AbbVie 2014 Annual Report Download - page 50

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quality assurance support, and other administrative services. The terms of the services under the
agreements vary by activity. These agreements facilitate the separation by allowing AbbVie to operate
independently prior to establishing stand-alone back office functions across its organization.
As of the date of the separation, AbbVie did not have sufficient back office infrastructure to operate in
markets outside the United States. As a result, AbbVie entered into transition services agreements with
Abbott to provide services outside the United States, including back office services in certain countries, for
up to three years after separation. These back office services include information technology, accounts
payable, payroll, receivables collection, treasury, and other financial functions, as well as order entry,
warehousing, and other administrative services. These transition services agreements have allowed AbbVie
to operate its international pharmaceuticals business independently prior to establishing a stand-alone back
office infrastructure for all countries. During the transition from Abbott, AbbVie has and will continue to
incur non-recurring expenses to expand its international infrastructure. In addition, in certain international
markets as of the date of the separation and as of December 31, 2014, certain marketing authorizations to
sell AbbVie’s products continued to be held by Abbott until such authorizations could be transferred
through the applicable regulatory channels.
It is not practicable to estimate the costs that would have been incurred in each of the periods
presented in the historical financial statements for the functions described above. Actual costs that would
have been incurred if AbbVie operated as a stand-alone company during these periods would have
depended on various factors including organizational design, outsourcing, and other strategic decisions
related to corporate functions, information technology, and international back office infrastructure. Refer to
Note 1 entitled ‘‘Background and Basis of Presentation’’ of the Notes to Consolidated Financial Statements
included under Item 8, ‘‘Financial Statements and Supplementary Data’’ for further description of
transactions between AbbVie and Abbott.
FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES
years ended December 31 (in millions) 2014 2013 2012
Cash flows provided by/(used in):
Operating activities $ 3,549 $ 6,267 $ 6,345
Investing activities (926) 879 (2,418)
Financing activities (3,293) (3,442) 1,931
Cash flows provided by operations in 2014 was $3.5 billion compared to $6.3 billion in 2013. The
decrease was primarily due to after-tax transaction and financing-related and other costs of $1.8 billion
incurred in connection with the termination of the proposed combination with Shire, including net foreign
exchange losses related to the settlement of undesignated forward contracts used to hedge anticipated
foreign currency cash outflows and the exit of certain foreign currency positions. The decrease was also
due to the timing of U.S. wholesaler collections and an investment in inventory in preparation for the
launch of AbbVie’s interferon-free HCV combination in the United States starting in mid-December 2014 and
in the European Union in January 2015. The decrease was also due to an increase in AbbVie’s voluntary
contribution to its main domestic defined benefit pension plan, which was $370 million in 2014 and
$145 million in 2013. AbbVie also made a voluntary contribution of $150 million to this plan subsequent to
December 31, 2014.
In 2014, cash outflows related to collaborations, acquisitions, and other arrangements totaled $622 million,
including $275 million paid to Infinity related to a global collaboration to develop duvelisib (IPI-145), and
$250 million to fund a novel R&D collaboration with Calico. AbbVie accrued an additional $500 million payment
to Calico in 2014 due to the satisfaction of certain conditions under the R&D collaboration, which was
subsequently paid in 2015. In 2013, cash outflows related to collaborations, acquisitions, and other
arrangements totaled $405 million, including $175 million related to the global collaboration with Ablynx NV
and $70 million related to a global collaboration with Alvine. Cash flows from investing activities
44 2014 Form 10-K