AbbVie 2013 Annual Report Download - page 49

establishing a stand-alone back office infrastructure for all countries. During the transition from
Abbott, AbbVie has and will continue to incur non-recurring expenses to expand its international
infrastructure. In addition, in certain international markets as of the date of the separation and as of
December 31, 2013, certain marketing authorizations to sell AbbVie’s products continued to be held by
Abbott until such authorizations could be transferred through the applicable regulatory channels.
It is not practicable to estimate the costs that would have been incurred in each of the periods
presented in the historical financial statements for the functions described above. Actual costs that
would have been incurred if AbbVie operated as a stand-alone company during these periods would
have depended on various factors, including organizational design, outsourcing and other strategic
decisions related to corporate functions, information technology, and international back office
infrastructure. Refer to Note 1 for further description of transactions between AbbVie and Abbott.
FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES
years ended December 31 (in millions) 2013 2012 2011
Cash flows provided by/(used in):
Operating activities $ 6,267 $ 6,345 $ 6,247
Investing activities 879 (2,418) 553
Financing activities (3,442) 1,931 (6,783)
Strong cash flows from operating activities were driven by net earnings and focused working capital
management. In 2013, cash flows from operating activities also reflected cash paid for taxes of
$1.3 billion, cash paid for interest of $283 million and a voluntary contribution to its main domestic
defined benefit pension plan of $145 million. In 2012, cash flows from operating activities reflected cash
paid for interest of $61 million and a voluntary contribution to its sponsored pension plans of
$46 million. In 2011, AbbVie recorded non-cash charges of $1.5 billion in accrued liabilities to establish
a litigation reserve related to claims on AbbVie’s previous sales and marketing activities for Depakote.
AbbVie made payments of $1.6 billion in 2012 to settle these claims.
Cash flows from investing activities in 2013 and 2012 reflected capital expenditures, net sales
(purchases) of short-term investments and payments related to certain collaboration, license and
acquisition agreements. Refer to Note 5 to the audited consolidated financial statements included
under Item 8, ‘‘Financial Statements and Supplementary Data’’ for information regarding significant
collaboration, license and acquisition agreements.
AbbVie issued senior notes of $14.7 billion in November 2012 and $1.0 billion of commercial paper in
December 2012. Abbott’s guarantee of the senior notes terminated upon the distribution of AbbVie
common stock to the shareholders of Abbott upon the separation on January 1, 2013. The senior notes,
which have maturities ranging from three to 30 years, may be redeemed at any time, except the floating
rate notes and some of the senior notes of each series, at a redemption price equal to the principal
amount plus a make-whole premium. In 2013, the company issued and redeemed commercial paper.
The balance of commercial paper outstanding at December 31, 2013 and 2012 was $400 million and
$1.0 billion, respectively, at weighted-average interest rates of 0.2% and 0.4%, respectively, for each
period. AbbVie may retire or issue additional commercial paper to meet liquidity requirements as
needed. Historically, cash flows from financing activities represented cash transactions with Abbott.
The company’s cash and equivalents and short-term investments increased from $8.0 billion at
December 31, 2012 to $9.9 billion at December 31, 2013. During 2012, Abbott contributed
approximately $4.4 billion of cash to newly formed AbbVie entities, and AbbVie distributed
$13.2 billion in cash and debt securities to Abbott. Subsequent to the separation, effective January 1,
2013, AbbVie no longer participates in cash management and funding arrangements with Abbott.
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