Abbott Laboratories 2012 Annual Report Download - page 44

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Abbott 2012 Annual Report
Options Outstanding Exercisable Options
Weighted Weighted Weighted Weighted
Average Average Average Average
Exercise Remaining Exercise Remaining
Shares Price Life (Years) Shares Price Life (Years)
December 31, 2011 85,439,279 $50.52 4.7 81,734,460 $50.51 4.5
Granted 4,055,956 60.91
Exercised (40,923,624) 49.73
Lapsed (380,717) 60.63
December 31, 2012 48,190,894 $51.98 4.0 43,052,057 $51.36 3.7
The aggregate intrinsic value of options outstanding and exercisable at
December 31, 2012 was $679 million and $633 million, respectively.
The total intrinsic value of options exercised in 2012, 2011 and 2010
was $528 million, $94 million and $77 million, respectively. The total
unrecognized compensation cost related to all share-based compen-
sation plans at December 31, 2012 amounted to approximately
$174 million, giving effect to the separation of AbbVie from Abbott,
which is expected to be recognized over the next three years.
Total non-cash compensation expense charged against income in
2012, 2011 and 2010 for share-based plans totaled approximately
$433 million, $383 million and $385 million, respectively, and the tax
benefit recognized was approximately $132 million, $116 million and
$119 million, respectively. Compensation cost capitalized as part of
inventory is not significant.
The fair value of an option granted in 2012, 2011 and 2010 was
$6.80, $6.23, and $9.24, respectively. The fair value of an option grant
was estimated using the Black-Scholes option-pricing model with the
following assumptions:
2012 2011 2010
Risk-free interest rate 1.2% 2.7% 2.9%
Average life of options (years) 6.0 6.0 6.0
Volatility 21.0% 21.0% 22.0%
Dividend yield 3.6% 4.1% 3.2%
The risk-free interest rate is based on the rates available at the time of
the grant for zero-coupon U.S. government issues with a remaining
term equal to the option’s expected life. The average life of an option is
based on both historical and projected exercise and lapsing data.
Expected volatility is based on implied volatilities from traded options
on Abbott’s stock and historical volatility of Abbott’s stock over the
expected life of the option. Dividend yield is based on the option’s
exercise price and annual dividend rate at the time of grant.
Note 9 — Debt and Lines of Credit
The following is a summary of long-term debt at December 31:
(dollars in millions) 2012 2011 2010
5.15% Notes, due 2012 $ — $ — $ 1,000
1.95% Yen Notes, due 2013 — 321 299
4.35% Notes, due 2014 — 500 500
1.2% Notes, due 2015 (1) 3,500 — —
Variable Rate Notes, due 2015 (1) 500 — —
2.7% Notes, due 2015 — 750 750
5.875% Notes, due 2016 — 2,000 2,000
1.75% Notes, due 2017 (1) 4,000 — —
5.6% Notes, due 2017 — 1,500 1,500
2.0% Notes, due 2018 (1) 1,000 — —
5.125% Notes, due 2019 947 2,000 2,000
4.125% Notes, due 2020 597 1,000 1,000
2.9% Notes, due 2022 (1) 3,100 — —
6.15% Notes, due 2037 547 1,000 1,000
6.0% Notes, due 2039 515 1,000 1,000
5.3% Notes, due 2040 694 1,250 1,250
4.4% Notes, due 2042 (1) 2,600 — —
Other, including fair value adjustments
relating to interest rate hedge contracts
designated as fair value hedges 85 719 225
Total, net of current maturities 18,085 12,040 12,524
Current maturities of long-term debt 309 1,027 2,045
Total carrying amount $18,394 $13,067 $14,569
(1) These notes were issued by AbbVie Inc. in November 2012. With the separation of
AbbVie on January 1, 2013, Abbott no longer has any obligations related to this debt.
In 2012, Abbott redeemed $7.7 billion of its outstanding notes. Abbott
incurred a cost of $1.35 billion to extinguish this debt, net of gains
from the unwinding of interest rate swaps related to the debt. In 2012,
AbbVie Inc., a wholly owned subsidiary of Abbott, issued $14.7 billion
of long-term debt with maturities ranging from 3 to 30 years. The debt
issued by AbbVie Inc. was guaranteed by Abbott with the guarantee
expiring when AbbVie Inc. separated from Abbott on January 1, 2013.
After the separation of AbbVie from Abbott on January 1, 2013, princi-
pal payments required on long-term debt outstanding and retained by
Abbott are $309 million in 2013 and $3.3 billion in 2019 and thereafter.
Notes to Consolidated Financial Statements
The number of restricted stock awards and units outstanding and the
weighted-average grant-date fair value at December 31, 2011 and
December 31, 2012 was 14,698,595 and $50.29 and 15,506,416 and
$53.17, respectively. The number of restricted stock awards and units,
and the weighted-average grant-date fair value, that were granted,
vested and lapsed during 2012 were 8,190,671 and $56.74, 6,774,145
and $51.32 and 608,705 and $52.32, respectively. The fair market value
of restricted stock awards and units vested in 2012, 2011 and 2010
was $385 million, $237 million and $203 million, respectively.