Restructuring Plans

6 Months Ended

Jun. 30, 2021

Restructuring Plans

Restructuring Plans

Note 7 — Restructuring Plans

On May 27, 2021, Abbott management approved a restructuring plan related to its Diagnostic Products segment to align its manufacturing network for COVID-19 diagnostic tests with changes in projected testing demand driven by several factors, including significant reductions in cases in the U.S. and other major developed countries, the accelerated rollout of COVID-19 vaccines globally and the U.S. health authority’s updated guidance on testing for fully vaccinated individuals.  Abbott estimates that the total pre-tax cost to implement this restructuring plan will be approximately $500 million to $625 million, including fixed asset write-downs of $80 million to $115 million, inventory-related charges of $250 million to $260 million, and other exit costs of $170 million to $250 million.  Other exit costs include contract cancellation and employee-related costs.  Actions associated with this plan are expected to be substantially complete by the end of 2021.

Note 7 — Restructuring Plans (Continued)

In the second quarter of 2021, Abbott recorded charges of $499 million under this plan in Cost of products sold.  The charge recognized in the second quarter includes fixed asset write-downs of $80 million, inventory-related charges of $248 million, and other exit costs, which include contract cancellations and employee-related costs of $171 million.  Other exit costs will result in future cash outlays that are expected to be made primarily over the next 6 months.  The following summarizes the activity for the first six months of 2021 related to this restructuring action and the status of the related accruals as of June 30, 2021:

	Inventory
	Related		Fixed Asset		Other Exit
(in millions)	Charges		Write-Downs		Costs		Total
Restructuring charges recorded in 2021	$	248	$	80	$	171	$	499
Payments		—		—		(19)		(19)
Other-non-cash		(248)		(80)		—		(328)
Accrued balance at June 30, 2021	$	—	$	—	$	152	$	152

From 2017 to 2021, Abbott management approved restructuring plans as part of the integration of the acquisitions of St. Jude Medical into the Medical Devices segment, and Alere Inc. (Alere) into the Diagnostic Products segment, in order to leverage economies of scale and reduce costs.  As of December 31, 2020, the accrued balance associated with these actions was $25 million.  In the first six months of 2021, charges of $4 million were recognized, of which $1 million is recorded in Cost of products sold and $3 million as Selling, general and administrative expense.  As of June 30, 2021, the accrued liabilities remaining in the Condensed Consolidated Balance Sheet related to these actions total $15 million and primarily represent severance obligations.

From 2017 to 2020, Abbott management approved plans to streamline operations in order to reduce costs and improve efficiencies in various Abbott businesses including the nutritional, established pharmaceuticals and vascular businesses.  In the first six months of 2021, charges of $1 million were recognized as Cost of products sold.  The following summarizes the activity for the first six months of 2021 related to these restructuring actions and the status of the related accrual as of June 30, 2021:

(in millions)
Accrued balance at December 31, 2020	$	70
Restructuring charges recorded in 2021		1
Payments and other adjustments		(24)
Accrued balance at June 30, 2021	$	47