Interim Results - Part 2

AstraZeneca PLC 25 July 2002 PART 2 Consolidated Profit & Loss Account 2002 2001 For the six months ended 30 June (restated) $m $m Sales 8,803 8,090 Cost of sales (2,299) (2,186) Distribution costs (65) (60) Research and development (1,420) (1,341) Selling, general and administrative expenses (2,869) (2,660) Other operating income 211 208 Operating profit before exceptional items 2,361 2,051 Exceptional items charged to operating profit - (81) Operating profit 2,361 1,970 Profit on sale of fixed assets - 10 Net interest and dividend income 22 78 Profit on ordinary activities before taxation 2,383 2,058 Taxation (644) (584) Profit on ordinary activities after taxation 1,739 1,474 Attributable to minorities (6) (5) Net profit for the period 1,733 1,469 Dividends to shareholders (398) (405) Retained profit for the period 1,335 1,064 Earnings per Ordinary Share before exceptional items $1.00 $0.86 Earnings per Ordinary Share $1.00 $0.83 Diluted earnings per Ordinary Share $1.00 $0.83 Weighted average number of Ordinary Shares in issue (millions) 1,741 1,764 Diluted average number of Ordinary Shares in issue (millions) 1,743 1,766 Consolidated Profit & Loss Account 2002 2001 For the quarter ended 30 June (restated) $m $m Sales 4,382 4,099 Cost of sales (1,130) (1,112) Distribution costs (35) (30) Research and development (723) (669) Selling, general and administrative expenses (1,485) (1,339) Other operating income 55 47 Operating profit before exceptional items 1,064 996 Exceptional items charged to operating profit - (56) Operating profit 1,064 940 Profit on sale of fixed assets - - Net interest and dividend income 1 23 Profit on ordinary activities before taxation 1,065 963 Taxation (288) (275) Profit on ordinary activities after taxation 777 688 Attributable to minorities (2) (2) Net profit for the period 775 686 Dividends to shareholders (398) (405) Retained profit for the period 377 281 Earnings per Ordinary Share before exceptional items $0.45 $0.41 Earnings per Ordinary Share $0.45 $0.39 Diluted earnings per Ordinary Share $0.45 $0.39 Weighted average number of Ordinary Shares in issue (millions) 1,736 1,762 Diluted average number of Ordinary Shares in issue (millions) 1,738 1,764 Consolidated Balance Sheet 30 June 30 June 2002 2001 (restated) $m $m Fixed assets Tangible fixed assets 6,079 4,925 Goodwill and intangible assets 2,748 2,661 Fixed asset investments 22 16 8,849 7,602 Current assets Stocks 2,460 2,063 Debtors 4,648 4,396 Cash and short-term investments 4,247 4,233 11,355 10,692 Total assets 20,204 18,294 Creditors due within one year Short-term borrowings and current instalments of loans (476) (263) Other creditors (6,646) (5,980) (7,122) (6,243) Net current assets 4,233 4,449 Total assets less current liabilities 13,082 12,051 Creditors due after more than one year Loans (337) (638) Other creditors (153) (258) Provisions for liabilities and charges (1,547) (1,691) (2,037) (2,587) Net assets 11,045 9,464 Capital and reserves Shareholders' funds - equity interests 10,994 9,428 Minority equity interests 51 36 Shareholders' funds and minority interests 11,045 9,464 Statement of Total Recognised Gains and Losses 2002 2001 For the six months ended 30 June $m $m Net profit for the period 1,733 1,469 Exchange adjustments on net assets 797 (783) Translation differences on foreign currency borrowings (5) 43 Tax on translation differences on foreign currency borrowings - (5) Other movements 3 3 Total recognised gains and losses relating to the period 2,528 727 Prior year adjustment (200) Total gains and losses recognised since last annual report 2,328 Consolidated Cash Flow Statement 2002 2001 For the six months ended 30 June $m $m Cash flow from operating activities Operating profit before exceptional items 2,361 2,051 Depreciation 328 296 Amortisation 131 128 Decrease/(Increase) in working capital 251 (254) Other non-cash movements 78 6 Net cash inflow from operating activities before exceptional Items 3,149 2,227 Outflow related to exceptional items (55) (181) Net cash inflow from operating activities 3,094 2,046 Returns on investments and servicing of finance 3 71 Tax paid (415) (522) Capital expenditure and financial investment Net cash expenditure on fixed assets (632) (628) New fixed asset investments (1) (5) (633) (633) Acquisitions and disposals - (45) Equity dividends paid to Shareholders (820) (830) Net cash inflow before management of liquid resources and financing 1,229 87 Management of liquid resources Movement in short-term investments and fixed deposits (net) (428) (451) Financing (815) (169) Decrease in cash in the period (14) (533) Net cash funds Net cash inflow before management of liquid resources and 1,229 87 financing AstraZeneca PLC Ordinary Shares Issued for cash 26 55 Repurchased for cash (748) (344) Inflow/(outflow) of net cash funds in the period 507 (202) Independent Review Report by KPMG Audit Plc to AstraZeneca PLC Introduction We have been instructed by the Company to review the financial information for the six month period ended 30 June 2002 set out on pages 9 and 11 to 15 and we have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the financial information. Directors' responsibilities The interim report, including the financial information contained therein, is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the interim report in accordance with the Listing Rules of the Financial Services Authority which require that the accounting policies and presentation applied to the interim figures should be consistent with those applied in preparing the preceding annual accounts except where they are to be changed in the next annual accounts, in which case any changes, and the reasons for them, are disclosed. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4 (Review of Interim Financial Information) issued by the Auditing Practices Board. A review consists principally of making enquiries of group management and applying analytical procedures to the financial information and underlying financial data and, based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review is substantially less in scope than an audit performed in accordance with Auditing Standards and therefore provides a lower level of assurance than an audit. Accordingly, we do not express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the six months ended 30 June 2002. KPMG Audit Plc Chartered Accountants London 25 July 2002 Notes to the Interim Financial Statements 1 BASIS OF PREPARATION AND ACCOUNTING POLICIES The unaudited financial statements for the six months ended 30 June 2002 have been prepared in accordance with UK generally accepted accounting principles. The accounting policies applied are those set out in AstraZeneca PLC's 2001 Annual Report and Form 20-F except that, in the current period, AstraZeneca adopted Financial Reporting Standard No. 19 'Deferred Tax'. Prior periods have been restated and the effects of this restatement were to reduce profits for the six months ended 30 June 2001 by $19m and reduce net assets at that date by $126m. On adoption net assets at 1 January 2002 were reduced by $193m. The table below illustrates the effect on EPS before exceptional items of this restatement. The financial statements are unaudited but have been reviewed by the auditors and their report is set out above. The statements do not constitute statutory accounts of the group within the meaning of Section 240 of the Companies Act 1985. Statutory accounts for the year ended 31 December 2001 have been filed with the Registrar of Companies. The auditor's report on those accounts was unqualified and did not contain any statement under Section 237 of the Companies Act 1985. 2001 TAXATION AND EARNINGS PER SHARE BEFORE EXCEPTIONAL ITEMS Q1 2001 Q2 2001 Q3 2001 Q4 2001 Year Tax charge before adoption of FRS 19 ($m) (316) (269) (286) (282) (1,153) Tax charge after adoption of FRS 19 ($m) (315) (289) (295) (315) (1,214) Published EPS before adoption of FRS 19 ($) 0.45 . 0.42 0.43 0.47 1.77 Adjusted EPS after adoption of FRS 19 ($) 0.45 0.41 0.42 0.45 1.73 2 JOINT VENTURES AND ASSOCIATES The group's share of joint ventures' sales for the half year to 30 June 2002 amounted to $173m and $163m for the comparative period. Share of joint ventures' operating profits for the half year to 30 June 2002, and for the comparative period were $nil. 3 RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS 2001 For the six months ended 30 June 2002 (restated) $m $m Shareholders' funds at beginning of period, (originally $9,786 million before deducting prior period adjustment of $200m) 9,586 9,395 Net profit for the period 1,733 1,469 Dividends to Shareholders (398) (405) 1,335 1,064 Issue of AstraZeneca PLC Ordinary Shares 26 55 Repurchase of AstraZeneca PLC Ordinary Shares (748) (344) Foreign currency adjustment 792 (745) Other movements 3 3 Net addition to Shareholders' funds 1,408 33 Shareholders' funds at end of period 10,994 9,428 4 NET CASH FUNDS The table below provides an analysis of net cash funds and a reconciliation of net cash flow to movement in net cash funds. At 31 Dec Cash Other Exchange At 30 June 2001 flow non-cash Movements 2002 $m $m $m $m $m Loans due after 1 year (635) 14 284 - (337) Current instalments of loans (107) 64 (284) (5) (332) Total loans (742) 78 - (5) (669) Short-term investments 3,118 428 - 33 3,579 Cash 705 (67) * - 30 668 Overdrafts (195) 53 * - (2) (144) Short-term borrowings, excluding overdrafts (19) 15 - 4 - 3,609 429 - 65 4,103 Net cash funds 2,867 507 - 60 3,434 Issue of AstraZeneca PLC Ordinary Shares (26) Repurchase of AstraZeneca PLC Ordinary Shares 748 Net cash inflow before management of liquid resources and financing 1,229 * Movement of $(14)m on cash and overdrafts corresponds to decrease in cash during period as defined under UK GAAP. 5 LEGAL PROCEEDINGS Further to note 36 to the Financial Statements found on page 94 in the AstraZeneca 2001 Annual Report and Form 20-F wherein reference is made to various investigations into drug marketing and pricing practices in the US, the US Department of Justice has been conducting an investigation into the sales and marketing of Zoladex (goserelin acetate implant). The Company has been informed that the investigation was prompted by the filing of a qui tam complaint by a private party and involves allegations of improper submission of claims to the Medicare program. The Company is cooperating with the investigation, which is ongoing. While it is not possible to predict the outcome of the investigation, management is of the opinion that the ultimate disposition should not have a material adverse effect on AstraZeneca's financial position or results. 6 HALF YEAR TERRITORIAL SALES ANALYSIS % Growth 1st 1st Half Half 2002 2001 Constant $m $m Actual Currency USA 4,719 4,259 11 11 Canada 273 254 7 9 Japan 412 389 6 17 France 537 482 11 13 Germany 335 348 (4) (2) Italy 379 337 12 14 Sweden 138 142 (3) 2 UK 330 370 (11) (10) Rest of World 1,680 1,509 11 14 Total 8,803 8,090 9 10 7 SECOND QUARTER TERRITORIAL SALES ANALYSIS % Growth 2nd 2nd Quarter Quarter 2002 2001 Constant $m $m Actual Currency USA 2,271 2,120 7 7 Canada 144 126 14 15 Japan 240 211 14 23 France 272 244 11 13 Germany 168 180 (7) (6) Italy 207 187 11 13 Sweden 74 75 (1) (1) UK 150 198 (24) (24) Rest of World 856 758 13 14 Total 4,382 4,099 7 8 8 HALF YEAR PRODUCT SALES ANALYSIS World US 1st 1st Constant 1st Half Half Actual Currency Half Actual 2002 2001 Growth Growth 2002 Growth $m $m % % $m % Gastrointestinal: Losec 2,355 2,866 (18) (17) 1,423 (24) Nexium 830 127 n/m n/m 653 n/m Others 30 21 43 43 9 - Total Gastrointestinal 3,215 3,014 7 8 2,085 7 Cardiovascular: Zestril 559 644 (13) (12) 351 (15) Seloken 446 350 27 28 306 46 Plendil 206 212 (3) (2) 75 (3) Tenormin 190 213 (11) (7) 37 6 Atacand 281 196 43 45 117 54 Others 181 220 (18) (16) 11 (67) Total Cardiovascular 1,863 1,835 2 3 897 7 Respiratory: Pulmicort 430 409 5 6 194 37 Rhinocort 146 130 12 13 100 23 Accolate 67 95 (29) (28) 47 (35) Oxis 61 65 (6) (4) - - Symbicort 122 14 n/m n/m - - Others 72 81 (11) (9) - - Total Respiratory 898 794 13 14 341 16 Oncology: Zoladex 387 344 13 16 105 3 Nolvadex 262 286 (8) (6) 193 (8) Casodex 274 244 12 16 65 (33) Arimidex 146 92 59 61 63 97 Faslodex 8 - n/m n/m 8 n/m Others 11 15 (27) (27) - - Total Oncology 1,088 981 11 14 434 (2) CNS: Seroquel 604 357 69 70 507 68 Zomig 168 154 9 10 98 (2) Others 15 3 n/m n/m 3 - Total CNS 787 514 53 54 608 50 Pain, Infection and Other Pharma: Diprivan 226 215 5 7 113 30 Merrem 142 106 34 35 33 50 Local anaesthetics 156 196 (20) (17) 33 (34) Other Pharma Products 189 225 (16) (15) 56 (13) Total Pain, Infection and Other Pharma 713 742 (4) (2) 235 5 Salick Health Care 113 95 19 19 113 19 Astra Tech 71 62 15 20 5 67 Marlow Foods 55 53 4 6 1 - Total 8,803 8,090 9 10 4,719 11 n/m not meaningful 9 SECOND QUARTER PRODUCT SALES ANALYSIS World US 2nd Quarter 2nd Quarter Constant 2nd 2002 2001 Actual Currency Quarter Actual Growth Growth 2002 Growth $m $m % % $m % Gastrointestinal: Losec 1,137 1,371 (17) (17) 679 (22) Nexium 474 46 n/m n/m 360 n/m Others 17 9 89 89 5 - Total Gastrointestinal 1,628 1,426 14 14 1,044 17 Cardiovascular: Zestril 276 350 (21) (20) 168 (27) Seloken 210 199 6 6 140 11 Plendil 98 106 (8) (7) 30 (14) Tenormin 96 115 (17) (14) 15 (32) Atacand 130 113 15 16 44 (10) Others 92 117 (21) (19) 5 (71) Total Cardiovascular 902 1,000 (10) (9) 402 (16) Respiratory: Pulmicort 201 209 (4) (4) 87 10 Rhinocort 82 74 11 12 56 19 Accolate 34 46 (26) (26) 24 (33) Oxis 30 33 (9) (6) - - Symbicort 68 11 n/m n/m - - Others 37 40 (8) (8) - - Total Respiratory 452 413 9 10 167 3 Oncology: Zoladex 197 184 7 10 57 8 Nolvadex 119 147 (19) (18) 82 (22) Casodex 150 129 16 19 34 (29) Arimidex 80 49 63 65 36 125 Faslodex 8 - n/m n/m 8 n/m Others 6 8 (25) (25) - - Total Oncology 560 517 8 10 217 (2) CNS: Seroquel 268 168 60 61 214 55 Zomig 75 88 (15) (14) 38 (37) Others 8 1 n/m n/m 1 - Total CNS 351 257 37 38 253 27 Pain, Infection and Other Pharma: Diprivan 113 108 5 6 58 32 Merrem 75 57 32 32 18 38 Local anaesthetics 60 92 (35) (34) 11 (54) Other Pharma Products 118 121 (2) (3) 38 6 Total Pain, Infection and Other Pharma 366 378 (3) (3) 125 7 Salick Health Care 59 50 18 18 59 18 Astra Tech 37 32 16 16 3 n/m Marlow Foods 27 26 4 8 1 - Total 4,382 4,099 7 8 2,271 7 n/m not meaningful Information for US Investors RECONCILIATION TO UNITED STATES ACCOUNTING PRINCIPLES The profit and loss accounts and balance sheet set out on pages 9 to 11 are prepared in accordance with generally accepted accounting principles in the United Kingdom (UK GAAP) which differ in certain material respects from those generally accepted in the United States (US GAAP). The differences as they apply to AstraZeneca PLC are explained in the 2001 Annual Report and Form 20-F, except that, with effect from 1 January 2002, goodwill amortisation has been prohibited. The effect has been to increase income for the six months under US GAAP by approximately $383m. The adoption of FRS19 under UK GAAP has not affected income or shareholders' equity under US GAAP although it has had a consequential impact on the relevant UK to US GAAP adjustment. Software and application costs of $13m arising on two infrastructure projects have been capitalised under UK GAAP in the first half of the year. The approximate effects on income and shareholders' equity of the GAAP differences are shown below. 1st 1st Half Half 2002 2001 Income attributable to Shareholders (restated) $m $m Net income for the period under UK GAAP from continuing Operations 1,733 1,469 Adjustments to conform to US GAAP Purchase accounting adjustments, (including goodwill & intangibles): - deemed acquisition of Astra (goodwill amortisation and other acquisition adjustments) (419) (767) Capitalisation less amortisation of interest - 19 Capitalisation less amortisation of software costs (42) 10 Deferred taxation 32 142 Pension expense (27) (22) Post-retirement benefits/plan amendment 2 2 Restructuring costs - (22) Unrealised gains on foreign exchange and others 52 (21) Net income in accordance with US GAAP 1,331 810 Net income / (loss) per Ordinary Share under US GAAP - basic and diluted $0.77 $0.46 RECONCILIATION TO UNITED STATES ACCOUNTING PRINCIPLES (CONTINUED) 30 June 30 June Shareholders' equity 2002 2001 (restated) $m $m Shareholders' equity under UK GAAP 10,994 9,428 Adjustments to conform to US GAAP Purchase accounting adjustments (including goodwill and intangibles): - deemed acquisition of Astra - goodwill 11,961 11,409 - tangible and intangible fixed assets 8,131 8,404 - others 31 31 Capitalisation of interest 192 154 Deferred taxation - on fair value of Astra (2,310) (2,390) - others (156) (96) Dividend 398 405 Pension expense (189) (151) Post-retirement benefits / plan amendment (26) (30) Software costs capitalised 68 130 Others 84 52 Shareholders' equity in accordance with US GAAP 29,178 27,346 Shareholder Information ANNOUNCEMENTS AND MEETINGS Announcement of third quarter and nine month results 24 October 2002 Annual Business Review 7 November 2002 DIVIDENDS The record date for the first interim dividend payable on 7 October 2002 (in the UK, Sweden and the US) is 23 August 2002. Ordinary Shares will trade ex-dividend on the London and Stockholm Stock Exchange from 21 August 2002. ADRs will trade ex-dividend on the New York Stock Exchange from the same date. Future dividends will normally be paid as follows: First interim Announced end of July and paid in October. Second interim Announced in January and paid in April. TRADEMARKS The following brand names used in this interim report are trade marks of the AstraZeneca group of companies: Accolate Arimidex Astra Tech Atacand Atacand HCT Atacand Plus Casodex Crestor Diprivan Exanta Faslodex Iressa Losec Merrem Nexium Nolvadex Oxis Plendil Prilosec Pulmicort Pulmicort Respules Pulmicort Turbuhaler Rhinocort Rhinocort Aqua Seloken Seroquel Symbicort Tenormin Toprol-XL Zestril Zoladex Zomig Zomig Rapimelt ADDRESSES FOR CORRESPONDENCE Registrar and Depositary Registered Office Swedish Securities Register Centre Transfer Office for ADRs The AstraZeneca Registrar JPMorgan Chase Bank 15 Stanhope Gate VPC AB Lloyds TSB Registrars PO Box 43013 London PO Box 7822 The Causeway Providence, W1K 1LN S-103 97 Stockholm Worthing RI 02940-3013 Sweden West Sussex BN99 6DA Tel: (0870) 600 3956 Tel: (781) 575 4328 Tel: (020) 7304 5000 Tel: (8) 402 9000 CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS In order to utilise the 'Safe Harbor' provisions of the United States Private Securities Litigation Reform Act of 1995, AstraZeneca is providing the following cautionary statement. This Interim Report contains forward-looking statements with respect to the financial condition, results of operations and businesses of AstraZeneca. By their nature, forward-looking statements and forecasts involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. There are a number of factors that could cause actual results and developments to differ materially from that expressed or implied by these forward-looking statements. These factors include, among other things, exchange rate fluctuations, the risk that research and development will not yield new products that achieve commercial success, the impact of competition, price controls and price reductions, the risk of loss or expiration of patents or trade marks, difficulties of obtaining and maintaining governmental approvals for products, the risk of substantial product liability claims, exposure to environmental liability. 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