v3.7.0.1
Segment Information
 3 Months Ended
Mar. 31, 2017
Segment Information  
Segment Information

Note 15 — Segment Information

 

Abbott’s principal business is the discovery, development, manufacture and sale of a broad line of health care products.  Abbott’s products are generally sold directly to retailers, wholesalers, hospitals, health care facilities, laboratories, physicians’ offices and government agencies throughout the world. On January 4, 2017, Abbott completed the acquisition of St. Jude Medical. Beginning with the first quarter of 2017, Abbott’s cardiovascular and neuromodulation business includes the results of its historical Vascular Products segment and the results of the businesses acquired from St. Jude Medical 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, Molecular Diagnostics, Point of Care and Ibis diagnostic divisions are aggregated and reported as the Diagnostic Products segment.

 

Cardiovascular and Neuromodulation Products — Worldwide sales of rhythm management, electrophysiology, heart failure, vascular, structural heart and neuromodulation products.

 

Non-reportable segments include AMO through the date of sale and Diabetes Care.

 

Abbott’s underlying accounting records are maintained on a legal entity basis for government and public reporting requirements.  Segment disclosures are on a performance basis consistent with internal management reporting.  Intersegment transfers of inventory are recorded at standard cost and are not a measure of segment operating earnings.  The cost of some corporate functions and the cost of certain employee benefits are charged to segments at predetermined rates that approximate cost.  Remaining costs, if any, are not allocated to segments.  In addition, intangible asset amortization is not allocated to operating segments, and intangible assets and goodwill are not included in the measure of each segment’s assets. As a result of the acquisition of St. Jude Medical, the total assets of the Cardiovascular and Neuromodulation segment increased from $1.425 billion at December 31, 2016 to $5.162 billion at March 31, 2017. The following segment information has been prepared in accordance with the internal accounting policies of Abbott, as described above, and is not presented in accordance with generally accepted accounting principles applied to the consolidated financial statements.

 

 

 

Three Months Ended March 31

 

 

 

Net Sales to
External Customers

 

Operating
Earnings

 

(in millions)

 

2017

 

2016

 

2017

 

2016

 

Established Pharmaceutical Products

 

$
950

 

$
888

 

$
140

 

$
148

 

Nutritional Products

 
1,642

 
1,671

 
351

 
342

 

Diagnostic Products

 
1,158

 
1,118

 
284

 
267

 

Cardiovascular and Neuromodulation Products

 
2,103

 
685

 
716

 
247

 

 

 

 

 

 

 

 

 

 

 

Total Reportable Segments

 
5,853

 
4,362

 
1,491

 
1,004

 

Other

 
482

 
523

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Sales

 

$
6,335

 

$
4,885

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate functions and benefit plans costs

 

 

 

 

 
(190

)
(81

)

Non-reportable segments

 

 

 

 

 
46

 
(2

)

Net interest expense

 

 

 

 

 
(204

)
(25

)

Share-based compensation (a)

 

 

 

 

 
(171

)
(152

)

Amortization of intangible assets

 

 

 

 

 
(522

)
(144

)

Other, net (b)

 

 

 

 

 
286

 
(598

)

 

 

 

 

 

 

 

 

 

 

Earnings from continuing operations before taxes

 

 

 

 

 

$
736

 

$
2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(a)

Approximately 50 percent of the annual net cost of share-based awards will typically be recognized in the first quarter due to the timing of the granting of share-based awards.

 

(b)

Other, net in 2017 includes the gain on the sale of the AMO business, partially offset by inventory step-up amortization, restructuring charges and integration costs associated with the acquisition of St. Jude Medical.  Other, net in 2016 includes the $477 million foreign currency loss related to operations in Venezuela and the $43 million impairment of an in-process research and development project related to a non-reportable segment.