Notes to Consolidated Financial Statements 6

Note 6 — Segment and Geographic Area Information

(dollars in millions)

Revenue Segments — 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. Effective with the acquisition of Guidant’s vascular intervention and endovascular solutions businesses on April 21, 2006, Abbott’s base vascular business and Guidant’s vascular intervention and endovascular solutions businesses are reported as the Vascular Products segment. Effective January 1, 2006, Abbott’s segments were reorganized to reflect the shift of nutritional products from Abbott’s International division to a newly formed division, Abbott Nutrition International. For segment reporting purposes, Abbott’s Ross Products division and the Abbott Nutrition International division are aggregated and reported as the Nutritional Products segment and the U.S. and international pharmaceutical products divisions are aggregated and reported as the Pharmaceutical Products segment. The segment information below has been adjusted to reflect the acquisitions and reorganizations. Abbott’s reportable segments are as follows:

Pharmaceutical Products — Worldwide sales of a broad line of pharmaceuticals. For segment reporting purposes, two pharmaceutical divisions are aggregated and reported as the Pharmaceutical Products segment.

Diagnostic Products — Worldwide sales of diagnostic systems and tests for blood banks, hospitals, consumers, commercial laboratories and alternate-care testing sites. For segment reporting purposes, four diagnostic divisions are aggregated and reported as the Diagnostic Products segment.

Nutritional Products — Worldwide sales of a broad line of adult and pediatric nutritional products. For segment reporting purposes, two nutritional products divisions are aggregated and reported as the Nutritional Products segment.

Vascular Products — Worldwide sales of coronary, endovascular and vessel closure products.

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. For acquisitions prior to 2006, substantially all intangible assets and related amortization are not allocated to segments. The following segment information has been prepared in accordance with the internal accounting policies of Abbott, as described above, and are not presented in accordance with generally accepted accounting principles applied to the consolidated financial statements.

		Net Sales to External Customers						Operating Earnings (Loss) (a)						Depreciation and Amortization						Additions to Long-term Assets						Total Assets
		2006		2005		2004		2006		2005		2004		2006		2005		2004		2006		2005		2004		2006		2005		2004
Pharmaceuticals (b) (c)	$	12,395	$	13,691	$	11,913	$	4,522	$	4,294	$	3,889	$	150	$	170	$	219	$	2,615	$	389	$	317	$	9,281	$	6,766	$	6,517
Diagnostics		3,979		3,756		3,378		431		495		378		277		231		201		435		425		399		4,073		3,742		3,691
Nutritionals		4,313		3,937		3,589		1,206		1,036		1,047		112		99		91		184		81		138		2,467		2,219		1,936
Vascular (c)		1,082		253		221		(115)		(136)		(104)		157		20		20		3,637		88		16		4,400		290		229
Total Reportable Segments		21,769		21,637		19,101	$	6,044	$	5,689	$	5,210	$	696	$	520	$	531	$	6,871	$	983	$	870	$	20,221	$	13,017	$	12,373
Other		707		701		579
Net Sales	$	22,476	$	22,338	$	19,680
(a) Net sales and operating earnings for 2006 were unfavorably affected by the relatively stronger U.S. dollar and 2005 and 2004 were favorably affected by the relatively weaker U.S. dollar. (b) The decrease in Pharmaceutical Products segment sales in 2006 is due primarily to the effects of the amendment to the Boehringer Ingelheim distribution agreement. (c) Additions to long-term assets for the Pharmaceutical Products segment includes goodwill and intangible assets acquired in 2006 of $1,590 and $821, respectively, and the Vascular Products segment includes goodwill and intangible assets acquired in 2006 of $1,688 and $1,195, respectively.

		2006			2005			2004
Total Reportable Segment Operating Earnings	$	6,044		$	5,689		$	5,210
Corporate functions and benefit plans costs (d)		449			289			341
Non-reportable segments		(6)			30			119
Net interest expense		292			154			149
Acquired in-process and collaborations research and development		2,014			17			279
(Income) from TAP Pharmaceutical Products Inc. joint venture		(476	)		(441	)		(375	)
Share-based compensation (e)		330			30			29
Other, net (f)		1,165			990			542
Consolidated Earnings from Continuing Operations Before Taxes	$	2,276		$	4,620		$	4,126
(d) Corporate functions and benefit plans costs for 2006, includes a philanthropic contribution of $70 to the Abbott Fund. (e) Approximately 40 to 45 percent of the annual cost of share-based awards will typically be recognized in the first quarter due to the timing of the granting of share-based awards. (f) Other, net for 2006 includes $281 for restructuring plans as discussed in Note 14; $220 for acquisition integration and related costs primarily associated with the acquisition of Guidant’s vascular intervention and endovascular solutions businesses and income of $91 from fair value adjustments to certain derivative financial instruments related to the investment in Boston Scientific common stock and note receivable. Other, net for 2005 includes $266 for restructuring and impairment charges as discussed in Note 14.

		2006			2005			2004
Total Reportable Segment Assets	$	20,221		$	13,017		$	12,373
Cash and investments		2,603			3,090			2,205
Current deferred income taxes		1,717			1,249			1,032
Non-reportable segments		1,147			1,031			1,434
Assets held for sale to Hospira		—			163			317
All other, net, primarily goodwill and intangible assets not allocated to reportable segments		10,490			10,591			11,406
Total Assets	$	36,178		$	29,141		$	28,767

		Net Sales to External Customers (g)									Long-Term Assets
	2006		2005			2004			2006			2005			2004
United States	$	11,995		$	12,707		$	11,242		$	13,536		$	7,717		$	7,293
Japan		1,054			1,027			987			974			935			1,044
Germany		885			992			811			6,154			5,467			6,176
The Netherlands		1,061			899			705			185			156			146
Italy		848			806			745			256			211			234
Canada		762			680			595			74			68			68
France		696			657			587			131			92			94
Spain		583			542			513			283			232			275
United Kingdom		517			504			496			1,446			1,281			1,415
All Other Countries		4,075			3,524			2,999			1,857			1,596			1,288
Consolidated	$	22,476		$	22,338		$	19,680		$	24,896		$	17,755		$	18,033
(g) Sales by country are based on the country that sold the product.

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