Restructuring Plans

9 Months Ended

Sep. 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 the second quarter 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. 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 included fixed asset write-downs of $80 million, inventory-related charges of $248 million, and other exit costs, which included contract cancellations and employee-related costs of $171 million.

In the third quarter of 2021, as the Delta variant of COVID-19 spread and the number of new COVID-19 cases increased significantly particularly in the U.S., demand for rapid COVID-19 tests increased significantly. As a result, in the third quarter Abbott sold approximately $120 million of inventory that was previously estimated to have no net realizable value under the second quarter restructuring action. In addition, the estimate of other exit costs was reduced by a net $19 million as Abbott fulfilled its purchase obligations under certain contracts for which a liability was recorded in the second quarter or Abbott settled with the counterparty in the third quarter.

Note 7 — Restructuring Plans (Continued)

The following summarizes the activity for the first nine months of 2021 related to this restructuring action and the status of the related accruals as of September 30, 2021:

	Inventory-
	Related		Fixed Asset		Other Exit
(in millions)	Charges		Write-Downs		Costs		Total
Restructuring charges recorded in 2021	$	248	$	80	$	152	$	480
Payments		—		—		(54)		(54)
Other non-cash		(248)		(80)		—		(328)
Accrued balance at September 30, 2021	$	—	$	—	$	98	$	98

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 nine months of 2021, charges of $5 million were recognized, of which $1 million is recorded in Cost of products sold and $4 million as Selling, general and administrative expense. As of September 30, 2021, the accrued liabilities remaining in the Condensed Consolidated Balance Sheet related to these actions total $10 million and primarily represent severance obligations.

From 2017 to 2021, 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 nine months of 2021, charges of $17 million were recognized, of which $1 million is recorded in Cost of products sold and $16 million as Selling, general and administrative expense. The following summarizes the activity for the first nine months of 2021 related to these restructuring actions and the status of the related accrual as of September 30, 2021:

(in millions)
Accrued balance at December 31, 2020	$	70
Restructuring charges recorded in 2021		17
Payments and other adjustments		(30)
Accrued balance at September 30, 2021	$	57