Equity compensation plans New Income Statement impact on guidance Earnings Per Share Questions and answers

Transcription

1 Investos/Analysts Confeence: Accounting Wokshop Agenda Equity compensation plans New Income Statement impact on guidance Eanings Pe Shae Questions and answes IAC03 / a / 1 1 Equity compensation plans The accounting envionment Cuent IFRS standad, IAS 19, specifies disclosue but not measuement. Cuent US GAAP allows altenatives: FAS 123 (fai value method) o APB 25 (intinsic value). New IFRS exposue daft, ED2, would equie expensing. Final standad expected ealy 2004 to implement in Cuently Roche uses APB 25 methodology, with IAS 19 disclosues. Supplementay Black-Scholes values given. IAC04 / b / 1 2 1

2 Equity compensation plans The cuent plans at Roche Roche Pefomance Shae Plan, and Stock Appeciation Rights. Pefomance elated / vaiable plans. Benefit is not fixed at gant date. Cost is accued ove vesting peiod and chaged to income. Roche Option Plan, and Genentech and Chugai plans. Fixed plans. Benefit is fixed at gant date. Expense is measued at intinsic value at gant date. Intinsic value is diffeence between shae pice and execise pice. Typically zeo fo at the money option gants. IAC04 / b / 1 3 Equity compensation plans Implications of ED2, as cuently dafted Would mean additional opeating expenses fo Roche, and all othe IFRS uses. No impact on US GAAP uses. Ceates anothe US GAAP vs IFRS diffeence (until US GAAP changes). Fixed plans would cause an expense, but not necessaily as high as Black-Scholes values. Impact of Roche Option Plan and Chugai plan elatively mino. Impact of Genentech plan moe significant. Pobably impacts 2005, not IAC04 / b / 3 4 2

3 New Income Statement impact on guidance Oveview Opeating pofit, net income and EPS ae unchanged. Adjusted esults ae no longe given. Opeating pofit befoe exceptional items. Cash discount eclassification educes sales and maketing & distibution IAC04 / c / 1 5 New Income Statement impact on guidance Specifics Non-opeating esult is unaffected, so no change to any guidance on financial income and income taxes. Reclassification of cash discounts inceases opeating pofit magin. Impact is aound 0.2% to the Goup opeating magin. Opeating pofit befoe exceptional items is not the same as adjusted opeating pofit. In paticula goodwill amotisation is excluded. IAC04 / c / 2 6 3

4 New Income Statement impact on guidance Opeating pofit befoe exceptionals vs. adjusted Includes Phama estuctuing expenses (2002 only) Includes Chugai inventoy FVA Excludes goodwill amotisation Continuing businesses IAC04 / c / 3 7 New Income Statement impact on guidance Reconciliation to old basis Adjusted opeating pofit 5,656 4,965 Phama estuctuing Chugai inventoy FVA Goodwill amotisation Opeating pofit befoe exceptional items 6,104 5,223 ( continuing businesses ) IAC04 / c / 4 8 4

5 New Income Statement impact on guidance Impacts on opeating guidance Reclassification of cash discounts has mino positive impact to the Goup opeating pofit magin. Impact is aound 0.2%. Exclusion of goodwill amotisation fom Opeating pofit befoe exceptional items inceases magin impact: +1.2% Phama and +3.2% Diagnostics. On-going impact will be slightly lowe, as amotisation is fixed amount and opeating pofit inceases. Result: opeating magin guidance has been inceased by +1% Phama and +3% Diagnostics. IAC04 / c / 5 9 Eanings Pe Shae EPS Basic EPS EPS = Eanings divided by numbe of shaes. Eanings is net income (IFRS basis) be sue you know what E you ae using in EPS. Numbe of shaes is weighted aveage numbe of outstanding shaes (i.e. net of shae issues/epuchases and teasuy shaes). fo Roche, LEPOs ae teated as teasuy shaes in the EPS calculations. IAC04 / d /

6 Eanings Pe Shae EPS Diluted EPS Diluted EPS also takes into account potential dilutions to shaeholde etun. Employee Shae Options: execise of vested options would incease numbe of shaes outstanding. Convetible Debt: convesion would lead to eduction of inteest expenses (net of tax) while numbe of shaes outstanding would incease. Also includes minoity inteest impacts. IAC04 / d / 2 11 Eanings Pe Shae Roche s diluted EPS calculations Full econciliation is given in the financial statements (also in pevious yeas). Convetible debt is usually dilutive, apat fom LYONs III. Roche Option Plan impact has been elatively mino to date. Genentech stock options effect depends upon the Genentech esult and the numbe of execisable options. IAC04 / d /

7 Eanings Pe Shae EPS Continuing businesses befoe exceptionals Not an IFRS measuement, eveyone has thei own definition (EBIT pe shae, EPS befoe goodwill, etc.). Top-down method: take Net Income and back out exceptional items (including tax and minoity impacts). Bottom-up method: take Phama and Dia Opeating Pofit befoe exceptional items, and add in financial income, tax and minoity impacts. Don t foget the dilutive effects. IAC04 / d / 4 13 Eanings Pe Shae Continuing business befoe exceptional items 2003 & Eanings Pofit befoe tax 5,430 6,021 Income taxes -1,402-1,595 Minoity inteests ,597 4,110 Dilutive impacts Convetible debt inteest Genentech stock options Net income 3,631 4,163 Pe shae Aveage shaes in issue Dilutive convetible debt EPS IAC04 / d /

8 Eanings Pe Shae Continuing business befoe exceptional items 2003 & EPS Impact of tax ate LabCop 35.0% Fin. Asset impaiment 5.0% Chugai inventoy FVA 41.5% Gains on poducts 26.0% Restuctuing 26.0% IAC04 / d /