AbbVie 2014 Annual Report Download - page 52

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AbbVie monitors economic conditions, the creditworthiness of customers, and government regulations
and funding, both domestically and abroad. AbbVie regularly communicates with its customers regarding
the status of receivable balances, including their payment plans and obtains positive confirmation of the
validity of the receivables. AbbVie establishes an allowance against accounts receivable when it is probable
they will not be collected. AbbVie also monitors the potential for and periodically has utilized factoring
arrangements to mitigate credit risk although the receivables included in such arrangements have
historically not been a material amount of total outstanding receivables. Currently, AbbVie does not believe
the economic conditions in Southern Europe will have a material impact on the company’s liquidity, cash
flow, or financial flexibility. However, if government funding were to become unavailable in these countries
or if significant adverse changes in their reimbursement practices were to occur, AbbVie may not be able to
collect the entire balance outstanding as of December 31, 2014.
Credit Facility, Access to Capital and Credit Ratings
Credit Facility
Prior to October 2014, AbbVie was party to a $2.0 billion unsecured five-year revolving credit facility
from a syndicate of lenders, which also supported commercial paper borrowings. The credit facility enabled
the company to borrow funds at floating interest rates. In October 2014, AbbVie replaced its existing
revolving credit facility with a new $3.0 billion five-year revolving credit facility. The new revolving credit
facility enables the company to borrow funds on an unsecured basis at variable interest rates and contains
various covenants.
At December 31, 2014, the company was in compliance with its credit facility covenants. Commitment
fees under the credit facility were not material. There were no amounts outstanding under the credit
facility as of December 31, 2014 and 2013.
Access to Capital
The company intends to fund short-term and long-term financial obligations as they mature through
cash on hand, future cash flows from operations, or by issuing additional debt. The company’s ability to
generate cash flows from operations, issue debt, or enter into financing arrangements on acceptable terms
could be adversely affected if there is a material decline in the demand for the company’s products or in
the solvency of its customers or suppliers, deterioration in the company’s key financial ratios or credit
ratings, or other material unfavorable changes in business conditions. At the current time, the company
believes it has sufficient financial flexibility to issue debt, enter into other financing arrangements, and
attract long-term capital on acceptable terms to support the company’s growth objectives.
Credit Ratings
On July 18, 2014, following the announcement of the proposed combination with Shire, Moody’s
Investor Service affirmed its Baa1 senior unsecured long-term rating and Prime-2 short-term rating and
revised its ratings outlook to ‘‘stable’’ from ‘‘positive’’. In addition, Standard & Poor’s Ratings Services (S&P)
placed its ‘‘A’’ corporate credit rating and senior unsecured debt rating on AbbVie on CreditWatch with
negative implications. On October 21, 2014, S&P affirmed AbbVie’s ‘‘A’’ corporate credit rating and senior
unsecured debt rating and removed the negative credit watch. S&P affirmed its ‘‘A-1’’ commercial paper
rating and did not place it on CreditWatch. There were no other changes in the company’s credit ratings in
2014.
Unfavorable changes to the ratings may have an adverse impact on future financing arrangements;
however, they would not affect the company’s ability to draw on its credit facility and would not result in
an acceleration of scheduled maturities of any of the company’s outstanding debt.
46 2014 Form 10-K