Note 2 — Discontinued Operations

On February 27, 2015, Abbott completed the sale of its developed markets branded generics pharmaceuticals business to Mylan Inc. (Mylan) for 110 million shares (or approximately 22%) of a newly formed entity (Mylan N.V.) that combined Mylan’s existing business and Abbott’s developed markets branded generics pharmaceuticals business. Mylan N.V. is publicly traded. Historically, this business was included in Abbott’s Established Pharmaceutical Products segment. Abbott retained its branded generics pharmaceuticals business in emerging markets. At the date of closing, the 110 million Mylan N.V. shares that Abbott received were valued at $5.77 billion and Abbott recorded an after-tax gain on the sale of the business of approximately $1.6 billion. The shareholder agreement with Mylan N.V. includes voting and other restrictions that prevent Abbott from exercising significant influence over the operating and financial policies of Mylan N.V.

At the close of this transaction, Abbott and Mylan entered into transition services agreements pursuant to which Abbott and Mylan are providing various back office support services to each other on an interim transitional basis. Transition services may be provided for up to 2 years. Charges by Abbott under these transition services agreements are recorded as a reduction of the costs to provide the respective service in the applicable expense category in the Condensed Consolidated Statement of Earnings. This transition support does not constitute significant continuing involvement in Mylan’s operations. Abbott also entered into manufacturing supply agreements with Mylan related to certain products, with the supply term ranging from 3 to 10 years and requiring a 2 year notice prior to termination. The cash flows associated with these transition service and manufacturing supply agreements are not expected to be significant and therefore, these cash flows are not direct cash flows of the disposed component under Accounting Standards Codification 205.

In April 2015, Abbott sold 40.3 million of the 110 million ordinary shares of Mylan N.V. received in the sale of the developed markets branded generics pharmaceuticals business to Mylan. In the first nine months of 2015, Abbott recorded a pretax gain of $207 million on $2.29 billion in net proceeds from the sale of these shares. The gain is recognized in the Other (income) expense line of the Condensed Consolidated Statement of Earnings. The proceeds from the sale were invested in short-term investments.

On February 10, 2015, Abbott completed the sale of its animal health business to Zoetis Inc. Abbott received cash proceeds of $230 million and reported an after tax gain on the sale of approximately $130 million.

As a result of the disposition of the above businesses, the current and prior year operating results of these businesses up to the date of sale are reported as part of discontinued operations on the Earnings from Discontinued Operations, net of tax line in the Condensed Consolidated Statement of Earnings. Discontinued operations include an allocation of interest expense assuming a uniform ratio of consolidated debt to equity for all of Abbott’s historical operations.

On January 1, 2013, Abbott completed the separation of AbbVie Inc. (AbbVie), which was formed to hold Abbott’s research-based proprietary pharmaceuticals business. For a small portion of AbbVie’s operations, the legal transfer of AbbVie’s assets (net of liabilities) did not occur with the separation of AbbVie on January 1, 2013 due to the time required to transfer marketing authorizations and other regulatory requirements in each of these countries. Under the terms of the separation agreement with Abbott, AbbVie is subject to the risks and entitled to the benefits generated by these operations and assets. The majority of these operations were transferred to AbbVie in 2013 and 2014. These assets and liabilities have been presented as held for disposition in the Condensed Consolidated Balance Sheet. Abbott has recorded a prepaid asset of $216 million for its obligation to transfer these net liabilities held for disposition to AbbVie.

Abbott has retained all liabilities for all U.S. federal and foreign income taxes on income prior to the separation, as well as certain non-income taxes attributable to AbbVie’s business prior to the separation. AbbVie generally will be liable for all other taxes attributable to its business. Earnings from discontinued operations in the first nine months of 2015 and 2014 reflect the recognition of $10 million of tax expense and $37 million of tax benefit, respectively, primarily as a result of the resolution of various tax positions related to AbbVie’s operations for years prior to the separation. The following table summarizes the components of discontinued operations:

	Three Months Ended Sept. 30						Nine Months Ended Sept. 30
(in millions)	2015			2014			2015			2014
Net Sales
Developed markets generics pharmaceuticals and animal health businesses	$	—		$	544		$	256		$	1,527
AbbVie	—			—			—			—

Total	$	—		$	544		$	256		$	1,527

Earnings (Loss) Before Tax
Developed markets generics pharmaceuticals and animal health businesses	$	(6	)	$	163		$	14		$	324
AbbVie	—			—			—			—

Total	$	(6	)	$	163		$	14		$	324

Income Tax Expense (Benefit)
Developed markets generics pharmaceuticals and animal health businesses	$	(1	)	$	58		$	11		$	68
AbbVie	27			5			10			(37		)

Total	$	26		$	63		$	21		$	31

Net Earnings (Loss)
Developed markets generics pharmaceuticals and animal health businesses	$	(5	)	$	105		$	3		$	256
AbbVie	(27		)	(5		)	(10		)	37

Total	$	(32	)	$	100		$	(7	)	$	293

The sale of the developed markets branded generics pharmaceuticals and animal health businesses in the first nine months of 2015 resulted in the recognition of a pretax gain of $2.837 billion, tax expense of $1.085 billion and an after tax gain of $1.752 billion.

The assets of the operations held for disposition and the liabilities to be assumed in the disposition related to the businesses noted above, as well as the AbbVie assets and liabilities are classified as held for disposition in the Condensed Consolidated Balance Sheet as of September 30, 2015 and December 31, 2014. The cash flows associated with the developed markets branded generics pharmaceuticals and animal health businesses are included in Abbott’s Condensed Consolidated Statement of Cash Flows up to the date of disposition.

The following is a summary of the assets and liabilities held for disposition:

(in millions)	September 30, 2015		December 31, 2014
Trade receivables, net	$	58	$	498
Total inventories	48		254
Prepaid expenses, deferred income taxes, and other receivables	33		140

Current assets held for disposition	139		892

Net property and equipment	2		125
Intangible assets, net of amortization	—		804
Goodwill	—		950
Deferred income taxes and other assets	—		55

Non-current assets held for disposition	2		1,934

Total assets held for disposition	$	141	$	2,826


Trade accounts payable	$	337	$	423
Salaries, wages, commissions and other accrued liabilities	19		257

Current liabilities held for disposition	356		680
Post-employment obligations, deferred income taxes and other long-term liabilities	—		108

Total liabilities held for disposition	$	356	$	788