AbbVie 2014 Annual Report Download - page 82

13NOV201221352027
Maturities of Long-Term Debt and Capital Lease Obligations
The following table summarizes AbbVie’s future minimum lease payments under non-cancelable
operating leases, debt maturities and future minimum lease payments for capital lease obligations as of
December 31, 2014:
Operating Debt maturities
as of and for the years ended December 31 (in millions) leases and capital leases
2015 $114 $ 4,021
2016 103 19
2017 92 4,018
2018 81 1,014
2019 74 6
Thereafter 98 5,737
Total obligations and commitments 562 14,815
Fair value hedges and unamortized bond discounts n/a (229)
Total debt and lease obligations $562 $14,586
Lease expense was $115 million in 2014 and $107 million in 2013 and was not material for 2012. As
part of the separation, AbbVie entered into agreements to lease certain facilities, including office,
laboratory, and factory and warehouse space, under principally non-cancelable operating leases with
Abbott. AbbVie’s operating leases generally include renewal options and provide for the company to pay
taxes, maintenance, insurance and other operating costs of the leased property. Capital lease obligations
relate to automobiles and certain facilities. As of December 31, 2014, annual future minimum lease
payments for capital lease obligations are not material.
Debt maturities and capital leases in 2015 include the $500 million floating notes due in 2015 and
maturities of $3.5 billion of 1.2% senior notes.
Contingencies and Guarantees
In connection with the separation, AbbVie has indemnified Abbott for all liabilities resulting from the
operation of AbbVie’s business other than income tax liabilities with respect to periods prior to the
distribution date and other liabilities as agreed to by AbbVie and Abbott. AbbVie has no material exposures
to off-balance sheet arrangements, no special-purpose entities and no activities that included non-exchange-
traded contracts accounted for at fair value. In the ordinary course of business, AbbVie has periodically
entered into third-party agreements, such as the assignment of product rights, which have resulted in
AbbVie becoming secondarily liable for obligations for which AbbVie had previously been primarily liable.
Based upon past experience, the likelihood of payments under these agreements is remote. AbbVie
periodically acquires a business or product rights in which AbbVie agrees to pay contingent consideration
based on attaining certain thresholds or based on the occurrence of certain events.
Note 10 Financial Instruments and Fair Value Measures
.....................................................................................................................................................................................................................................................................................................................................................
Risk Management Policy
The company is exposed to foreign currency exchange rate and interest rate risks related to its business
operations. The company’s hedging policy attempts to manage these risks to an acceptable level based on the
company’s judgment of the appropriate trade-off between risk, opportunity and costs. The company uses
derivative instruments to reduce its exposure to foreign currency exchange rates. The company is also
exposed to the risk that its earnings and cash flows could be adversely impacted by fluctuations in interest
rates. The company periodically enters into interest rate swaps, based on judgment, to manage interest costs
in which the company agrees to exchange, at specified intervals, the difference between fixed and
76 2014 Form 10-K