GSK Annual Report 2002

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70 GlaxoSmithKline Operating and financial review and prospects Other operating income was significantly lower in 2001 than in 2000 due to lower sales of equity investments, lower product disposals and higher costs related to product withdrawals. Profit on disposal of interest in associate The Group sold 1.5 million shares in Quest Diagnostics, Inc. during the year realising a gain of £96 million. As at 31st December 2001, after a 2 for 1 share split by Quest after the share sale, GlaxoSmithKline held 22.1 million shares. Share of profits/(losses) of joint ventures and associated undertakings The share of profits of associates arose principally from the Group’s holding in Quest Diagnostics, Inc. 2001 2000 Net interest payable £m £m Interest payable (198) (317) Investment income 129 158 (69) (159) Share of interest payable of associate (19) (23) (88) (182) Net interest payable was lower due to a lower average level of net debt in 2001 than in 2000 and to lower interest rates. Profit before taxation Other operating income/(expense), together with the disposal of part of the interest in an associate, added £133 million to profit before taxation in 2001, compared to £418 million in 2000. This reduction in one-time profits was planned to improve the overall quality of the Group’s earnings. Taking account of the contribution from associates, comprising share of profit less share of interest, less the Group’s own net interest payable, business performance profit before tax was £6,169 million, compared to £5,327 million in 2000, an increase of 12 per cent. Merger items, restructuring costs and disposal of businesses The key items in 2001 are discussed below. Merger Costs arising from the integration of the Glaxo Wellcome and SmithKline Beecham businesses into a unified GlaxoSmithKline business, referred to as merger integration costs, amounted in 2001 to £1,069 million. The costs primarily include consultancy fees, severance, asset write-offs and share option retention incentives. Manufacturing and other restructuring Costs of £147 million were incurred in implementing the previously announced Glaxo Wellcome and SmithKline Beecham plans for restructuring of manufacturing and other activities. A further £15 million was charged in respect of post-merger restructuring activities. The costs in 2001 include consultancy fees, severance and asset write-offs. Block Drug Company, Inc. GlaxoSmithKline acquired Block Drug in January 2001. The costs incurred in acquiring and integrating this business were £125 million in 2001 comprising professional fees, severance and asset write-offs. Disposal of businesses The loss on disposal of businesses in 2001 primarily arose on the sale of Affymax. The charge includes a £299 million write-off of goodwill which was previously eliminated against reserves. Taxation 2001 2000 (restated) (restated) £m £m Business performance (1,655) (1,497) Merger restructuring and disposal of subsidiaries 322 (250) (1,333) (1,747) The Group implemented FRS 19 ‘Deferred Tax’ in 2002. This 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 in basis has been accounted for as a prior year adjustment and comparative information has been restated as necessary. Business performance taxation The charge for taxation on business performance profit amounting to £1,655 million represents an effective tax rate of 26.8 per cent. The tax rate benefits from lower rates of tax applicable to manufacturing operations in Singapore, Puerto Rico and Ireland. Merger and restructuring The credit for taxation on merger and restructuring items amounting to £322 million reflected the estimated actual tax rate applicable to the transactions in the territories in which they arose. Earnings 2001 2000 (restated) (restated) Earnings (£m) 3,053 4,106 Basic earnings per share 50.3p 67.7p Basic earnings per ADS $1.45 $2.06 Adjusted earnings (£m) 4,383 3,654 Adjusted earnings per share 72.3p 60.2p Adjusted earnings per ADS $2.08 $1.83 Weighted average number of shares (millions) 6,064 6,065 Adjusted earnings and adjusted earnings per share for GlaxoSmithKline are presented above in order to illustrate business performance which is the primary measure used by management, as discussed earlier.
Selected financial data UK/US GAAP Operating and financial review and prospects GlaxoSmithKline 71 Profit and loss account 2001 2000 1999 1998 2002 (restated) (restated) (restated) (restated) £m £m £m £m £m Amounts in accordance with UK GAAP Sales 21,212 20,489 18,079 16,796 16,002 Operating profit 5,551 4,734 4,729 4,343 4,306 Profit before taxation 5,506 4,517 6,029 4,236 3,564 Earnings 3,915 3,053 4,106 3,077 2,436 Basic earnings per share 66.2p 50.3p 67.7p 50.3p 39.9p Diluted earnings per share 66.0p 49.9p 66.9p 49.9p 39.4p Weighted average number of shares in issue: Basic 5,912 6,064 6,065 6,118 6,100 Diluted 5,934 6,116 6,134 6,171 6,178 Dividends per GlaxoSmithKline share (p): GlaxoSmithKline shareholder 40.0 39.0 Glaxo Wellcome shareholder 38.0 37.0 36.0 SmithKline Beecham shareholder 29.66 26.69 24.02 Dividends are expressed in terms of a GlaxoSmithKline share. Amounts in accordance with US GAAP Sales 21,212 20,489 9,559 8,490 7,983 Operating profit 1,026 590 (4,456) 1,634 1,816 Profit/(loss) before tax 925 494 (4,399) 1,584 1,804 Net income/(loss) 413 (143) (5,228) 913 1,010 Basic net income/(loss) per share (pence) 7.0p (2.4)p (145.6)p 25.2p 28.1p Diluted net income/(loss) per share (pence) 7.0p (2.4)p (145.6)p 25.1p 27.8p The information below presents US GAAP net income/(loss) and net income/(loss) per share as if the results for the years ended 31st December 1998 to 2001 were adjusted to reverse the amortisation expense for goodwill and indefinite-lived intangible assets, that is, as if SFAS 142 had also applied in those years. Adjusted net income/(loss) 1,456 (4,658) 1,476 1,573 Adjusted basic net income/(loss) per share (pence) 24.0p (129.7)p 40.8p 43.7p Adjusted diluted net income/(loss) per share (pence) 23.8p (129.7)p 40.6p 43.3p Balance sheet £m £m £m £m £m Amounts in accordance with UK GAAP Total assets 22,327 22,343 21,999 19,162 18,592 Net assets 7,388 8,252 8,834 6,534 5,271 Equity shareholders’ funds 6,581 7,390 7,590 5,391 4,158 Amounts in accordance with US GAAP Total assets 57,671 61,341 65,786 13,901 14,035 Net assets 35,729 40,969 46,239 7,281 8,073 Shareholders’ equity 34,922 40,107 44,995 7,230 8,007 Exchange rates As a guide to holders of ADRs, the following tables set out, for the periods indicated, information on the exchange rate of US dollars for sterling as reported by the Federal Reserve Bank of New York (‘noon buying rate’). Average 1.51 1.44 1.51 1.61 1.66 The average rate for the year is calculated as the average of the noon buying rates on the last day of each month during the year. Feb Jan Dec Nov Oct Sept 2003 2003 2002 2002 2002 2002 High 1.65 1.65 1.61 1.59 1.57 1.57 Low 1.57 1.60 1.56 1.54 1.54 1.53 The noon buying rate on 3rd March 2003 was £1= US$1.58. 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 information has 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
Page 21 and 22: Product approvals Country/Region Pr
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Page 25 and 26: Operating resources Intellectual pr
Page 27 and 28: Compensation philosophy and program
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Page 33 and 34: Corporate governance This section d
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Page 37 and 38: The Annual General Meeting takes pl
Page 39 and 40: Research and development Safety of
Page 41 and 42: Remuneration report GlaxoSmithKline
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Page 45 and 46: Performance graph 100 90 80 70 60 N
Page 47 and 48: Non-Executive Directors Non-Executi
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Page 51 and 52: Incentive plans Remuneration report
Page 53 and 54: Operating and financial review and
Page 55 and 56: 2002 Year World economy The world
Page 57 and 58: Pharmaceutical sales by therapeutic
Page 59 and 60: Consumer Healthcare sales 2002 2001
Page 61 and 62: Earnings 2001 2002 (restated) CER%
Page 63 and 64: Contractual obligations and commitm
Page 65 and 66: Funding, maturity and counterparty
Page 67 and 68: Stricter regulatory controls also h
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Page 75 and 76: Financial statements GlaxoSmithKlin
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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
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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
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Page 105 and 106: 30 Legal proceedings The Group is i
Page 107 and 108: 30 Legal proceedings continued In F
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Page 111 and 112: 31 Acquisitions and disposals conti
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34 Employee share schemes continued
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37 Reconciliation to US accounting
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Notes to the financial statements G
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38 Principal Group companies Notes
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38 Principal Group companies contin
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Financial record GlaxoSmithKline 14
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Investor information GlaxoSmithKlin
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Shareholder information Ordinary sh
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Share capital GlaxoSmithKline 155 A
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Cross reference to Form 20-F GlaxoS
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Index A Access to healthcare 27 Acc
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Contact details INTERNET Informatio
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GSK Annual Report 2002

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