AbbVie 2012 Annual Report Download - page 29

amounts that the distributor owes it on a timely basis or at all, which could negatively impact AbbVie’s
business and results of operations.
Changes in the terms of rebate and chargeback programs, which are common in the pharmaceuticals
industry, could have a material adverse effect on AbbVie’s operations.
Rebates related to government programs, such as fee-for-service Medicaid or Medicaid managed
care programs, arise from laws and regulations. AbbVie cannot predict if additional government
initiatives to contain health care costs or other factors could lead to new or modified regulatory
requirements that include higher or incremental rebates or discounts. Other rebate and discount
programs arise from contractual agreements with private payers. Various factors, including market
factors and the ability of private payers to control patient access to products, may provide payers the
leverage to negotiate higher or additional rebates or discounts that could have a material adverse effect
on AbbVie’s operations.
AbbVie is subject to evolving and complex tax laws, which may result in additional liabilities that may affect
results of operations.
AbbVie is subject to evolving and complex tax laws in the jurisdictions in which it operates.
Significant judgment is required for determining AbbVie’s tax liabilities, and AbbVie’s tax returns will
be periodically examined by various tax authorities. Although Abbott retains the risk for tax
contingencies arising from operations pre-separation, AbbVie bears risks for future tax contingencies
arising from operations post-separation. Due to the complexity of tax contingencies, the ultimate
resolution of any tax matters related to operations post-separation may result in payments greater or
less than amounts accrued.
In addition, AbbVie may be impacted by changes in tax laws, including tax rate changes, changes
to the laws related to the treatment and remittance of foreign earnings, new tax laws, and subsequent
interpretations of tax law in the United States and other jurisdictions.
AbbVie has debt obligations that could adversely affect its business and its ability to meet its obligations.
The amount of debt that AbbVie has incurred and intends to incur could have important
consequences to AbbVie and its investors, including:
• requiring a portion of AbbVie’s cash flow from operations to make interest payments on this
debt;
• increasing AbbVie’s vulnerability to general adverse economic and industry conditions;
• reducing the cash flow available to fund capital expenditures and other corporate purposes and
to grow AbbVie’s business; and
• limiting AbbVie’s flexibility in planning for, or reacting to, changes in AbbVie’s business and the
industry.
To the extent that AbbVie incurs additional indebtedness, the risks described above could increase.
In addition, AbbVie’s cash flow from operations may not be sufficient to repay all of the outstanding
debt as it becomes due, and AbbVie may not be able to borrow money, sell assets, or otherwise raise
funds on acceptable terms, or at all, to refinance its debt.
The terms of AbbVie’s debt contain covenants restricting its financial flexibility in a number of
ways, including among other things, restrictions on AbbVie’s ability and the ability of certain of
AbbVie’s subsidiaries to incur mortgages with respect to principal domestic properties and to enter into
sale and leaseback transactions with respect to principal domestic properties, and restrictions on
AbbVie’s ability to merge or consolidate with any other entity or convey, transfer or lease AbbVie’s
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