AbbVie 2014 Annual Report Download - page 77

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anticipated foreign currency cash outflows associated with the terminated proposed combination with Shire
and the exit of certain foreign currency positions. The forward contracts were settled in 2014. AbbVie
expects to record additional foreign exchange losses of $170 million in the first quarter of 2015 to reflect
the completed liquidation of its remaining foreign currency positions. Refer to Note 10 for further
information regarding these forward contracts and to Note 9 for further information regarding certain credit
facilities entered into in anticipation of the proposed combination with Shire.
Note 5 Earnings Per Share
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For periods subsequent to the separation, AbbVie calculated basic earnings per share (EPS) pursuant to
the two-class method. The two-class method is an earnings allocation formula that determines earnings per
share for common stock and participating securities according to dividends declared and participation rights
in undistributed earnings. Under this method, all earnings (distributed and undistributed) are allocated to
common shares and participating securities based on their respective rights to receive dividends. In
addition, participating securities may include certain performance-based awards that may otherwise have
been excluded from the calculation of EPS under the treasury-stock method. AbbVie’s forfeitable restricted
stock units (RSUs) and restricted stock awards (RSAs), including most performance-based awards, participate
in dividends on the same basis as common shares and such dividends are nonforfeitable to the holder once
declared. As a result, these forfeitable RSUs and RSAs meet the definition of a participating security.
The dilutive effect of participating securities is calculated using the more dilutive of the treasury stock
or the two-class method. For the years ended December 31, 2014 and 2013, the two-class method was
more dilutive. As such, the dilutive effect of outstanding RSUs and RSAs for the years ended December 31,
2014 and 2013 of approximately 4 million and 5 million, respectively, was excluded from the denominator
for the calculation of diluted EPS. These awards otherwise would have been included in the calculation of
EPS under the treasury stock method. Additionally, all earnings (distributed and undistributed) allocable to
participating securities, including performance-based awards not otherwise included in the calculation of
EPS under the treasury-stock method, were excluded from the numerator for the calculation of basic and
diluted earnings per share under the two-class method. Earnings allocable to participating securities for the
years ended December 31, 2014 and 2013 were approximately $9 million and $26 million, respectively.
For the years ended December 31, 2014 and 2013, approximately 0.4 million and 1 million common
shares issuable under stock-based compensation plans were excluded from the computation of earnings per
common share assuming dilution because the effect would have been antidilutive.
For periods prior to the separation, the numerator for both basic and diluted EPS was net earnings
attributable to AbbVie. The denominator for basic and diluted EPS was calculated using the 1,577 million
AbbVie common shares outstanding immediately following the separation. The same number of shares was
used to calculate basic and diluted earnings per share since no AbbVie equity awards were outstanding
prior to the separation.
Note 6 Acquisitions, Collaborations and Other Arrangements
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In 2014, 2013 and 2012, cash outflows related to collaborations, the acquisition of product rights and
other arrangements totaled $622 million, $405 million and $688 million, respectively. AbbVie recorded
IPR&D charges of $352 million, $338 million and $288 million in 2014, 2013 and 2012, respectively. In
2014, AbbVie also recorded other expenses of $750 million related to a collaboration. Significant
arrangements impacting 2014, 2013 and 2012, some of which require contingent milestone payments, are
summarized below. In addition to the significant arrangements described below, AbbVie entered several
other arrangements resulting in charges to IPR&D of $77 million in 2014 and $48 million in 2013 and upon
the achievement of certain development, regulatory and commercial milestones, could make additional
payments of up to $966 million and $894 million related to arrangements entered into in 2014 and 2013,
2014 Form 10-K 71