GSK Annual Report 2002

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128 GlaxoSmithKline Notes to the financial statements 37 Reconciliation to US accounting principles continued 2002 2001 2000 Consolidated statement of cash flows under US GAAP £m £m £m Cash flows from operating activities Net income/(loss) 413 (143) (5,228) Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 755 742 427 Amortisation of intangible assets 1,781 3,577 735 Write-off in-process R&D acquired – – 6,324 Impairment of goodwill, tangible and intangible fixed assets 2,829 253 47 (Gain)/loss on sale of fixed assets and other productive assets (46) 99 (152) Deferred taxes (1,216) (877) 28 Stock compensation 331 162 254 Tax benefit from exercise of stock options 13 56 9 Income in associate (75) (71) – Loss on sale of associate and investment – (5) – Derivatives (8) (15) – Other (41) (93) – Changes in operating assets and liabilities, net of acquisitions: (Increase)/decrease in inventory (2) 550 21 Increase in trade and other debtors (72) (77) (281) Increase in trade and other creditors 426 368 444 Increase/(decrease) in pension and other provisions 257 80 (92) Net cash provided by operating activities 5,345 4,606 2,536 Cash flows from investing activities Acquisition of fixed assets (1,080) (1,111) (416) Acquisition of intangible assets (5) (80) (76) Acquisition of SmithKline Beecham – cash received on acquisition – – 1,129 Acquisition of other new businesses – net of cash acquired (17) (803) (24) Proceeds from disposition of fixed assets and businesses 61 211 12 Proceeds from sale of intangible fixed assets – 6 – (Increase)/decrease in equity investments (10) 92 194 Net cash (used in)/provided by investing activities (1,051) (1,685) 819 Cash flows from financing activities (Increase)/decrease in liquid investments (34) 1,006 (235) Proceeds from additional borrowings 1,094 973 – Reduction in debt (89) (112) (3) Purchase of treasury stock – (795) (471) Dividends paid (2,432) (2,454) (1,334) Net repayment of short-term loans (408) (718) (193) Net (repayment of)/increase in cash overdrafts (27) 38 (121) Redemption of preference shares issued by a subsidiary – (457) – Ordinary shares purchased for cancellation (2,220) (1,274) – Issue of share capital 114 338 121 Other – (28) 13 Net cash used in financing activities (4,002) (3,483) (2,223) Net increase/(decrease) in cash and cash equivalents 292 (562) 1,132 Exchange rate movements (42) 15 1 Cash and cash equivalents at beginning of year 832 1,379 246 Cash and cash equivalents at end of year 1,082 832 1,379 Supplemental cash flow information Cash paid during the year for: Interest 215 196 235 Income taxes 1,633 1,717 635 Non-cash investing and financing activities Under the purchase acquisition dated 27th December 2000 the Group acquired all the outstanding shares of SmithKline Beecham in exchange for shares of GlaxoSmithKline. In conjunction with the acquisition, liabilities were assumed as follows: Fair value of assets acquired 57,158 Fair value of shares issued 43,919 Fair value of liabilities assumed 13,239
37 Reconciliation to US accounting principles continued Notes to the financial statements GlaxoSmithKline 129 The following is a summary of the material adjustments to profit and shareholders’ funds which would be required if US GAAP had been applied instead of UK GAAP. These adjustments have been reflected in the income statements and balance sheets presented in accordance with US GAAP. 2001 2000 2002 (restated) (restated) Profit £m £m £m Profit attributable to shareholders under UK GAAP 3,915 3,053 4,106 Less: SmithKline Beecham’s pre-acquisition profit attributable to shareholders under UK GAAP and merger alignment adjustments – – (2,237) US GAAP adjustments: Write-off of SmithKline Beecham in-process R&D acquired – – (6,324) Capitalised interest 25 18 15 Computer software 20 (3) 13 Purchased intangibles (86) (140) – Reversal/(amortisation) of goodwill 18 (1,261) (559) Amortisation and impairment of intangible assets (4,184) (2,266) (166) Recognition of cost of sales on fair value step-up of inventory – (298) – Disposal of purchased investment – (117) – Product divestments 7 – – Loss on disposal of subsidiary – 204 – Pensions and post-retirement benefits (138) (12) 75 Stock-based compensation (331) (162) (254) Provision against ESOT shares 51 (108) 26 Derivative instruments 8 15 – Restructuring 37 182 – Tax benefits on exercise of US stock options (13) (56) (9) Merger transaction costs – – 66 Deferred taxation 1,182 883 20 Impairment of equity investments (8) (75) – Net income/(loss) under US GAAP before cumulative effect of changes in accounting principles 503 (143) (5,228) Cumulative effect of changes in accounting principles (90) – – Net income/(loss) after cumulative effect of changes in accounting principles 413 (143) (5,228) 2001 2002 (restated) Equity shareholders’ funds £m £m Equity shareholders’ funds under UK GAAP 6,581 7,390 US GAAP adjustments: Tangible fixed assets 49 44 Investments 829 879 Product rights 18,590 22,927 Capitalised interest 175 155 Computer software (9) (29) Goodwill 17,989 17,928 Other intangible assets (438) (377) Unrealised gains on marketable securities 113 163 Pensions and other post-retirement benefits (1,198) 299 Employee Share Ownership Trust (2,826) (2,936) Restructuring costs (6) (46) Derivative instruments 98 29 Dividends 754 718 Deferred taxation (5,779) (7,037) Shareholders’ equity under US GAAP 34,922 40,107 Certain items for the years ended 31st December 2001 and 2000 have been reclassified for comparative purposes. During 2002, FRS 19 ‘Deferred Tax’ has been implemented by the Group under UK GAAP. This FRS requires deferred tax to be accounted for on a full provision basis, rather than a partial provision basis as in 2001 and earlier years. This change has been accounted for as a prior year adjustment for UK GAAP purposes and comparative adjustments to arrive at US GAAP have been restated as necessary. This change had no impact on US GAAP results.
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Do more, feel better, live longer T
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The Annual Report was approved by t
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Joint statement by the Chairman and
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04 GlaxoSmithKline Joint statement
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Products - Pharmaceuticals Descript
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Additionally, GlaxoSmithKline marke
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Competition - Consumer Healthcare T
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Operating activities Marketing and
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Description of business GlaxoSmithK
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Description of business GlaxoSmithK
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Product approvals Country/Region Pr
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As part of GlaxoSmithKline’s majo
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Operating resources Intellectual pr
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Compensation philosophy and program
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Access to healthcare in the develop
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GlaxoSmithKline gave unrestricted g
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Corporate governance This section d
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Corporate Executive Team (CET) JP G
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The Annual General Meeting takes pl
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Research and development Safety of
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Remuneration report GlaxoSmithKline
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The majority of the competitor pane
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Performance graph 100 90 80 70 60 N
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Non-Executive Directors Non-Executi
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Non-Executive Directors’ share ar
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Incentive plans Remuneration report
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Operating and financial review and
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2002 Year World economy The world
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Pharmaceutical sales by therapeutic
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Consumer Healthcare sales 2002 2001
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Earnings 2001 2002 (restated) CER%
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Contractual obligations and commitm
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Funding, maturity and counterparty
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Stricter regulatory controls also h
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Operating and financial review and
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Latin America reported eight per ce
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Selected financial data UK/US GAAP
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Financial statements GlaxoSmithKlin
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Independent Auditors’ report to t
Page 79 and 80: Consolidated statement of profit an
Page 81 and 82: Consolidated statement of cash flow
Page 83 and 84: Company balance sheet at 31st Decem
Page 85 and 86: 2 Accounting policies Consolidation
Page 87 and 88: 2 Accounting policies continued Sto
Page 89 and 90: 6 Segment information continued Not
Page 91 and 92: 7 Merger items, restructuring costs
Page 93 and 94: Notes to the financial statements G
Page 95 and 96: 13 Earnings per share Notes to the
Page 99 and 100: 19 Equity investments Notes to the
Page 105 and 106: 30 Legal proceedings The Group is i
Page 107 and 108: 30 Legal proceedings continued In F
Page 109 and 110: 30 Legal proceedings continued In 2
Page 111 and 112: 31 Acquisitions and disposals conti
Page 113 and 114: 32 Financial instruments and relate
Page 115 and 116: 32 Financial instruments and relate
Page 117 and 118: 33 Employee costs continued Notes t
Page 119 and 120: 33 Employee costs continued Notes t
Page 121 and 122: 34 Employee share schemes continued
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Page 125 and 126: 37 Reconciliation to US accounting
Page 129: Notes to the financial statements G
Page 141 and 142: 38 Principal Group companies Notes
Page 143 and 144: 38 Principal Group companies contin
Page 145 and 146: Financial record GlaxoSmithKline 14
Page 153 and 154: Investor information GlaxoSmithKlin
Page 155 and 156: Shareholder information Ordinary sh
Page 157 and 158: Share capital GlaxoSmithKline 155 A
Page 159 and 160: Cross reference to Form 20-F GlaxoS
Page 161 and 162: Index A Access to healthcare 27 Acc
Page 163: Contact details INTERNET Informatio
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GSK Annual Report 2002

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