Notes to Consolidated Financial Statements 6

Note 6 — Segment and Geographic Area Information

(dollars in millions)

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. 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.

Nutritional Products — Worldwide sales of a broad line of adult and pediatric nutritional products.

Diagnostic Products — Worldwide sales of diagnostic systems and tests for blood banks, hospitals, commercial laboratories and alternate-care testing sites. For segment reporting purposes, three diagnostic divisions are aggregated and reported as the Diagnostic 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. Effective in 2007, the Diagnostic segment was reorganized. Prior years' segment information has been adjusted to reflect this change. 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.

(a) Net sales and operating earnings for 2007 and 2005 were favorably affected by the relatively weaker U.S. dollar and were unfavorably affected by the relatively stronger U.S. dollar in 2006.

(b) The increase in Pharmaceutical Product segment sales in 2007 is due primarily to the acquisition of Kos Pharmaceuticals Inc. in December 2006 and the decrease in 2006 is due primarily to the effects of the termination of a distribution agreement.

(c) Additions to long-term assets for the Pharmaceutical Products segment includes goodwill and intangible assets acquired of $1,590 and $821, respectively, in 2006 and for the Vascular Products segment includes goodwill and intangible assets acquired of $1,688 and $1,195, respectively, in 2006.

(d) The decrease in the Nutritional Products segment operating earnings in 2007 was primarily due to the completion of the U.S. co-promotion of Synagis in 2006.

	2007	2006	2005
Total Reportable Segment Operating Earnings	$6,428	$5,853	$5,455
Corporate functions and benefit plans costs (e)	(421)	(449)	(289)
Non-reportable segments	298	197	204
Net interest expense	(456)	(292)	(154)
Acquired in-process and collaborations research and development	—	(2,014)	(17)
Income from TAP Pharmaceutical Products Inc. joint venture	498	476	441
Share-based compensation (f)	(430)	(330)	(30)
Other, net (g)	(1,447)	(1,165)	(990)
Consolidated Earnings Before Taxes	$4,470	$2,276	$4,620

(e) Corporate functions and benefit plans costs for 2006, includes a philanthropic contribution of $70 to the Abbott Fund.

(f) The increase in share-based compensation in 2007 is partially due to the granting of replacement stock options as a result of the increase in the market value of Abbott common stock. Abbott adopted FASB No. 123 (revised 2004) "Share-Based Payment" on January 1, 2006.

(g) Other, net for 2007 includes $197 for restructuring plans; $256 for acquisition integration and related costs primarily associated with the acquisitions of Guidant's vascular intervention and endovascular solutions and Kos Pharmaceuticals Inc. and a $190 fair market value loss adjustment to Abbott's investment in Boston Scientific common stock. Other, net for 2006 includes $281 for restructuring plans; $220 for acquisition integration and related costs primarily associated with the acquisition of Guidant's vascular intervention and endovascular solutions businesses. Other, net for 2005 includes $266 for restructuring and impairment charges.

	2007	2006	2005
Total Reportable Segment Assets	$20,956	$19,882	$12,707
Cash and investments	3,946	2,603	3,090
Current deferred income taxes	2,110	1,717	1,249
Non-reportable segments	1,575	1,486	1,341
All other, net, primarily goodwill and intangible assets not allocated to reportable segments	11,127	10,490	10,754
Total Assets	$39,714	$36,178	$29,141

	Net Sales to External Customers (h)			Long-term Assets
	2007	2006	2005	2007	2006	2005
United States	$13,252	$11,995	$12,707	$12,870	$13,536	$7,717
Japan	1,111	1,054	1,027	987	974	935
Germany	1,235	885	992	6,822	6,154	5,467
The Netherlands	1,271	1,061	899	211	185	156
Italy	974	848	806	288	256	211
Canada	832	762	680	156	74	68
France	854	696	657	142	131	92
Spain	731	583	542	336	283	232
United Kingdom	627	517	504	1,371	1,446	1,281
All Other Countries	5,027	4,075	3,524	2,488	1,857	1,596
Consolidated	$25,914	$22,476	$22,338	$25,671	$24,896	$17,755

(h) Sales by country are based on the country that sold the product.