Amgen 2001 Annual Report Download - page 41

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AMGEN 2001 ANNUAL REPORT
Employee stock option and stock purchase plans
The Company’s employee stock option and stock pur-
chase plans are accounted for under Accounting Principles
Board Opinion (“APB”) No. 25, “Accounting for Stock
Issued to Employees” (see Note 7, “Employee stock
option, stock purchase, and defined contribution plans”).
Earnings per share
Basic earnings per share is based upon the weighted-
average number of common shares outstanding. Diluted
earnings per share is based upon the weighted-average
number of common shares and dilutive potential com-
mon shares outstanding. Dilutive potential common
shares are outstanding options under the Company’s
employee stock option plans, restricted stock, and
potential issuances of stock under the employee stock
purchase plan (collectively “Dilutive Securities”) which
are included under the treasury stock method.
The following table sets forth the computation for
basic and diluted earnings per share (in millions, except
per share information):
Years ended December 31, 2001 2000 1999
Numerator for basic and
diluted earnings per
share – net income $1,119.7 $1,138.5 $1,096.4
Denominator:
Denominator for basic
earnings per share –
weighted-average
shares 1,045.5 1,029.6 1,021.7
Effect of Dilutive
Securities 38.9 55.1 56.6
Denominator for diluted
earnings per share –
adjusted weighted-
average shares 1,084.4 1,084.7 1,078.3
Basic earnings per share $ 1.07 $ 1.11 $ 1.07
Diluted earnings per share $ 1.03 $ 1.05 $ 1.02
Options to purchase 17.3 million, 10.6 million, and
1.6 million shares with exercise prices greater than the
annual average market prices of common stock were out-
standing at December 31, 2001, 2000, and 1999, respec-
tively. These options were excluded from the respective
computations of diluted earnings per share because their
effect would be anti-dilutive.
Use of estimates
The preparation of financial statements in conformity
with accounting principles generally accepted in the
United States requires management to make estimates
and assumptions that affect the amounts reported in the
financial statements and accompanying notes. Actual
results may differ from those estimates.
Recent accounting pronouncements
In June 2001, the Financial Accounting Standards Board
issued SFAS No. 141, “Business Combinations” and SFAS
No. 142, “Goodwill and Other Intangible Assets” effec-
tive for fiscal years beginning after December 15, 2001.
Under the new rules, goodwill will no longer be amor-
tized but will be subject to annual impairment tests.
Other intangible assets will continue to be amortized
over their estimated useful lives. The Company will
apply the new rules on accounting for goodwill and other
intangible assets beginning in the first quarter of 2002.
The impact of adoption of the new standards will not
have a material impact on the results of operations or
financial position of the Company.
Reclassification
Certain prior year amounts have been reclassified to
conform to the current year presentation.
Note 2: Related party transactions
The Company owns a 50% interest in Kirin-Amgen, Inc.
(“Kirin-Amgen”), a corporation formed in 1984 with
Kirin Brewery Company, Limited (“Kirin”) for the devel-
opment and commercialization of certain products based
on advanced biotechnology. Kirin-Amgen has given
exclusive licenses to Amgen to manufacture and market
certain products including erythropoietin, granulocyte
colony-stimulating factor (“G-CSF”), darbepoetin alfa,
and pegfilgrastim in certain geographic areas of the
world. The Company currently markets certain of these
products under the brand names EPOGEN®(erythropoi-
etin), NEUPOGEN®(G-CSF), and Aranesp™(darbepoetin
alfa). Kirin-Amgen’s revenues primarily consist of royalty
income related to its licensed technology rights. Kirin-
Amgen receives royalty income from Amgen, as well as
Kirin, Johnson & Johnson, Roche, and others under sepa-
rate product license agreements for certain geographic
areas outside of the United States. During the years
ended December 31, 2001, 2000, and 1999, Kirin-
Amgen earned royalties from Amgen of $147.1 million,
$140.8 million, and $128.1 million, respectively, which
are included in “Cost of sales” in the accompanying
consolidated statements of operations.
39