Abbott Laboratories 2013 Annual Report Download - page 44

ABBOTT 2013 ANNUAL REPORT
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Abbott and AbbVie entered into transitional services agreements
prior to the separation pursuant to which Abbott and AbbVie are
providing various services to each other on an interim transitional
basis. Transition services may be provided for up to 24 months with
an option for a one-year extension by the recipient. Services being
provided by Abbott include certain information technology and
back office support. Billings by Abbott under these transitional
services agreements are recorded as a reduction of the costs to
provide the respective service in the applicable expense category in
the Consolidated Statement of Earnings. This transitional support
will enable AbbVie to establish its stand-alone processes for various
activities that were previously provided by Abbott and does not
constitute significant continuing support of AbbVie’s operations.
For a small portion of AbbVie’s operations, the legal transfer of
AbbVie’s assets (net of liabilities) did not occur with the separa-
tion of AbbVie on January 1, 2013 due to the time required
to transfer marketing authorizations and other regulatory
requirements in each of these countries. Under the terms of the
separation agreement with Abbott, AbbVie is subject to the risks
and entitled to the benefits generated by these operations and
assets. The majority of these operations were transferred to
AbbVie in 2013 with the remainder transferring in 2014. These
assets and liabilities have been presented as held for disposition
in the Consolidated Balance Sheet. At December 31, 2013, the
assets and liabilities held for disposition consist of inventories
of $243 million, trade accounts receivable of $163 million, other
current assets of $32 million, equipment of $28 million, other
assets of $38 million, trade accounts payable and accrued liabilities
of $386 million and other liabilities of $7 million. Abbott’s obliga-
tion to transfer the net assets held for disposition to AbbVie of
$111 million is included in Other accrued liabilities.
Abbott has retained all liabilities for all U.S. federal and foreign
income taxes on income prior to the separation, as well as certain
non-income taxes attributable to AbbVie’s business. AbbVie
generally will be liable for all other taxes attributable to its busi-
ness. In connection with the separation, Abbott has adjusted its
employee stock compensation awards and separated its defined
benefit programs for pensions and post-employment medical and
dental benefit plans. See notes 8 and 12 for additional information.
NOTE 3 — SUPPLEMENTAL FINANCIAL INFORMATION
Other (income) expense, net, for 2013 primarily relates to gains
from the sales of equity securities. The loss on the extinguishment
of debt of $1.35 billion in 2012 relates to the early redemption of
$7.7 billion of long-term notes. The loss consists of the premium
paid on the notes and the write off of deferred financing costs
totaling $1.83 billion and was partially offset by a gain of $479 mil-
lion related to the unwinding of interest rate swaps related
to a portion of the debt. As discussed in Note 1, Other (income)
expense, net, for 2011 includes a charge of $100 million to recog-
nize the cumulative immaterial impacts to 2009 and 2010 relating
to the change in year end for foreign subsidiaries.
The detail of various balance sheet components is as follows:
(in millions)
Long-term Investments 2013 2012
Equity securities $ 93 $ 213
Other 26 61
Total $119 $274
The reduction in long‑term investments from December 31, 2012
to December 31, 2013 is due primarily to the separation of AbbVie
on January 1, 2013.
(in millions)
Other Accrued Liabilities 2013 2012
Accrued rebates payable to government agencies $ 136 $1,020
Accrued other rebates (a) 220 1,079
All other (b) 3,144 4,689
Total $3,500 $6,788
(a) Accrued wholesaler chargeback rebates of approximately $90 millon and $300 million at
December 31, 2013 and 2012, respectively, are netted in trade receivables because Abbott’s
customers are invoiced at a higher catalog price but only remit to Abbott their contract
price for the products. The reduction in the chargeback rebates from December 31, 2012
to December 31, 2013 is primarily due to the separation of AbbVie on January 1, 2013.
(b) 2013 and 2012 includes acquisition consideration payable of approximately $400 million related
primarily to the acquisition of Piramal Healthcare Limited’s Healthcare Solutions business.
(in millions)
Post‑employment Obligations and
Other Long‑term Liabilities 2013 2012
Defined benefit pension plans and
post‑employment medical and
dental plans for significant plans $ 1,818 $4,871
Deferred income taxes 466 710
All other (c) 2,500 3,476
Total $4,784 $9,057
(c) 2013 includes $1.3 billion of gross unrecognized tax benefits, as well as $70 million
of acquisition consideration payable. 2012 includes $1.4 billion of gross unrecognized
tax benefits, as well as acquisition consideration payable of $385 million related to the
acquisition of Piramal Healthcare Limited’s Healthcare Solutions business.