AbbVie 2014 Annual Report Download - page 68

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AbbVie Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Note 1 Background and Basis of Presentation
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Background
The principal business of AbbVie Inc. (AbbVie or the company) is the discovery, development,
manufacture and sale of a broad line of pharmaceutical products. AbbVie’s products are generally sold
worldwide directly to wholesalers, distributors, government agencies, health care facilities, specialty
pharmacies, and independent retailers from AbbVie-owned distribution centers and public warehouses.
Substantially all of AbbVie’s sales in the United States are to three wholesalers. Outside the United States,
products are sold primarily to customers or through distributors, depending on the market served.
AbbVie was incorporated in Delaware on April 10, 2012. On January 1, 2013, AbbVie became an
independent, publicly-traded company as a result of the distribution by Abbott Laboratories (Abbott) of
100 percent of the outstanding common stock of AbbVie to Abbott’s shareholders (the separation). On
January 1, 2013, Abbott’s shareholders of record as of the close of business on December 12, 2012,
received one share of AbbVie common stock for every one share of Abbott common stock held as of the
record date. AbbVie’s common stock began trading ‘‘regular-way’’ under the ticker symbol ‘‘ABBV’’ on the
New York Stock Exchange on January 2, 2013.
During the year ended 2013, separation-related adjustments totaling $1.3 billion were recorded in
stockholders’ equity. Separation-related adjustments to additional paid-in capital principally reflected
dividends to AbbVie shareholders that were declared from pre-separation earnings during the first quarter
of 2013 and the transfer of certain pension plan liabilities and assets from Abbott to AbbVie upon the legal
split of those plans in 2013. In addition, because the historical financial statements were derived from
Abbott’s records, separation-related adjustments also included an adjustment to accumulated other
comprehensive loss to reflect the appropriate opening balances associated with currency translation
adjustments related to AbbVie’s legal entities at the separation date. Refer to Note 11 for further
information regarding the separation of the pension plans.
In connection with the separation, AbbVie and Abbott entered into transition services agreements
covering certain corporate support and back office services that AbbVie historically received from Abbott.
Such services include information technology, accounts payable, payroll, receivables collection, treasury and
other financial functions, as well as order entry, warehousing, engineering support, quality assurance
support and other administrative services. These agreements facilitate the separation by allowing AbbVie to
operate independently prior to establishing stand-alone back office functions across its organization.
Transition services may be provided for up to 24 months, with an option for a one-year extension. The
majority of these transaction service agreements expired without extension at December 31, 2014.
During the years ended December 31, 2014, 2013 and 2012, AbbVie incurred $445 million,
$254 million, and $288 million, respectively, of separation-related expenses including legal, information
technology and regulatory fees, which were principally classified in selling, general and administrative
expenses (SG&A) in the consolidated statements of earnings.
Basis of Historical Presentation
For a certain portion of AbbVie’s operations, the legal transfer of AbbVie’s assets (net of liabilities) did
not occur with the separation of AbbVie on January 1, 2013 due to the time required to transfer marketing
authorizations and satisfy other regulatory requirements in certain countries. Under the terms of the
separation agreement with Abbott, AbbVie is responsible for the business activities conducted by Abbott on
its behalf, and is subject to the risks and entitled to the benefits generated by these operations and assets.
62 2014 Form 10-K