AbbVie 2013 Annual Report Download - page 85

transaction costs, which represents a Level 1 basis of fair value measurement. For 2012, the fair value
of long-term debt, excluding fair value hedges, was estimated based upon the quoted market prices for
the same or similar debt instruments. For 2013 and 2012, the fair value of other debt and lease
obligations was estimated based on a discounted cash flow analysis reflecting quoted market prices for
the same or similar debt instruments. There were no material adjustments to fair value during the years
ended December 31, 2013 and 2012 of assets and liabilities that are not measured at fair value on a
recurring basis, except as discussed in Note 5 regarding the impairment of the company’s investment in
Reata. The counterparties to financial instruments consist of select major international financial
institutions.
Concentrations of Risk
The company invests excess cash in time deposits, money market funds and U.S. Treasury securities and
diversifies the concentration of cash among different financial institutions. The company monitors
concentrations of credit risk associated with deposits with financial institutions. Credit exposure limits
have been established to limit a concentration with any single issuer or institution.
Three U.S. wholesalers accounted for 38 percent and 48 percent of total net accounts receivables as of
December 31, 2013 and 2012, respectively, and substantially all of AbbVie’s U.S. sales are to these
three wholesalers. In addition, substantially all of AbbVie’s trade receivables in Greece, Portugal, Italy
and Spain are with governmental health systems. Global economic conditions and liquidity issues in
these countries have resulted, and may continue to result, in delays in the collection of receivables and
credit losses. While the company continues to receive payments on these receivables, these conditions
have resulted in an increase in the average length of time it takes to collect accounts receivable
outstanding. Net governmental receivables outstanding in Greece, Portugal, Italy and Spain totaled
$781 million and $725 million as of December 31, 2013 and 2012, respectively.
HUMIRA is AbbVie’s single largest product and accounted for approximately 57 percent, 50 percent
and 45 percent of AbbVie’s total sales in 2013, 2012 and 2011, respectively. Any significant event that
adversely affects HUMIRA’s revenues could have a material adverse impact on AbbVie’s results of
operations, financial position and cash flows. Because HUMIRA is a biologic and biologics cannot be
readily substituted, it is uncertain what impact the loss of patent protection would have on the sales of
HUMIRA.
Note 10 Post-Employment Benefits
AbbVie sponsors various pension and other post-employment benefit plans, including defined benefit,
defined contribution and termination indemnity plans, which cover most employees worldwide. In
addition, AbbVie provides medical benefits, primarily to eligible U.S. retirees, through other
post-retirement benefit plans.
Abbott Sponsored Plans
Prior to separation, AbbVie employees participated in certain U.S. and international defined benefit
pension and other post-employment (OPEB) plans sponsored by Abbott. These plans included
participants of Abbott’s other businesses and were accounted for as multiemployer benefit plans in
AbbVie’s combined financial statements as of and for the years ended December 31, 2012 and 2011. As
a result, no asset or liability was recorded by AbbVie in the historical combined balance sheets through
December 31, 2012 to recognize the funded status of these plans. Effective January 1, 2013, in
connection with the separation of AbbVie from Abbott, these plans were separated and AbbVie
assumed net benefit plan obligations that were previously provided by Abbott. For Abbott-sponsored
defined benefit and post-employment benefit plans, AbbVie recorded expenses of $200 million in 2012
and $150 million in 2011. Abbott made voluntary contributions to its defined benefit pension plans that
AbbVie accounted for as multiemployer benefit plans totaling $310 million and $289 million in 2012
and 2011, respectively. The multiemployer benefit pension plans were approximately 94 percent funded
as of December 31, 2012.
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