cost of the acquisition was $3.4 billion.� The acquisition of CFR more than doubles Abbott�s branded generics pharmaceutical presence in Latin America and further expands its presence in emerging markets.� CFR�s financial results are included in Abbott�s financial statements beginning on September�26, 2014, the date that Abbott acquired control of this business. The impact of the acquired operations on Abbott�s operating results was not significant for the third quarter of 2014.� Abbott owns 99.9% of the outstanding ordinary shares of CFR.� The fair value of the non-controlling interest at the acquisition date was approximately $4 million.� The acquisition was funded with cash and cash equivalents and short-term investments.� The preliminary allocation of the fair value of the acquisition is shown in the table below.� The allocation of the fair value of the acquisition will be finalized when the valuation is completed.

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Acquired intangible assets consist primarily of product rights for currently marketed products and are amortized over 12 to 16 years (average of 15 years).� The goodwill is primarily attributable to intangible assets that do not qualify for separate recognition.� The goodwill is identifiable to the Established Pharmaceutical Products segment.� The acquired tangible assets consist primarily of cash and cash equivalents of approximately $94 million, trade accounts receivable of approximately $177 million, inventory of approximately $187 million, other current assets of approximately $52 million, property and equipment of approximately $209 million, and other long-term assets of approximately $146 million.� Assumed liabilities consist of borrowings of approximately $570 million, trade accounts payable and other current liabilities of approximately $185 million and other noncurrent liabilities of approximately $15 million.

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Annualized net sales for CFR Pharmaceuticals are expected to total approximately $800 million. Had the acquisition of CFR Pharmaceuticals taken place on January�1, 2013, the consolidated net sales and earnings of Abbott would not have been significantly different from the reported amounts.

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In August�2013, Abbott acquired 100 percent of IDEV Technologies, net of debt, for $310 million, in cash. The acquisition of IDEV Technologies expands Abbott�s endovascular portfolio. The final allocation of the fair value at the date of acquisition resulted in non-deductible acquired in-process research and development of approximately $170 million which is accounted for as an indefinite-lived intangible asset until regulatory approval or discontinuation; non-deductible definite-lived intangible assets of approximately $66 million; non-deductible goodwill of approximately $112 million; and net deferred tax liabilities of $47 million. Acquired intangible assets consist of developed technology and are being amortized over 11 years.

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In August�2013, Abbott acquired 100 percent of OptiMedica for $260 million, in cash, plus additional payments up to $150 million to be made upon completion of certain development, regulatory and sales milestones. The acquisition of OptiMedica provides Abbott with an immediate entry point into the laser assisted cataract surgery market.� The final allocation of the fair value at the date of acquisition resulted in non-deductible definite-lived intangible assets of approximately $160 million; non-deductible acquired in-process research and development of approximately $60 million which is accounted for as an indefinite-lived intangible asset until regulatory approval or discontinuation; non-deductible goodwill of approximately $130 million; net deferred tax liabilities of $49 million; and contingent consideration of approximately $70 million.� The fair value of the contingent consideration was determined based on an independent appraisal. Acquired intangible assets consist of developed technology and are being amortized over 18 years.

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Note�7�- Goodwill and Intangible Assets

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The total amount of goodwill reported was $10.0 billion at September�30, 2014 and $9.8 billion at December�31, 2013. In the nine months ended September�30, 2014, foreign currency translation adjustments decreased goodwill by approximately $293 million. The acquisition of CFR Pharmaceuticals increased goodwill by $1.6 billion, purchase price allocation adjustments associated with other recent acquisitions decreased goodwill by approximately $30 million, and approximately $1.0 billion of goodwill was moved to Non-current assets held for disposition due to the planned disposition of the developed markets branded generics pharmaceuticals business.� The amount of goodwill related to reportable segments at September�30, 2014 was $3.4 billion for the Established Pharmaceutical

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Products segment, $286 million for the Nutritional Products segment, $444 million for the Diagnostic Products segment, and $2.9 billion for the Vascular Products segment.� There was no reduction of goodwill relating to impairments.

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The gross amount of amortizable intangible assets, primarily product rights and technology, was $10.5 billion as of September�30, 2014 and $12.2 billion as of December�31, 2013, and accumulated amortization was $4.5 billion as of September�30, 2014 and $6.8 billion as of December�31, 2013.� Indefinite-lived intangible assets, which relate to in-process research and development acquired in a business combination, was approximately $114 million at September�30, 2014 and $266 million at December�31, 2013. The acquisition of CFR Pharmaceuticals increased intangible assets by approximately $1.8 billion. Approximately $840 million of net intangible assets related to the developed markets branded generics pharmaceuticals businesses was reclassified to Non-current assets held for disposition due to the planned disposition of these businesses.� Foreign currency translation adjustments decreased intangible assets by approximately $127 million.� The remaining change in intangibles primarily reflects the movement of an IDEV-related intangible asset, Supera, to amortizable assets due to the receipt of regulatory approval in the first quarter of 2014.� Abbott�s estimated annual amortization expense for intangible assets related to continuing operations is approximately $560 million in 2014, $640 million in 2015, $610 million in 2016, $600 million in 2017 and $520 million in 2018.� Amortizable intangible assets are amortized over 2 to 20�years (weighted average 12 years).

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Note 8 � Restructuring Plans

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In the first nine months of 2014, Abbott management approved plans to streamline operations in order to reduce costs and improve efficiencies in various Abbott businesses including vascular, diagnostics and nutritional businesses. Abbott recorded employee related severance and other charges of approximately $107�million in 2014. Approximately $17�million is recognized in Cost of products sold, $41 million is recognized in Research and development and approximately $49 million is recognized in Selling, general and administrative expense. The following summarizes the activity for these restructurings:

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In 2014 and 2013, Abbott management approved plans to reduce costs and improve efficiencies across various functional areas and in Abbott�s established pharmaceuticals business. In 2012, Abbott management approved plans to streamline various commercial operations in order to reduce costs and improve efficiencies in Abbott�s core diagnostics, established pharmaceuticals and nutritionals businesses. Additional charges of approximately $120�million were recognized in 2014 of which approximately $7�million is recorded in Cost of products sold, approximately $2 million in Research and development and approximately $111 million in Selling, general and administrative expense.

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The following summarizes the activity for the first nine months of 2014 related to these restructuring actions and the status of the related accrual as of September�30, 2014:

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In 2013 and prior years, Abbott management approved plans to realign its vascular manufacturing operations in order to reduce costs. The following summarizes the activity for the first nine months of 2014 related to these restructuring actions and the status of the related accrual as of September�30, 2014:

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In 2011 and 2008, Abbott management approved plans to streamline global manufacturing operations, reduce overall costs, and improve efficiencies in Abbott�s core diagnostics business. The following summarizes the activity for the first nine months of 2014 related to these restructuring actions and the status of the related accrual as of September�30, 2014:

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Note 9 � Incentive Stock Programs

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In the first nine months of 2014, Abbott granted 3,802,651 stock options, 584,354 restricted stock awards and 5,367,732 restricted stock units under its incentive stock programs.� At September�30, 2014, approximately 110�million shares were reserved for future grants.� Information regarding the number of stock options outstanding and exercisable at September�30, 2014 is as follows:

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The total unrecognized share-based compensation cost at September�30, 2014 amounted to approximately $186 million which is expected to be recognized over the next three years.

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Note 10 � Financial Instruments, Derivatives and Fair Value Measures

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Certain Abbott foreign subsidiaries enter into foreign currency forward exchange contracts to manage exposures to changes in foreign exchange rates for anticipated intercompany purchases by those subsidiaries whose functional currencies are not the U.S. dollar.� These contracts, with notional amounts totaling approximately $1.36 billion at September�30, 2014 and approximately $140 million at December�31, 2013, are designated as cash flow hedges of the variability of the cash flows due to changes in foreign exchange rates and are recorded at fair value.�� Accumulated gains and losses as of September�30, 2014 will be included in Cost of products sold at the time the products are sold, generally through the next twelve months.� The amount of hedge ineffectiveness was not significant in 2014 and 2013.

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Abbott enters into foreign currency forward exchange contracts to manage currency exposures for foreign currency denominated third-party trade payables and receivables, and for intercompany loans and trade accounts payable where the receivable or payable is denominated in a currency other than the functional currency of the entity.� For intercompany loans, the contracts require Abbott to sell or buy foreign currencies, primarily European currencies and Japanese yen, in exchange for primarily U.S. dollars and other European currencies.� For intercompany and trade payables and receivables, the currency exposures are primarily the U.S. dollar, European currencies and Japanese yen.� At September�30, 2014 and December�31, 2013, Abbott held $13.0 billion and $13.8 billion, respectively, of such foreign currency forward exchange contracts.

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Abbott has designated foreign denominated short-term debt as a hedge of the net investment in a foreign subsidiary of approximately $485 million and approximately $505 million as of September�30, 2014 and December�31, 2013, respectively.� Accordingly, changes in the reported value of this debt due to changes in exchange rates are recorded in Accumulated other comprehensive income (loss), net of tax.

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Abbott is a party to interest rate swap contracts totaling approximately $1.5 billion at September�30, 2014 and December�31, 2013 to manage its exposure to changes in the fair value of fixed-rate debt.�� These contracts are designated as fair value hedges of the variability of the fair value of fixed-rate debt due to changes in the long-term benchmark interest rates.� The effect of the hedge is to change a fixed-rate interest obligation to a variable rate for that portion of the debt.� Abbott records the contracts at fair value and adjusts the carrying amount of the fixed-rate debt by an offsetting amount.� No hedge ineffectiveness was recorded in income in 2014 or 2013 for these hedges.

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The following table summarizes the amounts and location of certain derivative financial instruments as of September�30, 2014 and December�31, 2013:

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The following table summarizes the activity for foreign currency forward exchange contracts designated as cash flow hedges, debt designated as a hedge of net investment in a foreign subsidiary and the amounts and location of income (expense) and gain (loss) reclassified into income in the third quarter and first nine months of 2014 and 2013 and for certain other derivative financial instruments.� The amount of hedge ineffectiveness was not significant in 2014 and 2013 for these hedges.

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